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“When all the experts and forecasts agree — something else is going to happen”, Bob Farrell

26 June 2021

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

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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

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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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London house prices edge closer to a tumble

16 May 2020

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

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Uber’s $91bn IPO marks the top for today’s debt-fuelled stock markets

28 April 2019

Uber’s IPO next month is set to effectively “ring the bell” at the top of the post-2008 equity bull market on Wall Street.  True, it is now expecting to be valued at a “bargain” $91bn, rather than the $120bn originally forecast. But as the Financial Times has noted: “Founded in 2009, it has never made

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The BoE’s pre-emptive strike is not without risk

12 February 2019

The Financial Times has kindly printed my letter below, arguing that it seems the default answer to almost any economic question has now become “more stimulus” from the central bank. After 15 years of subprime lending and then quantitative easing, last week’s warning from the Bank of England suggests there are fewer and fewer economic

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

3 February 2019

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

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“What could possibly go wrong?”

21 October 2018

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

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Boomer SuperCycle unique in human history – Deutsche Bank

30 September 2018

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

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London house prices slip as supply/demand balances change

22 July 2018

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 […]

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Chemicals flag rising risk of synchronised global slowdown

29 April 2018

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

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The tide of global debt has peaked: 8 charts suggest what may happen next, as the tide retreats

22 April 2018

The results of the central bankers’ great experiment with money printing are now in, and they are fairly depressing, as the charts above confirm: On the left are the IMF’s annual forecasts from 2010 – 2018 (dotted lines) and the actual result (black) Until recently, the Fund was convinced the world would soon see 5% […]

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Economy faces slowdown as oil/commodity prices slide

12 February 2018

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

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The return of volatility is the key market risk for 2018

8 January 2018

We are living in a strange world. As in 2007 – 2008, financial news continues to be euphoric, yet the general news is increasingly gloomy. As Nobel Prizewinner Richard Thaler, has warned, “We seem to be living in the riskiest moment of our lives, and yet the stock market seems to be napping.” Both views […]

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Budgeting for the Great Unknown in 2018 – 2020

23 October 2017

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

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Interest rates and London house prices begin return to reality

4 October 2017

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%: […]

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London housing market hit by Brexit, China’s capital controls

6 March 2017

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 […]

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Monetary policy reaches sell-by date for managing the economy

27 February 2017

Monetary policy used to be the main focus for running the economy.  If demand and inflation rose too quickly, then interest rates would be raised to cool things down.  When demand and inflation slowed, interest rates would be reduced to encourage “pent-up demand” to return. After the start of the Financial Crisis, central banks promised […]

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Global auto market heads for 5% fall as stimulus impact wanes

30 January 2017

2016 data highlights one startling statistic about the world’s Top 7 auto markets.  They are 85% of total world sales and as the chart shows, their overall sales growth since 2007 has been entirely due to China:    China’s sales have risen nearly four-fold since 2007, from 6.3m to 24.2m    Sales in […]

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Trump and dollar strength will accelerate the Great Reckoning

12 January 2017

Corporate debt in the Emerging Markets highlights the impact of the Great Reckoning, with the US dollar and interest rates rising, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Corporate borrowers in Emerging Markets (EMs) are now facing higher debt service and capital repayment costs, due to […]

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Recession the base case scenario for 2017

9 January 2017

It is hard to be optimistic about the outlook for 2017. The good news is that policymakers are finally giving up on the idea that stimulus can somehow return us to the growth levels seen when the Baby Boomers were young.  As the Bank of England note in a new Report:   ”Economic theory suggests that a […]

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Chart of the Year: US$, 10-year US interest rates begin to rise

21 December 2016

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, […]

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2016′s Word of the Year: “Impossible”

19 December 2016

Nobody likes change, particularly on the scale that is taking place all around us today.  Understandably, we prefer to live in a state of Denial.  This is why “Impossible” is my Word of the Year for 2016. The main feature of the word is that it is a statement, and a very clear statement.  People […]

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Interest rate and US$ surge mark start of the Great Reckoning

21 November 2016

The bond market vigilantes are back.  And they clearly don’t like what they are seeing.  That is the clear message from the charts above, showing movements in 10 year government bond interest rates for the major economies, plus their exchange rate against the US$ and the value of the US$ Index:   As I warned […]

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US 10-Year interest rates suggest Great Reckoning may be near

19 September 2016

 ”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 […]

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

7 September 2016

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 […]

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US pensioners pay the price for Fed’s monetary policy failure

19 August 2016

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 […]

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Global demand slowdown hits chemical industry results

15 August 2016

Its not been a great 6 months for the global chemical industry, and my usual quarterly survey of company results confirms the disappointment. The first half of the year is typically the strongest, for seasonal reasons, as companies come back to work after the Christmas holiday and prepare for the peak car-buying and construction periods […]

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

12 August 2016

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

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Brexit poll creates UK, euro interest rate rise risk

26 February 2016

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 […]

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Great Unwinding creates Great Divergence in financial markets

2 December 2015

Most traders prefer to be with the crowd – then, at least, they can’t be personally blamed if things go wrong.  Instead, they can claim that “nobody could have seen the change coming”.  So as we approach year-end, many traders are becoming very nervous as the Great Unwinding of policymaker stimulus means that markets start […]

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US 10-year interest rates jump 23% as Fed debates 0.25% hike

30 November 2015

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 […]

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Phase 2 of the Great Unwinding of policymaker stimulus begins

13 July 2015

Greece, Iran, China – suddenly real world issues are starting to dominate the headlines.  And few people now believe that printing more money is the way to solve these issues.  Instead, political leaders are being forced to take the hard decisions they have ducked for so long. Financial markets are clearly reflecting the change.  They […]

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Fed’s loss of credibility risks causing investor stampede

22 June 2015

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 […]

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German markets stumble as “Sell in May” theme continues

15 June 2015

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 – […]

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US margin debt hits record highs, whilst interest rates jump

8 June 2015

Everyone knows that the US Federal Reserve will “never” let stock markets fall.  So it makes perfect sense for investors to borrow as much as they can, in order to chase the market higher.  It therefore is no surprise to see that borrowing to fund purchases on the New York Stock Exchange has reached a […]

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European interest rates go negative as Draghi boosts stock markets

17 March 2015

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; […]

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Interest rate outlook more uncertain as Bill Gross leaves PIMCO

3 October 2014

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 […]

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Great Unwinding of policymaker stimulus creates interest rate risk

10 September 2014

Interest rate risk is rising in the developed economies as the Great Unwinding of policymaker stimulus continues.  Since the blog first highlighted this Unwinding last month: Oil prices have continued to tumble, with Brent now down over $15/bbl from its late-June peak The US$ has continued to rise from multi-year lows versus the yen, euro and pound And of course, […]

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

12 March 2014

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 […]

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US markets see Happy Days again

20 January 2014

New Year optimism over the economic outlook is breaking out all over the USA.   Weak employment numbers for December were ignored, as were weak data on housing markets.  Whilst prices for benzene, the blog’s favourite sentiment indicator, not only jumped to a record high but dragged European levels to an all-time record as well. Happy Days are clearly […]

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Most major financial markets have doubled since 2009 lows

7 October 2013

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%,

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US Federal Reserve cuts growth forecast, again

23 September 2013

5 years after the Crisis began, there still seems to be a worrying lack of accountability in the banking sector, even when things go wrong on an epic scale.  Take JP Morgan Chase, for example: It lost $6.2bn in London last year, which its CEO Jamie Dimon initially called “a tempest in a teapot” It has now been […]

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Higher US interest rates will test housing market strength

18 September 2013

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.  […]

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A flap of a butterfly’s wings to freeze the UK economy

28 August 2013

The world’s media are increasingly aware that economic growth is being impacted by major demographic change.  Thus the leading UK weekly magazine, the New Statesman, has published this article by the blog last week. It looks at the challenges facing the UK in the next few months.  These are, of course, the same challenges that face all the major economies. “The [UK […]

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Global interest rates surge as Newton’s 3rd Law continues to operate

27 August 2013

Newton’s 3rd Law of Motion states, “To every action there is always an equal and opposite reaction“.  Thus the forces of two bodies on each other are always equal and are directed in opposite directions.

Policymakers forgot this Law in …

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UK bond yields return to historical levels

31 January 2013

Are you worried about the future direction of interest rates, and what they may mean for your pension, your family and your company?

Then the chart above, showing 300 years of UK government bond yields, may just be helpful. It will probably also su…

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3rd London Olympics sees UK bond yields back at 1908 levels

24 July 2012

This week marks the opening of the 3rd London Olympics. To celebrate, the blog today looks at developments in government bond yields since the 1st London Games in 1908. On Thursday, it will look at GDP per capita changes since the 2nd London Games in…

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Eurozone crisis gets worse, not better

21 June 2012

Global bond investors have found a new worry. 10 year interest rates in Spain, the world’s 12th largest economy, have risen alarmingly in recent weeks. As the chart shows, they are now above 7% (blue column) compared to 4% when the blog first focused…

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C is for Complexity

24 May 2012

The blog’s series on the VUCA world today reaches C for Complexity.

Interest rates are key to company profitability. They determine rates of return for new investments, and their affordability. They also have a major influence on consumer spending p…

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Germany in the firing line as Greek default nears

12 January 2012

Interest rates are key to the direction of the global economy.

But not in the way that was true during the 1982-2007 economic SuperCycle. Then, there was a global surplus of savings, due to the vast numbers of people in the Wealth Creating 25 – 54 …