By Chris Berry (@cberry1)
For a PDF of this note, click here.
With few exceptions, deflationary forces are likely to challenge growth in much of the world in 2015. With the global economy more tightly integrated than ever before, the risk of much of the world catching a “disinflationary” or deflationary cold is pronounced. Most commodities are trading at or near five year lows, real interest rates negative in various countries, and Central Banks are having difficulty hitting their (admittedly low) inflation targets of 2%. It’s obvious to even the most casual observer that the inflation genie is not even close to being let out of the bottle.
Given that the global economy is generally struggling to generate “escape velocity” growth, the main question is how deflation might spread? I see three transmission mechanisms:
globalization, high debt to GDP ratios, and innovation in technology spurred by R&D.
This note discusses the first two mechanisms with a focus on China’s efforts to halt the “export” of deflation.
By Chris Berry (@cberry1)
To view this entire piece in a PDF, Click here.
“It’s tough to make predictions, especially about the future.”
- Yogi Berra
In the time that I have been writing on the metals markets and global economy, one mainstay has always been reading the tsunami of year end research reports laying out predictions for the year ahead. Almost universally, these well-written and tirelessly researched musings all share one consistent trait: they are almost always off the mark.
Last year at this time, I was reading about the looming interest rate increases in the United States (not even close), Japan finally conquering deflation and returning to growth (fourth recession since 2008), oil prices never falling below $100 per barrel (no comment necessary), the junior mining markets turning higher (I think we’re several years from this) and electric vehicles taking a much larger piece of automotive market share (not yet, but eventually).
I don’t mean to denigrate those who make predictions as it’s a necessary part of portfolio construction. The fact that so many predictions are so spectacularly wrong I think speaks to how interconnected markets are which makes it difficult to anticipate any sort of domino effect.
By Chris Berry (@cberry1)
For a PDF version of this note, click here.
Europe has always fascinated me. A thousand years of rich history confront you regardless of the country or city you visit. Opportunities to talk to Europeans from all walks of life about their views on current events or the global financial markets put in a unique historical context are worth the time and effort it takes to plan a trip.
My recent trip to Frankfurt, Munich, Zurich, and Geneva was no exception. I went as a keynote speaker on the Fourth Annual Zimtu Capital Bus Tour where I spoke in each city and served as a moderator and emcee. Accompanying Zimtu were a well-rounded stable of companies representing resources as varied as diamonds, potash, coal, and uranium. Representatives from the Canadian Securities Exchange along with several CSE-listed companies were also in attendance on the bus, and as these companies were not natural resource-focused (vertical farming, biotech, etc), it gave this year’s tour a more diverse flavor than in years past and everyone – from institutional and individual investors to the companies themselves – had a unique opportunity to view the small cap discovery sector in a different light.
That said, this note is really intended to focus on what European investors think of the resource sector now that we are three years into what feels like a seemingly relentless malaise.
Though many disinflationary forces still predominate around the globe, more and more is being said about food inflation. We still believe in the primacy of food security as forces as disparate as the weather and urbanization coalesce to push the price of food upwards.
Some recent headlines reinforce this assertion:
