Famous Last Words

Paul SommervilleDelta Index Ltd.

24th June 2010

Famous Last Words:

• Don’t be an idiot, who else would use the fast lane in this

fog?

• Of course it isn’t loaded................

• Right, hold my coat...................

• Tell me when I’m getting near the edge............

• Now let me see – brown neutral, blue live................

• Don’t worry; I know how to tie a rope properly..............

• Listen, I drive better after a few

drinks.................................

• Its years since I’ve ridden one of these yokes...................

Famous Words in the Financial World:

• The worst is over

• Sure nobody could have seen this coming

• Always diversify

• China is going to be big!

– Just like the Internet was going to be big, just like

property is the only safe investment, commodities

were going to be big

• Solar energy is a great investment !

• It’s a great day to buy stocks –they look undervalued

Human Nature

• I’m really unlucky at trading, the minute I buy something it seems to go down.

– In fact I’m just an unlucky person.

• The market is a lottery sure nobody can make head nor tail of it.

• I like to buy things and when they go up I sell them. If they don’t go up I buy more, sure they’re bound to go up eventually!

• My stockbroker tells me the buy and hold strategy is the best.

– Warren Buffet agrees!

• I prefer to leave it to the experts.

Rule No. 1

• The first rule about making money;

– STOP LOSING MONEY

Anglo Irish Bank 2007 to Bust

Bank of Ireland 2007 to Present

Bank of Ireland2010

“Buy”Target: 1.50

“Buy”Target: 1.70

“Buy”Target 1.95

“Buy”Target: 1.20

“Buy”Target: 0.90

What We Said Sunday Times - 14 Sept 2008

Rule No. 2

• Discipline

– Totally lacking in investment

– Overtrading

• Where are the stops?

• Using a buy and hold strategy with leverage in a bear

market – lethal

• The market does not always go up

– Nikkei Chart

– Dow Chart

Rule No. 3

Know where you are getting out,

BEFORE you get in

Rule No. 4

• The market is a forward pricing mechanism

• Learn this rule.....this is all you need to know!

CRHFeb – Aug 23rd

In line with guidance provided in the January trading update

CRH27th July – 7th Sept

Global signs according to Paul

• Many of the sources of today’s growth are temporary and

precarious.

• The rebuilding of inventories will not boost firms output for

long.

• Across the globe spending is being driven by Government

largesse not animal spirits.

• The world has changed and especially the investment

world and it is those who adapt will survive and thrive.

• Stimulus packages wearing off

• A great credit contraction is upon us

• Recovery hopes pinned on cheap credit but new debt has gone out of style

This is a bear market

All bear markets are characterised by despair, followed by

misplaced hope, followed by further despair.

Nikkei 225 1989 - Present

Sentiment Indicators

• Volume

• Optimism

• Momentum

• Anecdotal

• Human Psychology

What have we learned?

• I’m really unlucky at trading- the minute I buy something it seems to go down.

– No you’re just the last man in.

• In fact I’m just an unlucky person.

– No you’re just using your emotions and uninformed broker to make decisions.

What have we learned?

• The market is a lottery sure nobody can make head nor tail of it.

– No the market is a forward pricing mechanism, this is the key to everything.

• I like to buy things and when they go up I sell them. If they don’t go up I buy more, sure they’re bound to go up eventually!

– A recipe for having a portfolio of dogs.

Berkshire Hathaway 2009

Crude Oil

Goldman: Oil heading below $30

Goldman: Oil heading to $200

Dollar

Euro/Dollar

Monsanto

LSE:CRH

Nikkei 225 Index Chart - NIK:NI225

Think !

• If you swim with the crowd you will lose money like the crowd.

• Last thing to remember is stay away from slow horses and fast women and always ask the question;

“Where are all the customers’ yachts?”