Category Archives: Past the Post

Jane Fonda confesses!

Jane Fonda in an interview with the Australian Financial Review on 21 January: “I’m falling apart but I’m healthy. I have osteoarthritis so I have joint issues. I just have them replaced and I keep going,” she says.

Pinkers is a great fan of Jane’s! After all, nobody has done more stretching than the Academy Award-winning actress and fitness queen! Oh… damn… not quite true… . Blinded by love, Pinkers completely forgot about the stock markets. Apologies. If valuations are stretched, sentiment is over-stretched!

So is it finally happening? Are fundamentals finally reasserting themselves? And is sentiment finally turning?

Top of the agenda right now are China in the slowing lane and Emerging Markets imploding. So are the markets heading south due to bad economic ‘news’? Of course not. None of this is ‘news’: Data from China, manipulated or not, has indicated a slowdown in growth for at least 6 months and the EM rout should have happened a month or two ago with the Fed confirming a move from heroin to methadone.

And the way out of this mess? Well, let’s do a Fonda: Chuck out those tired old bones (banks, retail, tobacco etc) and have them replaced with… no, not Primark plastic… but proper stuff: Iron, copper and oil to keep it all… well… well-oiled, of course!


Hurrah! Right on target! The UK’s inflation rate, as measured by the Consumer Prices Index, fell to 2% in December, down from 2.1% the month before. It’s the first time inflation has been at the government-set target since November 2009 – and then only helped along by a cut in VAT. The BoE and Mr Osbourne must be mightily relieved: No need to write embarrassing letters or answer awkward questions in parliament. No! This is well-managed sound economic growth without inflationary pressures: it’s goldilocks time! A clear message to Mr Balls: Go into retirement! This chancellor and his guv have got it sussed and sorted.

Well, that appears to be the consensus anyway. Pinkers really doesn’t wish to be the party pooper, yet again… but perhaps it might be just be worth pointing out a thing or two…?

First of all, the CPI includes rents but not house prices. How can that be??? Yes, of course, it’s a terribly old hat but that doesn’t make it less relevant. At a time when house price growth outstrips the CPI by 3.3%, surely it’s time for a rethink on the matter? The boom & bust cycle will continue indefinitely until the most important ‘consumer item’ is thrown into the basket. What? It’s full already? Pinkers would like to suggest making space by taking out the electric educational toy. Oh no… on reflection, better not: That could come rather handy when the next crisis hits… . So what about the non-disposable charcoal BBQ or perhaps the self-assembly kitchen wall units? All this DIY… it’s a bit like signing up for the gym membership after the Christmas binge only to abandon it in despair a month later. As for the Retail Price Index: This may include housing costs such as mortgage payments but these, of course, are being kept artificially low by the CPI figure – frankly, it’s a con… and not even in disguise!

It is interesting, however, that the markets don’t seem to be playing by the rules. On the other side of the pond, in a similarly ‘benign’ environment, inflationary expectations are on the increase. In a recent razor-sharp analysis published in MoneyWeek, Antonia Oprita alerts investors to the difference between yields on ten-year bonds and those on ten-year inflation protected securities (TIPS): This apparently widened to 2.31 percentage points compared to an average of 2.22 percentage points over the past decade. Miss Oprita sounds a warning: “Keep your eyes on US Tresury yields – that’s where the panic will show up first.” And one thing is for sure: If there is a panic on Wall Street, there will be a panic in Paternoster Square, too.

Essential reading: ‘Forget US employment data – watch out for Treasury yields instead’ by Antonia Oprita, 10 January 2014.

2014: Clairvoyant Readings!

Everybody is having a go at the moment and, for once, Pinkers really doesn’t want to spoil the party and decided to join in!  Predicting the future, that is, of course!  This supremely pointless and utterly superfluous annual exercise provides, after all, a source of much fun & entertainment and let’s face it: Who worries about the past or the present?  We live in uncertain times (well, we always have…) and the clairvoyants give us the (false!) sense of security we all crave so desperately: the comfort suckie, if you like.

So here, for what it’s worth, the Pinkers Post weather forecast for 2014!

The stock markets

Sentiment will turn negative in the first quarter – February by the latest. With all the ‘good news’ already priced in, the markets will suffer from high altitude sickness.  The S&P and the Dax are particularly vulnerable.  The Footsie should hold up reasonably well considering its relative underperformance in 2013.  Fundamentals will reassert themselves and the focus will shift back to companies’ earnings.  This will make it a year for the discerning stockpicker.: Pinkers is keen on miners (BHP & Glencore) and support & construction (Carillion, Balfour Beatty).  Investors favouring a truly contrarian approach should look at the Shanghai Composite, bumping along rock bottom!  As for emerging markets: let them drown!

Interest rates

Forget forward guidance.  Rates will move upwards much earlier than generally forecast.  As opposed to virtually all economic commentators, Pinkers thinks a rise towards the second or third quarter of 2014 is entirely possible.  The first rise will probably take place in the UK rather than US and Europe will be last, probably not before 2015.


The Dollar will strengthen against both the Euro (significantly) and Sterling (moderately).  The printing presses will come to a standstill and a strengthening economy with the prospect of interest rate rises will be reflected in a stronger currency. With a shift to fundamentals and investors waking up to the fact that the Eurozone troubles have actually not evaporated but merely been sleeping (ignored, rather!) during 2013, the Euro looks particularly vulnerable. Despite Mr Weidman’s insistence that QE will never be on the agenda, Mr Draghi will find a way around the Bundesbank opposition, probably by giving it a different name (!).  In any case, sooner or later Mr W will have to accept that Mr D is his boss, rather than the other way round.  Tough luck!  As for the Yen: Who the hell knows whether or not Mr Abe will successfully implement the third and hardest leg of his economic agenda ‘Abenomics’: Deep infrastructural reform.  It’s all very well turning on the printing presses but the hard bit will be the real test.  A tall order, indeed.


The precious metal appears to be in meltdown.  After an amazing bull run lasting 12 years, 2013 has seen the first negative return: Trading at around the $1,700 an ounce mark in January gold has slumped to just over $1,200, which represents a 30pc fall.  This is the biggest yearly drop since 1981.  So what does the future hold?  The sentiment is overwhelmingly negative and, for once, Pinkers does not take a contrarian view.  In fact, Pinkers believes most analysts are still too optimistic with their forecasts ranging from $1,090 to $1,200 average for 2014.  In the first half of the year, gold will probably test the major support level of $900-950.  This should represent a good entry point.  Even a drop to $750 is not inconceivable.  However, we should see consolidation in the second half, especially with Eurozone troubles reemerging and higher inflation in the US and UK.  Pinkers believes gold will end 2014 around the level where it is now: $1,200.  The shiny metal doesn’t need polishing: It is and always will be a ‘safe haven’ asset and widely held as an insurance policy.  Physical demand, especially from India and China, will remain robust at current and lower levels but it will not be enough to make up for ETF outflows.


Shale.  This year was all about shale.  ‘Peak oil’ is history.  Not that shale oil extraction is a new thing: The first patent was granted by the British Crown in 1684 and the earliest description of the process dates to the 10th century.  What is new is the technology deployed, offering a more cost-efficient way of large scale industrial extraction.

The US appears to be the main beneficiary with large deposits and analysts have forecast that the world’s largest economy could be energy self-sufficient within 5 years.  The end of OPEC and the dawn of a a new era of limitless supply of hot chocolate?  Of course, not.  The issues and mostly unanswered questions surrounding shale extraction are by far more complex: Different types of oil for different uses, distribution (construction of pipelines), refinement (most refineries in the US are OPEC owned!), political and environmental concerns… to name but a few.

Last but not least, when it comes to ‘miracle solutions’, the old adage applies: “If it’s too good to be true, it probably is.”

The hard facts paint an altogether different picture: The oil price has proved remarkably resilient; oil majors such as Shell have pulled out of shale projects due to higher than anticipated costs; ‘conventional’ oil exploration around the world is more active than ever; geopolitical upheaval will continue to offer support… and so the list goes on.

Pinkers believes Brent Crude will trade in a range of $100-$115 during 2014; i.e. no change. How boring is that?

Global economics and politics

Global GDP is forecast to be around 3%.  Yes, quite healthy.  What does that mean?  It’s no more than an average and the discrepancies between the major economic blocks are huge.  Pinkers is worried about China: Bad loans are piling up, housing bubbles are bursting, local governments are mired in debt and the shadowy financial system poses a real threat to Beijing’s reform agenda – so far remarkably well managed but can they keep it up?  The biggest risk, however, is that of the Fed getting it wrong: The transition from massive injections of liquidity to ‘normal’ private sector led growth will be a huge challenge.  We still don’t know the outcome of this bold experiment. Eurozone troubles will again be on top of the agenda: Political will has to be backed up by a proper political and fiscal union and whether or not a consensus amongst strong and weak economies can be reached remains to be seen.  This increasingly tedious saga will probably go on for a few years, yet, and keep dictating investors’ sentiment: Risk on and off is here to stay.

As for politics… Harold Macmillan’s famous quote “Events, my dear boy, events” is as topical as ever.  Tensions between China and Japan make Pinkers feel rather queasy and Russia’s virtual dictatorship may not be as stable as it currently appears to be.  Russia has a history of revolutions… far-fetched?  And the rest of the world?  A tinderbox!  The whole of Africa appears to be in turmoil with revolutions and military coups all over the place.  All this quite enough grub for the bears to feed on.

In summary: Pinkers probably got it all wrong… but isn’t that the whole point about making an exciting weather forecast?  After all, the nation’s favourite in that department remains Michael Fish. Let’s take his lead and on that note: Cheers and a Happy New Year!