12 Years of VP vs Noise
Sharing the ideas and experiences that have influenced our work
Structural tailwinds for US homebuilders
The 2010s marked a lost decade for US homebuilding. The number of homebuilders declined 50% between 2007 and 2012 in the US, and the GFC caused a massive hole in personal savings and equity, meaning that fewer people could afford a home. This drove a shift towards...
Lessons from past market tops
We looked at 3 major tops (1929, 1973 and 2000) suggests tops are immediately preceded by 1) sustained monetary policy tightening and 2) divergence of surging bubble stocks vs the average stock moving sideways/falling. 2021 has been characterized by late-cycle markets...
A perfect storm for food prices
Brazil is suffering the worst drought in a century, after its crops were scorched and frozen earlier in the year. Agricultural commodities prices are spiking, forcing the UN world price index 33% higher vs 12 months ago. EM inflation baskets generally have a much...
US economic outperformance supports USD rally
We continue to expect US economic outperformance in the coming months, which should attract capital towards the US, boosting the USD. Although US PMIs are no longer elevated vs the rest of DM, the previous surge has yet to play out, and offers a long 12 month lead on...
When to buy EM debt
Real yields are much higher in EM vs DM, and the spread is the widest in 20 years. Source: Bloomberg, Macrobond, Variant Perception With many EM central banks committing to hiking cycles and front-loading rate hikes to combat surging inflationary pressures, nominal...
A garden is never finished
When I think about creating a great service, a quote by Czech writer Karel Capek comes to mind: "A garden is never finished. In that sense it is like the human world and all human undertakings". At Variant Perception we strive to improve upon yesterday, from the...
Back to the Seventies?
Inflation tends to operate in regimes: unanchored vs anchored, and this often coincides with political regimes. Activist governments and policy coordination with central banks often feature in, and contribute to, high inflation. And we tend to see wealth...
The crude oil recovery
US petroleum product data shows that diesel and gasoline consumption is recovering strongly. Back in May, we had flagged the potential for a bonanza summer travel season that could boost oil demand. This is kicking in. Source: Bloomberg, Macrobond, Variant Perception...
US labor market: issues under the surface
The US labor market has structural problems that are more significant than a headline unemployment rate nearing 5% would suggest. The skill mis-match narrative is visible in the data. The ratio of hires to job openings has collapsed. Source: Bloomberg, Macrobond,...