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.
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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.
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.
Japan has wasted trillions of yen with its failed stimulus programmes. Had it devoted even a tenth of this money to developing a proper Retraining programme for people in their 50s/60s, it wouldn’t now be facing a major debt and currency crisis. The rest of the Western world needs to rapidly learn from its mistake.
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.
The history of the 1929 and 2000 downturns suggests the real pain is yet to come. Housing markets look terribly over-valued around the world, as I noted last month. And US consumer sentiment is at all-time lows. So most company earnings seem set to fall, with more than 60% of US CEOs now expecting to see a recession.
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 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.
Flooding in China and Europe, record temperatures in the USA, wild fires – all these are signs that climate change is accelerating. After all, the world has gone from 2.5bn people in 1950 to 7.9bn today. That must have an …
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 …
Our 16th World Aromatics and Derivatives conference will take place on 8-9 November. Co-organised with ICIS, it provides an excellent opportunity for delegates to meet and exchange views in the critical end-of-year period. It features the usual strong line-up of speakers: Ronald Doesburg, GM for Shell’s Base Chemicals business, will describe how innovation is driving new […]
“By Monday, the third straight day of flooding, the aftermath of Hurricane Harvey had left much of the region underwater, and the city of Houston looked like a sea dotted by small islands. ’This event is unprecedented,’ the National Weather Service tweeted. ‘All impacts are unknown and beyond anything experienced.’” This summary from the New […]
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 […]