Adam Parry – Beware the bubble on Blue Monday

Monday 18th Jan 2021|London

Lets’ start with a little pop quiz.

Name that tune from the following lyrics:

“How does it feel
To treat me like you do?
When you’ve laid your hands upon me
And told me who you are?
I thought I was mistaken
I thought I heard your words
Tell me how do I feel?
Tell me now, how do I feel?”

One suspects that this will be tricky for anybody under the age of 35, so here’s another clue.

This is the biggest selling 12-inch single of all time selling over 700,000 copies. If you do not know what a 12 inch single is, ask your Dad. The track was released in March 1983 and reached number 9 in the UK charts.

Give up?

Well it’s Blue Monday by New Order.

And as misfortune would have it, today is Blue Monday. Officially the most depressing day of the year. And with all that is going on, Blue Monday 2021 must have a legitimate claim to be the most depressing day of the century, with more strains of the virus being found and all of us being locked down in cold, frankly miserable weather.

For those of you that might be interested, there are a couple of formulae that arrives at this conclusion.

1: (C X R X ZZ)/ ((Tt +D) X St) + (P XPr) > 400

Where Tt = travel time; D = delays; C = time spent on cultural activities; R = time spent relaxing; ZZ = time spent sleeping; St = time spent in a state of stress; P = time spent packing; Pr = time spent in preparation

2: [W+(D-d)] x T to the power Q / M x N.

Where W=weather, d=debt, D=monthly salary, T=time since Christmas, Q=time since failing our new year’s resolutions, M=low motivational levels, and Na=the feeling of a need to take action.

Personally, I tend to gravitate toward the latter. But is there anything to feel cheerful about on this most depressing of days?

Well, as the legendary Gordon Brittas, manager of Whitbury New Town leisure centre (guess what I’ve been watching this week) would say “Yeees…of course there is”.

Over in the US, Wednesday will see the inauguration of President elect Joe Biden and his promise to inject nearly USD2tn into the US economy. Over here, the vaccination programme is continuing to accelerate and as if that is not enough for you, the days are beginning to get appreciably lighter. Clutching at straws, you say. Possibly.

The fact of the matter is that there is not a lot to shout about, and that goes for the markets too. Now as you all should know by now, I think that the only market that is showing any logic is the sovereign debt markets. The short ends of the various curves are trading where they should. As mentioned last week, the curves are beginning to steepen, and while I don’t think European peripheral markets should be as tight as they are, they are not totally illogical.

Not a lot else makes a lot of sense given the parlous state of global economies, as seen by some of last week’s GDP numbers.

And that brings me to another kind of Monday. A black Monday.

Historically, Black Monday’s (or any other day for that matter) tend to occur at the end of that most dangerous of economic phenomena. The bubble.

Let’s take a little trip back through time.

We’ll begin in the Netherlands in 1636. A couple of years previously, the price of tulips had begun to rise, mainly due to demand from the French. And that drew speculators into the market, leading to a rapid rise in price, with a single bulb fetching hundreds of guilders. It wasn’t long before a tulip futures market was formed and the price skyrocketed as speculation in bulbs turned into a frenzy.

Tulip mania reached its zenith during the winter, with some bulb contracts changing hands umpteen times a day.

The market was never going down again. Except it did.

There was an outbreak of bubonic plague (sounds familiar) on Haarlem and all of a sudden there were no buyers at a fairly routine bulb auction in February 1637. In the absence of buyers, traders who did not want to take delivery of a load of flowers, started to offload there contracts and the price collapsed, leading to an abrupt bursting of the bubble and the end of tulip trading there and then.

Fast forward 83 years, and we are looking at the fluctuations in price of the infamous South Sea Company. At the beginning of 1720, the company started talking up its stock with hugely extravagant rumours of its potential trade possibilities in the New World. This led to a frenzy of buying in London’s Coffee Houses. In January 1720, the share price was at an already vastly inflated £128. The next month it was at £175, by March it was at £330 and May at £550 as all and sundry piled in. By August the price was £1,000.

The market was never going down again. Except it did.

After reaching that milestone, sellers decided to book some profit. With liquidity poor, the level of selling turned into a tsunami and by the end of the year the price was back where it started leaving bankruptcies among those who had leveraged up to get on the bandwagon, which accelerated the sell-off. Short-sellers also got on the act. It ended up a bloodbath. And it was not the stupid that got hosed. Sir Issac Newton owned nearly £22,000 worth of South Sea stock, and numerous sources stated he lost up to £20,000.

Move on a couple of hundred years to Wall Street in the roaring 20’s. Throughout that decade of excess, the world and his wife speculated on US stocks despite plenty of economic hurt for US farmers due to overproduction.

In March 1929, the Fed even warned the market of excessive speculation, but despite a shaky few days, by the summer, stocks were on the march again despite some less than impressive economic data. Over the course of the summer, the Dow Jones Industrial Average gained more than 20%, meaning that the index had increased tenfold since the beginning of the decade.

The market was never going down again.

Except it did.

Throughout September, the market was volatile, with periods of selling offset by days of recovery. And then the bubble burst. On October 24, the market lost 11% on the opening bell. Four days later, investors facing margin calls dumped stock, forcing the market down another 12%. The following day another 12% was lost. Despite a brief respite on October 30, the market continued to fall and by July 1932, the index was 89% off the highs. Brutal.

In more recent history, we had the Dot-com bubble, where we saw the Nasdaq rise 400% between 1995 and the highs of March 2000.

The market was never going down again.

Except it did.

The index proceeded to give back all its gains over the next couple of years, causing several online shopping companies – such as – as well as comms companies like Worldcom to go belly up. Cisco’s stock dropped 86% but managed to survive. Even Amazon dropped a large portion of its market cap. Messy.

So as you can see, the concept of a bubble is always at its most dangerous when everybody thinks the market is never going down again.

With that I give you one word.


Right. On to this week’s recipe and something to cheer and cleanse the palate on this miserable day. A simple Asian broth.

First make a stock. Take the carcass of Sunday’s roast chicken and bung it in a large pot with spring onions, chilli and slices of unpeeled ginger. Add some black peppercorns and top up with water. Simmer for a couple of days, topping up with water as you go.

For the broth, put your stock in a saucepan and bring to the boil. Add some soy sauce, Shaoxing rice wine, lime juice and simmer for ten minutes before adding some rice noodles for a couple of minutes.

Serve the noodles in a bowl and top with shredded roast chicken, sliced spring onion, julienned ginger, sliced red chilli, toasted sesame seeds and plenty of coriander. Slurp away happily.

Try to enjoy the week if you can, and just remember, the happiest day of the year is apparently only five months away!


On the Agenda:



  • Wednesday: NAHB Housing Market Index
  • Thursday: Initial Jobless Claims; Housing Starts and Building Permits; Philly Fed.
  • Friday: Markit PMIs; Existing Home Sales.


Monday: Italian CPI.

  • Tuesday: German CPI; ECB Current Account; Italian Trade Balance; ZEW Survey.
  • Wednesday: German PPI; Area Wide PPI/CPI.
  • Thursday: French Business Confidence; Italian Industrial Orders.
  • Friday: Markit PMIs.


  • Monday: Rightmove House Prices.
  • Wednesday: Inflation.
  • Friday: Public Sector Net Borrowing; Retail Sales, Markit PMIs.

Central Banks:

  • Fed: Nowt.


  • Monday: Eurogroup meeting.
  • Tuesday: Ecofin meeting; Bank Lending Survey
  • Thursday: ECB rate decision at 12.45pm; Marginal Lending, depo and refi rates expected unchanged at 0.25%, -0.5% and 0.00%. Lagarde press conference at 13.30.


  • Monday: BoE Flagship Seminar.
  • Wednesday: Bailey and Brazier at Citizens’ Panel Open Forum.

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