February 2013


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Accordingly I ask myself this question. If ‘A’ promises ‘B’ to perform a service for ‘B’ which ‘B’ intends, and ‘A’ knows, will confer a benefit on ‘C’ if it is performed, does ‘A’ owe to ‘C’ in tort a duty to perform that service?

So expressed, this new question, and the right way to approach it is as Lord Devlin explained in Hedley Byrne & Co v Heller and Partners Ltd [1964] is “to see how far the authorities have gone, for new categories in the law do not spring into existence overnight.

To answer the question we must start with listing the principals in law that define when a ‘duty of care’ is owed.

*Proximity, and
*Foreseeability, and
*Just, fair and reasonable.

The son [intended beneficiary] was cognizant of the father’s intention to alter the will in his favour. The fact that he was the son, and aware of the intentions, provides the condition of proximity. That the son was aware of the intention of the father, and that the solicitor was aware of the son’s knowledge, provides for the condition of ‘foreseeability’. All the Law Lords were in agreement that it was ‘just, fair and reasonable’ that the son become his father’s legal beneficiary.

We can therefore state that in law, as it stands, finds that the solicitor does owe a duty of care to the son in executing his father’s will. That he does not do so, provides for the second step in law, viz, ‘a breach of that duty’.

Lord Mustill continues;

As I understand your Lordship’s opinions only one feature of existing law is relied upon as the starting point for a new principal wide enough to yield an affirmative answer to the question just posed: namely Hedley Byrne itself. Once again, the facts are too distant for the decision to be applied directly. In Hedley Byrne the plaintiffs asked the defendants to do something; the defendants did it, and did so imperfectly. Here, leaving aside the special facts of this appeal, and concentrating on the general case of the disappointed beneficiary, the complaint is that the solicitor did not do something which the beneficiary never asked him to do.

His Lordship needs to re-read the facts of the case [Hedley Byrne] as the plaintiffs asked the defendants to perform a service without liability or responsibility, and the defendants performed that service, stating that it was performed without liability or responsibility.

It was found that no duty of care could be owed when, both parties agreed that no duty should attach to the service provided, and that carried no financial reward for the defendants in performing that service.

Returning to the present case, it is distinguished by those facts: here, the solicitor does owe a duty of care under law. Therefore, it is entirely possible that as the analysis continues, he can be found negligent. The breach of that duty has already been demonstrated through the facts.

The third step is one of causation.

To be continued…

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Enjoy last week’s report, the profits are almost in the bank. I’ll have the final results at market close tomorrow.

“Experience hath shewn, that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny”.
Thomas Jefferson

The COT index number this week is +14.8%. It would seem that some buying support has come into the market. That means this week we will be buyers of the dip.

The short term technical trend rolled over last week, so there is no agreement between the technicals and the COT number. This poses an immediate problem. The technical chart suggests that in the early part of the week, likely Monday, we will see a continuation of Friday’s rally off of the lows. This will encounter a short term downtrend, which with a buy signal from the COT, we don’t want to sell short – but, waiting to buy a dip, we may run out of days in the week as we are interested in the weekly Option series.

This means that in all likelihood, the short term system won’t take a trade this week either. That is trading. It is far better to miss taking poor trades than to snatch at marginal trades and take losses. This distinguishes the professional trader from the rank amateur.

It is also in part why I am developing the COT numbers for Gold and Copper, where there may not be stock trades, there may well be commodity trades.

The long term duCati Methodology remains in the market. Having made some sales, is now a fair distance from either further sales or purchases. This methodology is ideal for the investor who does not want to watch the market day-to-day.

The market action, attributed to the Fed minutes, released mid-week, suggested that QE is either near conclusion, or subject to variation, viz, purchasing a variable dollar value of risk assets rather than the fixed $85 Billion/month that we currently have.

Personally, QE will not end anytime soon. The Federal Reserve and Bernanke are one trick ponies. They have nothing else except monetary expansion [inflation] and will continue until 6.5% unemployment, which is years off.

That they might vary the dollar value…that is something that may happen, less as the market rises, more on dips. If that is the pattern that develops, dips will be aggressively bought, and just avoiding the dips will be the value add.

I will be keeping a very close eye on developments in this area, as will, I’m sure, the rest of the market.

The trade, if it happens is this: we look for the market to decline to circa $148.50. I want very near to a $0.50 spread [maybe less as it will likely be late in the week] and at least 1 trading day remaining, or no later than the close on Thursday.

Buy $148.50
Sell $149.50

Current Price:
$151.89
Price Profit / Loss ROI %
111.38 ($50.00) -100.00%
126.44 ($50.00) -100.00%
142.29 ($50.00) -100.00%
148.50 ($50.00) -100.00%
149.00 $0.00 0.00%
149.50 $50.00 100.00%
158.15 $50.00 100.00%
174.01 $50.00 100.00%
189.86 $50.00 100.00%

It provides a 1:1 trade with a 100% return on invested capital, with the B/E point at current statistical support. This is remember in a short-term declining market, which, if for some reason we sell-off early in the week, will likely be lower. If that should occur, lower the spread by a $1.

Buy $147.50
Sell $148.50

Use the same baseline $0.50 spread.

Until next week,
jog on
duc

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Market closes near the highs for the day. The blogs are a mixed bag, at least the ones I read. You will need to differentiate between the underlying fundamentals and the technical characteristics of the market. The two often provide very different signals.

The bear case is that the fundamentals are terrible. Terrible for what? The economy…certainly, but, not necessarily for the market, as Bernanke and the Fed support the financial system and the financial markets with all the resources available to them. They are significant.

The technicals in the market support the analysis, not for the economy, but for the stock market. As we are primarily interested in the financial markets, it is this that we need to pay attention to.

QE Infinity is the bid under the market. Until that expires, you cannot short, nor exit this market, irrespective of the general economic conditions. That does not however mean that you buy, hold and sit passively. You must engage in sensible and informed buying/selling of your holdings, viz. some limited trading.

Weekly trades can be postulated on the COT activity. Studies, run over fifty years, have demonstrated that these large well capitalised traders have been consistently profitable. Why not go along for the ride? The duCati Report tracks their positions and changes thereto.

A longer term, viz, permanent, stock trading/holding portfolio is the subject of my long term positions in [i] SPY [ii] international indices. The international portfolio is in the top 25% of marketocracy portfolios.

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sc

I’m just having my first coffee of the morning and checking the market. Lo and behold, it’s trading higher, the disaster of the Italian election or whatever…is firmly forgotten as Bernanke supports the dip.

I haven’t checked on the majority of newsletter/blogs around blogoland the last couple of days, I’ve been really busy with day-to-day stuff and Mr Romulus’ diabetes, that finally looks to resolving, so I’ll have a better look around this morning.

The message coming from the market is that there is no established trend currently, we move essentially sideways in an increasing volatile manner. With volatility jumping, holding positions becomes a little more difficult as entry points, unless well timed, can become potential losses quickly, which places stress on the trader and obviously the position.

Make sure you read this week’s duCati Report, I’ll post it as usual at the end of the week.

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sc

I’m still gathering data on gold…but it is looking increasingly viable as another trading vehicle via the COT data.

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sc

Well to those who get my newsletter, there will be a trading plan in preparation for today. There will be a ‘story’ or a possibly even a number of conflicting stories to explain today.

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