Employment and Major Construction

Employment and Major Construction

Trading Features / Strategies from Simon Denham of Capital Spreads.

A grim day on the exchanges yesterday as virtually everyone decided at the same moment that discretion was the better part of valour.

At one point in after hours dealing the FTSE 100 was being called 200 points down on the day but a late rally in the States last night means that this morning we are likely to open on the side of the angels with the early call being for a 20 point move to the upside on the open. The Dow turned a near 200 point fall into a 30 point rally after the Europeans had done their worst, shut off their screens and gone down the pub for a pint.

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We are in danger of talking ourselves into a real funk at the moment. Yes, prospects are not great but neither are they as bad as is being portrayed. Employment is still reasonably firm, the High Street is weak but, on a quick recce through the town centre last weekend, I could see no evidence of the resurgence of those ubiquitous ‘charity shops’ which always seem to spring up in vacant lots nor was there any evidence of ‘closing down’ sales in smaller retailers. The country is still in positive growth (just) and whilst most companies are not looking to increase headcount this is a long way from actually cutting. Aside from anything to do with retail, housing and banking small businesses are not going to the wall in the kind of numbers that would indicate a slump.

Times are going to get tough, no doubt, with a shrinking of discretionary spending numbers but many companies are doing very nicely. Major construction works are still on the up and there is, finally, a sense that the UK will be pushing through the major upgrades to the infrastructure that governments, of whatever hue, have avoided making decisions on for years in fear of upsetting voters. The creation of a major projects Quango, which can override local planners, with no requirement for ‘Public Inquiries’ has been needed for decades and will presumably push through the Nuclear, Coal, Rail, Road and Air developments that have sat on the sidelines for more than twenty years. We always ask “why does France have such great road and rail links?” the answer is that they can force through projects of national importance without reference to ‘Mr & Mrs Smith of 4a Nimby Crescent’ and often (gasp) without finding Great Crested Newts anywhere near the site. Gordon Brown is so unpopular now that he might as well push through the vital decisions as it is unlikely to make much difference now.

The above comments do not constitute investment advice and neither Capital Spreads nor Clean Financial accept any responsibility for any use that may be made of them.

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'Employment and Major Construction' edited by SD, updated 02-Jul-08

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