12 Years of VP vs Noise
Sharing the ideas and experiences that have influenced our work
Monetary Policy Still Too Hot for Germany
An ongoing theme we kept coming back to throughout 2015 in the eurozone is that monetary policy tends to either too hot or too cold for the core or periphery. The ECB’s attempts to fight deflation and reflate the periphery have fuelled increases in German mortgages...
Peak in Heavy Truck Sales Point to Cyclical Pain
Heavy truck sales are oddly a good leading indicator for the economy. It is odd because a lot of industrial production is coincident with the business cycle. However, if you go back over forty years, you can see that recessions have always been preceded by a decline...
USD Positioning Supports Weaker Dollar
In January and February we discussed our view that we thought the dollar would find it difficult to rally further and would instead display a modest weakening bias. The initial leg up of the rally in 2014 was not due to higher yield differentials with the US, or the...
European Recovery: Periphery Loan-growth Needed
One of the aims of loose monetary policy is to boost lending. The theory is lower rates and greater availability of liquidity will encourage lending and borrowing, which in turn will boost economic activity. Unfortunately, an increased supply of loans does not...
Earnings to Fall Further
Profit margins are declining, and we expect them to fall much further. As you can see from the chart below, Variant Perception’s leading indicator for wages does a very good job of leading US corporate profit margins by a little over a year and a half. The message is...
Aussie Housing Finance Rolling Over
We are already seeing cracks in the housing market in Australia. At Variant Perception we track news articles of things in oversupply, as this flags interesting investment themes. Normally, we’ve seen commodities in oversupply, but interestingly, Australian...
Commercial and Industrial Lending to Fall
You can take a horse to water, but you can’t make it drink. This is generally the mistake made by many when it comes to credit. If you expand the availability of credit, and make it more attractive, then more people will want credit. But this is rarely the case. ...
Financial Conditions Keep Tightening
Financial conditions are slowly but surely tightening. We have had one actual rate hike by the Fed, but conditions had begun to tighten before this. This is primarily a developed market phenomenon. Real M1 for the G7 has been trending down for the past 6 months....
Inflation Alive and Well in the US
We have focused on the theme of the misplaced fear of deflation at Variant Perception frequently over the past 18 months. At several points, markets and commentators seem to have become preoccupied with a belief that growth-destroying deflation was imminent. Using...