Armageddon : Are we living New Normal Times for Trading?

Posted on Sunday, June 21st, 2009 | In Market Commentary

Contributed by: Jim Musselwhite (http://www.straightstocks.com) -

By Guest Author: Andy Richardson

My sister went house hunting last week. She likes a Taylor Wimpey PLC new build development but the plot she would want has not been started. The site representative said that Taylor Wimpey would not start to build on that particular plot until the three existing houses have been sold. They are anticipating about 18 months. So much for green shoots in the housing market. An estate agent I spoke to the other day said how fast rents are falling in my area since so many repossessions are being rented out by the receivers instead of being sold at auction. The receiver gets paid, the mortgage company gets some income and the tenant gets a home with an affordable rent.

I had a hard look at some ‘Industrials’ over the past couple of days. CHTR is a very well managed company yet its last trading announcement was dire. Looking at the underlying reason for the statement I think all Engineers/Industrials will have worse earnings figures next year compared this year. Kenz is a possible exception.
A new trader who had been trading for 7 months asked me wondering if the current market was the right time to start learning (in terms of difficulty).
Are ‘normal times’ just more predictable than they are now?
The last 7 months have been far from normal and, as I sit here and read that Brown is demanding an emergency plan to stop oil wrecking recovery, I wonder about the future. What emergency plan can Brown have? There is simply a conflict of interest between the needs of the oil producing countries and everyone else. Nothing new there but suddenly it is more critical than it was, say, 5 years ago. Brown believes the G20 missed a trick to put in place measures to stabilise the oil price when it fell to $35 earlier this year. Why did they miss that trick? I suggest because there is nothing the rest-of-the-world can do. And they know it.

I am still phased by the rational arguments being made for Armaggeddon in the markets. These are not isolated and one has to respect that the gloomsters were warning us that the good times were over long before we were willing to listen. Fundamentally things are far worse now. Technically Armageddon is still on the cards.

It is this uncertainty that makes things ‘not normal’. When I started trading one could hunt for good companies that had been sold-off or that were lagging their sector; now it’s more like a lottery.
We are definitely not living in normal times in the trading sense however I also think I think we are approaching a new normal times. The new normal could be long term higher borrowing costs, lower employment, cheaper housing costs, lower equity and commodity values, higher overall taxation, lower government/local authority spending and slower GBP growth when it eventually returns. I think the new normal will be GDP growth in line with inflation growth – held back by lower wages and commodity prices but fueled by printing money.
When the time is right I will buy and hold but for now I think the Armageddon scenario is the more likely outcome so I will just continue to take what I consider to be high probability low risk spread betting trades.

Looks like CEY holders will have a good open Monday. Nice. Frankly, if it’s really able to mine 200k oz gold ramping up to 500k in 2012 with 15 years of production…the only question is why it is so cheap. Beats me.

Spread Trader is the nom-de-plume of Andy Richardson a UK based spread trader, who like his inspiration, the late Jesse Livermore is a student of the markets and plays a lone hand. Resident financial spread betting expert Andy publishes a spread betting guide where one can find objective spread trading information.