stimulus

China’s housing market moves from boom to bust, with $3.9tn of unsold properties on the market

China’s housing inventory is now at a record 25 months. Prices/demand continue to fall. And local government land sale income has already fallen 1/3rd since 2021 to $800bn, with a further 10% fall to expected this year. And Daiwa suggest total local government debt has already reached $14tn.

China’s housing market moves from boom to bust, with $3.9tn of unsold properties on the market Read More

All happy property owners are alike, each unhappy owner is unhappy in their own way

“The entire commercial real estate space has to reset. No one really knows where the values are…You can’t raise rates this quickly and not expect a financial shock. We’re already working on transactions at 50% on the dollar: the equity is wiped out and half of the loan is wiped out.”

All happy property owners are alike, each unhappy owner is unhappy in their own way Read More

Rethinking, repositioning and restructuring are now essential for industry survival

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

WeWork’s bankruptcy marks the beginning of the end for the stimulus economy

Essentially, the central banks thought that unlimited amounts of free money could reverse the impact of ageing populations. WeWork’s bankruptcy suggests that the bills for this mistake are now coming due, after 20 years of what the Wall Street Journal called “The most reckless monetary and fiscal experiment in history”

WeWork’s bankruptcy marks the beginning of the end for the stimulus economy Read More

Bond markets reach “The End of the Beginning” as traders finally realise rates will be higher for longer

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%

Bond markets reach “The End of the Beginning” as traders finally realise rates will be higher for longer Read More

It’s our 16th birthday – and the chemical industry remains the best leading indicator for the global economy

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.

It’s our 16th birthday – and the chemical industry remains the best leading indicator for the global economy Read More

“Houston, we have a problem” – China’s move to self-sufficiency a game-changer for the plastics industry

Essentially, China’s move to self-sufficiency, and the need to deal with the issue of plastic waste, means there is no ‘business as usual’ option. Winners and Losers are already starting to emerge, as companies react to the challenges of today’s New Normal world.

“Houston, we have a problem” – China’s move to self-sufficiency a game-changer for the plastics industry Read More

An Asian debt crisis would shake the global economy, now the ‘Presidential Cycle’ effect is over

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.

An Asian debt crisis would shake the global economy, now the ‘Presidential Cycle’ effect is over Read More

FT Letters - Jackson Hole comment by Paul Hodges

Today’s financial crisis confirms that “failing to plan, equals planning to fail”

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

China’s One Child Policy meant it “lost” 87 million girl babies – adding to its real estate and economic risks today

Everyone will now lose out as China’s real estate bubble continues to burst. The speculators who bought apartments they couldn’t afford will go bust. The new capacity built to supply the bubble will have to close down. And the millions of people who invested in China’s “growth miracle” will lose their shirts.

China’s One Child Policy meant it “lost” 87 million girl babies – adding to its real estate and economic risks today Read More

Japan’s premier warns of “social dysfunction” as ageing populations challenge Western and Chinese economies

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.

Japan’s premier warns of “social dysfunction” as ageing populations challenge Western and Chinese economies Read More

China has locked down again. Yet World Cup TV shows that normal life has resumed outside China. And the real estate bubble (29% of GDP) continues to burst

The World Cup runs till December 18. That’s a long time for Chinese viewers to ask themselves “Why am I still locked down, when the rest of the world is living a normal life again”? And in the background, the real estate bubble continues to burst.

China has locked down again. Yet World Cup TV shows that normal life has resumed outside China. And the real estate bubble (29% of GDP) continues to burst Read More

Interest rates break out of their 40-year downtrend – and start creating chaos in global markets

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.

Interest rates break out of their 40-year downtrend – and start creating chaos in global markets Read More

FT Letters - Jackson Hole comment by Paul Hodges

Jackson Hole is a chance to prepare for a financial shock

The problems began with the supply chain crisis caused by the pandemic. Russia’s war in Ukraine then created a further challenge. And now we face the risk of famine as fertiliser costs become unaffordable. Central bankers at their annual Jackson Hole get-together should therefore focus on preparing for the arrival of a potential Fourth Horseman of the Apocalypse, in the shape of a major financial crisis.

Jackson Hole is a chance to prepare for a financial shock Read More

The blog’s 15th birthday – and the chemical industry remains the best leading indicator for the global economy

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 blog’s 15th birthday – and the chemical industry remains the best leading indicator for the global economy Read More

Markets will see plenty of rallies, but history suggests the real bottom will be at least 2 years away

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.

Markets will see plenty of rallies, but history suggests the real bottom will be at least 2 years away Read More

The chemicals industry continues to be the best leading indicator for the global economy

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

Time to focus on the danger of corporate and household leverage as “subprime on steroids” comes to an end

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.

Time to focus on the danger of corporate and household leverage as “subprime on steroids” comes to an end Read More

The world’s real estate bubbles start to burst, as central banks pivot to focus on inflation

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 world’s real estate bubbles start to burst, as central banks pivot to focus on inflation Read More

Time for demographics to replace economics, as Evergrande’s default marks the end of the central banks’ debt bubble

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.

Time for demographics to replace economics, as Evergrande’s default marks the end of the central banks’ debt bubble Read More

Friends of the Earth v Royal Dutch Shell – what did the Dutch Court rule, and what does it mean for Shell’s business?

My Dutch colleague, Daniël de Blocq van Scheltinga, is a graduate of Leiden University in the Netherlands, with a Master of Law degree and a specialty in International law. Here he gives his expert view on the Dutch court’s decision to order Shell to reduce its CO2 emissions by at least 45% , relative to

The post Friends of the Earth v Royal Dutch Shell – what did the Dutch Court rule, and what does it mean for Shell’s business? appeared first on Chemicals and the Economy.

Friends of the Earth v Royal Dutch Shell – what did the Dutch Court rule, and what does it mean for Shell’s business? Read More

2021 unlikely to see a quick return to ‘business as usual’

Investors have been spoilt in recent years by the absence of risk. 2020 confirmed the ‘risk off’ mode as central banks ramped up their support. But will Wall Street continue in party mood, despite the growing problems on Main Street?

 

2021 unlikely to see a quick return to ‘business as usual’ Read More

What would another 4 years of President Trump’s policies mean?

50 million Americans have already voted in the Presidential election. Turnout is on course to be the highest percentage since 1908. This week we analyse President Trump’s agenda if he is re-elected. Next week, we will look at Joe Biden’s alternative for the country.

 

What would another 4 years of President Trump’s policies mean? Read More

Central banks try to ‘print babies’ to boost consumption

Supply/demand balances are weakening in oil markets, whilst a Fed Governor has highlighted the serious problem that developed in Treasury markets during the March collapse. We also focus on the economic impact of the Perennials – who will provide the majority of US/Western and Global population growth over the next decade.

 

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Chemical industry data shows reflation remains hope, not reality

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