Helping you navigate the new normal
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
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
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
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
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.
As promised last week, today’s post looks at the impact of the ageing of the BabyBoomers on the prospects for economic growth. The fact that people are living up to a third longer than in 1950 should be something to celebrate. But as I noted in my Financial Times letter, policymakers are in denial about the importance of […]
The post West’s household spending heads for decline as population ages and trade war looms appeared first on Chemicals & The Economy.
Commentators have confused cause with effect when analysing this month’s sudden downturn in financial markets, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Surprise and confusion seem to have been the main reactions to this month’s sudden downturn in western financial markets. Yet across the world in […]
The post China’s role in market volatility – Beijing’s shifting priorities raise questions over assumptions of global growth appeared first on Chemicals & The Economy.
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 […]
Many people in financial markets were hoping a new QE4 stimulus programme would be announced at the recent IMF meeting in Peru. Unsurprisingly, markets rallied in anticipation: Brent oil was at $44/bbl on 24 August, and rallied to $56/bbl within a week The US S&P 500 Index rallied from 1823 to 1979 over the same period […]
Something has clearly changed in global financial markets in recent weeks. Not only have they been falling, but real world issues have begun to provide a negative impact. This sounds a strange statement. But it simply means that in the past, markets have seen “bad news” as being good news. They expected that it would […]
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, […]
“We have for many years addressed the very important issues of how to avoid becoming pregnant, how to avoid sexual diseases, how kids have a right to their own bodies, but we totally forgot to tell them we cannot have children forever.” Suddenly, and it does seem to be a sudden realisation, Western countries are beginning to […]
The blog’s suggestion back in March that now would be a good time for US readers to buy a new car is looking more and more prescient. As the head of American Honda explained to investors last month: “In addition to a heavy reliance on fleet sales to boost volumes, we are seeing some of our […]
Financial markets today only care about one thing – whether central banks will continue to provide more low-cost financing to support higher asset prices. Thus markets liked last Friday’s weak US jobs report. They hoped that the US Federal Reserve would slow its tapering process as a result. This inverted logic explains why bad news for the […]
The stock market used to be a good leading indicator for the economy. But that was before the central banks decided to manipulate it for their own purposes. As then US Federal Reserve Chairman boasted 3 years ago on launching their second round of money-printing: “Policies have contributed to a stronger stock market just as […]
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 […]
Oil markets have been driven by speculative excess since 2009. None of the factors that were supposed to create supply shortages have ever occurred. Markets have never even been close to scrambling for product. And the rallies are getting shorter and shorter, as this simple fact is finally being better understood. Thus traders’ most recent efforts to create […]
Last week the US Federal Reserve announced the second move in its so-called tapering process, and reduced its bond buying by another $10bn/month. But there was only a temporary repeat in stock markets of the enthusiastic response to its first reduction in December. We are thus about to test whether the blog’s theory of ‘two steps and a […]
The most important event of the past week, and possibly of the whole year, was Wednesday’s decision by the US Federal Reserve to finally “taper” its vast stimulus effort – now worth $4tn, nearly 25% of US GDP. The timing was no great surprise. The blog was convinced Ben Bernanke would want to start the process […]
Sometimes the blog’s mind goes back to its happy days in Houston, Texas, when it set up and ran ICI’s feedstock and petchems trading office. And it thinks through the factors that it would have considered when deciding whether to buy, sell or sit on the sidelines. The memory came back during last week’s lively ACS webinar, when […]
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 […]
Back in September 2011, the Bank of England published the chart above to show how it expected Quantitative Easing (QE) to revive the UK economy*. It argued: “How does the economy adjust to asset purchases? “The overall effect of asset purchases on the macroeconomy can be broken down into two stages: an initial ‘impact’ phase and an ‘adjustment’ […]
In early March, the blog described itself as feeling like “a lonely voice, focused on what is really happening in the real world”. But gradually since then, the consensus view on growth and commodities regulation has begun to shift in its direction. For example, a recent New York Times article on China by Nobel Prize-winner Paul Krugman could have […]