Helping you navigate the new normal since 2001
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
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
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
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.
The Fed might change its mind and rush to support asset markets again. But that seems unlikely today. If it doesn’t, then debt, divorce and death will force an increasing number of people to sell their home. And if buyers continue to disappear, then sellers will have to continue cutting prices in order to try and achieve a sale, as the bubble finally bursts.
US housing bubble starts to deflate as sellers cut prices and mortgage rates rise 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.