Helping you navigate the new normal since 2001
European and Asian buyers need to worry about whether US exports of transport fuels will continue in the autumn as the US midterm elections loom. The risk is that the White House won’t want the domestic market to go short to support exports.
Oil product shortages and price hikes seem inevitable as Gulf War moves into 6th month Read More
Two major wars are underway in Europe and the Arabian Gulf. The IEA continues to warn that they have already created “the largest energy supply disruption in history”. And now, it seems financial markets are waking up to the major risks created by the $2.6tn AI bubble
If Trump now walks away, he will leave Iran with control of Hormuz. But he will need a lot of ‘boots on the ground’ to invade a country of 93 million people.. As history confirms, air power alone is unlikely to win the war
Brent returns to $100/bbl, with 25% of global output now impacted by war Read More
Apple’s massive price rises highlight demand destruction in action. Suddenly, prices are going up, not down. The longer the wars and the AI bubble continue, the more prices and inflation will rise as supplies reduce
Smartphone sales collapse confirms War and AI-related demand destruction is now underway Read More
We are nearing crunch time for vital energy supplies of transport fuels and natural gas. Europe’s gas storage for the winter was just 28% full when refilling for the winter began in April. And around the world, energy supplies are getting tighter by the day.
Hormuz fighting, Russia’s fuel crisis, highlight risks to global fuel and gas supplies Read More
There are major upside risks on crude oil and product pricing as we head into H2. Inventories are very low, with no margin for error. And nobody knows whether the current US-Iran talks will actually end in a long-term agreement.
Major upside risks remain for oil and product pricing in H2 Read More
Financial markets think the oil crisis created by the Hormuz closure is over. But in reality, the risk of major shortages by Q4 is actually increasing. Oil inventories are near tank bottoms. And Hormuz transits are still only a fraction of the pre-invasion level.
Ras Laffan explosion, Iranian/US attacks, confirm restart risks for Hormuz plants Read More
The question is whether normal volumes of oil and gas will now start to flow again though the Strait? If they don’t, then an increasing number of major storage points will join Cushing in being at ‘tank bottoms’. And rationing will start to become inevitable, as the IEA warned in April.
Trump confirms oil reserves are down to just 4 weeks Read More
Oil companies are warning that “the US Strategic Petroleum Reserve is going to be precariously low. What comes next is higher prices. We are getting closer to the bottom. July is likely the pain point when the market turns.”
Hormuz closure pressures global oil reserves and food supplies 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
Financial markets are assuming the Strait will reopen this month, and free passage resume in June. If this is delayed, the risks of a global downturn to rival 2008 are rising.
Hopes rise for an early return to free passage in the Strait of Hormuz Read More
Petrochemical prices are warning of major inflation risks ahead due to the crisis in the Strait. They confirm we need to move back to a world of ‘local-for-local’ supply chains. The question is how quickly these can be put in place?
Petchem price rises confirm inflation risk as Strait of Hormuz remains closed Read More
China is potentially in the ‘eye of the storm’ as component prices rise. This will force its manufacturers to raise their prices – just as the Strait of Hormuz closure forces consumers to cutback spending.
Strait of Hormuz closure adds to smartphone downturn Read More
As with Covid in March 2020, a ‘wake-up call’ is now about to hit most Western governments. Critical oil and gas-based products are at increasing risk of becoming unaffordable, or unobtainable.
Oil and product prices set to be ‘higher for longer’ as Hormuz remains closed 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
Europe is facing its first major supply crisis, on jet fuel. Prices have already doubled. And now the IEA is warning, “Several European countries may start to face shortages of jet fuel in the next 6 weeks”.
Iran war starts to threaten key parts of the global economy Read More
The history of energy crises suggests that today’s supply chain surge will likely be followed by recession. Buyers will suddenly start destocking again, as they realise consumer demand was actually slowing, whilst they were busy increasing inventory.
Smartphone markets are essentially acting as the ‘canary in the coalmine’, warning us that the global economy is still only at the start of suffering a major shock.
Hormuz crisis, memory-chip costs, will reshape the smartphone market Read More
Today’s oil/natural gas price rises will likely repeat previous ‘boom and bust’ cycles. Companies therefore need to (a) prepare for the short-term ‘boom’ and (b) plan in detail for the potential recessionary ‘bust’ which will follow it.
Strait of Hormuz closure risks major economic impact Read More
As the BBC warns: “The greatest danger now is that President Trump, having amassed this powerful force close to Iran’s borders, decides he must act or lose face, and a war begins with no clear end-state and with unpredictable and potentially damaging repercussions.”
US automakers have been around a long time. It is too early to write them off. But Trump’s EV restrictions and their lack of robotaxi options suggests they risk running out of road sooner rather than later.
US automakers running out of road due to lack of EV and robotaxi options Read More
Oil market volatility is likely to continue. But OPEC’s need to regain market share also makes it likely that prices will continue to decline. This is good news for the global economy – and geopolitically as it means Russia will have less money to spend on its Ukraine war.
Oil price volatility highlights underlying market weakness Read More
House market crashes usually start slowly, as sellers hold out for a price recovery that never comes. But then, the risk is that prices begin to slide as the 3Ds – Divorce, Debt and Death – create forced sellers.
It would seem prudent to plan for further escalation of the military and trade wars in H2. Countries will likely continue to join trading blocs to counter Trump’s tariff war. And defence spend will further increase as the Middle East/Ukraine wars escalate
Middle East and Ukraine wars add to trade war risks for the global economy Read More
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.
China is Trump’s main target. He has claimed that China will pay the extra cost. But US consumers know better. They rushed to buy in March before prices rose. Q1 US sales were up 12% as Apple flew-in 1.5m iPhones ahead of the start of the tariffs.
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.
Last week, the CEOs of Wal-Mart, Target & Home Depot told Trump that “His tariff and trade policy could disrupt supply chains, raise prices and empty shelves.” They suggested the disruptions would become obvious in early May – only 2 weeks away.
Trump’s Tariff War risks empty US shelves at Wal-Mart, Target, Home Depot Read More
The US economy is most at risk from the new policy. But President Reagan’s warning applies to every country trading with the US: “Then the worst happens: Markets shrink and collapse; businesses and industries shut down; and millions of people lose their jobs.”
President Trump’s trade war risks crashing the global economy Read More
We are back in a world where geopolitics, not economics, drives decision-making. It is a world of shifting alliances. And so defence spending is set to be a key growth area for the future as Cold War 2.0 begins.
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
“The Dumbest Trade War in History. Trump will impose 25% tariffs on Canada and Mexico for no good reason.” Wall Street Journal editorial
Deflation means the real value of debt increases. This is the opposite of what happens with inflation, when its real value reduces. China’s ageing and falling population therefore risks entering a debt trap. More and more money will be needed to refinance existing debt, accelerating the slowdown in the wider economy.
China risks entering a debt trap as its housing bubble continues to deflate Read More
Time is not on Europe’s side. Hopefully, this crisis will lead policymakers to take the urgent actions that are now essential.
Europe’s chemical industry, and its economy, faces existential challenge Read More
Europe is expected to have its coldest winter since Russia’s invasion of Ukraine, with the continent already dipping deeper than usual into gas storage as temperatures plummet.
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
The world’s most successful investor, Warren Buffett, has been selling his shares. Apple was once half of his equity portfolio. But over the past year, he has sold 2/3rds of his holding. And Buffett doesn’t normally sell shares when he thinks the company will do well.
Smartphone markets could see major changes as Trump rolls out his tariffs Read More
Voter enthusiasm is usually key to election victory. And it is clear that Trump’s focus on immigration is enthusing many voters. But logic suggests that Kamala Harris’ focus on women’s reproductive rights makes her best placed to win, potentially with a larger majority than the polls suggest.
Oil market developments need very careful attention. If prices do now fall below $50/bbl, then central banks will likely rush to make major cuts in interest rates. And that will make deflation even more likely.
Deflation risks rise as OPEC aims to regain market share and cut oil prices Read More
OPEC+ countries have been playing the geopolitical card for the past 2 years. But their output cuts have allowed US producers to gain market share, with production up 1.2mbd. The hurricane season may support prices for a while. But the risks are all to the downside. And, of course, today’s higher prices are also helping to accelerate the energy transition.
Europe faces major geopolitical threats. In the East, the EU faces an existential challenges from Russia’s Ukraine invasion and its “no limits” partnership with China. In the West, there is rising uncertainty over Donald Trump’s support for Europe if he became president
European voters rally to the centre as external threats increase Read More
The critical test is now ahead – making it happen. Companies, investors and policymakers need to borrow Winston Churchill’s famous motto, “Action this Day”.
As Sir Jim Ratcliffe has highlighted, the penalty for doing nothing will be closure.
The Houthi attacks and increased hurricane risks highlight how geopolitics are replacing economics as the key driver for decisions. Global supply chains are increasingly being replaced by local-for-local operations as producers aim to improve reliability and control costs.
Hurricanes, Houthis, pressure global supply chains and add to inflation risk Read More
The two super-critical ‘dividends’ of the past 30 years are now reversing. The ‘demographic dividend’ of constant growth and low inflation created by the BabyBoom generation has ended, along with the ‘peace dividend’ created by the end of the Cold War in 1989
It’s our 17th birthday – and the world is looking very different from when we started Read More
Geopolitics are starting to fragment the global economy again. Economics are no longer the key driver for decisions. And so we need to refocus on the geopolitical risks ahead.
Chemical prices start to slide in Asia and Europe, as summer slowdown starts early Read More
Q1 data showed that many consumers are tightening their belts and focusing on value for money. But investors don’t yet seem to have noticed, and are still bidding up Apple’s share price to euphoric levels.
Smartphone sales continue to slow as consumer demand patterns change Read More
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
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%
Economists might like to believe that inflation is somehow a monetary phenomenon. But as we are all likely to learn to our cost over the winter, food and energy prices are critical for most people. Oil prices are already rising. And food prices are joining them.
Food prices set for further rise as energy and fertilizer costs increase Read More
It’s too soon to talk of an actual energy crisis. But as the charts showing Brent oil and European natural gas prices confirm, it is certainly time to start planning for the possibility. Oil prices have recently risen 25%. And Europe risks gas shortages if there is a cold winter
Energy markets could be heading towards a new crisis 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
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
The Ukraine war highlights how the real world can often be a very messy place. Issues such as geopolitics and demographics aren’t easy to understand. It can be hard to understand the detail of how key industries and markets are operating.
So it’s no surprise that most policymakers have preferred to stay in the world of theory.
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
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
As the World Food Programme warns, “High fertilizer prices could turn the current food affordability crisis into a food availability crisis, with production of maize, rice, soybean and wheat all falling in 2022.”
Food prices hit record level as fertilizer costs/availability reduce farm output Read More
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.
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
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”.
Millions of people around the world are already having to cutback on buying food for their families due to today’s high prices. By wintertime, the risk is that they will have to choose between buying food or heating their homes.
IMF warns the risks “for the economy are overwhelmingly tilted to the downside” Read More
The US is moving into recession as the Atlanta Fed chart confirms. Chemicals have been warning of this for some time. But policymakers and commentators remain in Denial about the economy. They prefer to focus on their computer models, and ignore the real world outside their window.
The election’s timing could hardly be worse, with Johnson a caretaker premier. The UK should be working closely with the EU to combat the Russian threat to food and energy supplies. But instead, we may well see candidates attacking the EU to win constituency support
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
Consumer sentiment is already at all-time lows. Rising energy, transport and food prices will likely soon push inflation above 10%, and interest/mortgage rates to 5%+, adding to the risk of a major and long-lasting downturn.
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
These are difficult times, and there is no guarantee that they may not get worse. But they also remind us of the critical need to move beyond the Age of Oil, and develop more sustainable energy resources for the future.
Our pH Report Sentiment Index has been a very reliable guide to the S&P 500 in recent years. Now it is suggesting a major downturn may be underway as the US and Chinese stimulus programmes come to an end.
Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.
We can expect to see electricity prices fall along with CO2 emissions. And consumers will no longer be held to ransom by geopolitical events
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
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
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
The blog’s 14th birthday – and the New Normal world it predicted has arrived 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.
Wishful thinking remains the dominant feature in oil markets, as in our other key areas of the global economy
Policymakers continue to prefer wishful thinking to reality Read More
April will be the cruellest month, as the Covid-19 virus starts to have its full impact on health and the economy.
“Saving lives and protecting livelihoods ought to go hand in hand”, IMF Read More