London house prices are “falling at the fastest rate in almost a decade” according to major property lender, Nationwide. And almost 40% of new-build sales were to bulk buyers at discounts of up to 30%, according of researchers, Molior. As the CEO of builders Crest Nicholson told the Financial Times:
“We did this sale because we knew we would otherwise have unsold built stock.”
They probably made a wise decision to take their profit and sell now. There are currently 68,000 units under construction in London, and nearly half of them are unsold. Slower moving builders will likely find themselves having to take losses in order to find a buyer.
London is a series of villages and the issues are different across the city:
Nine Elms, SW London. This $15bn (US$20bn) transformation has been ‘an accident waiting to happen‘ for some time. It plans to build 20000 new homes in 39 developments at prices of up to £2200/sq ft. Yet 2/3rds of London buyers can only afford homes costing up to $450/sq ft – thus 43% of apartments for sale have already cut their price.
West End, Central London. This is the top end of the market, and was one of the first areas to see a decline. As buying agent Henry Pryor notes:
“Very few people want to buy or sell property in the few months leading up to our monumental political divorce from Europe next March, which is why 50% of homes on the market in Belgravia and Mayfair have been on the market for over a year. Yet there are people who have to sell, whether it be because of divorce, debt or death, so if you have money to spend I can’t remember a time since the credit crunch in 2007 when you could get a better deal.”
NW London. Foreign buyers flooded into this area as financial services boomed. Rising bonuses meant many didn’t need a mortgage and could afford to pay £1m – £2.5m in cash. But now, many banks are activating contingency plans to move some of their highly paid staff out of London ahead of Brexit. Thus Pryor reports buying a property recently for £1.7m, which had been on the market for £2.25m just 2 years ago.
W London. Also popular with foreign buyers, even areas such as Kew (with its world-famous Royal Botanic Gardens) have seen a dramatic sales volume decline. In Kew itself, volume is down 40% over the past 2 years. And, of course, volume always leads prices – up or down. Over half of the homes now on sale have cut prices by at least 5% – 10%, and the pace of decline seems to be rising. One home has cut its offer price by 17.5% since March.
Outer London. This is the one area bucking the trend, due to the support provided by the government’s ‘Help to Buy’ programme. This provides state-backed loans for up to £600k with a deposit of just 5%. As Molior comment, this is “the only game in town” for individual purchasers, given that prices in central London are out of reach for new buyers.
The key issue is highlighted in the charts above – affordability:
- The first chart shows how prices were very cyclical till 2000, due to interest rate changes. They doubled between 1983 – 1989, for example, and then almost halved by 1993. In turn, the ratio of prices to average earnings fluctuated between 4x – 6x
- But interest rates have been relatively low over the past 20 years, and new factors instead drove home prices
- The second chart shows the impact in terms of first-time buyer affordability and mortgage payments. Payments were 40% of take-home pay until 1998, but then rose steadily to above 100% during the Subprime Bubble. After a brief downturn, the Quantitative Easing (QE) bubble then took them back over 100% in 2016
The paradigm shift was driven by policy changes after the 2000 dot-com crash. As in the USA, the Bank of England decided to support house prices via lower interest rates to avoid a downturn, and then doubled down on the policy after the financial crash – despite the Governor’s warning in 2007 that:
“We knew that we had pushed consumption up to levels that could not possibly be sustained in the medium and longer term. But for the time being if we had not done that the UK economy would have gone into recession… That pushed up house prices and increased household debt. That problem has been a legacy to my successors; they have to sort it out.”
- The 2000 stock market collapse and subprime’s low interest rates led many to see property as safer than shares. They created the buy-to-let trend and decided property would instead become their pension pot for the future
- The 2008 financial crisis, and upheavals in the Middle East, Russia, and parts of the Eurozone led many foreign buyers to join the buying trend, seeing London property as a “safe place” in a more uncertain investment world
- Asian buyers also flooded in to buy new property “off-plan”. As I noted in 2015, agents were describing the Nine Elms development as: ” ‘Singapore-on-Thames’. Buying off-plan was the ultimate option play for a lot of the buyers [who are] Asian. You only need to put down 10% and then see how the market goes. A lot of buyers are effectively taking a financial position rather than buying a property”“
But now all these factors are unraveling, leaving prices to be set by local supply/demand factors again. Recent governments have taken away the tax incentives behind buy-to-let, and have raised taxes for foreign buyers. As the top chart shows, this leave prices looking very exposed:
- They averaged 4.8x earnings from 1971 – 2000, but have since averaged 8.7x and are currently 11.8x
- Based on average London earnings of £39.5k, a return to the 4.8x ratio would leave prices at £190k
- That compares with actual average prices of £468k today
And, of course, there is the issue of exchange rates. Older house-owners will remember that the Bank of England would regularly have to raise interest rates to protect the value of the pound. In 1992, they rose to 15% at the height of the ERM crisis. But policy since then has been entirely in the other direction.
Nobody knows whether what will happen next to the value of the pound. But if interest rates do become more volatile again, as in 1971-2000, cyclicality might also return to the London housing market.
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As China’s shadow banking is reined in, the impact on the global economy is already clear, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog
China’s shadow banking sector has been a major source of speculative lending to the global economy. But 2018 has seen it entering its end-game, as our first chart shows, collapsing by 64% in renminbi terms in January to April from the same period last year (by $274bn in dollar terms).
The start of the year is usually a peak period for lending, with banks getting new quotas for the year.
The downturn was also noteworthy as it marked the end of China’s lending bubble, which began in 2009 after the financial crisis. Before then, China’s total social financing (TSF), which includes official and shadow lending, had averaged 2 times gross domestic product in the period from 2002 to 2008. But between 2009 and 2013, it jumped to 3.2 times GDP as China’s stimulus programme took off.
It is no accident, for example, that China’s Tier 1 cities boast some of the highest house price-to-earnings ratios in the world or, indeed, that Chinese buyers have dominated key areas of the global property market in recent years.
The picture began to change with the start of President Xi Jinping’s first term in 2013, as our second chart confirms. Shadow banking’s share of TSF has since fallen from nearly 50% to just 15% by April, almost back to the 8% level of 2002. TSF had already slowed to 2.4 times GDP in 2014 to 2017.
The start of Mr Xi’s second term has seen him in effect take charge of the economy through the mechanism of his central leading groups. He has also been able to place his supporters in key positions to help ensure alignment as the policy changes are rolled out.
This year’s lending data are therefore likely to set a precedent for the future, rather than being a one-off blip. Although some of the shadow lending was reabsorbed in the official sector, TSF actually fell 14% ($110bn) in the first four months of the year. Already the economy is noticing the impact. Auto sales, for example, which at the height of the stimulus programme grew more than 50% in 2009 and by a third in 2010, have seen just 3% growth so far this year.
The downturn also confirms the importance of Mr Xi’s decision to make “financial deleveraging” the first of his promised “three tough battles” to secure China’s goal of becoming a “moderately prosperous society” by 2020, as we discussed in February.
It maps on to the IMF’s warning in its latest Global Stability Financial Report that:
“In China, regulators have taken a number of steps to reduce risks in the financial system. Despite these efforts, however, vulnerabilities remain elevated. The use of leverage and liquidity transformation in risky investment products remains widespread, with risks residing in opaque corners of the financial system.”
The problems relate to the close linkage between China’s Rmb250tn ($40tn) banking sector and the shadow banks, through its exposure to the Rmb75tn off-balance-sheet investment vehicles. The recent decision to create a new Banking and Insurance Regulatory Commission is another sign of the changes under way, as this will eliminate the previous opportunity for arbitrage created by the existence of separate standards in the banking and insurance industries for the same activity, such as leasing.
As the IMF’s chart below highlights, lightly regulated vehicles have played a critical role in China’s credit boom. Banks, for example, have been able to use the shadow sector to repackage high-risk credit investments as low-risk retail savings products, which are then made available in turn to consumers at the touch of their smartphone button. This development has heightened liquidity risks among the small and medium-sized banks, whose reliance on short-term non-deposit funding remains high. The IMF notes, for example, that “more than 80% of outstanding wealth management products are billed as low risk”.
Mr Xi clearly knows he faces a tough battle to rein-in leverage, given the creativity that has been shown by the banks in ramping up their lending over the past decade. The stimulus programme has also created its own supporters in the construction and related industries, as large amounts of cash have been washing around China’s property markets, and finding its way into overseas markets.
But Mr Xi is now China’s most powerful leader since Mao, and it would seem unwise to bet against him succeeding with his deleveraging objective, even if it does create short-term pain for the economy as shadow banking is brought back under control.
As Gabriel Wildau has reported, the official sector is already under pressure from Beijing to boost its capital base. Analysts are suggesting that $170bn of new capital may be required by the mid-sized banks, whilst Moody’s estimates the four megabanks may require more than double this amount by 2025 in terms of “special debt” to meet new Financial Stability Board rules.
Essentially, therefore, China’s lending bubble is now history and the tide of capital flows is reversing. It is therefore no surprise that global interest rates are now on the rise, with the US 10-year rate breaking through 3%. Investors and companies might be well advised to prepare for some big shocks ahead. As Warren Buffett once wisely remarked, it is “only when the tide goes out, do you discover who’s been swimming naked”.
Paul Hodges and Daniël de Blocq van Scheltinga publish The pH Report.
The post China’s lending bubble is history appeared first on Chemicals & The Economy.
Greed and fear are the primary emotions driving China’s housing and auto markets today, as China’s lending bubble hits new heights. For ordinary citizens, greed is the key driver:
Average home prices in Beijing rose an eye-popping 63% between October 2015 – February 2017
In Shanghai, one enterprising estate agent (realtor) has married 4 of his clients to enable them to buy a home
Mr Wang’s story highlights the bubble mentality that has taken over the market. As the Daily Telegraph reports, 30-year old Mr Wang:
“Married, and then quickly divorced 4 women to allow them to circumvent strict property laws which seek to cool prices in China’s booming cities, and pocketed more than £8000 ($10k) from each transaction. Once the paperwork is put through, Wang applies for a divorce and puts himself on the market again”.
This is just the latest phase of a market craze, as I noted in November, when one Shenzhen resident told the South China Morning Post:
“The only thing I know is that buying property will not turn out to be a loss. From several thousand yuan a square metre to more than 100,000 yuan. Did it ever fall? Nope.” He and his wife got divorced in February, in order to buy a 4th apartment in Shanghai for 3.6m yuan (US$530k) on the basis that “ If we don’t buy this apartment, we’ll miss the chance to get rich.”
A collective delusion has swept China’s Tier 1 cities, just as happened in the USA during the sub-prime bubble. Amazingly, China’s property bubble is even larger than sub-prime. Unremarkable pieces of land in Shanghai are now being sold at $2000/sq foot ($21500/sq metre), nearly 3 times the average land price in Manhattan, New York.
It is understandable in some ways, as Chinese buyers have never known a downturn, as I noted in September:
“It is also easy to forget that housing was all state-owned until 1998, and still is in most rural areas. Urban housing was built and allocated by the state – and there wasn’t even a word for “mortgage” in the Chinese language. Not only have home-buyers never lived through a major house price collapse, they have also had few other places to invest their money”.
The scale is also much larger, as UBS have reported:
“Chinese banks’ outstanding loans extended to the property industry were between Rmb 54tn – Rmb 72 tn in 2016 ($7.8tn – $10.4tn).”
The chart above confirms this analysis. In reality, the key driver for the bubble has been the growth in lending. As with the US subprime bubble, this has not only impacted housing markets, but also auto sales:
Q1 lending (Total Social Financing) averaged Rmb 2.4tn/month, 2.2x the Rmb 700bn/month level in Q1 2008
Q1 auto sales averaged 1.9 million, 2.06x the 733k/month average in Q1 2008
China’s GDP was only $11.2tn last year, meaning that its property sector loans are more than 2/3rds of GDP.
The problem is that everyone loves a bubble while it lasts. And so, as in the US during subprime, most analysts are keen to argue that “everything is fine, nothing to worry about here”.
In the US, we were told at the peak of the bubble in 2005 by then Federal Reserve Chairman, Alan Greenspan, that house prices would never fall on a national basis
Today, similar wishful thinking dominates, based on the myth that China has suddenly developed a vast middle class, with Western levels of incomes
The problem, of course, as the second chart shows, is that this is also not true. Annual disposable income for city-dwellers averaged just $5061 last year, whilst in rural areas it averaged only $1861. You really don’t buy many homes or cars with that level of income, unless a massive lending bubble is underway.
And this is why fear is the right emotion for everyone outside China. Its lending bubble has driven the “recovery” in global growth since 2009 – pushing up values of everything from homes to oil prices. So anyone who remembers the end of the US subprime bubble should be very scared about what could happen when – not if – China’s bubble bursts.
We can all hope that President Xi’s new policies will enable a “soft landing” to occur, and gently unwind the stimulus policies put in place by Populist Premier Li and his predecessor Premier Wen? But hope is not a strategy. And as the Guardian reported last month:
“Goldman Sachs is said to estimate the chance of a financial crisis in China this year at 25%, and in 2018 at 50%.”
Brexit negotiations are likely to prove a very uncomfortable ride for UK consumers as Russell Napier of Eric, the online research platform, warned last week:
□ ”Public sector debt remains at near-historic highs (in peace time!) and for the first time this public sector debt comes with a private sector bubble
□ Credit card debt is rising at its fastest rate in a decade — 9.3% in the year to February
□ Unsecured debt as a whole is rising at more than 10% and some 6,300 new cars are bought on credit in the UK every day”
Companies and investors already face growing uncertainty as March 2019 approaches, as discussed on Monday. UK consumers now face similar challenges as their spending power is further squeezed by the pound’s fall in value since June, as the chart confirms, based on official data:
UK earnings for men and women have been falling in real terms since the financial crisis began in 2008
Male earnings are down 5% in £2016, and female earnings down 2%
Since June, unsurprisingly, cash-strapped families have had to raid their savings to fund consumption
New data shows the UK savings ratio hit an all-time low of just 5.2% last year – and was only 3.3% in Q4
One key issue is that monetary policy has reached its sell-by date, with Retail Price Inflation hitting 3.2% in February as a result of the pound’s fall. Interest rates may well have to rise to defend the currency and attract foreign buyers for government bonds. Foreigners currently fund more than a quarter of the government’s £2tn ($2.5tn) borrowing, and cannot easily be replaced.
Unfortunately, these are not the only risks facing the UK consumer. As I feared in June:
“ Many banks and financial institutions are already planning to move out of the UK to other locations within the EU, so they can continue to operate inside the Single Market
There is no reason for those which are foreign-owned to stay in the country, now the UK is leaving the EU
This will also undermine the London housing market by removing the support provided by these high-earners
In addition, thousands of Asians, Arabs, Russians and others will now start selling the homes they bought when the UK was seen as a “safe haven”
Lloyds, the global insurance insurance market, has just announced plans to move an initial 100 out of 600 jobs to Brussels, so that it can continue to serve EU clients. Frankfurt, Paris, Amsterdam, Dublin and Copenhagen are also lining up to offer attractive deals to companies wishing to maintain their EU passports to trade. And last month saw an ominous warning from JP Morgan Chase CEO, Jamie Dimon:
“The clustering of financial services in London is hugely efficient for all of Europe. Now you’re going to have a de-clustering, which creates huge duplicative cost which is expensive to clients. Nevertheless, we have no choice.”
Dimon’s warning was reinforced on Tuesday by the leader of the powerful European People’s Party in the European Parliament, who told reporters 100k financial services jobs would likely relocate from London due to Brexit:
“EU citizens decide on their own money. When the UK is leaving the EU it is not thinkable that at the end the whole euro business is managed in London. This is an external place, this is not an EU place any more. The euro business should be managed on EU soil.”
Until now, many consumers have been cushioned from the fall in real incomes by the housing bubble. But as I discussed in December, the end of such bubbles is normally quite sudden, and sharp:
Worryingly, UK house prices fell in March for the first time in 2 years
The Bank of England also reported that mortgage approvals are falling
And normally, lower mortgage volume leads to lower house prices
Certainly it would be no surprise if prices did now start their long-overdue collapse, as highly-paid financial professionals start to leave the UK. One key indicator – the vastly over-priced 9 Elms development – now has an astonishing 1100 apartments for sale. And if the housing market does collapse, then recession is inevitable.
The key problem is that consumers do not have many options when the economy moves into a downturn. New sources of income are hard to find if mortgage costs start to rise. All they can do is to cut back on spending, and boost their savings – to help them cope with any future “rainy days”. This in turn creates a vicious circle as consumption – over 60% of the economy – starts to fall.
There are therefore no easy answers when trying to plan ahead for likely storms. But being prepared for a downturn is better than suddenly finding oneself in the middle of one.
London’s housing market was always going to have a difficult 2017. As I noted 2 years ago, developers were planning 54,000 new luxury homes at prices of £1m+ ($1.25m) in central London, which would mainly start to flood onto the market this year.
They weren’t bothered by the fact that only 3900 homes were sold in this price range in 2014, or that the number of people able to afford a £1m mortgage was extremely limited:
□ The idea was that these would be sold “off-plan” to buyers in China and elsewhere
□ They had all heard that London had now become a “global city” and that it offered a safe home for their cash
□ There was also the opportunity to “flip” the apartment to a new buyer as prices moved higher, and gain a nice profit
Of course, it was all moonshine. And then Brexit happened. As I warned after the vote, this was likely to be the catalyst for the long-delayed return of London’s house prices to reality:
□ “Many banks and financial institutions are already planning to move out of the UK to other locations within the EU, so they can continue to operate inside the Single Market
□ There is no reason for those which are foreign-owned to stay in the country, now the UK is leaving the EU
□ This will also undermine the London housing market by removing the support provided by these high-earners
□ In addition, thousands of Asians, Arabs, Russians and others will now start selling the homes they bought when the UK was seen as a “safe haven””
Confirmation of these developments is now becoming evident. A new study from the Bruegel research group suggests up to 30,000 bank staff and £1.5tn of assets could now leave London, as it becomes likely that the UK will not retain the vital “passport” required to do business in the Single Market after Brexit. This would be around 10% of the estimated 363k people who work in financial services in Greater London.
They will also likely be more senior people, able to afford to buy London homes with cash from their annual bonuses, rather than the more junior people who need to rely on a mortgage based on a multiple of their income. And there is no shortage of tempting offers for these bankers, with Frankfurt, Paris, Amsterdam and Dublin all lobbying hard for their business.
Now, another threat has emerged to prices, in the shape of China’s new capital controls. China has seen its foreign exchange reserves tumble by $1tn over the past 18 months, due to its revived stimulus programme. January data showed they were now just below $3tn, perilously close to the $2.6tn level that most observers suggest is the minimum required to operate the economy. As we have reported in The pH Report:
□ China has now banned the use of the annual $50k foreign currency allowance for foreign real estate transactions
□ It has also banned State-Owned Enterprises from buying foreign real estate valued at $1bn+
The rationale is simple. The country can no longer afford to see money disappearing out of the country for purposes which have nothing to do with the real needs of business. And the impact on London’s property market (and that of other “housing bubble” cities such as New York, Singapore and Sydney) could be huge, as Chinese have been the largest buyers of new residential homes globally according to agents Knight Franks – and were responsible for 23% of commercial deals in central London last year.
Central London prices fell last year by 6%, and by 13% in the most expensive areas according to agents Savills. And now London’s Nine Elms development (pictured) at the former Battersea Power Station has just revealed a serious shortage of new buyers.
It was intending to build 3800 new homes, and originally found an enthusiastic response back in 2013 when the first 865 apartments went on sale. But 4 years later, just 1460 homes have been sold in total – and yet residents are supposed to be moving into the first phase later this month. Even worse, 116 of these original sales are now back on the market from buyers who no longer wish, or can afford, to take up residence.
Some of these buyers have already taken quite a hit on price. As property journalist Daniel Farey-Jones reports, one anxious seller originally listed his apartment for sale at £920k. Having failed to sell, he had cut the price by Friday to £699,995 – a 24% reduction.
Nine Elms is just one of many sites where developers are anxiously watching their cash flow, and hoping a flood of new buyers will rush through the doors. Sadly, they are not the only ones who may soon be panicking.
In recent years, large numbers of home buyers – many of them relatively young and inexperienced – have been persuaded to buy unaffordable homes on the basis that London prices could never fall. I fear that, as I have long warned, they are now about to find out the hard way that this was not true.
Last year it was the oil price fall. This year, there is no doubt that the US dollar has taken centre stage, alongside the major rise underway in benchmark 10-year interest rates. As 2016′s Chart of the Year shows:
The US$ Index (black) has risen 12% since May against other major currencies (euro, yen, pound, Canadian dollar, Swiss franc, Swedish krona), and is now at its highest level since 2003
Benchmark 10-year US interest rates (red) have almost doubled from 1.4% in July to 2.6% today. They are back to 2013-4 levels, when the Fed proposed “tapering” its stimulus policy
Clearly something quite dramatic is now underway.
In currency markets, investors are voting with their feet. It is hard to see much upside in the European, Japanese or Canadian economies in the next 12 – 18 months. Europe is going to be gripped by the unfolding crisis over the future of the euro and the EU itself, as it moves through elections in The Netherlands, France, Germany and probably Italy. By March, the UK will be on the Brexit path, and will leave the EU within 2 years. Japan is equally unattractive following the failure of Abenomics, whilst Canada’s reliance on commodity exports makes it very vulnerable to the downturn underway in the BRICs (Brazil, Russia, India, China).
Investors are also waking up to the uncomfortable fact that much of today’s borrowed money can never be repaid. McKinsey estimated global debt at $199tn and 3x global GDP at the start of 2015, and the total is even higher today.
As I warned a year ago in “World faces wave of epic debt defaults” – central bank veteran), there is no easy route to rescheduling or forgiving all this debt. Importantly, central banks are now starting to lose control of interest rates. They can no longer overcome the fundamentals of supply and demand by printing vast amounts of stimulus money.
This is the Great Reckoning for the failure of stimulus policies in action.
THE RISES WILL CREATE “UNEXPECTED CONSEQUENCES” FOR COMPANIES AND INVESTORS
These moves are critically important in themselves as the dollar is the world’s reserve currency, and US interest rates are its “risk-free” rates. Unsurprisingly, interest rates are already now rising in all the other ‘Top 15′ major economies – China, Japan, Germany, UK, France, India, Italy, Brazil, Canada, S Korea, Russia, Australia, Spain, Mexico. Together, these countries total 80% of the global economy.
The rises are also starting to create unexpected “second order impacts”. For example, many companies in the emerging economies have large US$ loans, which appeared to offer a cheaper interest rate than in their home country. Suddenly, they are finding that the cost of repayment has begun to rise quite rapidly.
This happens in almost every financial crisis:
People become excited by the short-term cost of borrowing – “Its so cheap, just $xxx/month”
They totally forget about the cost of repaying the capital -”I never thought the dollar would get that strong”
There were $9tn of these loans last year, according to the Bank for International Settlements. Many were to weak companies who are likely to default if the dollar keeps rising along with US interest rates.
In turn, these defaults will also have unexpected consequences. Lenders will suffer losses, and will be less able to lend even to stronger companies. Higher borrowing costs will force consumers to cut back their spending. This risks creating a vicious circle as corporate interest costs rise whilst revenues fall.
China is the obvious “canary in the coalmine” signalling that major problems lie ahead.
The Wall Street Journal chart shows 10-year rates have risen despite central bank support
Its total debt is around $27tn, or 2.6x its GDP, due to housing bubble and other speculation
The central bank now has to sell its US Treasury holdings to support the domestic economy
In turn, of course, this pushes US rates higher, as rates move inversely to bond prices
China used to hold around 10% of US debt, and was the largest foreign holder. Japan holds similar amounts, and is also stepping back from purchases due to the growing exchange rate volatility.
Nobody else has the financial firepower to take their place. The only possible replacements – Saudi Arabia and the Gulf countries – have seen their incomes fall with the oil price, whilst their domestic spending has been rising. This means interest rates and the US$ are likely to carry on rising.
Higher rates will further weaken the US economy itself, particularly if President Trump launches his expected trade war. In the important auto market, GM has just announced production cutbacks next month due to falling sales, despite the industry having raised incentives by 21% to nearly $4k/car. GM’s inventories are now 25% higher than normal at 86 days versus 69 days a year ago. Housing starts fell 7% last month, as mortgage rates began to rise.
And then there is India, the world’s 7th largest economy and a leading oil importer. Its rates are now rising as shocked investors suddenly realise recession is a real possibility, if the currency reform problems are not quickly resolved.
These risks are serious enough. But they are very worrying today, due to the steep learning curve that lies ahead of all those who began work after the start of the Boomer-led SuperCycle in 1983.
They assume that “recessions” are rare and last only a few months as central banks always rescue the economy.
Only those who can remember before the SuperCycle know that markets and companies should have long ago taken fright as these risks began to develop
This is why the rise in the US$ Index and US 10-year exchange rates is 2016′s Chart of the Year.