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Europe has left it very late to start protecting its own industries. If it doesn’t move now, key industries such as chemicals and autos will continue to disappear.
EU set to launch trade ‘bazooka’ to combat Chinese imports Read More
There seems no sign that either war will end soon. Companies and investors need to plan for further disruption and much higher costs, as today’s higher oil and transport costs are passed through the value chain. Sadly, global recession now also seems increasingly likely.
Iran/Ukraine Wars create energy crisis, interest rate, inflation and recession risk Read More
There are major upside risks on crude oil and product pricing as we head into H2. Inventories are very low, with no margin for error. And nobody knows whether the current US-Iran talks will actually end in a long-term agreement.
Major upside risks remain for oil and product pricing in H2 Read More
Financial markets think the oil crisis created by the Hormuz closure is over. But in reality, the risk of major shortages by Q4 is actually increasing. Oil inventories are near tank bottoms. And Hormuz transits are still only a fraction of the pre-invasion level.
Ras Laffan explosion, Iranian/US attacks, confirm restart risks for Hormuz plants Read More
A second Asian Financial Crisis would be a much bigger issue than in 1997. It would quickly impact 3 of the world’s Top 5 economies. And it would quickly panic investors in N America and Europe. Unfortunately, there are still no signs that policymakers realise the risks they are running.
An Asian Financial Crisis 2.0? More warning signs appear Read More
As legendary investor Warren Buffett warned long ago, a lot of problems can be hidden during a boom. The risk is that we may now be about to relearn the message of his famous quote:
“Only when the tide goes out do you discover who’s been swimming naked.”
“When you see one cockroach, there are probably more.” Jamie Dimon, JP Morgan CEO Read More
Roman Emperors used to distract people with “bread and circuses”. Today, it seems Bitcoin is playing this role. The Tariff War is at major risk of repeating 1930’s Smoot Hawley Tariff Act. It introduced tariffs to “protect” the economy. And it led directly to the Great Depression.
Borrowing makes a lot of sense when interest rates and inflation are low. But now, both are returning to more normal levels. This will increase default risk, as companies and people with too much debt find it difficult to make their repayments.
Bond vigilantes start to push interest rates higher – and impact auto/housing markets Read More
Republicans are racing to finish the draft budget by Memorial Day at the end of the month. Bond investors can be forgiven for getting nervous about who is going to pay the bill for Trump’s tariff war and tax cuts.
President Trump’s tariff war and planned tax cuts reawaken the ‘bond vigilantes’ Read More
President Trump’s Tariff War will soon lead to empty shelves at Wal-Mart, Target, Home Depot and many other stores this month. The famous saying “Well in May and go away” might be a prudent policy for investors.
The collapse of Asia’s main currencies versus the US$ confirms that our world is increasingly dominated by known unknowns. We know what the key issues might be, but we can only guess at how they might turn out.
Markets are finally rediscovering their core role of price discovery. The US 10-year rate has risen 0.5% since the Fed cut its rate by 0.5%. And so the clock is now ticking for the biggest stock market bubble of our lifetimes.
NVIDIA moves to new highs, whilst nearly half of major US companies have no earnings Read More
Nvidia is a good company. And AI has proved useful for decades – flying planes, for example. But Silicon Valley is also very good at hype. And so Nvidia’s share price is more likely to follow Cisco’s path, than to keep climbing forever.
Stock market bubbles follow the same pattern, as Nvidia and Cisco confirm Read More
This is the 3rd time we have forewarned of an approaching crisis. Both previous times, ahead of the Great Financial Crisis and the Covid pandemic, we were told we “didn’t know what we were talking about”. And nobody did anything to avoid the looming disaster Let’s hope its “3rd time lucky” and that “this time is different”.
Policymakers in the West and the East now find themselves adrift in increasingly stormy seas, without a compass. Their 2 key policy tools on trade and inflation have proved to be wrong. New thinking on the role of central banks is urgently required.
US Treasury Secretaries change their minds on trade and inflation policies Read More
investors are hoping Fed Chairman Jay Powell will soon signal a dramatic interest rate cut. And so they are positioning for a ‘Santa Claus’ rally. But most adults know that Santa Claus doesn’t really exist.
Investors hope (again) for interest rate cuts and a ‘Santa Claus rally’ Read More
Essentially, the central banks thought that unlimited amounts of free money could reverse the impact of ageing populations. WeWork’s bankruptcy suggests that the bills for this mistake are now coming due, after 20 years of what the Wall Street Journal called “The most reckless monetary and fiscal experiment in history”
WeWork’s bankruptcy marks the beginning of the end for the stimulus economy Read More
Last week, the Japanese yen fell through the US$ : ¥150 level for the first time since 1990. It has now fallen by nearly 50% against the US$ in the past two years. The currency is behaving as if Japan were a 3rd world country – whereas it is actually the 3rd largest economy in the world. Clearly, something is very wrong.
Asia’s debt crisis starts to approach its endgame as the yen continues to tumble Read More
US 10-year interest rates are the world’s benchmark “risk-free” market. And as the chart shows, their yield has risen from 3.25% on 4 June to peak at 4.88% on Friday. Prices move inversely to yield. So that means prices have fallen 50% in 4 months.
Central banks start to lose control of interest rates, and housing markets feel the pain Read More
300+ years of Bank of England data shows that interest rates are typically inflation plus 2.5%. At today’s level, this would imply – US rates would be 3.7% + 2.5% = 6.2%: Japan would be 3.2% + 2.5% = 5.7%: Eurozone rates would be 5.3% + 2.5% = 7.8%; UK rates would be 6.7% + 2.5% = 9.2%
Most Americans can’t qualify for a mortgage today with prices and interest rates at generation-highs. Yet housing starts average a post-2007 record of 1.5m/month. Logic therefore suggests the US housing market is heading for a repeat of the 2008 crisis
US interest rate rises start to threaten the housing market bubble Read More
Bubbles are great fun while they last. But they are much less fun when they burst. For the past 20 years, central bank stimulus has created some of the largest bubbles ever seen. But now, led by developments in Japan and China, they are bursting
Investors need to prepare for much slower, or maybe even negative growth and deflation. Optimistically, one can hope this paradigm shift will be good news for Net Zero investments. But it also makes it more difficult to reduce the vast debts created by recent stimulus programmes.
Investors should pack a copy of the Old Testament for the beach Read More
A celebrity, with money to burn, might buy an NFT to use as an avatar. But it seems “really, really weird” that NFT trading reached billions of dollars at the peak of the mania. One wonders what will happen when reality starts to return to the valuations of the 10 FAANMG+ stocks currently boosting the S&P 500.
‘Bored Ape’ prices tumble as the tech bubble continues to unwind Read More
Central banks have spent 15 years telling us that debt and demographics “don’t matter”. They claimed they could always create demand via stimulus. But now the policy has run out of road. Homeowners who thought mortgage rates would stay low forever, will be the ones to suffer
Bond yields start to go back to the future as stimulus policies unwind Read More
The Presidential Cycle is now over. Instead, worries about the recession and the US debt ceiling talks are moving centre-stage. But Asian currency markets are sending a warning signal. A rising US dollar and US interest rates, and a falling yen and yuan, could soon raise the risks of a major Asian debt crisis.
It seems highly likely that the Rebound rally is ending, and the market Downtrend is about to resume. Time spent on researching the paradigm shifts that will take us into the New Normal will likely prove very profitable for the future
Stock markets on the brink as the end of ‘Presidential Cycle’ support looms Read More
“You can’t run the most reckless monetary and fiscal experiment in history without the bill eventually coming due. The first invoice arrived as inflation. The second has come as a financial panic, with economic damage that may not end with Silicon Valley Bank.”
Its ‘Minsky Moment’ time again as investors start to worry about return of capital Read More
Companies and investors need to invest time now on having a genuine debate about the risks ahead. The regulatory failures of the past few days highlight what can quickly go wrong, if one hasn’t war-gamed out potential risks. As the saying goes, “Failing to plan, equals planning to fail”.
Today’s financial crisis confirms that “failing to plan, equals planning to fail” Read More
Now, we are all starting to suffer for the central banks mistake in adopting Bernanke Theory. The bubbles they created are finally starting to burst as interest rates return to more normal levels. This will be very painful for all those who trusted them to manage the economy.
“FANGs” lose their teeth as stock markets relearn their key role of price discovery Read More
Nobody knows how markets will develop. But past performance is the best guide that we have. This is why our Sentiment Index is my Chart of the year for 2022.
Chart of the Year – Our Sentiment Index proved a great guide to the S&P 500 in 2022 Read More
Since January, investors have begun to realise that the FAANG stocks were just as over-valued in December as during the dotcom bubble. Of course, hope springs eternal as we saw this month. History suggests we will see several ‘false dawns’ before the market finally bottoms.
FAANG stock prices start to tumble as the tech bubble begins to burst Read More
US inflation was last at 8.3% in January 1982. And then, the 10-year yield was 14.6%. History may not be a perfect guide, but it is the best we have. So it might be worth planning for rates to go much higher than most “experts” expect, now that they have broken out of their downtrend.
Most commentators chose to ignore the warnings on inflation and recession provided by chemical industry data. As a result, they have been blindsided by the speed and scale of the S&P 500’s downturn. But the Sentiment Index has proved far more reliable.
The problems began with the supply chain crisis caused by the pandemic. Russia’s war in Ukraine then created a further challenge. And now we face the risk of famine as fertiliser costs become unaffordable. Central bankers at their annual Jackson Hole get-together should therefore focus on preparing for the arrival of a potential Fourth Horseman of the Apocalypse, in the shape of a major financial crisis.
Jackson Hole is a chance to prepare for a financial shock Read More
The history of the 1929 and 2000 downturns suggests the real pain is yet to come. Housing markets look terribly over-valued around the world, as I noted last month. And US consumer sentiment is at all-time lows. So most company earnings seem set to fall, with more than 60% of US CEOs now expecting to see a recession.
There are positives in all this, as the Green agenda will create new opportunities to replace those that are now disappearing. But for the moment, at least, the risks associated with a likely lengthy and deep recession are likely to dominate. Please be careful out there.
Wall Street finally recognises a recession is underway – “It’s a hurricane…coming our way” Read More
The Fed might change its mind and rush to support asset markets again. But that seems unlikely today. If it doesn’t, then debt, divorce and death will force an increasing number of people to sell their home. And if buyers continue to disappear, then sellers will have to continue cutting prices in order to try and achieve a sale, as the bubble finally bursts.
US housing bubble starts to deflate as sellers cut prices and mortgage rates rise Read More
Markets have returned to the 1970s. They have to cope with “Putinflation”, recession, rising interest rates and energy prices – as well as geopolitical and nuclear risk. Unfortunately, today’s traders do not even have the experience of the 1960s as a guide, having lived in a different world for 20 years.
US stocks set for long-term decline as Fed pivots to focus on “Putinflation” Read More
The central banks are now abandoning the ‘Bernanke Doctrine’ set out in November 2010 – that what was good for markets, was good for the economy.
The Fed’s NASDAQ bubble starts to burst as Netflix, Facebook plunge 30% Read More
Our pH Report Sentiment Index has been a very reliable guide to the S&P 500 in recent years. Now it is suggesting a major downturn may be underway as the US and Chinese stimulus programmes come to an end.
Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.
Many valuations are, after all, at more extreme levels than in 2008, due to the belief that China’s demand growth is unstoppable.
An end to the China bubble would risk a Minsky moment Read More
Much of the way the world currently works depends on uninterrupted and elevated Chinese growth.
The end of China’s real estate bubble will impact global supply chains, exports and growth Read More
As with Lehman’s bankruptcy in September 2008, there is a real risk that an Evergrande default could cause a stampede for the exits around the world.
An Evergrande default could reset the Chinese, and global, economy Read More
At the beginning of the year, “everyone knew” that inflation was about to take off, and that the US$ was going to collapse. Last week, the great Bob Farrell’s Rule No 9 proved its worth, yet again. US interest rates fell sharply and the US$ bottomed for this cycle. The two charts above tell the
The post “When all the experts and forecasts agree — something else is going to happen”, Bob Farrell appeared first on Chemicals and the Economy.
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
Chart of the Year – CAPE Index signals negative S&P 500 returns to 2030 Read More
It is now 13 years since I wrote the first post here, in June 2007. A lot has happened since then: There was the 2008 subprime crisis, forecast here and in the Financial Times – although sadly, few took advantage of the warning This led to the publication of ‘Boom, Gloom and the New Normal: How
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
China’s property sector is at the epicentre of the crisis Read More
The wisdom of Sir Robert Walpole, the UK’s first premier, seems the only possible response to this weekend’s headline from the Wall Street Journal. How can a National Emergency ever be the basis for a major rise in stock markets? Of course, we all know that stock markets have become addicted to stimulus. But the
“They may ring their bells now, before long they will be wringing their hands” Read More
Few investors now remember the days when price discovery was thought to be the key role of stock markets. Instead, we know that prices are really now set by central banks, on the model of the Politburo in the old Soviet Union. How else can one explain the above chart? It shows the US S&P
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
Most people would quickly notice if $50 went missing from their purse or wallet. They would certainly notice if $50k suddenly disappeared from their bank account. But a fortnight ago, it took the New York Federal Reserve more than a day to notice that $50bn was missing from the money markets it was supposed to
$50bn hole appears in New York financial markets – Fed is “looking into it” Read More
China’s property bubble puts it at the epicentre of the ring of fire © Reuters China’s devaluation could be the trigger for an international debt crisis, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog August has often seen the start of major debt crises. The Latin American
After the excitement of Wimbledon tennis and a cricket World Cup final, Londoners were back to their favourite conversation topic last week – house prices. But now the news has become bittersweet as the price decline starts to accelerate. As the London Evening Standard headline confirms: “The London property slump has dramatically accelerated with prices
How can companies and investors avoid losing money as the global economy goes into a China-led recession? That’s the key question as we enter 2019. We have reached a fork in the road: Since 2008, Western central bankers have focused on supporting stock markets But the bursting of China’s shadow banking bubble means this cannot continue for
Stock markets risk Wile E. Coyote fall despite Powell’s rush to support the S&P 500 Read More
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 […]
The post Why everyone ignored my warnings ahead of the financial crisis appeared first on Chemicals & The Economy.
Why everyone ignored my warnings ahead of the financial crisis Read More
“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 […]
The post High-flying “story stocks” hit air pockets as credit finally tightens appeared first on Chemicals & The Economy.
High-flying “story stocks” hit air pockets as credit finally tightens Read More
London house prices are “falling at the fastest rate in almost a decade” according to major property lender, Nationwide. And almost 40% of new-build sales were to bulk buyers at discounts of up to 30%, according of researchers, Molior. As the CEO of builders Crest Nicholson told the Financial Times: “We did this sale because we […]
The post London house prices slip as supply/demand balances change appeared first on Chemicals & The Economy.
London house prices slip as supply/demand balances change Read More
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 […]
The post Financial markets party as global trade wars begin appeared first on Chemicals & The Economy.
Financial markets party as global trade wars begin Read More
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.
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 […]
The post US Treasury benchmark yield heads to 4% as 30-year downtrend ends appeared first on Chemicals & The Economy.
US Treasury benchmark yield heads to 4% as 30-year downtrend ends Read More
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.
Chart of the Year: Bitcoin, the logical end for stimulus policies Read More
The world is coming to the end of probably the greatest financial bubble ever seen. Since the financial crisis began in 2008, central banks in China, the USA, Europe, the UK and Japan have created over $30tn of debt. China has created more than half of this debt as the chart shows, and its total debt […]
The post China’s central bank governor warns of ‘Minsky Moment’ risk appeared first on Chemicals & The Economy.
China’s central bank governor warns of ‘Minsky Moment’ risk Read More
No country in the world now has a top quality pension system. That’s the conclusion from the latest Report by pensions consultants Melbourne Mercer. As the chart above shows: Denmark and The Netherlands have fallen out of the top category In the G7 wealthy nations: Canada is in category B; Germany and UK in C+; […]
The post US tax cuts will fail as Trump’s demographic deficit replaces Reagan’s demographic dividend appeared first on Chemicals & The Economy.
Global interest rates have fallen dramatically over the past 25 years, as the chart shows for government 10-year bonds: UK rates peaked at 9% in 1995 and are now down at 1%: US rates peaked at 8% and are now at 2% German rates peaked at 8% and are now down to 0%: […]
Interest rates and London house prices begin return to reality Read More
Interviewed for this Reuters article, I suggest today’s low levels of market volatility could be “the calm before the storm” Saikat Chatterjee and Vikram Subhedar, AUGUST 11, 2017 / 5:06 PM LONDON (Reuters) – After this week’s war of words between the United States and North Korea triggered the biggest fall in global stocks since the U.S. presidential […]
Investors ponder further shocks after North Korea jolt Read More
London’s housing market was always going to have a difficult 2017. As I noted 2 years ago, developers were planning 54,000 new luxury homes at prices of £1m+ ($1.25m) in central London, which would mainly start to flood onto the market this year. They weren’t bothered by the fact that only 3900 homes were sold […]
London housing market hit by Brexit, China’s capital controls Read More
Last year it was the oil price fall. This year, there is no doubt that the US dollar has taken centre stage, alongside the major rise underway in benchmark 10-year interest rates. As 2016′s Chart of the Year shows: The US$ Index (black) has risen 12% since May against other major currencies (euro, yen, […]
Chart of the Year: US$, 10-year US interest rates begin to rise Read More
London’s house market has been slowing for some time, as I noted last year. The issue is affordability. Artificially low interest rates make the monthly payment seem cheap. But the key question is whether your salary will allow you to repay the capital borrowed over time. Sadly, this has become increasingly impossible for many actual […]
Something very strange is happening in US stock markets, as the above chart highlights: It shows weekly (blue line) and average quarterly (red line) volatility in the US S&P 500 Index since 1928 Both are very close to
S&P 500 volatility close to 43-year lows as uncertainty rises Read More
TIME magazine covers often capture the mood of a moment. And that was certainly true in February 1999, with their now famous cover picturing then US Federal Reserve Chairman, Alan Greenspan, under the heading “The Committee to SAVE the World“. In a further sign of the times, Greenspan was flanked by the US Treasury Secretary […]
Markets question central bank power as Great Reckoning nears Read More
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
”History doesn’t repeat itself, but it often rhymes“, Mark Twain Bob Farrell of Merrill Lynch was rightly considered one of the leading Wall Street analysts in his day. His 10 Rules are still an excellent guide for any investor. Equally helpful is the simple checklist he developed, echoing Mark Twain’s insight, to help investors avoid […]
US 10-Year interest rates suggest Great Reckoning may be near Read More
”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 […]
6 impossible things not to believe about oil before breakfast Read More
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
It has been 5 years since we first warned of a looming pensions crisis in Boom, Gloom and the New Normal. Now, finally, it is becoming a mainstream issue. The latest round of central bank stimulus policies has clearly been the proverbial “straw that breaks the camel’s back” for anyone connected with pension funding. The […]
Pensions crisis finally becomes a mainstream issue Read More
“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
There was one bit of good news this week. For the first time since the financial crisis began, a Governor of the US Federal Reserve acknowledged that today’s demographic changes are having a major impact on the US economy. John Williams, of the San Francisco Fed, argued that: “Shifting demographics….(mean that) interest rates are going […]
US pensioners pay the price for Fed’s monetary policy failure Read More
It may be an idea to keep your smartphone charged and within reach, if you are planning a trip to the beach this month. Certainly market behaviour since June has been more and more skittish. The experts, after all, were telling us that central banks were certain to do more major stimulus efforts to boost […]
Boom/Gloom Index suggests volatile August may lie ahead Read More
We are approaching the 2nd anniversary of the Great Unwinding of policymaker stimulus, which began in August 2014: The initial movement was very sharp, with Brent falling 53% by January and the US$ rising 23% by March Oil then saw an initial correction – with Brent recovering to being 37% down by May during the “oil […]
Europe’s oil product glut halves gasoline margins in 2 weeks Read More
First, the good news. It has long been recognised that the UK economy is over-dependent on financial services, and that its housing market – particularly in London – is wildly over-priced in relation to earnings. The Brexit vote should ensure that both these problems are solved: Many banks and financial institutions are already planning to […]
Brexit a disaster for the UK, Europe and the world Read More
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
Thank goodness for Janet Yellen, and China’s provincial governments. That was clearly investors’ thoughts, when they bid up chemical company share prices during Q1. For as the chart above shows, there was nothing in the fundamentals of supply and demand to suggest economic recovery was finally underway. Instead, the latest American Chemistry Council data shows […]
Restocking boosts Q1 margins for chemical companies Read More
China’s polyester industry, like many others, is already preparing to shut down ahead of September’s G20 Summit in Hangzhou, to reduce pollution levels. The phenomenon even has its own Wikipedia page, APEC Blue, to describe the moment in November 2014 when Beijing suddenly saw blue sky for the whole of the Asia-Pacific Economic Co-operation (APEC) summit meeting. It […]
China’s G20 Summit shutdown highlights risks to buying “frenzy” in commodities markets Read More
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
What we “assume” can make an “ass of u and me“, as the proverb says. And that is certainly true of the way central banks have manipulated the major currencies since the financial crisis began in 2008, as the chart shows of the US$’s movements versus the Japanese yen and the euro: It shows the change […]
US Federal Reserve aims to devalue the dollar, again Read More
It is 7 years since global stock markets bottomed after the 2008 financial crash. But as my regular 6-monthly update on their performance shows, it has been a very mixed picture since then. The chart shows how prices have moved since their pre-2008 peak in the world’s 8 major markets, and in the US 30-year […]
Global stock markets weaken as Great Unwinding of stimulus continues Read More
Financial markets are very bad at evaluating political risk. They assume people will always be rational, and expect a ‘business as usual’ scenario to continue. But as we all know, people are not always rational. And emotion, as today over immigration may cloud their judgement. This week has seen the first signs of this complacency […]
Brexit poll creates UK, euro interest rate rise risk Read More
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. […]
Media hype over the potential for a 0.25% interest rate rise by the US Federal Reserve is well underway. But as often happens these days, this is missing the bigger picture. The issue is simple: developments in China are far more important to the global economy than anything the Fed might, or might not, do […]
US 10-year interest rates jump 23% as Fed debates 0.25% hike Read More
Go, go, go, said the bird: human kind Cannot bear very much reality. Time past and time future What might have been and what has been Point to one end, which is always present These lines from the great poet TS Eliot seem to sum up current thinking towards China. Analysts compete with themselves to […]
China’s total lending declines as shadow sector squeezed Read More
They don’t ring bells to warn of financial market tops and bottoms. But there are 2 very good substitutes in terms of the Farrell and Coppock Indicators, as the above chart for the UK stock market since 1973 shows: It is based on the Financial Times All-share Index (FTA), as the FTSE 100 only began […]
Coppock, Farrell indicators suggest financial market downturn underway Read More
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
Central banks have acted as the proverbial tooth fairy towards financial markets in recent years. But they have not just left a small amount of money under the pillow when a child lost its first tooth. Instead they have printed trillions of dollars via Quantitative Easing (QE), to persuade investors to buy shares and commodities, […]
Markets need more cash from the Janet Yellen tooth fairy Read More
Global stock markets turned in a vintage experience last week for those who like horror movies. Continued sell-offs in China finally convinced some financial investors, and some senior Western policymakers, that its economy might not be quite as strong as they had assumed. The ensuing panic led to record profits for the high frequency traders (HFTs), as the Dow Jones […]
Stock market volatility surges as margin debt hits danger level Read More
Crude oil prices continued to fall towards $30/bbl last week. Markets are finally starting to recognise, as the BBC reported last year, that ‘China fooled the world‘ with its stimulus programme. It had not suddenly become middle-class by Western standards in 2009. Instead, aided by developed country stimulus policies, its own stimulus had helped create […]
Contagion hits financial markets as Great Unwinding continues Read More
This morning, Greece introduced capital controls. People can only withdraw €60/day ($65) from their bank accounts. The government has also called a referendum on Sunday, after Eurozone talks on a new bailout package collapsed. The key issue is that Greece will never be able to repay its debts. These are currently estimated at €322bn ($365bn) […]
Greece introduces capital controls; IMF says it needs to default Read More
Credibility is hard to gain. And once gone, it is very hard to regain. That is the challenge facing the US Federal Reserve today. The New York Times is just one of the mainstream media now starting to highlight the issue, as last week’s Feb meeting led to a further deferral of the promised rise […]
Fed’s loss of credibility risks causing investor stampede Read More
My 4 May post was titled “‘Sell in May and go away?’ as US, German bond yields jump“. Since then, US interest rates have continued to soar and the US stock market is starting to wobble, as I discussed last week. Now emerging markets are in the line of fire. $9.3bn was withdrawn last week – […]
German markets stumble as “Sell in May” theme continues Read More
“If only US GDP growth could remain negative in Q2, what a lot of money we could make”. You could almost hear the excited chatter in financial markets on Friday, as news spread that revised data showed the US economy had seen negative growth in Q1. This is yet another example of the upside-down world […]
Gloom turns to boom as US economic data disappoints, again Read More
Since 2010, May/June has seen the US Federal Reserve start to realise it would have to revise its optimistic New Year forecast that economic recovery was inevitable. As its deputy chairman, Stanley Fischer, noted last August “Year after year we have had to explain from mid-year on why the global growth rate has been lower than […]
Policymakers’ out-of-date economic models fail to create growth, again Read More
The Great Unwinding of policymaker stimulus began last August with the collapse of oil prices and the rise of the US$. Of course, markets have bounced around since then – but that is what markets do. And in major markets such as these, there are also people with large wallets ready to manipulate prices in one direction […]
US interest rates likely to move higher sooner, not later Read More
China’s interest bill this year is around $1.7tn, according to ratings agency Fitch. And no, the “tn” isn’t a typo. China’s interest bill is indeed around the total size of India’s economy, and larger than the economies of S Korea ($1.3tn), Spain ($1.4tn) or Mexico ($1.3tn). Common sense tells us that no economy can afford […]
China lending curbs will hit global property bubbles Read More
Who would pay the bill, if Greece defaulted on its current €320bn debt ($340bn)? This is no longer just a theoretical question. Of course, we have all known since 2012 that Greece would never be able to repay its debt. But the EU covered up this hard truth by a ‘pretend and extend’ policy: The default deal deferred repayment […]
Germany could face €86bn bill from a Greek default Read More
As I have feared, major volatility is developing in financial and chemical markets, as the Great Unwinding of policymaker stimulus continues. The chart above shows the dramatic increase in the benchmark portfolio since the Unwinding began in mid-August: There was very little volatility from January until August, with prices generally remaining within +/- 10% Volatility then […]
Market volatility jumps as Great Unwinding continues Read More
Its been a fine run for the Boom/Gloom Index of financial market sentiment. Every time it has weakened, as in January, central banks have rushed to support it with ever-larger volumes of free cash. But the European Central Bank’s new €60bn/month ($65bn) programme doesn’t seem to be providing the same support for US equities as before, […]
Q1 was very difficult for many companies and investors. They had wanted to believe since 2009 that central banks could somehow control the global economy: The oil price would always be $100/bbl The US $ would always remain weak Central banks would always be able to stimulate growth in the economy Stock markets would always go up in the […]
Volatility rises as central bank policies prove wishful thinking Read More
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
Attention has rightly been focused on the collapse of oil prices over the past 6 months. These have further to fall, but the major part of the move must now be behind us. After all, Brent was at $104/bbl when I first forecast the move in mid-August, and closed at $56/bbl last night, so probably “only” has $20/bbl-$30/bbl further downside. […]
Historians will not look kindly on Mario Draghi, head of the European Central Bank. They will ask what he thought he was doing, issuing an extra €1tn ($1.05tn) of debt from March 2015, when the Eurozone was already struggling under a dead-weight of government debt: In the big countries, Italy has $47k of debt per person; […]
European interest rates go negative as Draghi boosts stock markets Read More
The world’s major financial markets hit bottom exactly 6 years ago, on 6 March 2009. They then began their recovery, fuelled by expectations of a quick V-shaped recovery as a result of G20 stimulus plans. At that date, prices had fallen in all markets versus their pre-Crisis peaks: The world’s largest Index, the US S&P […]
”What a difference a day makes Twenty-four little hours Brought the sun and the flowers Where there used to be rain” (lyrics, Renee Olstead) What would financial markets do without Mario Draghi, the head of the European Central Bank (ECB)? A month ago, they were worrying about deflation arriving in the Eurozone and the […]
A major new report from consultants McKinsey confirms my concerns over the dramatic increase in global debt levels since stimulus policies began in 2008. As their chart above highlights: Global debt has risen by $57tn to $199tn since 2007, nearly 3x global GDP Government debt is up by $25tn, with three-quarters of this in the developed […]
Mckinsey says global debt now 3x global GDP, and rising Read More
Increasing volatility in major Western financial markets suggests they are struggling to maintain their momentum. It is certainly hard to be very optimistic about the outlook for the major Western stock markets this year. The reason is that investors are still failing to think about political risk. They continue to believe, as they did a year ago, […]
US stock markets weaken as bond yields signal deflation is near Read More
In March 2007, the Financial Times kindly published a letter from me arguing that the US Federal Reserve seemed “to confuse being market-friendly with being friendly to markets“, and had forgotten “The famous dictum of William McChesney, the long-serving Fed chairman in the 1960s, that “the job of the Federal Reserve is to take away the punch […]
One day, the Fed will try to talk the market up – and nobody will listen Read More
Every time US stock markets weaken on a day-to-day basis, the US Federal Reserve now jumps in to support them, as the chart above shows: We saw this first on October 16, when the S&P 500 fell 5% in a week to 1862. In jumped Fed Governor James Bullard to calm market nerves by suggesting that the Fed should […]
I had a breakfast meeting yesterday with the investment head of one of the world’s major asset managers. He wanted to understand more about our Great Unwinding concept, and our correct mid-August forecast of $70/bbl oil prices. After that, we went on to discuss two critical and related areas: Would the oil price stay at today’s […]
Major investors worry about markets, focus on demographics Read More
“The basic function of a central bank is to defend the value of the currency.” Paul Volcker was the great US central banker of our time. Unlike Alan Greenspan and Ben Bernanke, he believed in taking firm action to avoid crises, rather than trusting in financial markets to regulate themselves. He also believed that politicians had […]
Japan’s panicking policymakers create risk of hyper-inflation Read More
The Great Unwinding began with the change of economic direction in China. So it makes good sense for businesses and investors to view developments with a Chinese perspective in mind. This is particularly relevant as the Chinese word for Crisis contains 2 characters – Danger and Opportunity – as the picture shows. DANGER It is not hard to identify the key Danger from the […]
Danger and Opportunity await as the financial Crisis returns Read More
How long can the juggler keep all the balls in the air? That is the question that compels us to stand in the square and watch her skill at work. We have the same fascination watching central bankers at work – they similarly aim to keep financial markets aloft, to create their desired ‘wealth effect’. But we know that […]
Boom/Gloom Index suggests S&P 500 close to its peak Read More
China’s ‘collateral trade’ is still a major force in world markets for iron ore, copper and even plastics such as polyethylene. September’s data suggests $13.5bn of fake invoices added 56% to the value of China’s exports to Hong Kong, as property developers strove to raise cash to finish their buildings. Full details of the trade […]
China sees $13.5bn of fake September ‘collateral trade’ invoices Read More
A blog reader has kindly sent the above cartoon from the financial pages of The Telegraph newspaper today. Clearly investors are beginning to share the blog’s analysis.
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
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
Global metal markets are at growing risk from developments in China’s ‘collateral trade’, as yesterday’s post highlighted. Worryingly, so are products such as polyethylene and ethylene glycol, as it seems likely these have also been used as collateral more recently. This will be bad news for producers already suffering from slowing demand: China’s economy continues to weaken as the […]
Polymer markets at risk if China’s ‘collateral trade’ unwinds Read More
Iron ore prices on China’s futures market were at 5-year lows yesterday. Copper prices also weakened in Australia. This adds to the blog’s concern that China’s ‘collateral trade’ market is getting closer and closer to its ‘moment of truth’. This will come as an awful shock to most outside observers, who have been led to believe China’s vast imports […]
China’s $10bn trade deal fraud hits iron ore and copper markets Read More
The last days of a bubble are always the most fun. And Alibaba’s New York market debut last Friday will be one of those to treasure and report to the grandchildren in decades to come. There were so many elements to enjoy: The investment bankers got the price wrong by 40%, but will still walk away with […]
US Fed governor agrees it helped fund Alibaba bubble Read More
Polymer traders must be already counting their end-of-year bonuses, as the value of the US$ rises whilst crude oil prices weaken. The biggest bonuses will likely go to polyethylene (PE) traders competing with US producers. The reason is that US ethylene spot prices are currently at record levels. An astonishing 10% of US ethylene capacity has been out […]
US ethylene outages boost European and Asian PE producers Read More
Nobel Prizewinner Prof Robert Shiller correctly forecast the dot-com collapse in 2000, and the 2008 financial Crisis, using the chart above. Now he is warning we risk a 3rd collapse. The problem is that Western central banks have undertaken the largest financial experiment in history. Their policy has been to boost financial markets, particularly the US S&P 500 – the world’s […]
Shiller warning suggests S&P 500 bubble coming to an end Read More
The blog’s 6-monthly review of global stock markets highlights the narrow nature of the advance since September 2008, when the blog first began analysing developments. It shows their performance since the pre-Crisis peak for each market, and the performance of the US 30-year Treasury bond. Remarkably, only the US, India, Germany and the UK stock markets […]
Global stock markets still depend on low-cost money for support Read More
Many readers have been taking a well-earned break over the past few weeks. As usual, therefore, the blog is highlighting key posts during August, to help you catch up as you return to the office. Economic outlook: Great Unwinding of stimulus underway. Q2 results show slowing growth. US retail sales decline in line with incomes, […]
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
Very large amounts of copper, iron and other commodities are in long-term storage in China as part of the ‘collateral trade’. More recently, it seems large amounts of polyethylene (PE), ethylene glycol (MEG) and probably other chemicals have also started to be used for the trade. None of this used to matter when the Chinese economy was booming. Why […]
Eliminating the impossible in China’s polyethylene market Read More
Western financial markets are getting nervous that the US Federal Reserve will cut off their supply of cheap money. They went through the same panic in 2011. Now they again have to wait to see what happens. The chart of the new IeC Boom/Gloom Index above highlights the parallels: Markets were strong through April 2011, with the […]
Markets slip as fears grow Fed’s cheap money may end soon Read More
Condom sales have dropped by 1 million/day in China according to The Economist magazine. It highlights how: Across China, luxury retailers and fancy restaurants are suffering from an edict against wasteful government spending. A chill has crept into karaoke parlours and brothels; mistresses also face a hard time. The reason is the new leadership’s anti-corruption […]
China condom sales droop 1 million/day on anti-graft campaign Read More
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 […]
Polyethylene, shadow banking and China’s ‘collateral trade’ Read More
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 […]
$20tn US, China stimulus and lending – but recovery elusive Read More
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 […]
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 […]
Almost every day brings new revelations about the growing evidence of major fraud in China’s ‘collateral trade’. Yet the world’s financial markets remain very complacent. They have forgotten the basic rule, that the first example is usually the tip of the iceberg – not a one-off mistake. They have also forgotten that the real problems only emerge when […]
$15bn gold loan scam revealed: Beijing property sales fall 50% Read More
The blog’s new Research Note in the ‘Your Compass on China’ series highlights the way that China’s commodity imports have been used to finance its housing bubble. This is clearly a shock for investors, who have till now believed the imports were a sign of its superior economic policies and long-term growth prospects. The Qingdao probe could […]
Qingdao probe the ‘straw on the camel’s back’ for world markets Read More
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 […]
China’s commodity imports have financed its property bubble Read More
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
China’s property market is the epicentre of the global debt bubble discussed yesterday. It has been red-hot since urban residents became free to buy their own home in 1998. Before then, they lived where the state told them. With interest rates held low to boost state-funded infrastructure spending, people had few options for investing their money. The […]
Prime Beijing house prices drop 40% since December Read More
A new article by an IMF economist makes the point that in April 2008, not a single one of the mainstream economic forecasts covered by ‘Consensus Economics’ was forecasting a recession in 2009. The IMF itself expected growth to continue, as did the World Bank and the Organisation for Economic Co-Operation and Development. Even by […]
Central banks have created a debt-fuelled ‘ring of fire’ Read More
The West has been living with cheap money from the central banks for over 5 years. Credit has been very easy to obtain in the financial sector, and interest rates have been at all-time lows. The result can be seen in the chart above from Business Insider of total lending to fund stock purchases on the New […]
Another ‘Minsky Moment’ beckons for US stock markets Read More
China’s President Xi Jinping became the first world leader to highlight the move into a “new normal” at the weekend: “China is still in a significant period of strategic opportunity. We must boost our confidence, adapt to the new normal condition based on the characteristics of China’s economic growth in the current phase and stay cool-minded” “Through […]
China’s president highlights ‘new normal’ of economic growth Read More
Strange things are happening in China’s polyethylene (PE) market, as the chart shows: Imports suddenly jumped 26% in Q1 (red column) versus last year (green) This would be an extraordinary amount at any time, but especially now with the economy slowing It comes at a time when China’s own production continued to increase, up 8% As a result, […]
China’s PE imports jump 26% as credit bubble peaks Read More
Government bonds in the larger, wealthy countries of the West have traditionally been regarded as being “risk-free”. Most countries have failed to pay their debts at some time in the past, but it hasn’t happened in the post-War period for the major economies, and so investors have forgotten this can happen. This situation may well change […]
Ageing populations create repayment risk for government bonds Read More
In olden days, highwaymen would hang around stagecoach inns, waiting to see when wealthy people were travelling. Then they would hide out along their likely route, getting wet and cold, in order to take their cash. Today the arrival of electronic trading has changed all this. High-Frequency Traders (HFT) now have computer programmes to act as their lookouts, […]
High-frequency traders pay $millions to be legal highwaymen Read More
William White was the only central banker to publicly warn of the risks to the world economy long before the Crisis, when he was chief economist of the Bank for International Settlements (the central bankers’ bank). He also warned of the problems that would be caused by their stimulus programmes as early as September 2009. A blog […]
“It’s worse than 2007, because then it was a problem of the developed economies” Read More
Every now and then, somebody in a senior position says something that really deserves to be noticed. Often this is when they are in a state of Denial. This was the case in the blog’s first post in the Interesting Quotes series, when CitiGroup CEO, Chuck Prince dismissed worries about subprime losses in August 2007, saying: […]
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). […]
Cement Shen’s $563m ‘Peach Blossom Palace’ bankruptcy Read More
So, here we are again. Each year it seems to take less and less time for the US Federal Reserve to give up on its confident New Year forecasts of economic recovery. New Fed Chair, Janet Yellen, argued in February that the weather was responsible for the economy’s poor performance. But now she seems to have decided the […]
Fed Chair Yellen ignores demographics, goes back to stimulus Read More
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: […]
China’s lending problems begin to worry wider world – too late Read More
Markets have been remarkably calm ahead of Crimea’s planned Sunday referendum to leave Ukraine and join Russia. Yet as Associated Press has reported: “The Group of 7 world leaders say they won’t recognize results of a referendum for the Crimea region to split from Ukraine and join Russia. A statement from the seven nations released from […]
Crimea referendum highlights growing geo-political risks Read More
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
“The proper role for monetary policy is to work behind the scenes to promote long-term growth and price stability, yet central banks have instead attempted to “manipulate asset prices and financial markets” to fine-tune their economies. “I do not think this is a particularly healthy state of affairs for the central banks or our economies. […]
Central banks have “attempted to manipulate asset prices and financial makets” Read More
Sentiment, as measured by the IeC Boom/Gloom Index has weakened considerably over the past 3 months as the chart shows: It peaked at 12 in November, hitting its highest level since before the 2008 Crisis began (blue column) It then drifted lower in December, before rallying back to 9 in the New Year But now […]
Sentiment weakens as US stock markets wait for more QE Read More
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
Markets stopped operating in their true role of providing price discovery sometime ago. Instead, they became dominated by the central banks, determined to prove their theory that increased asset values can stimulate sustained economic recovery. They, of course, have the firepower to bend markets to their will. Nobody else could have spent $16tn in this manner […]
When was the last time you told your customers that they would have to wait 570 days for delivery of material for which they have already paid? You’ve never done this? Well, you need to take lessons from those super-smart people who own the aluminium warehouses, such as Goldman Sachs (pictured above by Reuters). As the blog […]
Aluminium shortage “temporary and artificial” says world’s largest buyer Read More
The blog used the metaphor of a hurricane in 2007-8 to describe the likely impact of the looming financial crisis. Thus in July 2007, it discussed the potential for a “global hurricane” to develop. And it repeated this metaphor as the crisis built, until writing in September 2008 that “the financial hurricane had arrived in New York” with the […]
China’s new policies send earthquake tremors through markets Read More
We all know that strange things have been happening in global commodity markets in the past 5 years. Central banks have been pumping out free cash, which has been used to fund speculative trading by many of the major investment banks. In turn this has taken many prices to new records. And this was all happening when […]
Aluminium stocks enough to build nearly 2 years’ supply of cars Read More
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 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 […]
Boom/Gloom Index hits record high as western financial markets soar Read More
The blog is actually a fan of the artist Francis Bacon, and it rather likes the above painting of his friend and fellow-artist Lucien Freud. But the reason for showing it is not to discuss the finer points of art criticism. It is instead simply to note that its sale by auction house Christies in New York last […]
Record $142m for Bacon work shows markets now in “melt-up stage” Read More
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
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
The Eurozone crisis has been quiet since the summer of 2012, as the markets waited for the German election. But now this has occurred, it is unlikely that the problem can continue to be ignored. It is easy to forget the drama of May 2012, when the blog correctly forecast a crisis was about to occur in […]
The period since March 2009 has been a wonderful time for most investors in the major markets. As the blog’s 6-monthly update shows, almost every index has increased, and by large amounts:…
Russia has been the biggest winner, up 151%,
Most major financial markets have doubled since 2009 lows Read More
The above chart will be familiar to readers of Boom, Gloom and the New Normal. It shows the way in which Japan’s interest rates (black line, bottom axis) have been a leading indicator for US interest rates (red line, top axis) since the stock market peaks of 1990 in Japan and 2000 in the USA. […]
Higher US interest rates will test housing market strength Read More
More details continue to surface of the wasteful spending that underpinned much of China’s GDP growth in recent years. The empty city of Ordos (first highlighted 3 years ago in the blog) is just one example. House prices there have recently fallen 50%, and the shadow banking system (critical for privately-owned companies) is reportedly in […]
“Don’t fight the Fed” is one of the oldest rules in stock market investment. And it has proved valid again, as this month’s IeC Boom/Gloom Index shows:…
The Fed and other G7 central banks have poured $10tn of stimulus into
US stock markets hit record but real economy remains slow Read More
Asset bubbles are great fun whilst they last, as the West found out during the sub-prime era. The supply of money seems endless, and prices just keep rising to the skies. Meanwhile the regulators are busy assuring everyone that ‘this time is different’ and its quite safe to invest. The problem is that so-called ‘common […]
Emerging economies risk being submerged under debt Read More
This month’s IeC Boom/Gloom Index continues to flash warning signs over the state of global financial markets:…
The US S&P 500 Index (red line) and other markets have been supported by $10tn of central bank liquidity programmes (orange arrows) since
China’s new leadership are in a very difficult position. They have inherited an economy that has been run on stimulus programmes for the past 5 years. And as the head of the country’s largest developer, China Vanke, has warned, “If …
China interest rates hit 28% as property bubble targeted Read More
A new report from Pimco, the world’s largest bond fund manager, makes it clear they share the blog’s worries about the increasingly negative impact of western central bank policy:
“Central banks have reached a critical inflection point in which the …
Pimco warns on “negative impacts” of central bank policiy Read More
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…
We are now nearly at the end of May, and still there is no sign of a sustained recovery in demand. This mirrors the weakness seen in January and March – normally also very strong months. Now, unless seasonal patterns are overturned, demand will remai…
Japan’s 7% Nikkei index fall highlights risks ahead Read More
‘When I use a word,’ Humpty Dumpty said, in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’
This quotation from Lewis Carroll’s great novel ‘Through the Looking-Glass’ rather seems to sum up policymakers’ cur…
Friday provided a good test of the blog’s analysis that Japan’s aggressive policy of devaluing the yen could result in major downward pressure on crude oil prices:
• The yen crashed through the $1: ¥100 level, ending at a 4-year low of $1: ¥101.6
…
Central bankers mean well. But, of course, good intentions do not guarantee good results.
Their intention since the start of the 2008 crisis has been to boost financial markets. They have therefore provided $tns of liquidity, which has indeed produc…
Central banks pop champagne corks as stock markets soar Read More
Don’t be surprised if your finance team starts working even longer hours over the next few weeks. Not only will they have to worry about revising profit forecasts and working capital issues, as demand weakens in some core markets. Now they have to w…
Drug supplies cut to Greece as capital controls return to Europe Read More
China’s new premier, Li Keqiang, was the first senior official to confirm that the country’s GDP figures were “for guidance only”, being “man-made and therefore unreliable”. As he told the US ambassador in 2007, he instead used electricity consumption…
China’s new leadership prepare for property price crackdown Read More
The blog’s 6 monthly review of global stock markets highlights a very unusual pattern since global demand and chemical markets peaked on 29 April 2011, as the chart shows:
• Markets in developed economies have powered ahead with Japan up 24%, the US…
The president of the European Central Bank, Mario Draghi, was ‘person of the year’ in financial markets with his July promise to “do whatever it takes” to save the euro. 6 months later, it seems worth checking on the current situation.
The chart t…
Eurozone’s ‘Draghi rally’ faces election test in Italy Read More
January was, as usual, a good month for the optimists in the financial community. They filled the media with confident predictions of sustained and high levels of global economic growth. China will apparently soon be booming under its new leadership,…
Nobody ever said that financial and chemical were meant to be easy to understand. But current developments are clearly far more complex than normal. We have grown used to manipulation by policymakers, via their various quantitative easing (QE) progra…
Volatility rises as players bet on recovery or recession Read More
New Year is a traditional moment for price increases. And last week didn’t disappoint, with Brent crude oil jumping $3/bbl. Whilst financial markets soared globally on hopes that the US ‘fiscal cliff’ deal might be a sign that policymakers will final…
Hands-up those who remember the G-20? Well done, Mexican readers, you get full points. But other readers seem doubtful. This weekend the world’s Finance Ministers were meeting in Mexico City, as the country concludes its G-20 presidency. But you w…
The blog’s friends at the American Chemistry Council used a very relevant quotation recently from Alexander Graham Bell, who invented the telephone and numerous other modern wonders:
“Sometimes we stare so long at a door that is closing that we seek t…
US Federal Reserve policies confront a closing door Read More
Here we go again’ seems to be the reaction of financial markets to the US Federal Reserve’s latest push to expand liquidity. So far, policymakers have tried 4 times to return the economy to the world of the Supercycle between 1982-2007. As the chart …
Spain is in the eye of the storm in the Eurozone crisis. Its economy is the 12th largest in the world, with GDP of $1.4tn. If it crashes out of the euro, then we will all feel the impact. And worryingly, the pace of events seems to be speeding up, e…
The US Federal Reserve and the European Central Bank have adopted new and aggressive monetary measures to try and boost US employment and stabilise peripheral Eurozone bond markets. Unfortunately, their actions are more likely to increase the chances …
‘Masterly inactivity’ was Wellington’s policy in his successful European wars against Napoleon in the early 19th century. The English general was always under great pressure from the politicians to ‘do something’. But Wellington knew he had to defeat…
Central bankers fail to learn the Wellington lesson Read More
The blog’s 6-monthly review of global financial markets highlights some interesting developments. It began 4 years ago, and was followed by the co-ordinated G-20 stimulus programme in March 2009. This ran out of steam by April 2011, leading the blog …
Financial markets suffer despite stimulus programmes Read More
Over the past 20 years, the financial sector has captured an increasing share of the wealth created by the rest of the economy. At its peak before the Crisis, it accounted for 40% of all profits in the US corporate sector, allowing financiers to claim…
Candide, the classic novel of the great French writer Voltaire, is a satirical description of a young man who has been taught that ‘everything is for the best in the best of all possible worlds’. Voltaire’s modern equivalent might well decide to set h…