central banks

Americans hunker down on spending as the pandemic’s impact continues

US stock markets have been hitting new records recently, as investors swoon over the likelihood that the $1400 stimulus payments will power a major surge in consumer spending. But unfortunately, the facts show this is most unlikely. The chart from the New York Federal Reserve measures consumers’ intentions with regards to the 3 stimulus cheques

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Americans hunker down on spending as the pandemic’s impact continues Read More

Rising US interest rates, US$ and oil prices set to pressure financial markets

Everyone who has ever played the Beer Distribution Game on a training course knows what is happening in supply chains today. A small increase in underlying demand is rapidly leading to a massive increase in ‘apparent demand’. As the New York Times reports, “the pandemic has disrupted every stage of the (supply chain) journey.”  And

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Rising US interest rates, US$ and oil prices set to pressure financial markets Read More

China’s property sector is at the epicentre of the crisis

A branch of Centaline Property Agency in Hong Kong © Bloomberg Indebted Chinese property developers threaten a domino effect on western credit markets , as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Second-order impacts are starting to appear as a result of China’s lockdowns. These are having

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Chart of the Decade – the Fed’s support for the S&P 500 will end with a debt crisis

Each year, there has been only one possible candidate for Chart of the Year.  Last year it was the collapse of China’s shadow banking bubble; 2017 was Bitcoin’s stratospheric rise; 2016 the near-doubling in US 10-year interest rates; and 2015 the oil price fall. This year, the ‘Chart of the Decade’ is in a league

Chart of the Decade – the Fed’s support for the S&P 500 will end with a debt crisis Read More

Companies ignore the Perennials 55+ generation at their peril

Nearly a third of the the world’s High Income population are now in the Perennials 55+ generation. Yet companies mostly ignore their needs – assuming that all they want are walking sticks and sanitary pads.  Instead, they continue to focus on the relatively declining number of younger people. No wonder many companies are going bankrupt, and

Companies ignore the Perennials 55+ generation at their peril Read More

Smartphone sales decline begins to impact global stock markets

The bad news continues for the world’s smartphone manufacturers and their suppliers.  And President Trump’s decision to add a 25% tariff on smartphone component imports from China from June 25 is unlikely to help. Morgan Stanley estimate it will add $160 to the current US iPhone XS price of $999, whilst a state-backed Chinese consumer boycott

Smartphone sales decline begins to impact global stock markets Read More

Ageing Perennials set to negate central bank stimulus as recession approaches

The world’s best leading indicator for the global economy is still firmly signalling recession.  That’s the key conclusion from the chart above, showing latest data on global chemical industry Capacity Utilisation (CU%) from the American Chemistry Council. The logic behind the indicator is compelling: Chemicals are one of the world’s largest industries, and also one

Ageing Perennials set to negate central bank stimulus as recession approaches Read More

Fed’s magic money tree hopes to overcome smartphone sales downturn and global recession risk

Last November, I wrote one of my “most-read posts”, titled Global smartphone recession confirms consumer downturn. The only strange thing was that most people read it several weeks later on 3 January, after Apple announced its China sales had fallen due to the economic downturn. Why did Apple and financial markets only then discover that smartphone sales

Fed’s magic money tree hopes to overcome smartphone sales downturn and global recession risk Read More

“What could possibly go wrong?”

I well remember the questions a year ago, after I published my annual Budget Outlook, ‘Budgeting for the Great Unknown in 2018 – 2020‘.  Many readers found it difficult to believe that global interest rates could rise significantly, or that China’s economy would slow and that protectionism would rise under the influence of Populist politicians. […]

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“What could possibly go wrong?” Read More

Boomer SuperCycle unique in human history – Deutsche Bank

“The 1950-2000 period is like no other in human or financial history in terms of population growth, economic growth, inflation or asset prices.” This quote isn’t from ‘Boom, Gloom and the New Normal: How Western BabyBoomers are Changing Demand Patterns, Again‘, the very popular ebook that John Richardson and I published in 2011.  Nor is […]

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Boomer SuperCycle unique in human history – Deutsche Bank Read More

Why everyone ignored my warnings ahead of the financial crisis

It’s 10 years since my forecast of a global financial crisis came true, as Lehman Brothers collapsed.  I had warned of this consistently here in the blog, and in the Letters column of the Financial Times. But, of course, nobody wanted to listen whilst the party was going strong.  As the FT’s world trade editor wrote […]

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High-flying “story stocks” hit air pockets as credit finally tightens

“Nobody could ever have seen this coming” is the normal comment after sudden share price falls.  And its been earning its money over the past week as “suddenly” share prices of some of the major “story stocks” on the US market have hit air pockets, as the chart shows: Facebook was the biggest “surprise”, falling […]

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High-flying “story stocks” hit air pockets as credit finally tightens Read More

The blog’s 14th birthday – and the New Normal world it predicted has arrived

The blog has now been running for 14 years since the first post was written from Thailand at the end of June 2007.  And quite a lot has happened since then: There was the 2008 financial crisis, one of the blog’s early forecasting successes This led to the publication of ‘Boom, Gloom and the New

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The blog’s 14th birthday – and the New Normal world it predicted has arrived Read More

Time to recognise the economic impact of ageing populations

Is global economic growth really controlled by monetary policy and interest rates?  Can you create constant growth simply by adjusting government tax and spending policy?  Do we know enough about how the economy operates to be able to do this?  Or has something more fundamental been at work in recent decades, to create the extraordinary […]

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Time to recognise the economic impact of ageing populations Read More

Financial markets party as global trade wars begin

More people left poverty in the past 70 years than in the whole of history, thanks to the BabyBoomer-led economic SuperCycle.  World Bank and OECD data show that less than 10% of the world’s population now live below the extreme poverty line of $1.90/day, compared to 55% in 1950. Globalisation has been a key element in […]

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Financial markets party as global trade wars begin Read More

Oil prices flag recession risk as Iranian geopolitical tensions rise

Today, we have “lies, fake news and statistics” rather than the old phrase “lies, damned lies and statistics”. But the general principle is still the same.  Cynical players simply focus on the numbers that promote their argument, and ignore or challenge everything else. The easiest way for them to manipulate the statistics is to ignore […]

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Oil prices flag recession risk as Iranian geopolitical tensions rise Read More

Chemicals flag rising risk of synchronised global slowdown

Chemicals are easily the best leading indicator for the global economy.  And if the global economy was really in recovery mode, as policymakers believe, then the chemical industry would be the first to know – because of its early position in the value chain. Instead, it has a different message as the chart confirms: It […]

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West’s household spending heads for decline as population ages and trade war looms

As promised last week, today’s post looks at the impact of the ageing of the BabyBoomers on the prospects for economic growth. The fact that people are living up to a third longer than in 1950 should be something to celebrate.  But as I noted in my Financial Times letter, policymakers are in denial about the importance of […]

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West’s household spending heads for decline as population ages and trade war looms Read More

West faces “demographic deficit” as populations age

Rising life expectancy, and falling fertility rates, mean that a third of the Western population is now in the low spending 55-plus age group.  Given that consumer spending is around two-thirds of the economy in developed countries, the above charts provide critically important information on the prospects for economic growth. They show official data for household […]

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West faces “demographic deficit” as populations age Read More

China’s role in market volatility – Beijing’s shifting priorities raise questions over assumptions of global growth

Commentators have confused cause with effect when analysing this month’s sudden downturn in financial markets, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Surprise and confusion seem to have been the main reactions to this month’s sudden downturn in western financial markets. Yet across the world in […]

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China’s role in market volatility – Beijing’s shifting priorities raise questions over assumptions of global growth Read More

Economy faces slowdown as oil/commodity prices slide

Oil and commodity markets long ago lost contact with the real world of supply and demand. Instead, they have been dominated by financial speculation, fuelled by the vast amounts of liquidity pumped out by the central banks.  The chart above from John Kemp at Reuters gives the speculative positioning in the oil complex as published […]

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Economy faces slowdown as oil/commodity prices slide Read More

London house prices risk perfect storm as interest rates rise

2000 should have been the natural end of the BabyBoomer-led economic SuperCycle. The oldest Boomer (born in 1946) was about to leave the Wealth Creator 25 – 54 age group that drives consumer spending and hence economic growth.  And since 1970, Boomer women’s fertility rates had been below replacement level (2.1 babies/woman).  So relatively fewer young people were […]

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London house prices risk perfect storm as interest rates rise Read More

The global economy and the US$ – an alternative view

Every New Year starts with optimism about the global economy.  But as Stanley Fischer, then vice chair of the US Federal Reserve, noted back in August 2014:  “Year after year we have had to explain from mid-year on why the global growth rate has been lower than predicted as little as two quarters back.” Will […]

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The global economy and the US$ – an alternative view Read More

US Treasury benchmark yield heads to 4% as 30-year downtrend ends

The US 10-year Treasury bond is the benchmark for global interest rates and stock markets.  And for the past 30 years it has been heading steadily downwards as the chart shows: US inflation rates finally peaked at 13.6% in 1980 (having been just 1.3% in 1960) as the BabyBoomers began to move en masse into the […]

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US Treasury benchmark yield heads to 4% as 30-year downtrend ends Read More

Chart of the Year: Bitcoin, the logical end for stimulus policies

Last year it was the near-doubling in US 10-year interest rates.  In 2015, it was the oil price fall.  This year, there is really only one candidate for ‘Chart of the Year’ – it has to be Bitcoin: It was trading at around $1000 at the start of 2017 and had reached $5000 by August […]

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Chart of the Year: Bitcoin, the logical end for stimulus policies Read More

Central banks’ reliance on defunct economic theory makes people worry their children will be worse off than themselves

“Average UK wages in 2022 could still be lower than in 2008”  UK Office for Budget Responsibility While Western stock markets boom under the influence of central bank money-printing, wages for ordinary people are not doing so well.  So it is no wonder that Populism is rising, as voters worry their children will be worse […]

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Central banks’ reliance on defunct economic theory makes people worry their children will be worse off than themselves Read More

Budgeting for the Great Unknown in 2018 – 2020

“There isn’t anybody who knows what is going to happen in the next 12 months.  We’ve never been here before.  Things are out of control.  I have never seen a situation like it.“ This comment from former UK Finance Minister, Ken Clarke, aptly summarises the uncertainty facing companies, investors and individuals as we look ahead […]

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Budgeting for the Great Unknown in 2018 – 2020 Read More

The Great Reckoning for policymakers’ failures has begun

Next week, I will publish my annual Budget Outlook, covering the 2018-2020 period. The aim, as always, will be to challenge conventional wisdom when this seems to be heading in the wrong direction.  Before publishing the new Outlook each year, I always like to review my previous forecast. Past performance may not be a perfect […]

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The Great Reckoning for policymakers’ failures has begun Read More

Chemical industry data shows reflation remains hope, not reality

Western central bankers are convinced reflation and economic growth are finally underway as a result of their $14tn stimulus programmes.  But the best leading indicator for the global economy – capacity utilisation (CU%) in the global chemical industry – is saying they are wrong.  The CU% has an 88% correlation with actual GDP growth, far […]

Chemical industry data shows reflation remains hope, not reality Read More

Political risk and interest rates rise in US, UK and Japan, as debt and dysfunctionality grow

It was almost exactly 10 years ago that then Citibank boss, Chuck Prince, unintentionally highlighted the approach of the subprime crisis with his comment that: ‘We are not scared. We are not panicked. We are not rattled. Our team has been through this before.’ We are ’still dancing’.” On Friday JP Morgan’s CEO, Jamie Dimon, […]

Political risk and interest rates rise in US, UK and Japan, as debt and dysfunctionality grow Read More

“Exponentially rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways”

Companies and investors have some big decisions ahead of them as we start the second half of the year.  They can be summed up in one super-critical question: “Do they believe that global reflation is finally now underway?” The arguments in favour of this analysis were given last week by European Central Bank President, Mario Draghi: […]

“Exponentially rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways” Read More

Metastable markets at risk from impact of US, UK political stalemate

We are living in very uncertain times, where the only certainty is that there is no “business as usual” option for the future.  One sign of this is that the extraordinary has become ordinary : □   The FBI appear convinced Russia’s government targeted last year’s US elections: US President Trump and his former FBI head […]

Metastable markets at risk from impact of US, UK political stalemate Read More

UK consumers face difficult times as Brexit unwinds the housing bubble, and financial services de-cluster out of London

Brexit negotiations are likely to prove a very uncomfortable ride for UK consumers as Russell Napier of Eric, the online research platform, warned last week: □  ”Public sector debt remains at near-historic highs (in peace time!) and for the first time this public sector debt comes with a private sector bubble □  Credit card debt […]

UK consumers face difficult times as Brexit unwinds the housing bubble, and financial services de-cluster out of London Read More

Chemical industry flags rising risk of global recession in 2017, with Trump set to “clear the decks” at the start of his first term

The chemical industry is the best leading indicator that we have for the global economy.  It has an excellent correlation with IMF data, and also benefits from the fact it has no “political bias”.  It simply tells us what is happening in real-time in the world’s 3rd largest industry. Sadly, the news is not good. […]

Chemical industry flags rising risk of global recession in 2017, with Trump set to “clear the decks” at the start of his first term Read More

Fault-lines open connecting the debt-fuelled ‘Ring of Fire’

Next week, I will publish my annual Budget Outlook, covering the 2017-2019 period. The aim, as always, is to challenge conventional wisdom when this seems to be heading in the wrong direction: The 2007 Outlook ‘Budgeting for a Downturn‘, and 2008′s ‘Budgeting for Survival’ meant I was one of the few to forecast the 2008 […]

Fault-lines open connecting the debt-fuelled ‘Ring of Fire’ Read More

Oil markets enter the “post-fact economy”, where details of supply/demand no longer seem to matter

Once upon a time, oil markets were based on facts.  Producers and consumers focused on trying to understand what “would” happen”, whilst the speculators placed their bets on what “could” happen. In those days – even 20 years ago, as the chart shows – the role of the speculators on the futures markets was very […]

Oil markets enter the “post-fact economy”, where details of supply/demand no longer seem to matter Read More

Central banks defy slowing global economy by destroying markets’ power of price discovery

Markets have one main function in life – price discovery.  If I want to buy, and you want to sell, the existence of a market allows us to discover the price at which the market will balance in terms of supply and demand. History, however, provides many examples of times when rulers decided they knew […]

Central banks defy slowing global economy by destroying markets’ power of price discovery Read More

Central bankers create debt, not growth, by ignoring demographic reality

The world’s 4 main central bankers love being in the media spotlight.  After decades climbing the academic ladder, or earning millions with investment banks, they have the opportunity to rule the world’s economy – or so they think. But their background is rather strange preparation to take on this role – even if it was […]

Central bankers create debt, not growth, by ignoring demographic reality Read More

6 impossible things not to believe about oil before breakfast

 ”Sometimes I’ve believed as many as six impossible things before breakfast.” Oil traders know how the Queen felt in Lewis Carroll’s famous book, Alice Through the Looking-Glass.  The list of impossible things that they are being asked to believe grows almost by the day:   Last week, prices jumped 4% on the basis that strong […]

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Investors panic in “search for yield” as interest rates go negative

Its been a great few months for financial markets.  All the major markets have seen gains, as the chart shows – something that has happened only once before, since my half-yearly reviews began in March 2009: □   Long-term US Treasury bonds have gained, as long-term interest rates have been falling □   The 30-year bond […]

Investors panic in “search for yield” as interest rates go negative Read More

You’ve seen the Great Unwinding; get ready for the Great Reckoning

Companies and investors now need to prepare for the Great Reckoning, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog We have reached the second anniversary of the Great Unwinding of policymaker stimulus. Almost inevitably, this now seems likely to be followed by a Great Reckoning, a consequence […]

You’ve seen the Great Unwinding; get ready for the Great Reckoning Read More

Suspense rises as Great Unwinding becomes the Great Reckoning

“There is a distinct difference between “suspense” and “surprise.”  Alfred Hitchcock It is now 2 years since the start of the Great Unwinding of policymaker stimulus.  On 15 August 2014, Brent was at $105/bbl, and the US$ Index was at 81. Since then, as the chart shows, Brent oil prices have fallen 53%, whilst the […]

Suspense rises as Great Unwinding becomes the Great Reckoning Read More

Bank of England’s new stimulus policy creates bankruptcy risk for corporate pension funds

The Western BabyBoomers (born between 1946-70), have been one of the luckiest generations in history.  By and large, they have escaped the major wars that have plagued society down the ages.  They have also lived in a world where living standards and material wealth have made astonishing gains.  Equally priceless has been the rise in […]

Bank of England’s new stimulus policy creates bankruptcy risk for corporate pension funds Read More

Investors fear Fed’s outdated theories have hit sell-by date

These are difficult times for companies and investors.  It is becoming more and more apparent that central bank stimulus policies have failed to counter today’s demand deficit, caused by ageing populations.  It is also clear that central bankers themselves have little idea of what is happening in the real economy. They have based their programmes […]

Investors fear Fed’s outdated theories have hit sell-by date Read More

Chemicals, the “flea on the tail of the currency/interest rate dog”

Markets are becoming increasingly chaotic, as the world’s major central banks each try to devalue their currencies. They have created a traders’ paradise, with oil on a particularly wild ride.  But this has not been based on supply/demand fundamentals.  Instead, it has been due to hedge funds jumping back into the commodities market. They don’t […]

Chemicals, the “flea on the tail of the currency/interest rate dog” Read More

Oil market rally under threat as Doha meeting fails to agree

Yesterday’s failure of the Doha oil producers meeting will hopefully reintroduce a note of sanity into oil markets.  After all, Saudi leaders have made it clear, time and time again, that they were no longer interested in operating a cartel where they take the pain of cutting production, and everyone else gains the benefit of […]

Oil market rally under threat as Doha meeting fails to agree Read More

Oil market speculators profit as central banks hand out free cash

Oil markets are entering a very dangerous phase.  Already, many US energy companies have gone bankrupt, having believed that $100/bbl prices would justify their drilling costs.  Now the pain is moving downstream. The problem is the central banks.  Hedge funds have piled into the oil futures markets since January, betting that there would be lots […]

Oil market speculators profit as central banks hand out free cash Read More

If only the central banks could print babies

The Financial Times has kindly printed my letter below, arguing that central bank stimulus can’t restore growth to previous Super Cycle levels. Sir, John Plender’s excellent analysis “Central banks’ waning credibility is the real threat to confidence” (Insight, February 17) highlights the need for a new narrative to explain the economic slowdown of recent years. […]

If only the central banks could print babies Read More

US incomes have plateaued since 2001 as Boomers turn 55+

More and more people are lining up to support our argument that central bank stimulus programmes are damaging the economy, not helping it.  The latest is bond guru Bill Gross, who wrote yesterday: “Zero bound interest rates destroy the savings function of capitalism….(whilst companies) have plowed trillions into the financial economy as they buy back […]

US incomes have plateaued since 2001 as Boomers turn 55+ Read More

Financial markets head towards chaos as Great Unwinding continues

Financial markets are slowly descending into chaos.  The process began in China over the summer, and has now started to impact Wall Street and other developed markets as the Great Unwinding of policymaker stimulus continues. The problem is that successful investment, whether in financial or chemical markets, requires the combination of A clear understanding of […]

Financial markets head towards chaos as Great Unwinding continues Read More

Economic impact of ageing populations is obvious, but ignored

Too many policymakers, companies and investors are continuing to ignore the dramatic changes taking place in the age profile of the global population.  Yet common sense tells us these must have a major impact on the economy.  The impact comes from 2 equally important developments: One is the rise in the number of people in the New […]

Economic impact of ageing populations is obvious, but ignored Read More

US watchdog warns on today’s “quicksilver markets”

What could go wrong in today’s financial world?  Many stock markets in the West are hitting new highs, and central banks are promising they will do nothing to spoil the party.  But as Gillian Tett of the Financial Times warned on Friday: “Before anyone gets too thrilled about equities, they should read a sobering research document from […]

US watchdog warns on today’s “quicksilver markets” Read More

Fertility rates have collapsed in the world’s 10 largest economies

One of the great myths of our time is that the world’s population is inevitably growing.  Almost everyone has heard that the population is certain to reach 9bn by 2050, from today’s 7.3bn. Yet births in 2013 in the G7 economies (almost half of the global economy) were at the lowest level since the Great Depression year […]

Fertility rates have collapsed in the world’s 10 largest economies Read More

Market volatility highlights dangers for Q2

Today’s market conditions are some of the most dangerous that I can ever remember. Of course, markets are always unpredictable.  As UK prime minister Harold MacMillan noted in the 1960s, when asked what kept him awake at nights.  “Events, dear boy, events”.  But today’s markets have a 3-dimensional unpredictability: They have the normal issue of trying to understand fundamental levels […]

Market volatility highlights dangers for Q2 Read More

Rising life expectancy enabled Industrial Revolution to occur

Living standards have risen 20-fold over the past 200 years.  Yet they rose just 3-fold over the previous 800 years.  What enabled this dramatic change to take place? The key event was clearly the Industrial Revolution.  As Andy Haldane, chief economist at the Bank of England, notes in a thought-provoking new paper: “In explaining rising living standards since […]

Rising life expectancy enabled Industrial Revolution to occur Read More

Deflation gains: China’s plastics market sees over-capacity

More and more commentators are beginning to recognise that deflation is becoming inevitable in many major economies: China’s producer prices fell -4.3% last month, and its consumer prices rose just 0.8% Eurozone consumer prices fell in December to -0.2%, and are likely to have fallen further in January US prices rose just 0.8% in December and are […]

Deflation gains: China’s plastics market sees over-capacity Read More

“Houston, we have a problem!”

Suddenly, far too late, the world is catching up with reality.  Goldman Sachs and others yesterday halved their forecast for Brent oil to $42/bbl from $80/bbl.  But this isn’t forecasting, this is simply catching up with events long after they happened.  Brent, after all, opened at $45/bbl this morning. As readers will remember, I forecast back in August […]

“Houston, we have a problem!” Read More

Stock markets focus on central banks, ignore debt default risk

Some extraordinary things are happening in global chemical markets.  They indicate something is very wrong in the real world outside financial markets.  The chart above highlights some key developments since 18 August when the Great Unwinding of policymaker stimulus began: Brent oil prices have halved and are down 51% (blue) Naphtha, the main feedstock for the global industry, has also halved […]

Stock markets focus on central banks, ignore debt default risk Read More

Rocky road ahead for global economy as chemical industry remains downbeat

The chemical industry continues to be the best leading indicator that we have for the global economy.  This is because it is not only the 3rd largest industry (after agriculture and energy), but also because it is truly global and impacts virtually all areas of modern-day life. The chart above therefore presents a very downbeat […]

Rocky road ahead for global economy as chemical industry remains downbeat Read More

Oil price collapse, US$ rise confirm Great Unwinding underway

Stock markets are floating ever higher on an ocean of central bank money printing.  But something else is happening in the real world where we all live and work.  Since August, I have been warning that the Great Unwinding of this policymaker stimulus is now underway.  The chart above highlights how my 2 core forecasts have now been confirmed: Brent Oil […]

Oil price collapse, US$ rise confirm Great Unwinding underway Read More

Oil prices have further to fall as Great Unwinding continues

Oil prices are highly likely to fall further, not rebound, over the next few months.  That is the blog’s conclusion to its 3-part analysis of likely developments in oil markets. Having looked at the outlook for oil supply and demand over the past 2 days, today’s post looks at the key question of ‘what does this mean for oil […]

Oil prices have further to fall as Great Unwinding continues Read More

IMF says economic growth may never return to pre-crisis levels

The Great Unwinding of policymakers’ failed stimulus programmes is now clearly underway in the global economy.  The headlines this week all focused on the latest International Monetary Fund (IMF) report: “IMF says economic growth may never return to pre-crisis levels.” And then, in response, the US Federal Reserve suddenly realised that the US economy was not […]

IMF says economic growth may never return to pre-crisis levels Read More

European companies missing a major growth opportunity

We all know that the European economy is in a bad way.   Sales and incomes are under pressure, and political risk is rising, whilst unemployment remains at high levels.  Its very easy to get depressed about the outlook. We are also unlikely to get much help from policymakers.  They remain in their world of mathematical models.  These […]

European companies missing a major growth opportunity Read More

Interest rate outlook more uncertain as Bill Gross leaves PIMCO

Last week’s departure of Bill Gross from his role as Chief Investment Officer at PIMCO is likely to prove a turning point for interest rates in the West, and probably around the world. Gross founded PIMCO (Pacific Investment Management Co) more than 40 years ago.  During this time he built its assets under management to around $2tn.   That is […]

Interest rate outlook more uncertain as Bill Gross leaves PIMCO Read More

Equity markets under pressure as Boom/Gloom Index signals Great Unwinding

Whisper it quietly if you are walking past the imposing Federal Reserve building in Washington DC, so as not to disturb the occupants.  They believe that their efforts to boost financial markets have had their effect, and that the real economy, in which we all live and work, will now recover. But what if the […]

Equity markets under pressure as Boom/Gloom Index signals Great Unwinding Read More

US jobless dominated by Blacks, Hispanics and those without high school diplomas

Financial markets today only care about one thing – whether central banks will continue to provide more low-cost financing to support higher asset prices.  Thus markets liked last Friday’s weak US jobs report.  They hoped that the US Federal Reserve would slow its tapering process as a result. This inverted logic explains why bad news for the […]

US jobless dominated by Blacks, Hispanics and those without high school diplomas Read More

US dollar rises as investors worry low-cost money may disappear

Nobody knows how the Great Unwinding of central bank stimulus policies will develop.  The world has simply never been in this position before.  Thus the senior economics and business correspondent of the Financial Times, John Plender, began an article this week: “In a market where asset prices are comprehensively rigged by central bankers, rational investment […]

US dollar rises as investors worry low-cost money may disappear Read More

US, Japan consumer spend falls, deflation threatens Eurozone

We are now two-thirds of the way through 2014, and critical decisions are looming for companies and investors.  Do they give central banks one more chance to stimulate growth?  And are they prepared to trust policymakers to avoid a major geopolitical crisis in the Ukraine? Or do they decide that ‘enough is enough’, and that […]

US, Japan consumer spend falls, deflation threatens Eurozone Read More

Unilever says Q2 market growth slows in emerging countries, developed countries weak

The global economy really isn’t getting any better.  That’s the key conclusion from the blog’s quarterly survey of company results for Q2. Of course, some companies are doing well – either because of shale gas economics, or their own market positioning.  But consumer giant Unilever summarised the general picture very well: “Market growth continued to slow in emerging […]

Unilever says Q2 market growth slows in emerging countries, developed countries weak Read More

Oil price costs remain close to 5% of global GDP

Oil markets have been driven by speculative excess since 2009.  None of the factors that were supposed to create supply shortages have ever occurred.  Markets have never even been close to scrambling for product.  And the rallies are getting shorter and shorter, as this simple fact is finally being better understood. Thus traders’ most recent efforts to create […]

Oil price costs remain close to 5% of global GDP Read More

Bond investors embrace the 3 Normals

Sometimes the blog gets lucky with its timing.  That was certainly the case when it spoke to the world’s leading bond investors last week.  Just an hour before, they had been shocked by news that US GDP had fallen by 2.9% in Q1, far worse than earlier estimates.  And nobody believed the official excuse that […]

Bond investors embrace the 3 Normals Read More

‘Bubble, bubble, toil and trouble’ as China, West’s policy diverge

Sometimes its good to take a step back from the day-to-day markets, and focus on the bigger picture.  Thus the chart looks at how markets have moved since the start of 2008 when the sub-prime bubble came to an end: Prices peaked in June/July 2008 as oil peaked at $147/bbl (blue line) and naphtha at $1147/t […]

‘Bubble, bubble, toil and trouble’ as China, West’s policy diverge Read More

China’s earthquake opens fault-lines in debt-fuelled ‘ring of fire’

We can all hope that China’s ‘collateral trade’ turns out not to be as big a problem as seems likely.  But history shows that this type of problem has a way of escalating once people start investigating more closely. Thus state-owned Citic revealed yesterday that it has lost $40m in the Qingdao scandal, as half of its […]

China’s earthquake opens fault-lines in debt-fuelled ‘ring of fire’ Read More

Network effect leaves central banks fighting the real world

The blog first learnt about the network effect in the late 1990s, during the successful launch of the eBusiness platforms CheMatch and then ChemConnect.   Its Silicon Valley colleagues patiently explained that markets tended to move in predictable stages, once a new concept or product was launched: Everyone would initially jump on the bandwagon, not wanting […]

Network effect leaves central banks fighting the real world Read More

Financial market melt-up takes S&P 500 to new record

A year ago, the blog suggested that financial markets were reaching their most dangerous ‘melt-up’ stage, driven by investor complacency about the ability of central banks to protect them from any downturn.  This analysis was confirmed in November, when absurdly high prices were paid for works of modern art, smashing previous records. Gillian Tett of the Financial Times (another of […]

Financial market melt-up takes S&P 500 to new record Read More

Markets remain “volatile and challenging” says BASF chairman

Nothing has really changed over the past year.  That seems to be the key conclusion from the blog’s quarterly summary of company results for Q1. A year ago, BASF noted that “achieving our earnings target is significantly more challenging today than we had expected”.  This month, chairman Kurt Bock “warned the markets will remain volatile and […]

Markets remain “volatile and challenging” says BASF chairman Read More

Leaders need to “see around corners” in today’s VUCA world

The number “42″ was the answer to “the ultimate question of life” in the classic novel ‘The Hitchhiker’s Guide to the Universe’.  Yet as the supercomputer providing this answer then explained, it was a pointless exercise as nobody understood the meaning of the original question. The world’s policymakers are in the same position, although they don’t yet realise this.  They […]

Leaders need to “see around corners” in today’s VUCA world Read More

Demographics drive demand and fertility rates have fallen

A major debate is underway in Eurozone financial markets about the imminent approach of deflation.  As the chart above shows, Eurozone inflation has ben falling steadily for the past 2 years.  Yet most still fail to recognise that today’s demographics make this development more or less inevitable.  The Financial Times has kindly printed  the blog’s […]

Demographics drive demand and fertility rates have fallen Read More

5 years of stimulus have only delayed move to the New Normal

Coincidentally the blog began its 6-monthly review of global financial market performance on 7 March 2009, as the US market hit its post-Crisis bottom.  At this point, it was possible to hope that central banks would allow markets to resolve the issues that they themselves had created. After all, there would have been no subprime crash if the US Federal […]

5 years of stimulus have only delayed move to the New Normal Read More

“Reservations are no longer necessary at many high-end restaurants”

Think back a moment to September 16 2008.  Newly released transcripts analysed by the Wall Street Journal and Financial Times reveal for the first time what was really going on that day at the world’s most important central bank. Lehman Bros, one of Wall Street’s largest investment banks, had just gone bust.  Merrill Lynch, another giant, had […]

“Reservations are no longer necessary at many high-end restaurants” Read More

Global economy approaches a T-junction

Intuition’s great benefit is that it provides a different perspective.  Thus the intuitive concept behind the launch of the IeC Downturn Monitor was that April 2011 would prove a watershed moment for policymakers’ Recovery Scenario after 2008′s financial crisis.  Their Scenario essentially had two elements: Acting as a ‘lender of last resort’ when the major banks stopped lending to each other and the […]

Global economy approaches a T-junction Read More

The trend is your friend, until it isn’t

Investing in today’s financial markets is relatively easy.  You simply have to believe that governments in the US, Japan and Europe will continue to provide plenty of free cash to investors as part of their Recovery Scenario of a quick return to ‘normal growth’.  It doesn’t matter whether the investor believes in the Scenario, the driver is simply the fear of […]

The trend is your friend, until it isn’t Read More

Can oil prices stay at $100/bbl forever?

Sometimes the blog’s mind goes back to its happy days in Houston, Texas, when it set up and ran ICI’s feedstock and petchems trading office.  And it thinks through the factors that it would have considered when deciding whether to buy, sell or sit on the sidelines. The memory came back during last week’s lively ACS webinar, when […]

Can oil prices stay at $100/bbl forever? Read More

Growth remains below SuperCycle trend, whilst debt is building

Whisper it quietly, so as not to disturb policymakers’ dreams.  But the charts above from the Financial Times confirm, as if proof were needed, that their policies of the past 5 years haven’t worked. The charts compare trends in economic growth in the world’s two largest economies, the Eurozone and the USA.   As the arrows indicate, both are […]

Growth remains below SuperCycle trend, whilst debt is building Read More

“I’m Sorry, America” says Fed’s official responsible for QE operations

Over the years, the blog has been very critical of the quality of people appointed by the US Federal Reserve to undertake the actual trading involved in its ‘Quantitative Easing’ (QE) programmes: In October 2008, it felt “distinctly underwhelmed” by news that the person supervising decisions on which financial institutions should live or die during the peak of the Crisis […]

“I’m Sorry, America” says Fed’s official responsible for QE operations Read More

Benzene highlights rising risks in financial markets

The blog is busy preparing its presentations for its World Aromatics and Derivatives Conference later this month, co-organised as always with ICIS.  As well as looking at the impact of the transition to the New Normal, it will be investigating the current state of benzene markets.  These are always an excellent leading indicator for the global […]

Benzene highlights rising risks in financial markets Read More

Benzene challenges financial markets’ rosy view of the outlook

This is Budget week, when the blog prepares to present its Budget Outlook for 2014-16.  On Saturday, it reviewed its 2012 forecast.  And starting tomorrow, it will analyse auto markets – as these are the largest single driver of demand – before issuing its 2014 Outlook next Saturday. The chart above presents the dilemma facing companies, […]

Benzene challenges financial markets’ rosy view of the outlook Read More

"Its going to be scary"

As the Financial Times wrote on Saturday:

“Earlier this year, it all seemed so straightforward. Central banks printed money and proffered soothing words, and markets went up. Now, it’s getting more complicated.”

In fact, nervous readers might want t…

"Its going to be scary" Read More

A is for Ambiguity

Today the blog ends its review of the VUCA world with A for Ambiguity.

The global economy often seemed to be on auto-pilot during the 25 years of the economic Supercycle between 1982-2007. The chart above shows US GDP since 1929 (when records began),…

A is for Ambiguity Read More