Economic Time: sneak attack from the REAL economy


Tuesday, February 13, 2018 // Written by Enzio von Pfeil

America's and the global Economic Time is worsening - but not for the reason that you may think. Profits implications.

  1. Supranationals' 20/20 hindsight.  We already proclaimed some weeks ago that whenever the World Bank, IMF and OECD tell yo of major swings in the global economy, they are over with and time has moved on.  So with their last pronouncement some weeks ago, when they bellowed something in their omniscient manner about global growth picking up. The problem is that the boys at the Supras are about 9-12 months behind the curve, and here is why. They collate what all of the private sector forecasters postulate, then do a consultation - akin to yet another one on the agonies of the HK property market - and then they create a mega-average of what we heathens have postulated 6-9 months ago. 
  2. Where we are NOW.  I am a great believer in freight indices: tough to lie about how much stuff you are transporting, n'est pas?  Well, the three that I use suggest that global growth peaked in the third quarter of last year. It has been losing steam since.  Copper prices peaked at the end of December 2018, too.
  3. REAL, not monetary loss of momentum.  So, while the market is staring at MONETARY tightening, we are not: we don't believe in anachronistic views on wage-price spirals: Amazon (aka technology and globalization)  has quashed the unions' ability to dictate prices - as have us senior citizens (demography).  We are keeping a sharp eye on the REAL economy, where an excess supply of goods will manifest itself in about 9 months. Watch the market pick up on this lin about 4Q18 - and the supranationals' herd of sheep  in 3Q 2019!
  4. What this means. This loss of growth momentum means that the Economic Time remains just fine for now ; however, it is losing steam insidiously - a real sneak attack on profit momentum is in the offing in 4Q18.
  5. Investment implication.  Crazy at is sounds: keep buying this market. The sheep are bleating the out-of-tune song about "monetary tightening".  But Central Banks simply cannot tighten too much or too fast: they risk bringing down this whole house of crypto - policy, aka monetary "policy". This implies that the excess supply of money remains with us for a long time.  Instead, watch REAL global growth momentum takes it cyclical stroll downhill insidiously  - so: get out of the cyclicals.....they don't do well when there is an "excess supply of goods". 
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