Credit deflation and the reflation cycle to come (part 2)

[Loki]

[Harley]

 

5 hours ago, Green Devil said:

What do you think of the US tech plays? Ie T or VZ? They seem to offer and decent div yield and arent really sky high like the hot tech stuff.

I appreciate I wasn't asked but I wanted to say - "******* *****"!  On the basis of the fundamentals I look at.  Eye watering debt, poor current ratios, and very negative equity if you take out intangibles.  I haven't even bothered looking at the rest of the data.  The only good part is the yield, but then I haven't checked whether that's sustainable (or even borrowed!).  Classic examples of many US blue chips atm.  Of course none of that means the prices can't rocket in this insane market!

PS:. Maybe I just don't have a handle on this stuff.

[Lightscribe]

3 hours ago, DurhamBorn said:

https://www.dailymail.co.uk/news/article-9664623/Pay-furloughed-staff-sofa-says-BofE-chief-economist.html

Even the BOE are now saying workers need pay increases to tempt them back to work,not to mention all the inflation 

Good to see Brexit forcing up wages as well by locking out EU workers,exactly what the Red Wall voted Brexit for.

Here lies the tipping point for me.

Obviously we’re already seeing panic for skilled employment and the subsequent raising of offers to get it (as DB and others have referenced themselves).

But does cut throat sectors like service, hospitality and restaurants etc follow? I can’t see them raising salaries beyond what tax credits can achieve. It will either be functioning on minimal staff and dropping everything aside core service or go bust. 

IMO it will massively accelerate the race for automation in line with the 4th industrial revolution roadmap. US is the one to watch here, it’ll be a case of adapt very quickly to determine who sinks and who swims.

https://www.foxbusiness.com/technology/former-mcdonalds-ceo-15-minimum-wage-automation

And it will be happening globally at the same time.

https://innovateuk.blog.gov.uk/2017/03/28/what-does-the-fourth-industrial-revolution-4ir-mean-for-uk-business/

https://www.industry.gov.au/data-and-publications/industry-40-testlabs-in-australia

https://www.twi-global.com/what-we-do/research-and-technology/technologies/industry-4-0

 

 

[Lightscribe]

1 hour ago, Harley said:

Bit hard on @feed as he seems to have only showed a logo?

I thought you meant the C&A one, it brought back immediate memories of being dragged around in there with my mum in the 80’s. Clock House were ‘with it’ I seem to remember. 
I always wished I could go home and just get on the Spectrum but a trip to BHS or Woolies would always be next...

[feed]

I

5 minutes ago, Lightscribe said:

I thought you meant the C&A one, it brought back immediate memories of being dragged around in there with my mum in the early 80’s. Clock House were ‘with it’ I seem to remember. 
I always wished I could go home and just get on the Spectrum but a trip to BHS or Woolies would always be next...

 

It's was the centrica logo, in the Ford pic with the Ford/CNA EV partnership.  The C&A pic, well it's not like people say C ampersand A is it.  

 

[Don Coglione]

3 hours ago, Mapper said:

My worst by a country mile.

Here I am chasing it to the bottom.

#MeToo

[leonardratso]

surely T & A would be more in keeping with this fora

[Harley]

5 minutes ago, feed said:

It's was the c****** logo,

[BurntBread]

1 hour ago, Harley said:

One of those podcasts/videos (both available) you decide to listen to twice.  Some interesting perspectives from a long time metals guy Simon Hunt.  I've thought the behavior of the central banks (printing, etc) signals they know this is the end game of the current regime and are making the best out of it while they can so nice to hear someone else say it.  I'm already preparing as he (generally) recommends!  I just hope there is a USD bounce so I can load up on commodities.

A summary of the interview here:  https://palisadesradio.ca/simon-hunt-chinas-gold-and-digital-currency-reset/

 

Thank you Harley! It's interesting to listen to someone with a different macro view and timings. His (Simon Hunt's) perspective is that there will be a crash in commodities in Q4 this year, especially of copper, because speculative investment has run way ahead of industrial demand, and then there will be more stimulus from the West, pushing up equities for the next couple of years. So far so similar to DB/DH.

However, he has two very different views: one on timing, and one geopolitical. On timing, he things the big reset / debt deflation is 2024, and then things power ahead in a commodity super-cycle, with 2030 being great, in that respect.

The more geopolitical point he makes is that he is much more positive about China than anyone I have read recently. He thinks that China now is working hard to prepare for the 2024 event, in particular deleveraging across the board, and sorting out its balance sheets (which will be tied in with a gold-backed CBDC). They will then be in great shape to buy everything up in 2024. China is then aiming for a multi-pole world, not to replace America's hegemony.

In contrast, what we have been hearing from various other commentators is that China will probably become old before it is rich; that its leverage and malinvestments are teetering on the edge even now, and that it will struggle for energy. The idea being that there may well be a fall from hegemony of America, but it is far from obvious that China will be able to step into the space, even if it wanted to.

Anyway, even if he didn't say much about his reasoning (other than that he has analysed historical trends for the last 120 years), it's good to hear radically different viewpoints, so as not to give too much credence to one only, for want of anything to compare it against.

------

@Harley, on your point about the sketchiness of the balance sheets of US telcos (and almost every company in the US), I am guessing that the DB thesis is that provided the debt has fairly long maturity, then a high-inflation, negative-real rate environment will erode it ... provided the company in question can at least match inflation in the prices it charges for its products. The big risk, of course, is how well it gets through any debt-deflation in the short term. I think the David Hunter view is to wait for the BK before buying US industrials, and I've been trying to sit on my hands to do just that. What worries me is DB's comment that most companies go bust during the recovery. I can see myself loaded up with lots of yellow-sticker stocks, only to find half of them have fallen through the holes in my shopping basket on the way home.

[Lightscribe]

54 minutes ago, Harley said:

Should I mention that I’m up on C*******? (Not by much but I didn’t have much invested in the beginning)

[DurhamBorn]

3 hours ago, Harley said:

Fully loaded on BATS and two thirds on BT.  BATS has seen some odd monthly price action and the March 21 breakout has so far been muted.  BT has been better and is approaching overbought but likes to stay elevated and may have more room to run.  No idea why I didn't top up on the Dec 20 break with it's classic pullback (long term support/resistance) before popping.  BT is a classic example of one of the stocks I was mentioning where momentum seems to have run ahead of MACD to put me into a quandary where it is overbought but relatively not moved that much on the average.  Pullback or stay elevated momentum wise while MACD catches up?  DYOR but I'm favouring staying elevated given its prior chart action. 

Ingredion .  Ta for the heads up.  So why has it not come up on my screens?  Cap is over £1B, cash flow seems stable, and the current ratio just about scrapes over 1,......but......div is a bit below 3% (good enough though), intangibles are c.30% of equity, price to book getting a bit pricey at 2.7 but above all total debt to equity is 87%!  I do worry sometimes you seem to like the debt junkies!  But then long term debt to equity is only 28% and I still haven't worked out which metric of the two I should use.  Technically (monthly) interesting to see March 20 did little damage in its long run.  Very close of overbought now though, although its momentum seems to like staying elevated and MACD has more room to run.  Maybe worth a position to see if it breaks current resistance, but that debt!

Pretty close to being fully allocated to our two Brazilians, with a top up this week.  One is a bit hit and miss SIPP eligibility wise.

I think on the debt its to be expected at the end of dis-inflation and actually a good signal,though crucial the companies can generate good free cash even in a big downturn,and also that the debt is structured well and not lumpy.Im watching all mine now as they should mostly be de-leveraging ,even if slowly.Ingredion id prefer lower,but opened small position.Im full on the Brazil telcos,i didnt use ladders on them i just bought them a while ago in two tranches.Im going to enjoy that interview you put up as i i think you make a very good point about the fact they are doing as much as they can because they know its nearly the end game.I still expect its at the end of this cycle,but open to it being sooner.

[Harley]

3 hours ago, BurntBread said:

Thank you Harley! It's interesting to listen to someone with a different macro view and timings. His (Simon Hunt's) perspective is that there will be a crash in commodities in Q4 this year, especially of copper, because speculative investment has run way ahead of industrial demand, and then there will be more stimulus from the West, pushing up equities for the next couple of years. So far so similar to DB/DH.

However, he has two very different views: one on timing, and one geopolitical. On timing, he things the big reset / debt deflation is 2024, and then things power ahead in a commodity super-cycle, with 2030 being great, in that respect.

The more geopolitical point he makes is that he is much more positive about China than anyone I have read recently. He thinks that China now is working hard to prepare for the 2024 event, in particular deleveraging across the board, and sorting out its balance sheets (which will be tied in with a gold-backed CBDC). They will then be in great shape to buy everything up in 2024. China is then aiming for a multi-pole world, not to replace America's hegemony.

In contrast, what we have been hearing from various other commentators is that China will probably become old before it is rich; that its leverage and malinvestments are teetering on the edge even now, and that it will struggle for energy. The idea being that there may well be a fall from hegemony of America, but it is far from obvious that China will be able to step into the space, even if it wanted to.

Anyway, even if he didn't say much about his reasoning (other than that he has analysed historical trends for the last 120 years), it's good to hear radically different viewpoints, so as not to give too much credence to one only, for want of anything to compare it against.

------

@Harley, on your point about the sketchiness of the balance sheets of US telcos (and almost every company in the US), I am guessing that the DB thesis is that provided the debt has fairly long maturity, then a high-inflation, negative-real rate environment will erode it ... provided the company in question can at least match inflation in the prices it charges for its products. The big risk, of course, is how well it gets through any debt-deflation in the short term. I think the David Hunter view is to wait for the BK before buying US industrials, and I've been trying to sit on my hands to do just that. What worries me is DB's comment that most companies go bust during the recovery. I can see myself loaded up with lots of yellow-sticker stocks, only to find half of them have fallen through the holes in my shopping basket on the way home.

I read his bio saying he spends a fair amount of time each year in China so attach some credence, combined with the general impression I get of someone reasonably well connected. 

Heard today about a company filing going concern due to lack of liquidity.  Maybe the start of the trend?  I still hold this time will be about the neglected subject of balance sheets.

DH does not profess to be a great timer and timing, rather than sequencing, is a mugs game.  So I thought they were similar.

Another reason I had the impression the gentleman knew his stuff was how he wove together a number of areas I had only heard disparately from detailed geo-political strategists and the like.  Mr Hunt was generous with his time and knowledge.

But it was his upfront point that they (I should have said governments not CBs) are crashing the system because they know it'll be replaced resonated and had me hooked.

I'm in an odd place at the moment.  The markets are stuffed overbought or (crypto) consolidating with the risk of more shocks and shakes.  So very quiet for me and my past instinctively tells me this is the time to worry, to make final preparations, and then he says the same thing!  Says we've got two years.  I'm working to less.  And this time I'm no bunny in no headlights and it feels good.

It's all lying there, in the open, for all to see if we so choose.  The political, the macro, the social.  I've been thinking and worrying about the right things, at the right time, and I'm on it.

[DurhamBorn]

6 minutes ago, Harley said:

I read his bio saying he spends a fair amount of time each year in China so attach some credence, combined with the general impression I get of someone reasonably well connected. 

Heard today about a company filing going concern due to lack of liquidity.  Maybe the start of the trend?  I still hold this time will be about the neglected subject of balance sheets.

DH does not profess to be a great timer and timing, rather than sequencing, is a mugs game.  So I thought they were similar.

Another reason I had the impression the gentleman knew his stuff was how he wove together a number of areas I had only heard disparately from detailed geo-political strategists and the like.

But it was his upfront point that they (I should have said governments not CBs) are crashing the system because they know it'll be replaced resonated and had me hooked.

Was that the EV maker Harley running out of cash?,interesting to see how quickly it spreads and if rights issues spread instead of more debt.

[Harley]

44 minutes ago, DurhamBorn said:

I think on the debt its to be expected at the end of dis-inflation and actually a good signal,though crucial the companies can generate good free cash even in a big downturn,and also that the debt is structured well and not lumpy.Im watching all mine now as they should mostly be de-leveraging ,even if slowly.Ingredion id prefer lower,but opened small position.Im full on the Brazil telcos,i didnt use ladders on them i just bought them a while ago in two tranches.Im going to enjoy that interview you put up as i i think you make a very good point about the fact they are doing as much as they can because they know its nearly the end game.I still expect its at the end of this cycle,but open to it being sooner.

I've read hundreds of cash flow statements, etc and yes have been impressed by how some companies have already materially changed their debt ratios.  But I often find there are better looking companies out there in the sector where I can sidestep this issue, although maybe not in frontier stuff. 

27 minutes ago, DurhamBorn said:

Was that the EV maker Harley running out of cash?,interesting to see how quickly it spreads and if rights issues spread instead of more debt.

I believe it was!  Think it was on RealVision.  Great interview there.  I got the impression the interviewee and I share a similar approach given his comments.

PS: To add, in this theme of cash flow and general liquidity, if anyone is going to look at OCF, look at the actual OCF and not the one netted off with changes in working capital.  You may get a heads up of upcoming fundamental trouble by how hard they screw working capital to make the numbers.  I'm seeing some potential gaming already.  As for FCF, about as good as EPS.  Gotta go deeper!

[Harley]

3 hours ago, BurntBread said:

The big risk, of course, is how well it gets through any debt-deflation in the short term. I think the David Hunter view is to wait for the BK before buying US industrials, and I've been trying to sit on my hands to do just that. What worries me is DB's comment that most companies go bust during the recovery. I can see myself loaded up with lots of yellow-sticker stocks, only to find half of them have fallen through the holes in my shopping basket on the way home.

That's a good worry.  And fall through your shopping basket to be bought privately by our old and new lords and ladies.

[DurhamBorn]

26 minutes ago, Harley said:

That's a good worry.  And fall through your shopping basket to be bought privately by our old and new lords and ladies.

The problem i have Harley is if the things in that video come to pass i cant really roadmap it because i mostly stem from dollar liquidity and then cross market others against that.If we suddenly get a two polar world then that becomes a new ball game.

Its also important to try to understand what a crash of the financial system actually means.Plenty say it,but dont explain it.Do they mean the banking system,the Fiat system itself,bond markets,insurance ,or any company who cant roll over a bond.

I agree we will move from debt to equity,that is almost certain as only productive will be rewarded is part of the debt deflation we expect.

In simple terms of course what this all means is soon currencies are going to be priced against real assets depending on how much they have seen printed.The more woke,the more printing the bigger the hit on living standards.

For us in the UK its likely the only defence we would have would be higher rates than others.Irony as usual of course that that would smash the main asset in this country,housing wealth.

Chinese and Russian assets seem the hedge if the thesis is even partly right,and of couse the areas we already mostly own.

[reformed nice guy]

TC Energy scraps KXL project after President Biden revokes key permit

https://www.reuters.com/business/energy/tc-energy-terminates-keystone-xl-pipeline-project-2021-06-09/

Might cause a wobble, but ultimately it must drive up oil price? Also drives up the "Energy Costs of Energy" that the surplus energy blog talks about.

[DurhamBorn]

32 minutes ago, reformed nice guy said:

TC Energy scraps KXL project after President Biden revokes key permit

https://www.reuters.com/business/energy/tc-energy-terminates-keystone-xl-pipeline-project-2021-06-09/

Might cause a wobble, but ultimately it must drive up oil price? Also drives up the "Energy Costs of Energy" that the surplus energy blog talks about.

They just ship it by trains that Buffet owns,complete lunacy,unless you own the trains and sub the democrats.

[Lightscribe]

https://www.wsj.com/articles/if-you-sell-a-house-these-days-the-buyer-might-be-a-pension-fund-11617544801
 

Well looks like like a BK correction in house prices could be cancelled after all. In the US the big pension firms are buying up swathes of real estate above asking apparently, completely obliterating any individuals buying a home.

Here next no doubt following Lloyds already laid out plans to become the UKs biggest landlord. ‘You will own nothing’ and all that playing out in real time. 

https://www.wsj.com/articles/invitation-rockpoint-forge-1-billion-rental-home-venture-11602067500?redirect=amp#click=https://t.co/QY3dzdI8QU
 

(deleted the Twitter link as he seemed a bit of a nutter)

[wherebee]

11 minutes ago, Lightscribe said:

https://www.wsj.com/articles/if-you-sell-a-house-these-days-the-buyer-might-be-a-pension-fund-11617544801
 

Well looks like like a BK correction in house prices is cancelled after all. In the US the big pension firms are buying up swathes of real estate above asking apparently, completely obliterating any individuals buying a home.

Here next no doubt. ‘You will own nothing’ and all that playing out in real time. 

 

That does not match up to a depopulation agenda.

[Lightscribe]

2 minutes ago, wherebee said:

That does not match up to a depopulation agenda.

True. Putting aside conspiracies however you could argue that they’re successfully doing that in developed western nations already.

The 2.4 family unit for domestic population growth is a thing of the past as it’s both unaffordable and unachievable for most of the younger generation nowadays.

[macca]

Gold price in weimar germany as the currency crashed!  In fairness this could be a loaf of bread chart.. but still loving those lines.. 

[Castlevania]

6 hours ago, DurhamBorn said:

They just ship it by trains that Buffet owns,complete lunacy,unless you own the trains and sub the democrats.

Got to keep your backers rolling in dosh. Same with the “infrastructure” bill they’re trying to get passed. It mainly seems to be a way of funnelling a load of money to the companies that fund them.

[geordie_lurch]

Well I'm pleased a few of you are finally starting to take the deliberate crash of the current Fiat money system seriously via the 'well timed' Covid 'pandemic' and the never before seen levels of money printing that will 'inevitably' lead to the new CBDCs they want to force on as many of us as possible Let's hope they don't force all our savings, investments and other assets over to the new system and link that to your 'social credit' score like they have been using in China to stop anyone who tries to 'dissent' against the state from using public transport, accessing their own bank accounts etc

[mh9000]

5 hours ago, Lightscribe said:

https://www.wsj.com/articles/if-you-sell-a-house-these-days-the-buyer-might-be-a-pension-fund-11617544801
 

Well looks like like a BK correction in house prices could be cancelled after all. In the US the big pension firms are buying up swathes of real estate above asking apparently, completely obliterating any individuals buying a home.

Here next no doubt following Lloyds already laid out plans to become the UKs biggest landlord. ‘You will own nothing’ and all that playing out in real time. 

https://www.wsj.com/articles/invitation-rockpoint-forge-1-billion-rental-home-venture-11602067500?redirect=amp#click=https://t.co/QY3dzdI8QU
 

(deleted the Twitter link as he seemed a bit of a nutter)

As someone still looking to buy this is all we need.

Does beg the question to me though why didn’t they do it 2008-9? They were too broke themselves to do it?