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Now, whether it’s true or not is another matter

“The US economy is clearly slowing down, and in our base case it is headed for an outright contraction,” said Andrew Hollenhorst, Citigroup’s US chief economist.

If so, US Treasuries, German Bunds, and UK Gilts are massively mispriced. So are BBB junk bonds trading at an average wafer-thin spread of 1.09pc, matching the extreme complacency seen before the global financial crisis.

Mr Hollenhorst has pencilled in a contraction of 0.3pc and 2.1pc (annualised) over this quarter and next, with double-digit falls in business equipment investment. That in turn will push unemployment to 5.5pc by the end of the year in a classic recessionary dynamic.

But that’s then Trump for the win in November.

16 thoughts on “Now, whether it’s true or not is another matter”

  1. I will be extremely surprised if Trump ‘wins’ the ‘election’ in November; if he does I’d have thought large numbers of people will be losing their jobs and/or going to prison, and since those are the people in charge I doubt they’ll give him the chance.

  2. Yeah. I’ve suspicion there may be a lot of poll irregularities reported in the coming UK election. Whether those end up as being investigated is another matter though. But it’s another democracy becoming increasingly undemocratic.

  3. I’d guess Donald Trump’s chances of not being murdered in prison or shot by a lone gunman are about 50/50.

    They’ll kill him like they killed Huey Long, if they can. What are Republicans gonna do – vote harder?

  4. A Chancellor Reeves would be compelled to cut spending and tighten budget policy, in a destructive pro-cyclical fashion, unless she could summon the courage to ditch our toxic, anti-investment fiscal rules and reestablish macroeconomic sovereignty

    Lol, I won’t hold my breath.

    The record does not look so good when you adjust for immigration. Real disposable income per capita is down 0.5pc over the last year. That may explain why so many voters are in such a bad mood

    Wow, so filling your country with millions and millions of low IQ migrants from the Third World doesn’t make you richer?

    Who knew?

    America’s debt accumulation over the last seven years is akin to the costs of a world war.

    The International Monetary Fund says the US gross debt ratio has ballooned from 105pc to 123pc of GDP under the Trump-Biden spending blitz. It is heading for 134pc by 2029, and that assumes clear blue skies and no recession. We could be talking about 140pc plus before long.

    Pessimists say there is little to show for it. Strategic optimists say the money has been well spent launching America’s industrial rearmament and preventing China running away with clean-tech supremacy.

    It is a war-time cost. You cannot defeat the axis of autocracies on the cheap.

    The logic inherent to the “optimist” position is that a massively indebted and Net Zeroed West will fight WW3 against China and Russia, and somehow “win” an exchange of atomic weapons.


  5. “UK Gilts are massively mispriced” That’s good to know but are they overpriced or underpriced?

    If Trump survives I suspect he’ll win the election but lose the count.

  6. filling your country with millions and millions of low IQ migrants from the Third World doesn’t make you richer?

    Well, doesn’t make you and me richer, but it’s good news for exploiters of serf labour.

    preventing China running away with clean-tech supremacy

    Or we could do that by not buying their coal-fired green bullshit products?

  7. Dennis: Oppressor, Warmonger, Capitalist and Consumer of Petroleum Products

    50/50? I think you are being optimistic.

    I do not think he will be jailed, but I think there is an excellent chance (>70%) he will be assassinated.

  8. dearieme:

    “are they overpriced or underpriced?”

    Do you really think interest rates will be going down any time soon for an extended period?

    Or are they going to have to going up in order to sell off the new bonds that they will have to issue to cover their ongoing deficits?

    Interest rates *will* be going up, and staying up for a while, The question is when.

  9. Marius – I’d go one better: DO buy China’s cheap goods, cancel Net Zero, and enjoy peace and prosperity.

    Unfortunately, I’m one of those insane loonies the media calls “far right”, and all the sensible centrists want to send our children (but not theirs) to die in the next global war they’re planning.

    Dennis – an interesting observation from one of your countrymen:

    Wall Street Apes
    Something About The 2024 Election Doesn’t Seem Right

    “Am I the only one who’s genuinely nervous about this election? I’m currently on a road trip from Houston to Palm Springs, California, and I’m most of the way back to Houston now. I have stopped and stayed the night in almost every single major city along the way because I’m pulling a trailer and I can’t go very fast. I have not seen a single Biden Harris bumper sticker, Biden Harris flag sign. Not sh*t.

    Not even in California. And I actually went over past Palm Springs a little bit towards LA. Not a single one. I’ve seen a whole hell of a lot of Donald Trump, though, but you know what I also don’t see? I also don’t see any Biden Harris campaigning, like, at all.

    Like, not even a little bit. So they’re not even campaigning. I don’t see a single sign anywhere, yet they’re also not acting nervous. They know something we don’t know and that makes me nervous.”

    Of course, “Biden” didn’t campaign in 2020 either, yet “won” the highest number of “votes” of any US presidential election in the history of the USA.

  10. It is an AEP article though. He predicts some huge portentous move in the global economy every five minutes these days, usually interspersed with articles about how Net Zero is the answer to all our problems. So the weight I’d attach to to his prognostications is zero.

  11. bloke in spain said:
    “Yeah. I’ve suspicion there may be a lot of poll irregularities reported in the coming UK election.”

    I doubt they’ll be reported.

  12. AEP clearly has no idea. Triple B bonds (BBB) are investment grade not ‘junk’

    Now to Gilts. Everything is relative to a risk free return. Noting risk free exists so we use something called a secured overnight lending rate as the reference which is then magically made into longer durations. This gives rise to “swap rates” where people make promises to pay/receive a fixed rate to date X in order to receive/pay a floating rate. That floating rate is the one above giving rise to “swap rates”

    Now we compare that fixed rate above to Gilts at the same time horizon.

    Gilts yield a higher return, roughly 0.5% higher. Given Gilts are pretty much nominally credit risk free the extra return from taking credit risk (of higher quality than the BBB above) is pretty much nothing.

    So Gilts are cheap (high interest rates paid) and credit instruments like bonds are expensive (low rates paid). That’s odd…. Hence the query. The FT has a free article on it.

  13. Fun fact – I was at school with the current owner/MD of one of the other port houses up there….

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