Some readers may be interested in putting a voice – and even a face – to the author. Below are links to three recent audio-visual publications in which I discuss US & Chinese macro as well as the interrelations between the three great asset classes of stocks, bonds, an commodities. Following on is a wider sampling of my views. Continue reading
Birmingham statistician and financial forecaster Arthur H. Gibson’s so-called ‘paradox’ came about from his detailed empirical findings that the level of bond yields (as measured by the price of British Consols) tended to follow – with a lag of around a year – the price of wholesale commodities (a measure he adopted, as he himself explained, as a proxy for what he thought was the real crux of the issue, the cost of consumable necessities for which no comparable data existed). Argument has abounded as to the phenomenon’s true explanation, ever since.
The more our would-be Philosopher Kings attempt to display the awesome panoply of their intellectual armour, the more we think, not of the Greek sage from whom they seem to draw inspiration, but of Mickey Mouse’s dopey canine friend.
In bonds, the Bears are mounting another one of their forlorn hope charges against the central bank ramparts which is, in turn, rendering equities a little more expensive in relative, as well as absolute, terms. Commodities, meanwhile, are firmly rooted in mean reversion mode.
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No, Mario is NOT about to give up – whatever! China monetary trends might mean the industrial earnings cycle has peaked. US debt levels are still OK, but the low cost is promoting slightly worrisome growth – nor are Tech balance sheets entirely without blemish. Commodities – clueless and friendless.
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Falling returns in the US. Tight money in China. An upswing in Japan. Deflation in India. Gold goes cold. Fretting the Fed on falling CPI and a flattening curve? No need to panic, just yet.
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Please click the link for my latest thoughts, including a look at equity margin debt, the broad symmetry between today’s richest-ever & the 1980s’ cheapest bonds, the new natgas bulls, China, and gold. 17-05-29 M4 No 2
The First Time as Tragedy
In the past, our ready predisposition to fear the worst has proven to be well-founded. Indeed, through much of the two years leading up to the Great Crash of 2008, there was all too much evidence to ignore that a kind of collective madness had gripped the whole universe of investment world and had spilled out from thence into every plot of building land and every auction house in the real world.
Ah, Brexit! What is there left to say that not already been said, most of it either out of folly or falsehood? As regards the overall political backdrop to this lightning bolt of mass discontent, the only thing that is clear is that there is no clarity—neither within Britain nor without. If, as the Good Book tells us, a house divided against itself cannot stand—hard hats on, people! Continue reading
TOMORROW, AND TOMORROW, AND TOMORROW
So, one last time, let us lay out the argument developed above in the hope of eliminating all obscurity, for it is a pivotal one and therefore one which must be well understood if we are to challenge the very substance of the perilous theorizing of our Lords and Masters.
With positive real rates – which, we must again emphasize, simply imply that the instantaneous price ratio between goods today and goods tomorrow is greater than unity – the primal temptation is for the consumer to eat as much as he can, even including his seed corn, and so to yield to the pleasures of the moment in disregard of the needs of the morrow.
NO REMEDY IN THIS CONSUMPTION OF THE PURSE
But the sort of reasoning we developed in the last of this series is alien to much of today’s mainstream, many of whose members succumb to the long-dispelled, circular fallacies of the productivity argument. Yet more of them adhere to what Dennis Robertson wickedly derided as Keynes’ Cheshire Cat theory of ‘liquidity preference’ (‘The rate of interest is what it is because it is expected to be other than it is. But if it is not expected to be other than it is, there is nothing to tell us why it is what it is… [it is] a grin without a cat’).