Some applications - 1
The purpose of the analysis carried out at International Monetary Research is to make predictions about key macroeconomic variables (output and profits growth, inflation, interest rates), and then to translate these into "calls" in asset prices. (We advise on asset classes such as bonds, equities and real estate, and not on particular securities.)
For example, in January 2007 Tim Congdon prepared evidence for the Treasury Committee of the House of Commons in which he warned that the then high rate of money growth would be inflationary. Alone among economic forecasters at the time, he said, "an inflation rate of 4% - 5% in 2008 or 2009 would not be a surprising sequel to the burst of money growth since mid-2004". He then went on to say that a money slowdown would be needed to bring inflation so that
"…it is inevitable that the money balances of companies and financial institutions will - for a significant period of a few quarters - stagnate and they may even contract. That will not be good news for asset prices."
Tim Congdon's written evidence to the Treasury Committee of the House of Commons, for report on the 10th anniversary of the Monetary Policy Committee.
In these remarks Tim Congdon accurately anticipated the credit crunch of 2008 and the severe weakness of asset prices which accompanied it.