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

18 April 2021

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

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

11 April 2021

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

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China’s dual circulation policy aims to reduce debt reliance

14 March 2021

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

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

7 March 2021

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

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5 key questions for success in the New Normal

17 January 2021

Sustainability rather than globalisation is becoming the key driver for business. And the paradigm shift this creates means that companies need to adopt new Critical Success Factors as shown above. Leadership skills will be essential at all levels of the organisation in order to stimulate the creativity and action orientation required for success. There are

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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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OPEC set to lose out as Biden, EU and China focus on Climate Change opportunities

14 December 2020

OPEC used to dominate global oil markets. In the early 1980s, there was even talk of another OPEC cartel to control gas prices. But those days are long gone.  Instead OPEC members such as the UAE are increasingly aware they have only a limited time left to monetise their vast reserves of fossil fuels. This is

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Oil prices signal potential end to the V-shaped recovery myth

26 July 2020

Oil prices have moved into another ‘flag shape’ – which previously provided critical warning of the March collapse, and of those in 2014 and 2008. The shape is important as it means the bulls and bears have been battling each other to exhaustion, making it likely one or the other will give up. This time,

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Bankruptcies now the key risk as hopes for V-shaped recovery disappear

19 July 2020

Governments, financial markets and central banks all originally assumed the Covid-19 pandemic would be over in a few days or weeks. But it is now clear they were wrong. And unfortunately, there is little sign of a Plan B emerging. The idea was that consumers would have plenty of money in their pockets after the

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World moves from Denial to Anger, as the Paradigm of Loss moves forward

22 July 2020

I have been warning about the Covid-19 risk since early February, and in April suggested here that: “None of us have ever seen a health crisis on the scale of Covid-19 . Nor have we seen an economic crisis on this scale before. The best guide to what may happen is therefore likely to be

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Hertz goes bankrupt as non-essential consumer demand disappears

24 May 2020

The US Federal Reserve has now spent $7tn bailing out Wall Street. But it couldn’t save the 102-year old Hertz rental company from filing for Chapter 11 bankruptcy protection for its US business on Friday night. Sadly, Hertz won’t be the only casualty. Its collapse instead marks the moment when the problems created by two

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Debt, deflation, demographics and Brexit set to challenge London house prices

17 May 2020

London property websites haven’t used the word “reduced” for many years. But it’s starting to appear again on homes for sale and rent, even in core city postcodes. And in another sign of the downturn, homes can now be on offer for months without moving. The problem is that prices were already ready to tumble

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The bill for two decades of doomed stimulus measures is due

3 May 2020

The Financial Times kindly made my letter on the risks now associated with central bank stimulus their Lead Letter One has to agree with your editorial that deflation is now probably inevitable (“Deflation is a bigger fear than hyperinflation”, FT View, April 28). But it is still disappointing to see that the role of central

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Financial markets enter their Convulsion phase

19 April 2020

Many companies and investors are still comparing today’s downturn to the 9-month hiccups seen after the 1990/91 Gulf War and the 2000/1 dotcom crash. In reality, however, this is wishful thinking, as the IMF highlighted last week in its World Economic Outlook: “The Great Lockdown: Worst Economic Downturn Since the Great Depression” One key question,

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

29 March 2020

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

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“They may ring their bells now, before long they will be wringing their hands”

15 March 2020

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

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Chain’s smartphone and auto sales tumble as coronavirus hits demand

8 March 2020

China is the world’s largest market for smartphones and autos – responsible for c30% of global sales for both.  Yet as Reuters notes: “Most western policymakers and journalists view the world economy through a framework that is 10-15 years out of date, failing to account fully for the enormous shift in activity towards China and

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Contingency planning is essential in 2020 as “synchronised slowdown” continues

12 January 2020

The IMF has now confirmed that the world economy has moved into the synchronised slowdown that I forecast here a year ago. Its analysis also confirms the importance of the issues highlighted then, including “rising trade barriers and increasing geopolitical tensions”, a sharp decline in manufacturing, contraction in the auto industry and structural forces such

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Will stock markets see a Minsky Moment in 2020?

5 January 2020

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

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

22 December 2019

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

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Global economy hits stall speed, whilst US S&P 500 sets new records

1 December 2019

Whisper it not to your friends in financial markets, but the global economy is moving into recession. The US stock markets keep making new highs, thanks to the support from the major western central banks. But in the real world, where the rest of us live, the best leading indicator for the global economy is

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Budgeting for paradigm shifts and a debt crisis

27 October 2019

It is now 8 years since John Richardson and I published our 10-year forecast for 2021 in Boom, Gloom and the New Normal: How the Western BabyBoomers are Changing Demand Patterns, Again’. Remarkably, its core conclusions are very relevant today, as the summary confirms. Unfortunately, as we feared, policymakers refused to junk their out-of-date models,

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$50bn hole appears in New York financial markets – Fed is “looking into it”

29 September 2019

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

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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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G7 births hit new record low, below Depression level in 1933

15 July 2019

If a country doesn’t have any babies, then in time it won’t have an economy. But that’s not how the central banks see it. For the past 20 years, through subprime and now their stimulus policies, they have believed they could effectively “print babies”.  Even today, they are still lining up to take global interest

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From subprime to stimulus…and now social division

7 July 2019

The blog has now been running for 12 years since the first post was written from Thailand at the end of June 2007. And quite a lot has happened since then: There was the 2008 financial crisis, one of the blog’s early forecasting successes This led to the publication of ‘Boom, Gloom and the New

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Resilience amidst headwinds is key for H2

30 June 2019

Resilience is set to become the key issue as we look forward to H2, as I note in a new analysis for ICIS Chemical Business. None of us have ever seen the combinations of events that are potentially ahead of us. And none of us can be sure which way they will develop. So it

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Europe’s auto sector suffers as Dieselgate and China’s downturn hit sales

16 June 2019

Trade wars, Dieselgate and recession risk are having a major impact on the European auto industry, as I describe in my new video interview with ICIS Chemical Business deputy editor, Will Beacham. One key pressure point is created by the downturn in China’s auto industry. As the chart shows, it has been a fabulous growth

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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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Don’t get carried away by Beijing’s stimulus

8 April 2019

Residential construction work in Qingdao, China. Government stimulus is unlikely to deliver the economic boost of previous years © Bloomberg China’s falling producer price index suggests it could soon be exporting deflation, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog On the surface, this year’s jump in China’s total

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Stormy weather ahead for chemicals

24 March 2019

Four serious challenges are on the horizon for the global petrochemical industry as I describe in my latest analysis for ICIS Chemical Business and in a podcast interview with Will Beacham of ICIS. The first is the growing risk of recession, with key markets such as autos, electronics and housing all showing signs of major

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Ageing Perennials set to negate central bank stimulus as recession approaches

10 March 2019

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

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Déjà vu all over again for oil markets as recession risks rise

3 March 2019

Back in 2015, veteran Saudi Oil Minister Ali  Naimi was very clear about Saudi’s need to adopt a market share-based pricing policy: “Saudi Arabia cut output in 1980s to support prices. I was responsible for production at Aramco at that time, and I saw how prices fell, so we lost on output and on prices

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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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BASF’s second profit warning highlights scale of the downturn now underway

10 December 2018

The chemical industry is easily the best leading indicator for the global economy.  And thanks to Kevin Swift and his team at the American Chemistry Council, we already have data showing developments up to October, as the chart shows. It confirms that consensus hopes for a “synchronised global recovery” at the beginning of the year

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Asian downturn worsens, bringing global recession nearer

25 November 2018

The chemical industry is the best leading indicator for the global economy.  And my visit to Singapore last week confirmed that the downturn underway in the Asian market creates major risks for developed and emerging economies alike. The problem is focused on China’s likely move into recession, now its stimulus policies are finally being unwound. 

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Chemical output signals trouble for global economy

4 November 2018

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

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Budgeting for the end of “Business as Usual”

28 October 2018

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

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

29 July 2018

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

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

27 June 2021

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

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Time to recognise the economic impact of ageing populations

10 June 2018

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

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Financial markets party as global trade wars begin

3 June 2018

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

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China’s lending bubble is history

27 May 2018

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

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Oil prices flag recession risk as Iranian geopolitical tensions rise

20 May 2018

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

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Apple, Xiaomi squeeze smartphone mid-market as sales plateau

6 May 2018

The global smartphone market has finally gone ex-growth as China’s slowdown continues.  In turn, the market is starting to polarise – with Apple pushing further up-market whilst Chinese brands such as Xiaomi focus on volume.  Samsung’s middle market positioning looks increasingly under threat: The chart shows Q1 sales for Samsung, Apple, the 3 top Chinese […]

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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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Trump’s trade war hits Wall Street as tech downturn begins

25 March 2018

President Trump no longer tweets regularly about new record highs for US financial markets. The tweets were a core activity in the first year of his Presidency, when he was still feeling his way into the job. But now, as last week’s sackings of his Secretary of State and National Security Advisor confirm, his focus has returned […]

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

11 March 2018

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

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West faces “demographic deficit” as populations age

3 March 2018

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

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

19 February 2018

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

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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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London house prices risk perfect storm as interest rates rise

5 February 2018

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

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The global economy and the US$ – an alternative view

29 January 2018

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

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Anti-pollution drive hits China’s role as global growth engine

4 December 2017

China is no longer seeking ‘growth at any cost’, with global implications, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog A pedestrian covers up against pollution in Beijing © Bloomberg China’s President Xi Jinping faced two existential threats to Communist party rule when he took office 5 […]

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Difficult times ahead for US polyethylene exports as business models change

20 November 2017

This wasn’t the chart that companies and investors expected to see when they were busy finalising $bns of investment in new US ethylene and polyethylene (PE) capacity back in 2013-4.  They were working on 3 core assumptions, which they were sure would make these investments vastly profitable: Oil prices would always be above $100/bbl and […]

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Baby boomers’ spending decline has hit demand and inflation

21 September 2017

The Financial Times has kindly printed my letter below, wondering why the US Federal Reserve still fails to appreciate the impact of the ageing BabyBoomers on the economy Sir, It was surprising to read that the US Federal Reserve is still puzzled by today’s persistently low levels of inflation, given that the impact of the ageing […]

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China’s used cars put a dent in global industry

8 September 2017

China is now developing a used car market for the first time in its history.  This means the end of global auto sales growth, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog China’s car market has been key to the recovery in global auto sales growth since […]

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Chemical industry data shows reflation remains hope, not reality

8 September 2017

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

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Debt, demographics set to destroy Trump’s GDP growth dream

1 May 2017

Unsurprisingly, Friday’s US GDP report showed Q1 growth was just 0.7%, as the New York Times reported: “The U.S. economy turned in the weakest performance in three years in the January-March quarter as consumers sharply slowed their spending. The result fell far short of President Donald Trump’s ambitious growth targets and underscores the challenges of […]

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Ageing boomers are no longer spending

27 April 2017

The Financial Times has kindly printed my letter below, suggesting that President Trump’s focus on tax cuts is misplaced, given the headwinds created for spending and economic growth by today’s ageing US BabyBoomers. Sir, Gillian Tett provides an excellent analysis of the wishful thinking that seems to dominate US economic policy today (“Trump tested as […]

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China power struggle creates commodity snakes and ladders

9 March 2017

The clash of priorities between President Xi and Premier Li over the role of stimulus in China’s economy is close to being decided, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog The stakes are rising in China’s power battle ahead of October’s 19th Party Congress. Normally, the […]

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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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Basic Skills, not protectionism, key to sustaining today’s High Income, Services-based economies

13 February 2017

Suddenly, manufacturing and protectionism have become political issues across the Western world.  President Trump has already formed a Manufacturing Council with the aim of “reshoring jobs” from outside the USA, and is threatening to introduce import duties of up to 45%. The problem, however, as the chart shows, is that this will not help the people who […]

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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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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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Economic policy needs to focus on impact of the 100-year life

28 November 2016

Nearly two-thirds of people in the world’s top 25 countries feel their country is heading in the wrong direction, according to a new poll from Ipsos MORI.  As their chart shows: China, Saudi Arabia, India, Argentina, Peru, Canada and Russia are the only countries to record a positive feeling The other 18 are increasingly desperate […]

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Trump’s ’100-day plan’ means an end to “Business as usual”

14 November 2016

‘There are none so blind as those who will not see. The most deluded people are those who choose to ignore what they already know’ John Heywood, 1546 “When Aetna ran through post-election expectations, the idea that Donald J. Trump would win the presidency and that Republicans would control both chambers of Congress seemed so […]

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Chemical industry warns of likely global recession in 2017

7 November 2016

The chemical industry is the best leading indicator for the global economy, and it is flagging major warning signs about the outlook for 2017.  As the chart above shows, based on American Chemistry Council (ACC) data:   Since 2009, Capacity Utilisation (CU%) has never returned to the 91.3% averaged between 1987 – 2008   It […]

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

24 October 2016

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

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President Xi tells China’s government to “control asset bubbles”

10 October 2016

China’s housing bubble is not just about Shenzhen.  It is the most obvious sign of problems ahead, as I noted last month.  But as the chart above shows from the Wall Street Journal, total lending to the property sector has rocketed in recent months:    More than one-third of all loans went to the sector […]

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

26 September 2016

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

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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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Pensions crisis finally becomes a mainstream issue

26 August 2016

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 […]

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China becomes net PTA exporter, whilst cotton prices tumble

24 August 2016

China used to be the world’s largest importer of PTA (the raw material for polyester). But not any more. Instead it has become a net exporter for the first time in history: □  Its imports ramped up from 400kt in 1995 to 7 million tonnes in 2006, as Western textile manufacturing moved East □  They […]

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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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Surplus chemical industry capacity reaches 26% as demand slows

30 May 2016

Global demand is continuing to slow, yet chemical industry capacity is continuing to ramp up.  As a result, supply gluts are likely to appear in many key areas as we move into the second half of the year.  That is the key conclusion from the latest American Chemistry Council data for global chemical capacity and […]

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Central banks head for currency wars as growth policies fail

2 May 2016

The world’s central bankers would have been sacked long ago if they were CEOs running companies.  They would also have been voted out, if they were elected officials. Not only have they failed to achieve their promised objectives – constant growth and 2% inflation – they have kept failing to achieve them since the Crisis […]

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

25 April 2016

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 […]

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Global GDP saw record fall in 2015 – new IMF data

20 April 2016

New data from the International Monetary Fund confirms that last year’s collapse in global GDP was even worse than first reported. As the chart shows,the fall when measured in current dollars was a record $4.7tn, versus $3.3tn in 2009.  And it was 6% in percentage terms versus 5.3% in 2009: Even more worrying is that […]

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Hedge funds exit oil price rally as Saudi plans post-oil economy

6 April 2016

“Within 20 years, we will be an economy or state that doesn’t depend mainly on oil“. This critical statement from Saudi Arabia’s deputy Crown Prince has been lost in the hype surrounding Q1′s hedge fund-inspired rally in oil, commodities and Emerging Markets.  There has seldom been a better example of markets failing to see the […]

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Reality battles illusion in world financial markets

4 April 2016

“Buy on the rumour, sell on the news” is one of the most reliable definitions for a weak market.  And that seems to have been the picture in Q1 across commodity, stock and bond markets. The key issue is the ongoing battle between Reality and Illusion: Reality accepts that ageing populations have lower levels of […]

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The end of the Economic SuperCycle

30 March 2016

A paradigm shift is underway in global petrochemical and polymer markets, as I discuss in a new article for ICIS Chemical Business. Previously successful business models, based on the supply-driven principle, no longer work. As our new study, “Demand – the New Direction for Profit”, explains, companies now need to adopt demand-led strategies if they […]

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Central banks cannot control economic fortune of 7.3bn people

25 March 2016

Trillions of dollars have been spent on stimulus by central banks in the developed world since the financial crisis began in 2008.  Clearly these policies haven’t worked – but they are now lining up to do more of them. In this interview with Tom Brown, deputy editor of ICIS news, I argue that their analysis […]

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$1.8tn of stimulus later, Japan’s household spending unchanged

11 March 2016

3 years of massive stimulus spending in Japan has had no impact on the problem it was supposed to solve.  This is highlighted by new government data on household spending for 2015, as the charts above confirm – they compare 2015 data with that for 2012, before Abenomics began: Spending was almost exactly the same […]

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IEA says market “awash with oil” – debunks bullish myths

10 February 2016

Oil markets are the proverbial “canary in the coalmine”.  They are showing us what happens when the rose-tinted glasses provided by stimulus policy are removed.  Now markets have to return to their true role of price discovery, based on the fundamentals of supply and demand. This makes them very dangerous indeed.  Some large players in […]

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Global GDP sees record fall in 2015 as world hits “demographic cliff”

18 October 2016

Central bankers remain in Denial about the failure of their stimulus policies.  Yet new IMF data for global GDP shows GDP fell by $3.8tn in 2015 – the biggest fall on record – as the world hits the “demographic cliff”.  We have now seen 2 record falls in 6 years, as the previous record was $3.3tn […]

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Oil hits $30/bbl – and suddenly, analysts forecast lower prices

13 January 2016

Yesterday, oil prices reached my long-held $30/bbl forecast level.  And suddenly, it seems, all the leading analysts have begun to forecast lower oil prices.  As Reuters reported: “Adjusting to the price rout, analysts have been shifting their price outlooks downward, with Barclays, Macquarie, Bank of America Merrill Lynch, Standard Chartered and Societe Generale all cutting […]

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Financial markets feel impact of the Great Unwinding

8 January 2016

Its not been a great start to the year for those who have trusted in conventional wisdom: Western stock markets have been reeling, with the US S&P 500 Index down sharply since Monday It has been the worst opening for world stock markets since 2008 – not a good year for investors China’s currency has […]

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Great Unwinding sees oil fall 65%; US$ rise 22%; US 10-year rates rise 25%

4 January 2016

The Great Unwinding of policymaker stimulus was the major issue in financial markets in 2015.  And it is set to have even greater impact in 2016 once Phase 3 begins.  The chart above highlights the astonishing changes that have taken place since the Unwinding began in mid-August 2014; Phase 1 has so far seen Brent […]

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ECB President has temper tantrum in New York

7 December 2015

“There is no doubt that if we had to intensify the use of our instruments to ensure we achieve our price stability mandate, then we would.”  (Mario Draghi, New York, Friday) Pity poor Mario Draghi, President of the European Central Bank (ECB).  He is used to the adulation of markets – and adores his nickname […]

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EU warns euro may disappear as political, economic risks rise

4 December 2015

The excellent new Spielberg movie, Bridge of Spies, vividly captures the building of the Berlin Wall in 1952.  It also reminds us of the excitement when the Wall fell, and European borders reopened after 47 years. Now, Europe’s borders are closing again, pressured by vast Syrian refugee movements and terrorist massacres. France, Germany, Austria and Sweden have […]

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Japan goes back into recession as stimulus policies fail, again

18 November 2015

This week’s economic data from Japan confirmed, once again, that demographic changes are far more important for the economy than monetary stimulus. Japan’s premier Abe took power in 2012, promising to end the decline in Japan’s economic growth.  He appointed a new Governor for the Bank of Japan, and claimed that his “3 arrows policy” […]

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Budgeting for the Great Unwinding of policymaker stimulus

25 October 2015

There have been 35 “flash crashes” in US oil markets so far this year, when prices swung up or down by 200 basis points (2%) – before reversing the move by > 0.75%.  That’s 35 occasions when the markets were out of control.   It is tempting to blame this on misfiring algorithms at the […]

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Oil price rally disappears along with hopes of more stimulus

21 October 2015

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 […]

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Deflation returns to the major economies as stimulus fails, again

19 October 2015

Next week, I will publish my annual Budget Outlook, covering the 2016-2018 period.    The aim, as always, is to challenge conventional wisdom when this seems to be heading in the wrong direction: The 2007 Outlook ‘Budgeting for a Downturn‘, and 2008′s ‘Budgeting for Survival’ meant I was one of the few to forecast the 2008 Crisis 2009′s ‘Budgeting […]

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The “China Chill” slows global economy and petrochemicals

14 October 2015

There were record numbers at last week’s European Petrochemical Association annual meeting in Berlin.  But most of the 2900 attendees were in subdued mood.  Once again, it seems, the industry has chosen to sanction vast new investment at the top of the cycle, and will now suffer the consequences as it all comes online at […]

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5 Critical Questions every Company and Investor Need to Answer

12 October 2015

Today’s uncertain economic and oil price  environment has created chaos in petrochemical feedstock and product markets.  This creates major risks for producers, consumers and investors. ICIS and International eChem have therefore decided to combine our resources to launch a new Study, that will analyse the potential impact of these developments on the olefins, aromatics and […]

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Markets worry real world issues may trump monetary stimulus

5 October 2015

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 […]

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Oil heads to $30/bbl as Great Unwinding reaches 1st anniversary

17 August 2015

Global markets are becoming ever more complex as the Great Unwinding of stimulus policies continues.  This means that each blog post is now taking much longer to write.  It therefore seems sensible to focus on writing 3 posts each week – on Monday, Wednesday and Friday – in order to continue to provide the highest possible […]

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China electricity consumption growth drops to 1% in H1

20 July 2015

Latest data for China’s economy continue to suggest a major slowdown is underway: Rail freight, one of Premier Li’s key data points, was down 11% in January – May versus 2014 Total lending was down 15% in H1 versus 2014, with shadow lending down 50% And electricity consumption, his 3rd data point, was up just […]

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Fears of Austerity rise again, as Stimulus proves ineffective

1 July 2015

Austerity is in the news again, as the Greek/Eurozone debt negotiations continue.  So it seems interesting to see how financial market sentiment has been moving with regard to the issues of austerity and stimulus.  The above chart is therefore modeled on the familiar IeC Boom/Gloom Index It shows the ratio of sentiment for Austerity versus […]

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Bank of Japan admits stimulus policy is modelled on Peter Pan

9 June 2015

‘Peter Pan’ is one of the world’s most-loved children’s stories.But I hadn’t realised it had also become an economics textbook, at least in Japan.  Yet the Governor of the Bank of Japan (BoJ), Haruhiko Kuroda, described his stimulus policy last week as follows to an invited audience: “I trust that many of you are familiar with […]

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Europe can win despite age trends

2 June 2015

We all know that Europe has an ageing population.  Germany and Italy, for example, have median ages of 45 years.  And fertility rates have been below replacement levels for 45 years, so the relative number of higher-spending young people is reducing.  Instead, there are more and more older people, as life expectancy at age 65 […]

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Gloom turns to boom as US economic data disappoints, again

1 June 2015

“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 […]

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45-year baby drought stalls Western economic growth

29 May 2015

200 years ago, most blog readers would have been dead at their current age.  Life expectancy in the West was just 34 years in 1820, and averaged only 24 years everywhere else.  Today, as the chart shows, Western life expectancy has risen to 79 years (red area).  In the the emerging economies, it has nearly […]

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Budgeting for the Cycle of Deflation

4 November 2014

There is no “business as usual” scenario possible for the 2015-2017 Budget period.  Over the past 15 years (since the ”dotcom bubble” burst in 2000), policymakers have provided increasing amounts of stimulus to support the economy.  Now, finally, we are in the endgame, as the Great Unwinding takes place. This presents us all with major challenges: Most executives and investors under […]

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China becomes major PVC, PTA exporter for first time in history

28 October 2014

Be very careful what you wish for.  That is the key message coming out of close analysis of China’s latest trade data. Recent media reports were upbeat at news that China’s exports had increased, as it appeared to suggest Western demand was returning.  But it seems nothing could be further from the truth. One major concern is that part […]

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Oil prices have further to fall as Great Unwinding continues

17 October 2014

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

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

2 October 2014

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

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Global stock markets still depend on low-cost money for support

12 September 2014

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 […]

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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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Oil prices break out of their triangle – downwards

14 December 2021

The Great Unwinding of the central banks stimulus policies is underway, as discussed last week.  Oil markets have been one of the first to feel the change, as the chart shows, with prices finally falling out of the ‘triangle’ shape built up since 2008.  The value of the US$, interest rates and the S&P 500 […]

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The Great Unwinding of policymaker stimulus has begun

18 August 2014

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

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China’s waning stimulus spells trouble for the world’s biggest car market

14 August 2014

The blog’s latest post for the Financial Times, published on the BeyondBrics blog is below. By Paul Hodges of International eChem China’s July lending level of just Rmb 385bn ($62.6bn) has surprised financial markets, which were expecting an increase in stimulus. But bigger surprises may lie ahead. The strong link between lending and passenger car sales […]

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China’s housing market enters New Normal as prices slide

11 August 2014

Markets appear to be continuing to move, slowly but surely, into their expected ‘scary phase’.  The reason is the massive distortions that have been created in financial markets, and in China’s housing market, by the $35tn+ of stimulus from governments and central banks since 2009. Unwinding these distortions will not be simple.  The stimulus has not returned us […]

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Global auto markets depend on China for growth

23 July 2014

Global auto markets have started to move in new directions.  That much is clear from comment by the major national auto associations.  This will be a shock to manufacturers, who have over-expanded production.  Price wars and capacity cutbacks are inevitable if the industry forecasts are correct. The chart  starts from 2005, and shows the 7 major […]

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

21 July 2014

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

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China’s commodity imports have financed its property bubble

17 June 2014

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

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Chemical and oil prices still lower than 3 years ago

12 May 2014

Its now 3 years since the blog suggested on 2 May 2011: “They don’t ring bells at market turning points.  Otherwise, we could all retire to the Bahamas.   But there is growing anecdotal evidence, from chemical buyers and the main retailers, that we may have reached at least a temporary market peak.  And Brent crude oil […]

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US home ownership falls back to 1995 levels, as Boomers retire

7 May 2014

US housing demand used to be a major support for the US economy.  But that was in the days when millions of new BabyBoomer families wanted to set up home in the suburbs and raise a family.  The rule was simple – if prices were high, you just drove 10 miles down the freeway to find a […]

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China’s polyester market flashes red warning signals

28 April 2014

China’s polyester market seems to be trying to tell us something quite important about the real state of China’s economy, as the chart above shows for the main raw material, PTA (terephthalic acid): It focuses on the margin between PTA prices and naphtha feedstock (Singapore basis) Normally this is a premium between $200/t – $300/t as shows […]

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

31 March 2014

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

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Sentiment weakens as US stock markets wait for more QE

3 March 2014

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 […]

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“Bad news barrage sinks New Year consensus”

10 February 2014

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 […]

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Deflation far more likely than inflation

20 May 2020

The last in the blog’s series on things that we think we know, but may not, looks at the prospects for inflation.  A new survey this week of the world’s wealthiest individuals summed up the consensus view: “If there are two factors that make the rich stand out, on this survey, it is their fear […]

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China focuses on the need for jobs, as Western companies reshore production

27 November 2013

Its all about jobs.  That’s the clear message from this month’s critical Economic Plenum in China, confirming the blog’s analysis back in February 2012. Of course, there was a lot of detail about future reform plans, which will certainly help to move the country’s economy in the right direction.  But in the short-term, the key […]

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Record $142m for Bacon work shows markets now in “melt-up stage”

18 November 2013

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 […]