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Pandemic leads to ‘baby bust’ as births decline in most countries

18 April 2021

A year ago, many were suggesting the lockdowns might produce a “baby boom” as couples spent more time together. But early data suggests the world is instead seeing a “baby bust”. As Nikkei Asia reports: “Births (in December/January) have fallen between 10% and 20% in such countries as Japan, France and Spain — and even

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China’s dual circulation policy aims to reduce debt reliance

14 March 2021

Every now and then, people wake up to the fact that debt is only good news when it adds to growth. Otherwise, it simply destroys value. China is usually the case study for this analysis, as the chart confirms. It shows the rise in debt from 2002, when official data begins, versus the rise in

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

7 March 2021

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

The post Rising US interest rates, US$ and oil prices set to pressure financial markets appeared first on Chemicals and the Economy.

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Chart of the Year – CAPE Index signals negative S&P 500 returns to 2030

20 December 2020

Each year, it seems there is only one candidate for Chart of the Year. And 2020 is no exception. It has to be the CAPE Index developed by Nobel Prize winner, Prof Robert Shiller.  As the chart shows, it is nearly at an all-time high with Tesla’s addition to the S&P 500. Only the peak

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US chemical companies face ‘wake-up call’ as Biden focuses on the Climate Change agenda

14 December 2020

I worked for many years at a world-leading chemical company, ICI. But sadly, it lost its way as senior management began to focus more on financial metrics than market developments. In 2007, it disappeared. Today, other companies including the once-mighty ExxonMobil risk making similar mistakes: EM was the world’s most valuable company just 9 years ago It 

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Paradigm shifts create Winners and Losers

20 October 2019

MY ANNUAL BUDGET OUTLOOK WILL BE PUBLISHED NEXT WEEK Next week, I will publish my annual Budget Outlook, covering the 2020-2022 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

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Chemical output signals trouble for global economy

4 November 2018

A petrochemical plant on the outskirts of Shanghai. Chinese chemical industry production has been negative on a year-to-date basis since February Falling output in China and slowing growth globally suggest difficult years ahead, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Chemicals are the best leading indicator for the

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Budgeting for the end of “Business as Usual”

28 October 2018

Companies and investors are starting to finalise their plans for the coming year.  Many are assuming that the global economy will grow by 3% – 3.5%, and are setting targets on the basis of “business as usual”.  This has been a reasonable assumption for the past 25 years, as the chart confirms for the US economy:

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

29 July 2018

“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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China’s lending bubble is history

27 May 2018

As China’s shadow banking is reined in, the impact on the global economy is already clear, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog China’s shadow banking sector has been a major source of speculative lending to the global economy. But 2018 has seen it entering its […]

The post China’s lending bubble is history appeared first on Chemicals & The Economy.

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

18 December 2017

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 […]

The post Chart of the Year: Bitcoin, the logical end for stimulus policies appeared first on Chemicals & The Economy.

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China’s lending bubble sees Beijing home prices jump 63%

17 April 2017

Greed and fear are the primary emotions driving China’s housing and auto markets today, as China’s lending bubble hits new heights.  For ordinary citizens, greed is the key driver:    Average home prices in Beijing rose an eye-popping 63% between October 2015 – February 2017    In Shanghai, one enterprising estate agent (realtor) […]

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US watchdog warns on today’s “quicksilver markets”

23 March 2015

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 […]

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The Great Unwinding of policymaker stimulus has begun

18 August 2014

Large economies are like supertankers.  There are no brakes to use if you want to change direction in a hurry.  Instead, you have to put the engine into reverse, and hope you can slow down fast enough to avoid the rocks. That is what happened in China last month, as the new leadership began to […]

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Dow’s CEO says “pre-2008 economy was a bubble”

28 July 2014

Now its official.  Andrew Liveris, Dow CEO, told CNBC last week that the “pre-2008 economy was a bubble“.  And exactly mirroring the analysis of Boom, Gloom and the New Normal, he went on to add that “for a couple of years after 2008, we had a head-fake that the growth might have returned, but it […]

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Polyethylene, shadow banking and China’s ‘collateral trade’

22 July 2014

The blog’s latest post for the Financial Times, published on the BeyondBrics blog is below. By Paul Hodges of International eChem Strange things are happening in China’s polyethylene (PE) market. Despite a slowdown in the economy, demand is surging. Our research suggests that PE, like copper and iron before it, is the latest instrument of China’s […]

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$20tn US, China stimulus and lending – but recovery elusive

21 July 2014

Despite all the positive headlines, the world’s two largest economies have failed to deliver sustained recovery, even though the 2 governments have now spent a combined $20tn in stimulus and lending. US STIMULUS REACHES $10tn The US government and Federal Reserve have spent $10tn since the Great Recession began in 2008.  Federal deficits have increased by $6.27tn, whilst […]

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The €2bn WiFi company that wasn’t

10 July 2014

Blog readers often travel a lot.  And they certainly use WiFi.  So here’s a question: Q.  Do you ever remember using a WiFi service called Gowex? A.  Lots of puzzled looks in response Q.   Not sure?  You think it might be vaguely familiar, but maybe not.  Well this is what the company’s website says: “Your […]

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Do you know where your polyethylene is in China?

8 July 2014

In the late 1970s and early 1980s, New York Mayor Ed Koch fronted a series of public service TV commercials asking parents: “Its 10pm.  Do you know where your children are?” The blog was reminded of this when checking China’s polyethylene (PE) import data on Global Trade Information Services for the January – May period, as shown […]

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Will 2014 be a repeat of 2008, but worse?

7 July 2014

Will 2014 turn out to be a repeat of 2008 for the US economy? 6 years ago, after all, not a single mainstream forecaster – including the IMF and World Bank – was forecasting a recession.  Even in September 2008, the consensus was still confident about the economic outlook.  Yet the National Bureau for Economic Research […]

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

23 June 2014

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 […]

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

7 August 2019

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 […]

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China’s commodity imports have financed its property bubble

17 June 2014

Today, the blog launches a major new Research Note in the ‘Your Compass on China’ series, produced in association with leading Hong Kong-based financial advisory firm Polarwide. Titled ‘Here today and gone tomorrow – a simple guide to China’s world of trade finance’, it is probably the single most important paper it will publish all […]

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“Investors retreat as deflation fears rise”

19 May 2014

The blog’s important eBook, ’Boom, Gloom and the New Normal: How Ageing Western BabyBoomers are Changing Demand Patterns, Again’, was published 3 years ago this month.  Co-authored with John Richardson, it identified the major changes taking place in global and national demand patterns: Growth accelerated from the 1980s, as the population became concentrated in the wealth creating 25 – 54 […]

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Geopolitics lead to Boom/Gloom Index tumble after record high

5 May 2014

The IeC Boom/Gloom Index (blue column) proved its value again last month.  It shot to a new record high, and this was then followed by a record high for both the S&P 500 (red line) and the Dow Jones Industrials.  But now the Index has fallen sharply.  This highlights the major divergence between developments in the […]

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China’s credit cuts will send seismic tremors around the world

16 April 2014

Monday’s Interesting Quotes post highlighted how China’s leadership clearly recognise they have a massive debt problem, as detailed in the blog’s recent Research Note. Further evidence for this was provided by yesterday’s bank lending figures, which showed total lending down 19% versus March 2013 at Rmb2.07tn ($333bn), and the lowest increase in money supply since 2001. This makes […]

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Oil prices vulnerable to China property market fall

9 April 2014

Oil futures markets are a wonderful thing, in theory.  They are supposed to enable price discovery, whilst their liquidity is meant to enable companies to reduce inventory levels.  Instead of tying up working capital, they can simply go to the market and buy what they need, when they need it. But the chart above, of US oil […]

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Cement Shen’s $563m ‘Peach Blossom Palace’ bankruptcy

3 April 2014

The sight above may become more familiar as China’s new leadership seek to burst the property bubble.  It shows unfinished town houses on the Peach Blossom Palace estate in Fenghua city, south of Shanghai. They were built by local developer ‘Cement Shen’, whose Zhejiang Xingrun (ZX) property company went bust last month, owing Rmb3.5bn ($563m).  […]

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Demographics drive demand and fertility rates have fallen

25 March 2014

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 […]

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China’s lending problems begin to worry wider world – too late

19 March 2014

Suddenly, people are starting to talk about China and the risks it creates for the global economy.  There is a lifecycle to the way that such issues develop in the general consciousness, as John Mauldin has observed.  And so this development suggests that we are now well along the process, as highlighted in the chart above: […]

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UK tinkers with higher pension ages, ignores impact on GDP

5 March 2014

Many readers have asked to see how the UK economy is being impacted by its ageing population, following the blog’s December series on the US, China, Japan, Germany and France.  As the chart shows, it is in a very similar position to all of these countries: Life expectancy has increased by 17% to 81 years today, from […]

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China’s urban consumers depend on property ‘wealth effect’

20 February 2014

One of the great myths of modern times is that China is now full of middle class people with Western levels of consumption.  Nothing could be further from the truth. Annual per capita incomes have certainly soared over the past two decades.  But the main impact has been to lift people out of absolute poverty, […]

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China’s lending bubble could now lead to zero GDP growth

18 February 2014

China has been primarily responsible for driving global growth since the Crisis began in 2008.  Auto sales, for example, would have seen negative growth world-wide without China.  And auto manufacturing is the world’s largest manufacturing industry.  The chemical industry has been in a similar position.  Whilst China is also now responsible for nearly 50% of global […]

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And now the stumble?

3 February 2014

Last week the US Federal Reserve announced the second move in its so-called tapering process, and reduced its bond buying by another $10bn/month.  But there was only a temporary repeat in stock markets of the enthusiastic response to its first reduction in December.  We are thus about to test whether the blog’s theory of ‘two steps and a […]

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Deflation gets closer in Europe, USA and China

10 January 2014

Demographics drives demand.  If it doesn’t, then its hard to think what does.  So forecasting economic growth depends on two key variables: If you have lots of young people in your adult population, then you should have fast growth If you have lots of older people, then you will be lucky to have any growth […]

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China auto sales could drop if lending squeeze continues

24 December 2013

Imagine for a moment that you had become president or premier of China following the leadership transition in March.  You know that the country’s economic model has to change.  But you also know that you have to carefully develop your powerbase, whilst also putting in place new policies. Probably you would take things cautiously at […]

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“2 Steps and Then a Stumble”, as the Fed starts to taper

23 December 2013

The most important event of the past week, and possibly of the whole year, was Wednesday’s decision by the US Federal Reserve to finally “taper” its vast stimulus effort – now worth $4tn, nearly 25% of US GDP. The timing was no great surprise.  The blog was convinced Ben Bernanke would want to start the process […]

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The trend is your friend, until it isn’t

21 December 2013

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 […]

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Boom/Gloom Index hits record high as western financial markets soar

9 December 2013

The best view is always from the top of the mountain.  At least that is how it feels today, with this month’s IeC Boom/Gloom Index (blue column) hitting a record high.  Nor it is alone, as the S&P500 (red line), the world’s most important financial market index is also at record levels. Central banks broke […]

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A little bit of China stimulus goes a long way in housing

2 November 2013

It was only a “mini-stimulus” that was delivered by China’s new leaders in July.  Well, thank goodness it wasn’t more, to judge by the above chart from Albert Edwards at SocGen.  It shows how house price inflation has jumped in 69 of China’s 70 main cities between March and September: In March (orange column) inflation […]

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China’s auto sales rise as bank lending booms

22 October 2013

Autos are now the largest single manufacturing industry in the world.  Not only do they directly and indirectly employ vast numbers of people, but they are also increasingly key to consumer spending.  Thus it is no surprise that governments have tried to increase auto sales since the Crisis began in 2008. China is the prime example of […]

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Investors decide central banks may not know what they are doing

30 September 2013

The blog was speaking last week at the major Euromoney investor conference on bond markets.  It followed a keynote by the head of the UK’s Debt Management Office, who noted that the Bank of England now ‘owned’ ~30% of total UK government debt compared to none in 2008 The reaction to his speech revealed just how investor […]

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China lending remains out of control ahead of November’s plenum

11 September 2013

The blog’s views on the unsustainability of China’s epic economic growth since 2009 have now become truly mainstream.  Everyone now agrees, including the new leadership, that it was created by a credit bubble.  State-owned China Daily has even now warned …

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Financial markets worry as Fed talks of ending stimulus

26 August 2013

After 5 years of government stimulus, policymakers are having to think about their exit plans.  US Federal Reserve chairman Ben Bernanke retires in January, and most of the blog’s clients in the financial community believe that he intends to start the process before he leaves, perhaps as early as next month. This is likely to prove very scary […]

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London’s £300m house

15 September 2012

Blog readers are often very successful people. So the blog thought you might like to know that the London house above is now on sale.

A bargain at just £300m ($480m), the Financial Times reports it has 45 bedrooms on 7 floors and overlooks Hyde Park…

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‘Waiting for Bernanke’ is hottest show on Wall Street

23 July 2012

‘Waiting for Godot’, the great play by Irish writer and Nobel Literature Prizewinner, Samuel Beckett, deals with the meaning of existence. Written just after the Second World War, its two characters wait endlessly for the arrival of Godot.

US financi…

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China’s leaders mark time till power handover

17 July 2012

How many more empty cities like Ordos does China really need? Are 64.5m empty apartments enough, or should there be more? Should we build more steel mills, to add to the current 220MT of over-capacity?

These are the questions facing China’s leadersh…

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China battles economic slowdown

19 June 2012

Wenzhou in coastal Zhejiang province was the first city to encourage private enterprise when China began opening its economy in 1978. Its growth accelerated after China joined the World Trade Organisation in 2001, attracting 2.8 million migrant worker…

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PE demand decline highlights China risks

29 May 2012

China’s slowdown is continuing to gather pace.

Polyethylene (PE) demand has been a very reliable leading indicator for the economy. Its 50% growth between 2008-10 highlighted the overheating economy, as the government stoked a credit bubble, even wh…

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A China ‘hard landing’ gets closer

15 May 2012

China’s leadership remain preoccupied with the transition to a new politburo in October, and the continuing fallout from the Bo Xilai affair. Equally, April’s 7% rise in food price inflation remains a major issue for a country where 96% of the populat…

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China lending jumps to hit $380bn Q1 target

17 April 2012

China’s leaders have a lot to worry about. The purge of Bo Xilai has now been followed by news of his wife being suspected of murder. This makes the run-up to October’s leadership transition even more difficult.

Only 3 months ago, Bo was being tippe…

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A China ‘hard landing’ may be unavoidable

7 May 2020

Saturday’s blog post highlighted the risk of a hard landing in China.

This risk is very real, and is centred on the government’s need to achieve a difficult balance between reducing today’s high rate of food price inflation, whilst not collapsing the …

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The banana skin risk

14 January 2012

This week’s news provided more evidence to support the blog’s fear that the global economy is close to recession:

• The German economy, Europe’s motor, saw negative growth in Q4
• US retail sales grew just 0.1% in December, despite good auto sales…

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China’s producers lose pricing power

14 December 2011

China’s economy is slowing rather fast. That’s the only conclusion to be drawn from the above chart. It shows a major collapse in producer price inflation (PPI), from July’s 7.5% peak to just 2.7% in November.

The decline from September’s 6.5% level…

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China’s Minsky Moment may be starting

6 December 2011

Long-standing readers may remember the video posted in January 2010 showing ‘China’s empty city’.

This was the new city being built in Inner Mongolia, to help ensure local officials met China’s GDP growth target. Unlike the West, GDP in a communist c…

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China’s debt problems multiply

15 November 2011

It seems increasingly clear that China’s economic policy took a wrong turning 10 years ago, when it joined the World Trade Organisation.

2001 was also the year when the Western BabyBoomers (those born between 1946-70), began to leave the peak consumpt…

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China’s lending continues to tighten

19 September 2011

Financial bubbles are like balloons. Only instead of air, they need to be constantly pumped up with new lending. Otherwise they begin to deflate, and the Minsky Moment occurs.

The above chart of China’s bank lending shows, as discussed last month, t…

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China’s power consumption hits new record

27 August 2011

China’s growth in electricity consumption is a much better guide to its economic growth than the published GDP figures. This was confirmed by likely next premier, Li Keqiang. It has been a major reason for the blog’s long-standing focus on this key a…

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China’s bank lending nears its Minsky Moment

16 August 2011

China’s credit bubble is one of the largest the world has ever seen. This is true not only of its total size, but also in relation to GDP.

The history of credit bubbles is very clear about what happens next. Anyone who has followed the US subprime l…