Nick Hubble – Capital and Conflict (United Kingdom) –
A few years ago, a group of my friends and I had the clever idea to update the lyrics to Billy Joel’s We Didn’t Start the Fire. Adding three decades’ worth of events in song form didn’t go so well.
The song is basically just a list of things that have happened and people who made it big since the 1950s. The last verse is about the 80s, for example:
Birth control, Ho Chi Minh, Richard Nixon back again
Moonshot, Woodstock, Watergate, punk rock
Begin, Reagan, Palestine, Terror on the airline
Ayatollah’s in Iran, Russians in Afghanistan
Wheel of Fortune, Sally Ride, heavy metal suicide
Foreign debts, homeless Vets, AIDS, crack, Bernie Goetz
Hypodermics on the shores, China’s under martial law
Rock and Roller cola wars, I can’t take it anymore
These days, you can’t help but notice that we didn’t need to rewrite the song at all. You can just rerun the same lyrics all over again, with only minor updates.
North Korea, South Korea, gung-ho Russian leaders, American presidential scandals, Palestine, terror on the airlines, the US in Afghanistan, an opioid crisis, a bomb, trouble in Iran, British politician sex scandal, boxing rivalries, and search engine wars. It’s all the same.
Two of the above even feature at the top of The Telegraph’s homepage this morning. Then there’s Boris Johnson with his vision for Palestine down below. It all never ends. So Billy Joel was right. You didn’t start the fire, whoever you are.
The good news is that there’s plenty of rhyme and reason to all the drama. Akhil Patel over at Cycles, Trends and Forecasts is the expert on the rhyme. He explains what’s going to happen next based on what happened next the last few times around. You’ll find his remarkable set of current predictions here. If he’s right, his subscribers will get rich.
And don’t bother complaining that Akhil’s ideas don’t match up with what you’ll find in Capital & Conflict. We have no editorial line at Southbank Investment Research, our publisher. Akhil and I certainly aren’t the same person. And so we have different predictions. As does everyone at Southbank Investment Research.
That’s what makes watching our conference worth it. You get a selection of opinions, ideas and predictions. You can pick and choose what makes most sense to you.
As the world continues to turn, Billy Joel’s fire continues to burn. If you can figure out what’s going to happen in advance, using patterns like Akhil or whatever it is I do, then you have an edge. A way to invest to become wealthier, safer and more resilient.
Below is one example how your ideas shape what you think will happen next…
Can Japan break out of its iron coffin?
Does quantitative easing (QE) work? The monetary authorities are certainly trying. It’s the experiment of our time.
Not that anyone knows exactly what central bankers around the world are trying to achieve. Pumping the stockmarket to trigger a wealth effect? Recapitalise the banks? Create jobs? Jumpstart inflation? Push up wages? Crush bond yields and interest rates? Entice borrowing? Reflate the housing bubble?
If you believe the money-printers, QE solves everything at once. And it’s doing quite well on most measures. The question becomes whether there are side-effects worse than the cure. And whether you can wean yourself off the drug.
Japan led the way into QE. Its stockmarket is at heights not seen since the mid-90s, and more than double the levels of 2008. An impressive run. In fact, it recently had 16 consecutive days of gains – a record.
But Shannon McConaghy of Horseman Capital Management says Japan has hit the lid of an iron coffin. This is the ninth time the Japanese Topix index has closed around 1,800 points since 1992. But it never managed to breach that level by much before a tumble. It’s a similar story if you measure the stockmarket capitalisation as a per cent of Japanese GDP.
If your hypothesis is that QE makes the stockmarket go up, then you’re about to get a real trial. Can the Japanese market breach its iron lid?
If you believe QE won’t work, then this is the right time to bet on trouble in Japan.
I think Japan can breach the iron coffin. I think enough QE can make the market surge through any barrier. And the monetary meddleomaniacs have the political backing and stupidity to try it. The Bank of Japan already owns three quarters of the local stock holding exchange-traded funds (ETFs).
If you agree, a Japanese ETF is a good bet. The Vanguard FTSE Japan UCITS ETF [VJPN:LSE:GBP] is surging at the moment, up over 30% in 18 months.
Meanwhile, the UK is testing the withdrawal side of things. QE might have worked, but will ending it reveal a problem?
Can Carney pull off an exit?
On Thursday, the Bank of England (BoE) is expected to announce the first interest rate increase in a decade.
There are so many things to watch, and so many possible implications, it makes you dizzy. Inflation, the pound, borrowing, jobs, GDP growth, bank stocks and so much more will all be affected by the decision.
The funny part is, even if you think you know what governor Mark Carney will do, you don’t know how those variables will be affected. A rate hike could be good news or bad news for the stockmarket. Is the BoE acting to slow down runaway inflation or just maintain the right amount? If the pound surges and that crushes the inflation it had created by falling after the Brexit referendum, where will this leave inflation under a rising currency?
This guide from the European Central Bank’s (ECB) recent decision explained by the Financial Times is no help to your forecast:
The ECB’s benign retreat last week from its quantitative easing programme helped send European stocks to multiyear or record highs, depending on the particular bourse.
Great insight that was…
So we don’t know what’s going to happen. And even if we did, we wouldn’t know the result to expect. The only thing I do know is that a bad result from whatever does happen would not be tolerated by the masters of the market – central bankers. At least not for long.
As I told the audience in my conference speech, the central bankers will print enough money to make stockmarkets go up. Markets control central bankers, not the other way around.
Until next time,
Capital & Conflict