investing on the waves: 2025

Saturday, 13 September 2025

four year cycle warning but this time is different

Jurrien Timber

The median bull market lasts about 30 months and produces a gain of 90%. The current one is up 88% in 35 months

That is what normally happens in a four year cycle of equities. The new cycle started at the end of 2022 and after about 30 months you get the down part of the cycle. In the first part you have only minor corrections and buy the dip because of FOMO, is the best thing to do. Normally the FED causes corrections and the bear markets. Corrections beacause the FED is not as nice as thought or is causing a recession.

This time the FED doesn't want to cause a recession and will start easing again. Several rate cuts are now likely (independent of Trump). Inflation is going up because of Trump, but not much because rents are slowing and the oil price declining. The money growth is normal and not causing extra inflation. It is only those beautiful tariffs of Trump that are causing goods inflation. service inflation ex housing is pretty stable, a bit rising but when the economy further slows down the sevrice inflation probably will also slow down a bit despite goods inflation.

The profit taxations are going up for the third quarter and that is unusual. Nominal GDP growth seems to be reasonable, so not many revenue warnings (yet). And OBBA will arrive. If OBBA is arriving in time and helping consumption enough a recession probably will be avoided. This normally means a further rising market on FED cuts and fiscal stimulation.

So maybe this time is different and no bear market will arrive soon.

Blankfein also warns for a bear market based on credit risk, leverage and too low credit spreads. But he still is 100% in equities..

Sunday, 7 September 2025

the systems do'nt work anymore in the US, China, Germany

Voters are angry in many countries and that is because the system is no longer working well for them, at least in their eyes. So populism has become popular.

In the US won Trump because he saw that the deplorables had to be heard. Manufacturing left the rustbelt and meant no longer good jobs for the white man in the household. The trade deficit has become way too high, the foreigners are exploiting the US. The pathetic clappers in Europe do'nt pay for defense, the US will defend Europe. Europe must pay now. The norms and values had deteriorated because of immigrants and woke behaviour (it has become difficult for whites to go to premiums universities because of discrimination). So he promised to change that with a return to christian values, even while he himself never has been a good example of ethical behaviour. He is not a believer in battling climate change. Foreigners are evil, so he believed in taxing foreigners, high tariffs even while almost all economists believe it is bad end has proven many times to be bad. Manufacturing has declined steadily from 40% of GDP to 7% and the trend probably will continue, even while Trump is fighting it. The US has no longer a mentality to start capital intensive manufacturing. Venture capital and private equity only give credits to non capital intensive companies, services. The US has no longer the engeneers to create new manufacturing.Youth unempoyment under academics is starting to become a problem.

In China the state companies can no longer be funded enough with selling land. They continue to produce too much with subsidies. They make losses and the debts are rising fast and are becoming gigantuously. The housing sector is way too high. It is more than 25% of GDP and it should be less than 15% China produces way too much and consumption is too low. Producing even more is creating problems, the rest of the world doesn't want to stop manufacturing. Producing more and more with fast growing debts is not sustainable.Demographics are horrible and the labour market is no longer growing. The 20 million farmers that started to work in manufacturing is a thing of the past and no longer a motor for growth. The hukou system is a big problem. Youth unemployment is way too hiigh, also under young academics (a recipe for revolutions).

Germany had a model of exporting more to China, importing cheap energy from Russia. Closing nuclear plants. Immigrants are becoming a problem. The subsidies to the former DDR are a problem. The former DDR is still way poorer and AfD is by far the biggest political party now in the polls.Regulation has become excessive. .

UK had the Brexit. Outside of London average income is lower than Poland and most of Europe.

Monday, 25 August 2025

back in 2025

I'm too lazy for updating this blog. Now I want to give it a new try. The forecast of the real S&P500 in 2009 was better than everybody expected. The high of the cycle was later than indicated because of the tremendous monetary and fiscal stimulus after COVID. Since then we have seen a lot more inflation than before. So in real terms the S&P500 is not doing very well. But it is doing much better than indicated because of the Magnificent 7.

After COVID you see some problems for the market to continue rising a lot in real terms. Inflation is structurally higher than before 2020.The monetary policy is no longer as favorable as before. QE is abandoned for the time being. Labor is scarce. Globalisation has changed into deglobalisation. Government policies are less favorable for equities (tariffs, deficits too high, protection, more defense spending, climate change).

The shifting of the powers is still not in favor of Labor. Populist policies are still helping Business and fighting socialism. So profit margins are allowed to be very high.

So, profit margins especially in tech are high. AI is helping productivity. So things are better than thought in 2009.

In 2009: expectations very low, .monetary policy very easy (inflation was too low and danger of deflation) and getting more easy, profit margins rising.

In 2025 is inflation a problem, not yet a big problem, but enough to expect less monetary easing despite populism. Demographics are not favorable. Expectations are high, profit margins are not expecte to go higher. Populism can cause a Chaotic Destruction Scenario. Maybe 2028 and not 2024/2026 as expected in 2009. AI and the later top are causing a later falli nto the Chaotic Downturn Scenario.

Cycles

This blog will discuss from time to time the most important cycles, as we (ter Veer and Vermeulen) decribed in our book.

We illustrate the long wave, the Kondratiev wave, with the chart above the blog. So we see inaverage good times for investors until 2018 (maybe longer).

The four year cycle have we illustrated stylistic above the way ter Veer (and I) always did it. Other people describe the four year cycle difeerently.

From time to time I will try to indicate where we are on the four year cycle. You can't know for sure, so the indication will always be subjective and can be wrong.

At the moment I think we probably are in the phase FG (and we have seen the first correction in this phase).

Summary investing on the waves (beleggen op de golven)

This blog started because of the Dutch book Investing on the Waves (Beleggen op de golven in Dutch).

The summary of the book:

For being a good investor you must have views. You have to explain things well to judge what the future will bring.

We (Ter Veer and Vermeulen) think the next eight to ten years will bring prosperity as the world (dominated by the 85% of the world population that lives in Emerging Markets) has never seen.

We base that view on the study of several shorter and longer cycles in the economy. We use our investment chart (heading this blog) already for several decades: you can see the Kondratiev wave with its regular sequence of the scenarios recovery, creative transformation, prosperity, recession, chaotic downturn and depression.

To determine in which scenario we are you study the important powers in the society: business, employees, government and individuals. The shift of these powers goes in a regular cycle and causes the long wave (Kondratiev) in the economy with its long periods that things go well on average and its long periods that things don't go well.

In the current phase of the cycle business and indivuals are strong (and government plus employees weak). The strong powers cause a high growth of productivity and implementation of many innovations.

High productivity growth is much more important for economic growth than debts deleveraging.

That is why we -especially Emerging Markets- will get strong growth in the world. That will especially be the case when governments invest a lot in infrastructure (including what is necessary for the Green Revolution).

The growth in the world in the past years had three pillars: the ICT-Revolution, the Emerging Markets and the Financial Revolution with its Asset Economy.

All three pillars had its severe setbacks (The ICT-Revolution in 2000-2003, the Emerging Markets in the Asia crisis of 1997-1998 and the Financial Revolution in 2008-2009 because of the Credit crisis). The first two pillars saw very strong recoveries and we expect the same for the third pillar, especially when the Green Revolution will take off..

Gerhard ter Veer was CIO of PVF asset management that later merged with Achmea Asset Management and F&C. After his retirement he wanted together with Peter Vermeulen, then his head of strategy and now strategist at F&C extensively our theories about investing and our views that we had told to the boards of pension funds during decades.

To make things not too heavy and complicated we explain a lot with dreamings, the simple stories that aboriginals use to teach. On this blog you will see more new dreamings.

Explanation for the existence of a long wave (Kondratiev wave)

* Debt mechanism: over and under investment creates long cycles (Marxist explanation)

*Innovation mechanism: inventions, implementations follow long cycles (capitalist explanation). It explains productivity growth and so employment growth.

*Sociological mechanism: you have long periods where the society gets softer and harder.

All three mechanisms explain for a part the phenomenon of long waves. When you take them together, you can get a better picture.

The power shift between Business, Employees, Government and Individuals ( a social mechanism) is according to us the best explanation for long waves.. It explains why in some periods the incentives are right to have succesful innovations,inflation and high investment growth versus other periods in which inflation goes up,unemployment goes up and profit margins go down.

The current debt crisis is definitely a reason why growth is so low in high debt countries.

The possibilities for high growth are underestimated because productivity growth is high, many innovations have to be implemented and important new (emerging) markets grow fast.

In Emerging Markets and some developed markets like Germany you have the old classic situation of the powers for a prosperity scenario: strong Business (strong profit growth, high margins), strong position of employees (unemplyment rate is low or falling to low levels) and a weak position of government (has to downsize). Individualism is not yet strong.
In many dveloped markets like the US and the UK the situation of the important powers is differenT: employees are in a weak position and individuals (like knowledge workers with (international) networks) are in a strong position.

Because of the weak position of employees this is not the classic prosperity scenario, but you still can get high economic growth when the income of business and individuals grows strongly: a Goldilocks economy with a strong asset Economy. When this growth is strong enough this will lead to a more normal prosperity scenario with fast declining unemployment rates.

This situation will occur much sooner than most people realise: productivity growth is high, the housing market in the US will grow strongly from rock bottom levels, investment growth will be very high because of high profit margins and low real interest rates.

Because 85% of the world population lives in Emerging Markets and only 15% in Developed Markets and economic growth in the world is more than 4% (even while it is now only 2% in Developed Markets) for the world in total you can speak of a prosperity scenario.