Where are the jobs?

What is the UK economy running on? What does that mean for stocks? Why does the Bank of England want to raise interest rates? The reasons are based on 'good' reasons (eg. GDP growth above trend, jobs growth beyond non-inflationary levels) but based on 'bad reasons' (excess borrowing and consumption).

My view is that higher interest rates compound the 'bad reasons' you are trying to solve instead of returning things to greater health. We were promised higher rates only when GDP growth could handle it.

Clearly growth is weak, look at the small jobs growth in the US to get an indication on that.

No, raising rates because someone is spending on a credit card in the world's fourth most expensive economy is not sensible. Deal with the problem. Making things more expensive is not the answer. We'll just borrow more. Raising rates because of credit card debt, when exporters are saying a higher sterling is not good for growth, when jobs figures, GDP figures do not suggest rude economic health, does not make sense.

For ADVFN readers who would like a free multi-media audio-visual CDROM - just send me an email with your name and address: alpesh.patel@tradermind.com . Also check out the ADVFN bookstore for all my CDROMs by searching under 'Alpesh'.

Stocks

So under this backdrop which stocks come on the radar? New 52 week lows include any number of stocks which could be bid targets due to poor performance: 3i (venture capital obviously taking time to get a return), Amvescap (a bid target - given poor performance?), Avis Europe, Collins Stewart, Cattles, Capital Radio, ICAP - among many, many others.

What about 52 week highs? Stocks, storming ahead: Alvis, Arriva, BAA, Carpetright, Minerva, SIG, Next.

So is there anything the lows have in common that is different to the highs? Not really. Both have a smattering of sectors. Both have financial stocks. There are roughly double the number of new lows as highs.

Yet interest rates rise. Bankruptcies are on the rise too. My point is that falling stocks are not a problem to hold despite rising rates which may have you thinking the economy must be booming. Equally, rising stocks exist, despite how few.

So, record oil prices pushing up costs. Hmmm, I know, we'll make things even more expensive by raising interest rates. You didn't think economics could make a trader hot under the collar did you?

Bottom line: hedge your portfolio by having 'shorts' - selling stocks falling and pick your longs from the ultra-strong few like Greggs the baker.