Helping you navigate the new normal since 2001
Today’s energy crisis exposes the risk created by governments’ addiction to debt since 2008. So instead, as with a diesel export ban, they risk making a bad situation even worse.
Global interest rates jump as energy crisis builds ahead of the winter 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
Policymakers lost touch with the real world as their stimulus programmes – $353tn, 305% of global GDP – drove global debt to record levels after 2008. But now, the energy crisis is forcing them to face up to a very painful reality. Consumers, companies and investors are paying the price for their folly.
US 10-year interest rate nears 5% as rising energy costs fuel inflation Read More
The World Bank, IMF, IEA and WTO have all warned that the crisis risks spiralling out of control:
“If shipping flows do not return to normal, continued rapid depletion of global oil inventories ahead of peak summer oil demand in the Northern Hemisphere would present increasing risks for fuel security, market conditions, and broader economic resilience.”
Global risks rise as Hormuz remains shut and supply chains start to buckle Read More
US inflation risks are rising as the Hormuz closure enters its 4th month. Inflation rose to 3.8% in April. It was just 2.4% in February before the US/Israel war began. And the upward trend is set to continue
US inflation risks rise as Hormuz closure enters 4th month Read More
The IMF is warning that “Heightened macro risks and the prospect of tighter monetary policy could trigger a sudden repricing by financial markets—with much lower asset valuations, higher risk premia, more capital flight, and dollar appreciation”.
IMF warns on inflation and recession risks, as Iran war continues Read More
Stimulus debt has created a K-shaped economy. The top 10% of US earners account for nearly half of all consumer spending, as the chart shows from JP Morgan.
Reckoning looms for central bank stimulus as demographic crisis builds Read More
Tariffs, like interest rate changes, will take 12-18 months to work through the global economy. As always, the chemicals industry is providing early warning of what is around the corner in 2026.
President Trump’s tariffs change chemical industry business models 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
We are living through a 3rd paradigm shift since the end of World War 2. Today’s risks have been building for some time. But like the story of the frog in the saucepan, the world has been slow to notice that the water is starting to boil.
The problems have been mounting for years. The difference today is that time is running out. New business models based on a return to local-for-local production are now essential. And the industry also needs to pivot to a more service-based and solution-oriented approach
Slowing demand and tariffs add to Europe’s chemical industry crisis Read More
Europe cannot allow its chemical industry to close. That would risk the collapse of its economy as the European Commission confirms. So we are likely heading back to the Trade Wars of the 1930s, with protectionism the probable outcome.
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
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 Rules for doing business have to change. As NATO’s leader, Mark Rutte, has warned, Europe needs to “Raise defense spending or start learning Russian”
6 ‘Rules for Success’ as tariff wars and Europe’s Clean Industrial Deal begin Read More
Living longer should be a great opportunity for all of us. Today’s problem is that policymakers around the world have refused to accept that demographics are destiny. All of us now have to face the challenge of unwinding the mess they have made.
China’s property crash has already destroyed $18tn of household wealth – where next? Read More
“The Dumbest Trade War in History. Trump will impose 25% tariffs on Canada and Mexico for no good reason.” Wall Street Journal editorial
The collapse of Asia’s main currencies versus the US$ 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.
Europe has been built through crisis since the end of World War 2. Today’s economic and political crises require a similar focus on reinvention.
Europe’s economy loses its “engine”, as France follows Germany into political turmoil Read More
Today’s population growth is mainly due to increasing life expectancy, not babies being born. And these Perennials 55+ are the most under-served generation in history. Companies who pivot to meet their needs are likely to be very successful
Companies need to refocus to avoid over-capacity problems ahead Read More
Demographic changes are transforming the nature of demand in all major industries. The highly-profitable middle market is disappearing. Companies and investors need to abandon ‘business as usual’ strategies and refocus on these major changes.
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
The key is to rethink the business and become demand-led. And the good news is that companies are now starting to explore this option.
Chemicals industry starts to focus on Reinvention options at Berlin conference 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”.
As Hemingway noted, everyone is your friend when things are going well. But as countries and individuals are now starting to discover, the hangover when the party ends can be a painful experience.
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
The oil price has rallied 22% over the past 4 months, since it bottomed at $74/bbl. And slowly but surely, traders are being forced to realise that geopolitics are replacing economics as the key driver for world markets.
Oil and financial markets start to wake up to geopolitical reality Read More
Future Winners in today’s New Normal world will be those companies that realise that the key question is no longer, “Do we have low-cost supply?” It is instead “Do we have a customer who is willing and able to buy from us”.
Risks rise for petrochemical producers as trade tensions mount Read More
Resilience requires companies to refocus downstream and diversify their portfolio. They also need to be clear about the value proposition for their target market – are they providing Value, or Luxury? Rethinking, repositioning and restructuring are now all key to survival and future profit.
Rethinking, repositioning and restructuring are now essential for industry survival Read More
Demographics are taking demand patterns in completely new directions. Sustaining future growth now depends on successfully developing and implementing new policies, focused on the opportunities offered by the emergence of the Perennials 55+ cohort.
We don’t often use the word “impossible” in the newsletter. But in this case, it is clearly impossible for GDP to continue to grow in the major Western economies.
Demographics are destiny for the global economy, as central banks start to realise Read More
investors are hoping Fed Chairman Jay Powell will soon signal a dramatic interest rate cut. And so they are positioning for a ‘Santa Claus’ rally. But most adults know that Santa Claus doesn’t really exist.
Investors hope (again) for interest rate cuts and a ‘Santa Claus rally’ Read More
Last week, the Japanese yen fell through the US$ : ¥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
Unfortunately, the problems look set to get worse rather than better. And the oil price rise caused by the Israel/Gaza crisis adds to the problems caused by the Ukraine invasion. A difficult winter, and 2024, lie ahead.
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
The losses sitting on central bank balance sheets are starting to soar to eye-watering levels. The US Federal Reserve is sitting on a “mark-to-market” loss of $911bn. The UK taxpayer has already handed over £150bn ($192bn) to cover the Bank of England’s losses.
Central banks leak $bns as losses from their stimulus policies start to soar Read More
Taylor Swift’s concerts are creating massive short-term demand as people reconnect after lockdowns. But the chemical industry is warning that deflation could be round the corner, due to the over-capacity created by 20 years of stimulus
Chemicals confirm deflationary pressures are building around the world Read More
Either chemical markets are wrong or the financial markets are wrong, and obviously we think it’s the latter. People thought China was going to bounce back rapidly after Covid but China’s growth since 2008 was the product of massive stimulus and property speculation which couldn’t go on forever.
Chemicals, financial markets reach a fork in the road 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
Food prices have stayed high due to the disruption caused by the war. They are unlikely to fall back quickly as the war continues and economic volatility intensifies.
Food prices set to remain volatile as the war continues and fertilizer costs remain high 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.
Chemicals are telling us that all the world’s major economies are in a major downturn. And the downturn is starting to accelerate as companies cut back spending and fire people. Real estate, autos and other key areas are already suffering along with the banking system.
Chemical industry results confirm major recession is underway Read More
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
The problem is that most economic models were originally built in the 1960s/70s, when people still died around pension age, and are out-of-date
Stimulus programmes have created a major debt crisis, as the money cannot be repaid 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
‘Business as usual’ has been a great strategy for the past 40 years. But nothing lasts forever. It has now – like the central banks’ stimulus policies – hit the inevitable brick wall.
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
Underlying growth has been slowing since 2000 as more people joined the Perennials generation. Now, the bursting of the central bank stimulus bubbles – combined with the impact of Russia’s invasion – will likely cause the global economy to go ex-growth.
Global economy set to go ex-growth as world population hits 8bn Read More
Apple symbolises the major changes underway in the economy. Its stock price is in decline as central bank stimulus disappears. And its profits are threatened as pressure builds on its supply chain and pricing.
Apple’s China problems highlight smartphone market downturn 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.
It’s going to be a very difficult winter. Most of the world will be impacted as Europe bids up energy/food prices to keep its people warm and fed. And it would never have happened if policymakers had recognised the importance of geopolitics, energy markets and demographics.
As the head of Germany’s Employers’ Associations warned last month: “We are facing the biggest crisis the post-war Federal Republic has ever had. We have to be honest and say: First of all, we will lose the prosperity that we have had for years”.
We are facing a perfect storm of global food, energy and financial crises set off by the war in Ukraine. Analysts need to stop focusing on monetary policy and the inversion of the yield curve. They need to look out of the window and start dealing with the geopolitical reality of Putinflation.
Social and political issues were always more important than economics before the SuperCycle. And now they are resurfacing again. Does an individual woman have the right to choose what to do with her body? Or can judges tell her what she can, and can’t do? It is early days, but many women may choose to vote Democrat because of this issue in November.
US Supreme Court throws a lifeline to Democrats for the mid-term elections 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
Central banks and investors believed stimulus programs had created a “New Paradigm” where asset prices would always increase. Now they are starting to realise that stimulus is irrelevant against the 3 Horsemen of the Apocalypse – China’s continuing battle with the pandemic, Russia’s invasion of Ukraine, and potential famine as rising gas/fertilizer prices mean farmers can’t afford to grow their crops or feed their animals.
The chemicals industry continues to be the best leading indicator for the global economy Read More
The seeming genius of many private equity funds in recent years has been based on this ability to borrow at cheap rates during the ‘up’ part of the business cycle. Now we are heading into the ‘down’ cycle. And the central banks have abandoned Bernanke Theory and are back to worrying about inflation. So today’s excess leverage means many over-leveraged companies will go bust.
Problems in the housing market aren’t just confined to the US, UK, Germany and China. The average house price/income ratio is now back to the highest level since records began. And the problem for homeowners is that potential buyers are already starting to disappear as mortgage rates rise – and affordability reduces.
The issue is simply that investors are in a state of Denial. And so there is a growing risk of a financial crisis as reality finally dawns on them.
Putin’s war in Ukraine set to impact the real economy and financial markets 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
It is time for the central banks to give up their outdated economic models, and focus instead on the science of demographics. Their efforts to create economic growth by ‘printing babies’ have simply created a debt bubble. This will likely now burst as Evergrande goes bankrupt.
Recession may also burst today’s asset price bubbles in stock markets and housing prices – and even in more obscure assets such as art markets.
‘Watch out below!’ as supply chain chaos comes to an end Read More
The Federal Reserve can’t control the fallout from the bursting of China’s ‘subprime on steroids’ real estate bubble
The Fed’s stock market bubble is at risk as China bursts its real estate bubble 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
Central banks thought they could overcome demographic pressures from ageing populations by printing bucket-loads of money at zero interest rates to support housing and stock markets. Now they are finally realising this was wishful thinking.
Housing markets face long-term downturn as central banks abandon stimulus Read More
Wall Street is focused on central banks’ response to the pandemic, whilst Main Street focuses on its actual impact.
Wall Street hopes for the best, whilst Main Street fears the worst Read More
The Hertz rental car bankruptcy in the US highlights the risks to the economy
Financial markets are treading water as they wait to see what happens next
Financial markets have sharply diverged from events in the real world
A month ago, we forecast that oil prices would go negative in Q2
Markets are being driven by speculators funded by the central banks, rather than long-term investors.
Many indicators are now pointing towards a global downturn in the economy, along with paradigm shifts in demand patterns. CEOs need to urgently build resilient business models to survive and prosper in this New Normal world, as I discuss in my 2019
Tariffs are not a “silver bullet” and cannot solve the two key issues facing the US auto industry
Trump’s auto trade war adds to US demographic and debt headwinds Read More
The blog has now been running for 11 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
The blog’s 11th birthday – and a look forward to 2021 Read More
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 […]
Chemical industry data shows reflation remains hope, not reality Read More
One thing is certain about the 2017 – 2019 Budget period. ”Business as usual” is the least likely Scenario to occur. The IMF chart above highlights the key issue: for the past 5 years, all its forecasts of a return