Is it 2009 All Over Again?

I’ve heard several allusions to the fact that, economically at least, it’s the 1970s all over again. Judging from the plethora of charity shops, pawnbrokers, and the ‘we weigh your old rags and pay you cash’ clothes banks populating the high street, not to mention the regular appearance of the ‘any old iron’ modern-day Steptoe-and-Son driving around our town, I can well believe that it is the 1970s all over again.

Just recently, though, I’ve been thinking it’s 2009 all over again, with all the eurozone economic pessimism and stock markets falling like stones recently. More specifically, I’ve noticed that several of my actual or potential “position trade” stocks are heading towards or have already surpassed price levels last seen in the depths of the 2009 gloom. Here are a couple of examples.

One thing this demonstrates is that when the stock markets were rocketing during 2009 and 2010 we need not have fretted too much about “missing out”. If it is 2009 all over again, it may be time to take a second bite of the cherry. I hope so, because it was the bounce-back from the 2009 lows that netted me a nice 3000% leveraged return.

It’s 2009 all over again, or is it?

Actually, I’m not so sure that it is 2009 all over again, as a cursory inspection of the FTSE 100 chart reveals:

If Greece goes down and Spain blows up then the FTSE 100 has a long way yet to fall to fully mirror the depths of the 2009 despair.

For some specific stocks it’s definitely not 2009 all over again, and they’re in rude health price-wise. One of the best examples of which is IP Group:

Has this stock now “topped out” and will fall like a stone if the Eurozone implodes or explodes? Or is its resilience in the face of the recent rediscovered economic gloom a sign of even better things to come if the worst doesn’t happen?

Which way from today?

Mr. Market seems to be in two minds, and so am I.

On the one hand we’re back in recession, and some stocks are near to their 2009 low prices. But the worst possible Eurozone disaster may be already “priced in” such that the latest FTSE fall may have run its course, and now is the time to back up the truck to “buy on the dip”.

On the other hand, something is keeping the FTSE up way above its 2009 low point despite the clear and present danger of a Grexit (Greek exit) and the well-documented potential consequences. If the Mediterranean music stops, even those stocks that are back near their previous low prices could go even lower. And the gloom-busting companies like IP Group could go with them.

So the question I’d like to ask Mr. Market is: which way from today? With the European situation necessarily coming to a head sometime soon, he can’t keep me guessing for very long.

Tony Loton is author of the books “Stop Orders” published by Harriman House and “Position Trading” (Second Edition) published by LOTONtech.