More Kleptopia

Do we really have robust jobs growth?

This questions the strength of the recovery in jobs in the UK.



Demand is weak in the west, but strong in Asia. Shale is (surely?) not coming back. Libya and Iran may start selling. Who knows what will happen to prices?

My best guess is that demand will be stronger than anticipated, but I’m not putting money on it.

Forget zombies. Here come the vampires!

This ZH article explains that there have been a surge in companies that have negative EBITDA. It’s not only that they don’t earn enough to pay their debt service costs. It’s that they don’t even make enough money to cover their operating costs. But they are fine, because there is a big queue of “investors” who want to provide finance for them, expecting them to be the next $KODK or $RCL.

It will end in tears, but not yet, and very possibly not even next year. Meanwhile, fill your boots with fraud.

[Normal disclaimers with respect to links to ZeroHedge apply.]

Consensus forecasts for 2021

This is not yet the Christmas season, but it’s the season when sell-side analysts peer into their crystals balls to tell investors what will happen next year. My predictions of these predictions are as follows:

  • the Fed has our backs,
  • inflation will rise a bit but not enough to frighten the horses (or spook the bond market),
  • the dollar will fall, which will goose the stockmarket,
  • ESG stocks will continue to rally,
  • momentum/growth will continue to be the best performing factor,
  • gold will not break out,
  • Europe will continue to under-perform, in terms of its stock market and economies,
  • China’s economy will grow at 6%,
  • bitcoin will collapse,
  • credit quality will improve, and
  • banks will be fine.

I suspect that most of that will not come to pass. Notice I didn’t predict any predictions involving hard numbers (or precise timeframes). This is the first rule of making predictions. The exception is China’s growth rate, for obvious reasons.

I subsequently spotted this which somewhat supports my contention.

My predictions for 2021

[Watch this space.]


The Non-farms Payroll print was weak. Back in the day when I was writing simulations, this would have meant a widening output gap, and so lower long-dated yields, and so a rally of bond prices. Not any more. Weak economic statistics are just another reason for Wall Street (whoever, or whatever that is) to conclude that longer dated yields are going up. Twenty year yields went up by over 8bp today. OK, so only 8 hundredths of a percent: but that is actually a lot (Koyfin dutifully reports a change of 5.1% of the yield figure but I’m not sure what it’ll do as yields pass through zero, as they may well do in the near future). For a long time, bad news has pushed stock prices higher, on the expectation of easing, but bonds have remained steady, presumably on some sort of argument that the economy still has spare capacity. The response today suggests that someone somewhere, who is the marginal buyer or seller, has decided that we don’t have spare capacity (even though the ‘reserve army of labour’ has many, many divisions) and so this will at last result in inflation. The long and variable lag has elapsed.

Of course, I may well be reading far too much into one day’s figures. There may be other explanations. It might be a function of the trade deficit finally weighing on the dollar, and importing inflation. I do not have a working model of the economy, and it seems neither does anyone. But it’s another data point that supports the reflation thesis.

Kleptopia Mk 2

I finished listening to the Tom Burgis interview on the TC Podcast. It’s well worth listening to. Burgis works for the FT, so he has to be circumspect, but he came very close to being outspoken about Tony Blair and his dealings in Kazakhstan. Dictatorships, and kleptocracy are nothing new. Just read about the presidency of Mobutu Sese Seko. But things are different now, because now these dictators are actively aided and abetted by lawyers, accountants and politicians in London, Washington, Paris and really everywhere in the developed world. The wealth available to siphon out of countries in Africa (and other developing nations) is much larger, and the flows are much larger. We have always sold these places overpriced weapons and aeroplanes they hardly needed. Now we have the very much senior ex-politicians fawning over the oligarchs, and pleading them to come to London where their ill-gotten gains and their reputations are laundered. We seem hell bent on underfunding and undermining the agencies that could interfere with these flows, from the Serious Fraud Office to Companies House (which continues to make empty gestures to revealing beneficial ownership of front companies).

As in so many political issues, this topic never gets to the point where voters are engaged, so it becomes much safer to argue about transgender bathrooms and mask wearing in public. At the very least, try to inform yourself. Tom is a good investigative journalist. He wrote a piece for today’s FT about how Timur Kulibayev, the son-in-law of the Kazakh president, skimmed off millions from a pipeline project. Ask yourself whether it is likely that this scheme could have succeeded without active support of UK professionals.

(This item is continued tomorrow.)

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