It has been strange and somewhat bizarre in markets and life. We have chosen a brain-dead approach to things (and stop writing) than to feel constantly gaslighted as we have been in recent years. Not just by woke geopolitics but by mad market developments in meme stonks, NFTs, Ozempic, and now A.I., such that Donald Trump’s return and actions make things feel back to normal and a life before our now-defunct pronoun(s).

All this time, we have been spending an inordinate amount of time searching for that elusive asteroid like Nibiru, meteors, volcanoes, earthquakes and Carrington-event solar flares to end life on earth. We will be happy to share our Twitter/X list with the reader, as we have come to conclude that perhaps we should surrender and accept this as our new normal in trading. Yes, bonds rise on tariff fears, then crash on tariff fears, and chop around on tariff fears along with the dollar, yen, gold and bitcoin.

How did we get here? That may be a story for another day. For now, let us embark on a short introspective on the new normal in trading, and by that, we mean trading the markets—just about anything except, quite obviously, manipulated products like crypto and NFTs, an opinion that we beg to differ on.

Over a quarter century ago, we evoked vague memories of the trading simulation game in the management trainee programme in the outskirts of London where we were partnered up and had to trade forex. We won because it was all too simple, and the fastest, consistent finger wins. UK GDP up, buy cable; retail sales down, sell cable; BoE hikes, buy cable, etc.

Then, we were assailed by success stories of the fabled trader who cornered JGB markets and sunbathed on the beaches of the Bahamas while they unwound his positions or the notorious chap who made a killing on the Bank of Thailand’s interventions during the Asian crisis—both still living in their GCBs in town. But our favourite story was the graph paper guy who would not be remembered except by us and our friend who shared the story with us.

Mr Graph Paper was an even “older” timer who was self-employed in the 80s to 90s, who had managed to send three children to the States on like 30 or 50 or 100 feet of graph paper, of all things. Our friend was then selling forex data and trading tools (which was nothing more than charts) for a provider that no longer exists if names like Knight Ridder and Telerate ring any bells. Old chap had been painstakingly plotting candlesticks on graph paper for over a decade, glueing those sheets together to get charts that we summon with just a click and trading his way (probably from a land line phone) to a GCB and more.

And thus began our lifelong search for the holy grail of trading. How we marvelled at the old chaps with their Ichimoku charts, Fibonacci and who can forget the day we discovered the clandestine and exclusive club of DeMark that required a separate subscription on Bloomberg, which are all but perhaps obsolete on their own in this current day, begetting the question of how different is DeMARK now from graph paper then?

For all the possible charts and indicators and signals anyone has up their sleeves has been tested and back-tested, to be used or not deployed by the big data algos out there. Trading will never be the same again as it evolves at an accelerated rate that even MetaTrader cannot keep pace with.

Yet success is not guaranteed even for algos as we evolve to A.I., and we admit some of the A.I. bond prices we see these days are so out of whack that some naughty A.I.s deserve a spanking.

The fundamental truth is that the market machinery has changed.

The players: Markets used to be an exclusive club of banks, non-bank financial institutions, pension funds, macro hedge funds and sovereign wealth funds and such. Now, we are looking at algo funds like CTAs and HFTs, family offices, retail/private banks, even more sovereign funds, central banks, A.I. funds, robo-investors and more.

The products: Confounding array of products and more products that we even have ETFs for trending hedge fund strategies (one aptly named Baboon) and need we even talk about how FANGMAN have become big enough to influence Bitcoin or is it the other way? Derivatives on everything and double triple leverage on everything has changed the game.

The analysis: Fundamentals are obsolete, says meme stonks, and market cap indexing means all of us own Tesla these days. It is pretty much pointless doing the daily charts on forex when a tariff headline can change sentiments. Hedge funds are paying millions for weather modellers because we all know what happened to USDJPY after the Great Tsunami. It is futile to analyse when the BoJ owned 70 per cent of all Japanese ETF assets just as the recent G9/erman QE announcement is changing the game.

The tech: Fastest fingers means the fastest cable to the stock market hardware because the nanoseconds in speed make the difference to Flash Boys. Citadel pays Robinhood for “order flow” data and trading software can now even sense where your mouse hovers these days. Bring in the A.I. and algos, and it doesn’t matter if your analysis is right because if everyone is on the same side, it will be harder to stay solvent longer than markets can remain irrational, to paraphrase Keynes. Closer to home, how does a bond trader price a bond versus a machine that has the prices of 250,000 bonds out there to match for relative value?

The correlations and index-investing: Repeat after us, Risk On, Risk Off. The world has moved to a Risk On, Risk Off mode since the concept of QE in 2008. Things will never be the same again with the Fed put and bailouts since Covid. To simplify the situation for the layman, index-investing is now the mainstay. Who cares about zombie companies that short sellers target? Short-seller Jim Chanos gave up in 2023 and Hindenburg Research just shuttered this year. Asset prices now move as a basket/index; we are just waiting for them to commoditise real estate on blockchain or something where a building’s value can be marked to market daily, along with interest rates, bond prices and all. The correlations make it impossible for, say, a good bond trader to be oblivious to the rest of the market/indices and not be able to hedge a position with equity options, just saying.

The platforms: Forget Robinhood and Citadel; they know everything you do. Too Big to Fail (TBTF)—since the GFC/Lehman crisis, some players or assets have become too big to fail. Now we have dark pools called “private rooms” within dark pools, as reported by Bloomberg this week. This is on top of private exchanges sprouting up with private equity and credit (and their ETFs) thrown in to add a multitude of layers to the investing/trading correlation landscape.

Yes, countries are technically bankrupt, but the US is TBTF. Since the GFC and then Covid, we have seen the largest transfer of wealth in history as governments bankrupt themselves from debt and QE to the private sector and stock buybacks. (Not an empty statement; please refer to Ray Dalio.) And stock buybacks drive EPS (less stock means higher EPS), which means higher stock prices correlated to bonds, rates, forex and commodity indices.

The new normal is here whether we like it or not but we will not be a casualty of The Game yet as we toy with new concepts of behavioural finance in markets and such. You see, Buffet was a great stock picker when that was all The Game was about and although now The Game is all about The Flows and Front-running the Machine, Buffet is still around because he is not a trader and does not need to worry about the flows and the algos.

As for traders, you know the drill. Graph paper is out!