Its been a crazy volatile week in the markets, thought i’d post some relevant articles and videos.
A few notes first:
-US monetary policy is tightening while US fiscal policy is stimulative. US is running the largest fiscal deficit at the peak of the business cycle, which has never been done before.
-US Leading indicator is still above zero, although is declining. The World LEI is declining and below zero.
-Inflation is a big wildcard. The subject of a future post. Deflation first and then inflation? or vice versa…
Videos and Links:
Alex Chausovsky recently delivered ITR’s most up-to-date economic outlook at the @MeasControl event. Check out some of the highlights!
-ITR’s long term outlook: “The real problems with debt won’t come until interest rates go significantly higher, as in the late 1970s and early 1980s. Until that happens, worries about business debt levels are overstated. While the problem is forming now, the consequences will come about 10 years from now. Higher interest rates on ascending debt levels play quite well into our forecast of a Great Depression beginning around 2030 (the details of which are in our book, Prosperity in the Age of Decline).”
Hedgeye: How to survive the quad 4 hurricane. Check out their growth/inflation quadrant work!
Fat-pitch weekly: http://fat-pitch.blogspot.com/2018/10/weekly-market-summary_28.html
“Summary: US equities are down 10% from their all-time highs just 5 weeks ago. The trend in equities has turned bearish, and that is not something that should be taken lightly. The evidence pointing to a major top being formed has further increased. But the set up for higher prices, at least before a significantly lower low, appears to be very strong. This is not a certainty, but it is a high probability.”
Financial Sense Investment Strategy Conference 2018:
Updated Conference videos:
I especially liked their characterization of the market a few weeks ago as ‘Flash Crashes and Flash Bubbles’
GaveKal: Are we still in a bull market? via Jesse Felder
“What caught my eye this week? Louis updated his Four Quadrants Framework chart and said, “For the last 30 years the world has broadly been at the bottom of our four quadrants, oscillating between disinflationary busts and disinflationary booms. We are now at a strange moment: most of the world is moving from disinflationary boom to disinflationary bust; but the US is moving towards an inflationary boom. This divergence doesn’t make portfolio construction easy.” He concluded, “A similar situation more or less prevailed in 1998-2000 and did not end happily.”
Here is the updated chart:”
-GaveKal Update 2: Quarterly Outlook: https://blog.knowledgeleaderscapital.com/?p=14554
Daniel Lacalle on the Biggest Bubble of All
Ray Dalio on Debt Cycles
How the economic machine works – Ray Dalio
Business Cycle Frameworks:
Update: 2018-10-29 Interesting debt rollover timing
Source: JP Morgan
“Canada’s economy is in the throes of a zombie outbreak and it’s threatening to devour the country’s productivity.
That, more or less, is the conclusion of a new report from Deloitte, which found that at least 16 per cent of publicly traded firms here could be classified as “zombies” — defined as mature firms more than 10 years old that lack sufficient revenue to cover interest payments on their debt.
The concept comes from a 2017 report by the Organization for Economic Co-operation and Development (OECD) that explored how inappropriate insolvency structures in Europe kept companies intact when a competitive marketplace would have forced them to liquidate or restructure.
In Canada, Deloitte looked at 2,274 companies listed on the TSX and TSX Venture Exchange from 2015 to 2017, and found that 350 firms fit the definition.”