The End of “Business as Usual”

Published on
April 8th, 2019
Duration
30 minutes

The End of “Business as Usual”

The Expert View ·
Featuring Paul Hodges

Published on: April 8th, 2019 • Duration: 30 minutes

Paul Hodges, chairman of the pH Report, breaks down a unique set of economic data through the lens of the world’s third largest industry behind energy and agriculture — chemicals. Looking at the chemical capacity utilization, supply and demand dynamics, and activity in China, a pattern emerges. With an abnormal first quarter of 2019 and the benefit of near real-time information, Hodges holds that the data suggests the global economy could be set for a downturn. Filmed April 1, 2019 in London.

Comments

Transcript

  • JS
    John S.
    12 April 2019 @ 18:51
    Fascinating conversation but he spoke of continued deleveraging in China when in fact they are currently doing the exact opposite while running twin deficits. Kyle Bass and Kieth McCullough discuss this in detail on a recent video available at hedgeye.com. China may be among those who wouldn't mind lower petroleum and chemical prices even if it does result in deflation as it would slow the disappearance of their hard currency reserves. If he's right about inflation rates going into the end of 2019 policy makers will be in full panic mode, Raoul's long bond call will pay out in spades, and things will get very interesting indeed.
    • PH
      Paul H. | Contributor
      20 April 2019 @ 09:32
      Thanks for the comment. But what many people have have missed is that the People's Bank of China restated all the lending data last year. What appears to be a new bout of major stimulus in reality seems to be focused on bailing out the Local Government Financing Vehicles. March auto sales were still negative, for example, which never happened before after major stimulus. As the Chinese business paper Caixin has commented: “Local government debt, in particular the trillions of yuan of liabilities hidden in financing vehicles, is threatening to overwhelm dozens of authorities across the country... “The problem has taken on added urgency as 2019 marks the beginning of a three-year peak debt repayment period for local government financing vehicles (LGFVs), whose fundraising has spanned a wide range of channels including bond sales, bank and trust-company loans, and asset management plans sold by financial institutions.” https://www.caixinglobal.com/2019-04-12/in-depth-the-local-government-debt-crisis-that-just-wont-go-away-part-2-101403601.html
  • KJ
    Kelly J.
    11 April 2019 @ 14:09
    This was an excellent interview - one of the best. His macro views of the key trends in the global economy felt very grounded because he showed how they arrived at them out of a detailed analysis of chemical production trends, growth vs stockpiling, and therefore, related demand or slack in the major economies.
  • RL
    Robert L.
    11 April 2019 @ 04:46
    Evergrande post CNY sales for March MOM increase 159.5%. March contracted sales data of top 100 property developers was very strong, with most improvement in tier one and tier two cities. "V" shape recovery is now getting talked.
  • AS
    Anant S.
    11 April 2019 @ 01:57
    One of the best interviews and guests on RV. Please bring him back every quarter or 6 months.
  • CM
    C M.
    10 April 2019 @ 01:53
    Excellent interview. This is better than any macro analysis from a fund manager or analyst. Great presentation of data to support a weakening economy. Like Sunil's comparison of chemicals to the transporation industry.
  • SB
    Sunil B. | Contributor
    10 April 2019 @ 01:35
    Tracking Chemical Industry is at par with tracking Transportation but getting data is the challenge. Paul does a great job of translating his understanding and knowledge of the industry and using 20+ years of Data. Incredibly valuable delivered in an unassuming fashion.
  • RD
    Rahul D.
    10 April 2019 @ 00:24
    Outstanding!
  • SU
    Shakeel U.
    9 April 2019 @ 19:18
    I hope Paul Hodges becomes a regular at Real Vision
  • EW
    Emma W.
    9 April 2019 @ 17:41
    Great insight thank you
  • aa
    allan a.
    9 April 2019 @ 17:16
    Liked it
  • RP
    Raoul P. | Founder
    9 April 2019 @ 10:58
    Really good Expert View. Paul’s take is very interesting as it dovetails in with the work of others such as Daniel Ruiz on the Auto sector or my own macro work.
    • CM
      C M.
      10 April 2019 @ 01:54
      Add in semiconductors. Lots of sectors are showing weakness yet the market rallies higher. Looking to implement your bond strategy.
  • CF
    Cause F.
    9 April 2019 @ 08:43
    Superb! Clear and precise
  • JD
    James D.
    9 April 2019 @ 06:01
    Top notch, well thought out commentary. Please get Mr Hodges back again!
  • PB
    Pieter B.
    9 April 2019 @ 05:54
    Thanks a lot for being back on RV with such valuable insights Paul!
  • NR
    Nelson R.
    9 April 2019 @ 01:54
    Really enjoy Paul’s data backed outlooks and views. Have seen two of his interviews on RV (this one and the previous one) on both I walked away with nuggets of knowledge previously unknown to me. Please keep bringing guests of Mr. Hodges caliber to RV.
  • DL
    Dillon L.
    9 April 2019 @ 00:30
    It's extrapolating bear catnip with a few recent anecdotes - I want to see more detailed industry/sector analysis and information presented over longer time frames vs. oil & macro commentary that is bearish confirmation
  • DL
    Dillon L.
    9 April 2019 @ 00:19
    Focus on the chemical industry; do a deep dive on the indicators and signals from the chemical industry compared to previous slowdowns and recessions.....all the pro-reviews are conflating his macro commentary with the actual subject he specializes in.....
  • RA
    Robert A.
    8 April 2019 @ 22:18
    Excellent presentation. It is amazing that MMT and Helicopter money are now being mentioned nonchalantly more and more....literally in the last several months. We’d better find out how the Japan end game turns out before we go too far down the Rabbit hole, but maybe all the CBs are bound and determined to jump off the cliff together....or circumstances may not allow them the time to run some “what if” scenarios before, in their minds, having to pull the switch. I’m hoping RV can get some good stuff before us on Debt Jubilee, Helicopter money, and the potential effects of unrestrained fiscal spending.
  • CT
    CHRISTIAN T.
    8 April 2019 @ 21:47
    Great stuff, bring this fine gentleman again!
  • DS
    David S.
    8 April 2019 @ 20:46
    Excellent. Practical information that makes a difference. Thanks. DLS
  • LT
    Lucas T.
    8 April 2019 @ 19:57
    Interesting economic indicators. Very outside the box. I wonder if they are actually leading though. Would be nice to see some evidence that they lead recessions like the yield curve, initial claims, and building permits.
    • DR
      David R.
      8 April 2019 @ 21:52
      Aren't all employment indicators laggards including initial claims? Things Mr Hodges is measuring tend to fall in demand early, as an inventory build ends (he cites UK as an example but US is in the same boat currently), which precedes a slowdown if not a recession. Clearly the US is in a big slowdown now, worse than most as US is "catching up", even as some others will likely pick up again this quarter.. Kyle Bass fans, of which there are many here for some reason, might like to know that Bass was on HedgEye today explaining why a US recession beginning in later 2019 into 2020 is highly probable in his view..
    • DR
      David R.
      8 April 2019 @ 21:57
      Could US GDP for the first quarter be 1% or less? Quite possibly.
    • LT
      Lucas T.
      9 April 2019 @ 14:13
      David R. Initial claims is the only employment metric that I believe is leading. I think Average weekly manufacturing hours worked is also slightly leading as well. I am not really sure the use of all these guests talking about the slow down in the US economy. Totally baked into the cake, that is what Sept-Dec was about. I don't think market comes down until the Fed starts cutting rates.
    • DS
      David S.
      9 April 2019 @ 17:57
      David R. - Thanks for the link. Kyle is a little late to the game on his recession prediction as it is consensus. I am looking for slow to no growth as the service sector keeps plodding along. Also interesting, China is looking at stopping Bitcoin mining in China for environmental reasons? Or maybe capital flight?? DLS
    • DR
      David R.
      9 April 2019 @ 23:43
      Lucas, thanks for clarifying about those leading indic's. David, China banned bitcoin exchanges on the mainland last year but not yet in the autonomous regions. Banning bitcoin mining is the next logical step. As CCP hates individual freedom which it fears is a threat, IMHO.
  • BH
    Bin H.
    8 April 2019 @ 18:30
    It is just fascinating. Mr. Hodges insightfully nailed down the timing to China time table and made his own prediction. Great!
  • T
    Thomas .
    8 April 2019 @ 17:52
    Please bring Mr. Hodges back soon.
  • RM
    Richard M.
    8 April 2019 @ 15:44
    Wow, great interview! Love Mr. Hodges and his various outlooks on the Oil/Chem markets (I think these are definitely forward looking indicator types of markets and can tell us a lot about what to expect in the way of economic growth over the next 6-12 months). Please have him back on in 3-6 months for an update! Many thanks Mr. Hodges for sharing your views.
  • EL
    Eugene L.
    8 April 2019 @ 15:37
    Wow. This information is really valuable. Please bring back quarterly or semi-annually.
  • BA
    Bhagwanta A.
    8 April 2019 @ 14:43
    This is Brilliant information, supported by charts. Pl bring him back in 6 months time.