Gadzooks, it’s been a long time since I blogged. What can I say – I didn’t mean to ignore you, it’s just that I’ve been busy. And the best part of breaking up is making up…

Anyway there’s lots of lip-smacking stuff in the paddypowertrader pipeline including a new look for the blog pages, a complete facelift for weekly wraps, new tutorials and a Trader Academy home page with all our fave websites, a blog roll and the rest. Only problem is how do I get that lot built, this blog written and trade at the same time?

Not that my August trades were anything to blog home about. My last trade, some 6 working days ago, got stop lossed out. The theory was fine; if I could ride out the volatility the markets would eventually rise. No cigar though. A stop loss of 150 points was just not enough to ride out the volatility. Not enough by a country mile.

My only consolation is that for Hedge Funds August was also a shocker. So at least I (and you if you had a bad month) have company down here in the mire.

On Monday I briefly thought about jumping back in but frankly, what with the US putting its feet up on Monday and all the major news (ECB Interest Rates, BOE Interest Rates, US Jobs figures) not due until later in the week I reckoned the start of this week would be quieter than a nun’s fart.

How wrong was I? Yesterday the FTSE fell 175 points, then pushed up 280 points. And so far today it has lost 80 points and is hovering very near Tuesday’s open. Right now, with FTSE at 6288, I’m not looking to go long or short. If the market falls back down to under 6100 I’d certainly be looking to buy (depending on the news flow of course). 6400 could be a sell but I’m always a little dodgy about selling into what is still (so far) a three-year bull run.

So, what to blog about in the mean time? Which hand-held gadget I’d like for my Birthday? Whether my baby girl has started teething yet? Nah, I’ve got a better idea. I’m gonna ask myself an enormously big and impossible to answer question – something really nasty. That way, when I’m half way through writing the answer and getting really bogged down I can kick myself. Hard.

I know, here’s a real stonker of a question: Is The Sub-Prime Crisis Over?

Like just about everyone else on the planet I can’t answer that – but hey, why should I let that stop me?

Let’s start with an estimate of how much the sub-prime crisis will cost. The number I’m starting with is from Big Ben – remember way back when in mid August when Big Ben Bernanke gave an estimate of $50bn to $100bn. I’ve looked back at all the news stories and I can’t tell whether he was talking about the US or the whole goddamn globe (apparently there are Americans who know there is a world outside of the USA – some of them even have passports). But I’m going to assume that, as Chairman of a US institution he was talking about the US.

Now let’s do a shopping list of what losses have been revealed in the US.

The above doesn’t include losses abroad such as German IKB’s $8bn whoopsy. Nor lots of others like the losses from the fall in mortage companies share prices or any of the losses stemming from the credit crunch. Infact to suggest these numbers are back-of-an-envelope is probably doing a disservice to envelopes everywhere.

However add them all together and you get a losses announced so far of $26bn. Which puts us only half way to Big Ben’s low-range estimate and a mere 25% of the way up to the top estimate. And bear in mind that some people in the press were saying $200bn was more realistic …

My point is that there are a lot more losses out there – and we still don’t know with whom or how much. While a lot of people are looking at Sept 18th for the next Fed Interest Rate decision, that day also sees Lehmans releasing the Q3 earnings. They’ll be followed by others, and while we all know to watch out for them and Bear Sterns the results from the likes of Morgan Stanly, Credit Suisse and Goldmans are going to tell us a lot about what the sub-prime shenanigans are really costing.

Can’t see volatility declining any time too soon …

May the markets be with you, homies.

Z