Disclaimer

Disclaimer. After nearly 40 years managing money for some of the largest life offices and investment managers in the world, I think I have something to offer. These days I'm retired, and I can't by law give you advice. I do make mistakes, but I try hard to do my analysis thoroughly, and to make sure my data are correct. Remember: the unexpected sometimes happens. The expected does too, but all too often it takes longer than you thought it would.

The Goddess of Markets punishes (eventually) greed, folly, laziness and arrogance. No matter how many years you've served Her. Take care. Be humble. And don't blame me.

BTW, clicking on most charts will produce the original-sized, i.e., bigger version.

Friday, February 28, 2014

I've said it before ...

... the collapse in Spain/Greece/Italy was as bad as the great depression in the US in the 30s.

This article from The Age talks about the extraordinary level of youth unemployment:

In Spain, nearly half of those under 30 - almost 2 million people - cannot find a job. Suicide rates are up and the young fear they have no future in their own country. Anthony Ham reports from Madrid.

The chart below suggests that unemployment may have peaked, which would be consistent with the (sluggish) European recovery, but unemployment always rises much faster each cycle than it falls in the subsequent recovery.


Saturday, February 22, 2014

Thursday, February 20, 2014

Soft underbelly

This graph shows the weighted average of industrial production for Greece, Italy and Spain, among the 5 or 6 European economies hardest hit by the Global Financial Crisis (GFC).  You can see the impact in 2008 of the meltdown in the US, and the slow recovery in 2009 and 2010.  Then these economies started to fall again, this time a European own-goal, as German-imposed economic and financial orthodoxy forced swingeing fiscal austerity.  The US ran massive (federal) deficits, and so its recovery, though sluggish, still actually happened.  In the grip of a malign madness, Greece, Spain, Italy, Portugal and Ireland by contrast were forced to slash spending and up taxes, and naturally, their economies plummeted.  During 2013, the fall stopped, but as you can see, there's scarcely a boom going on.

The total decline in IP and GDP, the jump in unemployment and dire poverty, all these were as bad as the Great Depression in the US.  And frankly, it could take a decade before the economies of these countries pass their previous peaks.




Wednesday, February 19, 2014

Brazil slowdown

The chart below shows the year-on-year change in Brazilian IP (industrial production) on the left hand scale compared with the level of interest rates (on the right) as represented by the central bank discount rate ('SELIC').  The interest rates are plotted inverted, because as interest rates rise, the economy slows, as they fall, it sets up the economy for recovery.  Interest rates have been rising for nearly a year now, and IP has started to fall.  But interest rates lead the real economy.  Even if rates stop rising now, the economy will keep on slowing for at least another six months.  And by the looks of it, I'd say Brazil is headed for quite a deep recession if rates go on rising.


Repellent

Our esteemed PM, Cane Toad Tony, earns almost $10,000 a week.  He and his mates in the increasingly misnamed "Liberal" Party have targeted the unemployed (whose numbers will surely grow over the next year) as an area to cut government expenditure.  But a single person on the dole gets just $250 a week -- 2.5% of what he earns.  Not to mention the million dollars of taxpayer funds he spent travelling around the country going to cycling and swimming meets so he could show his lycra-clad package to hoi polloi.

Not content with crushing the already poor by making it harder for them to get benefits as well as reducing those benefits, the so-called "Liberals" also want to demolish the free health system by forcing doctors to charge $6 per visit even if they don't want to.  As if the American health system were an example to emulate!

Meanwhile, the upper middle class tax breaks will continue.  Tax free pensions.  Negative gearing.

Repellent.

[Photo from The Age]


Tuesday, February 18, 2014

Japan to the stars

The Japanese recovery is strengthening.  The latest PMI (Purchasing managers index) is higher than it's been since the GFC began, and is trending strongly upward.  The new policy of the authorities in Japan, to encourage moderate price inflation instead of deflation, is working.  Output still hasn't recovered to the previous pre-GFC peak (you can see the GFC slump in 98, and then the downward spike because of the earthquake and tsunami in 2011, and since January last year a sustained recovery in both industrial production and the PMI.    There is finally a sustained recovery in developed economies.



Friday, February 14, 2014

Six years lost

In the middle of last year, my coinciding index for the US economy passed the previous peak which occurred just before the onset of the GFC.  It's taken SIX YEARS for this to occur.  Six years of lost output and lost incomes, of lost jobs, of despair and poverty.

Oh, the index fell in the latest month, but that was due mostly to the big freeze. It'll pass.

Six years.  So much for rational markets and automatically self stabilising markets and economies.



Our Pledge


Saturday, February 8, 2014

My US 'Early Release' indicators fall a tad

The big freeze in the US has shown up in the economic indicators.  Lower payrolls growth, a soggy ISM (for manufacturing, more seriously affected by freezing conditions than services) etc.  Still the overall 'early release' indicator only fell a little.  In my view, eco recovery in the US is still on track.

As usual, click to get full sized chart.


Friday, February 7, 2014

PMI indicator has modest fall

This is my weighted average of US, China, Japan and Europe PMI/ISM, indicators which are private sector surveys of manufacturing conditions in these countries (Europe is a composite of several European countries)

A minor blip in January, prolly caused by the big freeze in the US.