1. Moneyweek - Expect further slides in the price of copper

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    Copper prices have slid by around 10% this year to $6,700 a tonne. Since 2011, as Longview Economics points out, a structural bear market has been underway, with prices down 32%, and the outlook remains negative.

    Chinese demand growth edged down last year and this trend should endure. Half of China’s copper demand stems from the construction and infrastructure sectors, and a slowdown in real-estate construction is underway.

    Inventories of unsold properties are at a 12-year high and prices and transaction volumes are heading south, foreshadowing fewer housing starts and hence lower copper demand.

    The government is clamping down [...]

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  2. The Telegraph - 20th June 2014

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    Chris Watling of Longview Economics has done the homework on this, and finds that in the last two tightening cycles, the cumulative rise in interest rates was between 2.3 and 2.4 percentage points.

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  3. The New Zealand Herald - What interest rate is neutral?

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    In its April newsletter Longview Economics show that world private sector non-financial debt has increased from about 126 per cent of GDP in 1970 to more than 250 per cent of GDP in early 2014. That is unprecedented. Mr Gross's musings are relevant because the Fed funds rate, like the OCR in NZ, helps to price bonds, property and shares and just about everything else. In the US the futures markets anticipate a 4.0 per cent Fed funds rate in 2020 but if the neutral policy rate was only 2.0 per cent then bonds instead of being overpriced would be cheap. That has implications for NZ investors

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  4. Financial Times - Central bank trickery sets stocks and bonds at odds

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    Equity market calm might actually be a worrying sign. Low equity volatility – as measured by the CBOE’s Vix, known as the Wall Street “fear gauge” – as well as falling US, German and UK bond yields, point to a high level of complacency among equity investors, argues Chris Watling, chief market strategist at Longview Economics. “In sell-offs and waves of risk aversion, the most crowded trades are often the first parts of the financial market to start to deteriorate,’’ he warns.

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  5. Financial Times - "2014 Outlook - Market Melt-up"

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    Failing these things, it could be left to the Fed itself to do the job by raising rates or removing stimulus faster than the market had expected.

    Chris Watling of Longview Economics in London says US equity valuations are undoubtedly “full” – but are no more expensive than when Alan Greenspan, then Fed chairman, tried to talk down the stock market by warning of “irrational exuberance” in December 1996. On that occasion the bull market carried on for three more years and turned into an epic bubble before finally going into reverse.

    “They’ll become more expensive,” says Mr Watling. “It’s not until we see tight money that we talk about the end of this valuation uplift in the US.”

    http://www.ft.com/cms/s/0/28cd4a70-714e-11e3-8f92-00144feabdc0.html#slide0

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  6. The Financial Times - "Reality Dawns for Artificial World Created by Fed Activism"

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    The ready availability of cheap credit also delays the natural cycle of corporate bankruptcies, which results in a more efficient use of resources across the economy.

    “QE has pushed up asset prices and enhanced income inequality, that’s a structural weakness for the economy,” says Chris Watling, chief market strategist at Longview Economics. “QE has also held back the long-term health of the economy as we have not seen the normal pattern of business deaths that is part of the creative destruction process.”

    While emergency near-zero interest rates and the first round of QE stabilised markets and the economy in 2009, the missing ingredient of a robust recovery has been the reticence of companies to boost their capital spending.

    http://www.ft.com/cms/s/0/a2f5d320-6740-11e3-a5f9-00144feabdc0.html

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  7. City AM, 4th September 2013 - "UK economy continues to accelerate – but dangers loom large"

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  8. The Economist Jul 24th 2013, 15:19 by Buttonwood

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    Chris Watling of Longview Economics has crunched the numbers. Total US non-financial debt, which was 180% of GDP as recently as 2000, is around 250% (and may be edging up). Eurozone non-financial domestic debt is approaching the same level; the UK numbers are more than 280%, Japan is over 370%. All are well above their pre-crisis levels

     

     

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  9. The Independent Hamish McRae - Britain up, eurozone down - for once, the Bank is right

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    So without wanting to spoil the party, let's just put on record that two economists that I admire are sounding notes of caution. Chris Watling of Longview Economics thinks there is a high risk of some sort of pull-back, while Simon Ward at Henderson asks: "Should equity investors take profits?"

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  10. The Independent - Hamish McRae, "Why shares thrive while the economy flounders"

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    Longview Economics focuses on equities and asks: how long will the Western secular bull market last? Its answer, to give away the punchline, is about two years. It makes its own calculation on what is fair value for shares and plots to what extent shares have been above or below fair value. You can see in the bottom graph the result, with bands shown at one standard deviation and two standard deviations above and below it. As you can see, this indicator has been signalling a "buy" since August last year and remains in buy territory.

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  11. Wall Street Journal - Wheels are Falling off the Supercycle

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    Have we fallen off the cycle or is the bike broken? Since 1998, commodities have been in a bull market—the so-called supercycle, where surging demand for raw materials eclipses supply, juicing prices to abnormal highs.

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  12. The Independent - Making sense of the market's new normal

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    At any rate, Chris Watling's view is that positive news from the US and the prospect of a return to growth in Europe in the second half of this year should underpin equities for a couple of months more, a view supported by one of the oldest of market adages, the first part of which is that one should "sell in May and go away

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  13. The Economist Buttonwood - Gold and sterling - The odd couple

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    ALTHOUGH the yen has captured most of the currency headlines since the start of the year, sterling has been almost as weak. It started the year worth Y141 and is now around Y143. Against the dollar, the pound has weakened from $1.62 to $1.53; against the euro, the drop has been from €1.23 to €1.145, a 6.9% decline. It doesn't sound much but remember that the pound was only allowed to fall 6% from its peg to the D-Mark under the old Exchange Rate Mechanism.

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  14. The Financial Times - Back to the future on a cycle made in China

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    Some intuitive suspicion of grand theories of history is in order, of course. But the fit with recent history is very plausible, and the ramifications go beyond commodity investors. Research by Chris Watling of Longview Economics showed that throughout the 20th century, stocks were horizontal when commodities were in their “up” cycle and made all their gains when commodities were quiet. The surge in materials prices during the past decade coincides with a “lost decade” for stocks.

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  15. The Independent - Hamish McRae, "Out of bonds, into equities: if only it were that simple"

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    Those are the arguments, and the conclusion of Chris Watling at Longview Economics, who pulled together this data, is that assuming the US manages to sort out its fiscal situation and the eurozone gets through its current troubles (two big "ifs") global shares are indeed a good buy. But there is a solid view, articulated for example by Andrew Smithers of Smithers & Co, who believes that US shares in particular are significantly overpriced when compared with their long-term performance.

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  16. The Financial Times - Miners in a hole need to stop digging

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    Past commodity supercycles have lasted from 12 to 30 years, according to Longview Economics. If this one is ending, it will be the shortest so far. But if it is, prepare for much bigger falls to come...

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  17. The Economist - Gas, grains and growth - making sense of the fall in commodity prices

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    IS IT good news or bad news? Commodity prices have been falling sharply in recent weeks—the S&P GSCI index dropped by 13% in May alone, the biggest monthly decline in two years. That amounts to a tax cut for Western consumers but it may also be a worrying sign that global growth is decelerating.

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