“It took us three years to find someone to manage our wealth, and we can now sleep at night! ”

Darren and Ruth Johnston (Semi-retired entrepreneurs) (N Wales) (2011)

The Big Picture April 2016

Posted by jdavis on April 29, 2016

In The Big Picture I show what is really going on and what informs our thinking.

Look at February's to see what I showed then.

The following is a sample of what I see now: (see lots more on Twitter @j0nathandavis)

This is a scary chart if you are a stock market bull.

In the top chart we see US industrial production peaking in 2000 and 2007 and 2015...

Next we see Wilshere 5000 (entire stock market) 10 and 20 month moving averages.  Note the 10 has gone below the 20 recently.

Finally, we see the Wilshere 5000 All Share index.  Seems to me the Wilshere is in a bear market.  What does your wealth manager say?  Are you comfortable to have 50 or more percent of your portfolio in stocks?  I'm not.

 

China

I have discussed previously the possibility and result of a major Chinese currency devaluation (it would result in a Poseidon Adventure-sized wave of deflation in the West).  Consider the following:

Across the World, authorities take the Joseph Stiglitz view (Nobel prize winner) that a country over 90% of GDP in debt is in trouble.  China is estimated as 216% in debt... a massive rise from the 2008 global collapse.  They now borrow $12 for every $ of growth.  Yeah, that'll end well.

China's currency is continuing to devalue as the Politburo attempts to inflate away its vast debts.

Do you believe it guaranteed China will keep its currency strong and not devalue?  I'll take the other side of that, thank you.

What would a major devaluation of the Renmimbi and the subsequent deflation in the West do to shares and property?  Is your portfolio safe?

 

The above is US jobs.  Note the unemployment number is at 40 year lows.  Yippee!  Well, not actually.

Because whenever it gets this low what happens next?  Unemployment rises and (the grey columns) we have Recessions.

Still confident of your equities, corporate bonds, property portfolios?

 

This is so telling:

US Growth in successive 16 year periods:

1952-1968: 85%

1968-1984: 59%

1984-2000: 73%

2000-2016: 33%

And the difference is the sheer amount of debt in society, even though there has been 000s of Billions of 'stimuli'.

The US Bureau of National Statistics, this week, announced that, annualising the Q1 growth figure, the US is growing at merely 0.5% pa.  Recession may be just around the corner.  Or not, I guess.

 

There is so much data to show the Western/global economy is slowing down as well as the stock markets.

I expect 2015 to 2018 to be similar to 2000 to 2003, the difference though being interest rates are already practically rock bottom.  Think again about that.  Call me if you want to.

 

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