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There is a sharp division between bulls and bears. The first argue the markets have already seen the lows, and the latter argue much worse is to come. They look at all kinds of data, economic data, historical data, financial data, technical market data, etc. All useful, but partial in our view. The most important […]

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Things are getting to get worse, likely to be a lot worse. The U.S. is now passed the containment phase. The next phase is limiting the spread which necessitates much more economically costly measures, compounding the damage coming from abroad. The immediate worries should be the risk of the healthcare system getting overrun. Given the […]

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With the exception of US bank balance sheets, the financial system is all that much more robust than it was at the outset of the financial crisis, in our view. Problems center mostly on the quality and quantity of outstanding corporate debt. Stress signs are already emerging, and we know from a decade ago that […]

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The good news is that the situation in China is improving albeit at exorbitant economic cost, and the virus spreads mostly through family. However, experiences from South Korea show that under unfortunate conditions, few infected people can wreak havoc. On a world scale, we’re only as strong as the weakest links, and there are many […]

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There is still a lot we don’t know about the spread of the coronavirus, and with that, the economic impact of the measures aimed to contain it. With large parts of the second-largest economy in lockdown, this is going to produce a significant shock to the Chinese and, by extension, the world economy. Nobody knows […]

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Many shares are already down 40%-50% off their (arguably lofty) highs in short order. We see reasons for Fed moderation, a possibility for a trade truce between the US and China and the imminent Italian budget crisis has waned. However, if markets keep selling the negative sentiment, it’s likely to infest the real economy. Source: […]

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The idea might seem crazy at first, but it follows logically from a model in which beliefs about future asset prices (‘animal spirits’) have real effects on output and employment. The case is reinforced when these animal spirits can feed on themselves and become self-fulfilling prophesies. We think a case can be made for this […]

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Cramer has come up with 10 criteria that have to be fulfilled before the markets can find a bottom. While useful, we think these criteria focus too much on the markets, and too little on what’s driving them, most notably fears about world economic growth. World economic growth will decide whether this is a correction […]

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The tax cuts produced a boom in economic growth, but the effects look set to peter out. The tax cuts also unleashed some headwinds that could gather force, like rising rates and yields and a rising dollar, a pretty dangerous cocktail for the world economy. Earnings are set to peak and even if we avoid […]

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The situation on the ground in Italy is deteriorating fast, with growth coming to a complete halt. The debt/GDP ratio will rise further as a result of the expansionary budget. The reason is not only growth deceleration in the eurozone. It’s the rising Italian yield triggering a credit squeeze and capital flight and the end […]

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