So after two years or so I’m parting ways with spread betting. This is for a number of reasons but mostly because I suck at spread betting. Being honest spread betting is possibly the most challenging thing that I have ever done. It challenged me mentally, emotionally and personally and all of these impacted me more than I foresaw.

Rather than coming up with a lot of excuses about why spread betting is evil I would like to explore why it didn’t work for me. I started off well which was a bad thing. This gave me a false sense of success that amplified my arrogance. Lets face it most spread bettors are arrogant and you need it as a tool to survive. Having made some decent profits I shorted the greatest rally in recent history and lost impressively. The reasons I lost was not because the US government did this that or the other but simply because I was unwavering in my belief that the markets were overbought. I refused to adapt.

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There is potential to exploit every disaster for financial gain. The catastrophic failings of BP recently have pummeled their share price and left it down 40%. The British oil giant has said that the costs have already reached $2 billion for the botched cleanup and additionally 100,000 barrels a day are reported to be leaking. Weekend reports also stated that the company could be trying to raise up to $50 billion in asset sales.

Meanwhile Tony Hayward is getting his life back together and enjoying some weekend yacht races. This hasn’t gone down well and his handling of the PR side of things has been “How Not To” guide book. This hasn’t helped BPs share price and his lack of remorse and sincerity has badly damaged the companies reputation. In a last minute attempt to salvage what’s left of their reputation SkyNews reported that Tony Hayward will lose control of the company’s operations and that Bob Dudley will now take over.

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I guess that it has been quite a while since my last post. March has come and gone and my December forecasts of a step down in March were well off. In fact the opposite has happened which is normal according to sod’s law.

I’m just going to note some of my observations and what I have been following for the past few months. Banks have been of a keen interest to me with Allied Irish Banks and Bank Of Ireland offering more than a roller coaster ride for those who can stay up with the upgrades, downgrades and rumours. Approximately two weeks ago AIB were down at .90 cents and I have been very disciplined in entry points with .80 cent being my target. I don’t believe for a second that we have seen the last of the bad news and this would be a short term trade. However I missed the boat as .90 was the low and we are now back at over 1.50 with a recent dip but renewed strength. Short term outlook is very positive for the stock but long term I see renewed weakness.

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I’m away for the Christmas holidays and looking forward to the break. I haven’t traded recently and have no intention of doing so until the New Year. My supposition is still that after a Christmas rally which could take the FTSE 100 to 5,500 there will be a slow down in January and cliff dive in March 2010 (4,500 FTSE100).

The fundamentals still don’t add up and once the Christmas spirit has worn off the hangover could start to kick in. Many will say this is just the perma-bear in me but I have been patiently following the markets recently and waiting for my entry. The FTSE 100 has been struggling at these heights and whilst there are good indicators my common sense approach i.e. what I see in the shops tells me that year end isn’t going to see stellar growth and usher in a new wave of spending.

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Fundamentals have been thrown out the window and technical analysis over the past few months have been at best a frustrating black art. With the dollar being hammered left, right and centre gold has raced past the $1,000 mark and is now steaming ahead with very little resistance.

The gold play seems to be re-enforcing the systematic devaluation of the dollar and as the dollar drops equity risk taking rises. This seems to be the stable and reliable trade till the year end. With inflationary pressures under way and China urging the US to increase rates the FED are in a tough spot. Jobless figures have eased but not to the extend that an improvement can be measured or to the extent that job creation is on the cards.

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There has been a huge amount of speculation over the end of the recession and the V shaped recovery that may ensue. The apprehension in the market comes from the uncertainty of the fourth quarter this year and how the Christmas shopping season will pan out. From my vantage point I see what could be the basis of a good recovery but then a set of figures comes out like the US monthly consumer credit report which adds to the doubt in my mind. I can’t balance the equation of rising unemployment, consumer retrenchment with rising corporate profits and runaway equity prices.

I think the resilience of the consumer is something that can’t be underestimated. The fact that consumers have been enduring economic turmoil for over a year now may also create the need for an emotional break in for form of splurging at Christmas. For this reason I think spending will hold up into the shopping season and whilst consumers are savvier and shrewder I believe that most will let their hair down over the holiday period and ignore the perils till next year.

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It’s been a few months since I last traded and the reasons are many. The reason I still haven’t traded is one of time and confidence. On the time front I have a heavy workload and a fantastic newborn son to play with. Both of these are keeping me for giving a 100% to my market analysis but I’m not complaining. This time away has taught me more about relaxing, patience timing and the markets ability to surprise. It’s been time well spent.

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I am getting back into the daily news and trying to get my focus back on the markets. It’s another earnings season and with that we can expect some good beats and some scary misses. The interesting thing will be if we can push the markets higher or sink back lower when all is said and done. Personally I think we will escape flat to slightly higher once the earnings are over and this will leave us time for a nice Christmas rally. Yeah I’m already thinking of the Christmas rally. Every year it has taken me for a ride but maybe this year I should sit it out and save some cash.

The rally so far has taken on many new subscribers with me included. Many of the perma-bears have shed their coat and are now wearing a nice new
bull skin. I had thought that the fundamentals would have put the breaks on the markets but then lots of little things kept improving. This morning is a case in point as UK house prices rise for the first time in 16 months. All this little signs have fed the most amazing and unprecedented rally in recent history. Hindsight has clearly shown us that the March lows were very oversold but the current pricing in of growth is in my humble opinion overly exuberant. Somewhere in between these two extremes lies the perfect market price. However that’s not my concern, in the past this would have swayed my view but now I’m just watching the trend and not questioning the greed.

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