Helping you navigate the new normal since 2001
2008 saw the US subprime crisis become the Great Financial Crisis. Now 2026 seems set to be the year when China hopes to solve its ‘subprime on steroids’ crisis. But its fundamental problem – the lack of babies – seems as far from solution as ever.
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
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
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
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
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.
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.
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.
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
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
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.
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.
‘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
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.
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 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 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
Evergrande’s default will only be the first of many. Companies and countries that have “bet the ranch” on China’s “perpetual motion machine” need to urgently decide how to minimise their potential losses, whilst there is still time
China’s ‘perpetual motion’ housing machine is starting to slow Read More
Many valuations are, after all, at more extreme levels than in 2008, due to the belief that China’s demand growth is unstoppable.
An end to the China bubble would risk a Minsky moment Read More
As the real estate market slows, China imports will reduce – setting off a chain reaction across the world
Xi aims to “bring order out of chaos” by bursting China’s property bubble Read More
Much of the way the world currently works depends on uninterrupted and elevated Chinese growth.
The end of China’s real estate bubble will impact global supply chains, exports and growth Read More