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

[Sugarlips]

Jaco reckons the outcome of the Arizona audit will be revealed on the 14th. Are the press just going to bury it or is this a suitably large black swan to rock markets?

[Lightscribe]

21 minutes ago, mh9000 said:

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?

 

Because it was the right time to start QE at that point but wasn’t the right time to do this:

[Harley]

10 hours ago, DurhamBorn said:

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.

I appreciate this and @BurntBread considered responses.  I admit I was on the log splitter when listening to the podcast and multitasking the second time around!  I'll go for a third just in case as I didn't register much of a disconnect (if that's the take away). 

My impression was that Mr Hunt was not a million miles away and fitted with the broad thesis of this thread.  I don't think this thread has (or should have) a narrow prescriptive narrative.  That is not how things work.  Especially in regard to timings.  Mr Market (and Mrs Macro!) always likes to wrong foot us!  My biggest take away of my close work with the intellectual powerhouse that was the leading strategy company was to quickly move forward by defining a best possible hypothesis but to slave away at always keeping it under review and see where it leads.  If a hypothesis is a lightening rod, then it is the lightening that is interesting, not so much the rod!  "It was only a hypothesis"!  Intellectual pragmatism and flexibility (as it was allowed back then!).  I hope this thread is a broad "church" with a common set of broad beliefs but also a wide array of changing nuances among its attendees. 

What particularly resonated with me was Mr Hunt's integrated view, bringing in macro+.  Lots of others do too but there was something about him that worked well for me.  I've talked to senior people like that and learnt to listen.  Sure, no deep dive but such is the program format and sometimes this macro stuff is just like press reports post rationalising market moves.  Things can happen just because enough of the right people wish, expect, or make it so.  And the rich and powerful have not been floundering around all this time.

Our biggest risk is being blindsided by the very things we ignore (in practice if not in thought).  I'm steep in economics and finance but now old enough not to go down those rabbit holes.  I've bashed on about the bigger picture (i.e. political and social) to keep a sense of balance.  The biggest mistake we can make is not to think beyond the finance and economics, like say Napier stresses.  Our guesses could easily be blown out of the water by just a fraction of the covid stuff being applied to the financial world.  And IMO it will, but a lot more.  We can already see the direct impact (RDSB, Exxon, etc) of all this stuff.  But IMO these are very early days with much more to come.  We can be right about the macro and easily still get slaughtered and IMO we probably will.  I'm engaging in the covid forums because of what it means, the bigger and broader picture, to us here.  This stuff has to become viseral to be able to deal with it because it is so foreign. 

FWIW, I believe there will be a bi (or more) polar world, and that a crash will be more than just the narrow stuff we talk about in economic and financial terms.  This other stuff will almost make that traditional crash talk irrelevant.  I see a crash as much being regulation and privatisation to non-existence (at least for us), etc.  Driven under the guise of the social and political narratives currently being seeded.  Of course Russia and China are currently being singled out by the gang!  A gang that is probably well invested (under the cloak of secrecy) in all the things they send their drones to promote against!

You've created a great hypothesis to underpin this thread.  Those old strategy folk would be proud to take it forward.  It's a hypothesis though, and folk need to understand conceptually what that is and how to use it correctly to tease out all the other stuff.  It's the start of the journey, not its end.

God I love this stuff!  Makes you humble, 360 degrees wide!

[Green Devil]

Funny guy!

 

[Harley]

6 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)

Good shout out.  You see how Mr Market, Mrs Macro, and the rest of the family just love to wrong foot us all.  It was only ever about a crash or not, with all the boomer bashing and other social noise wrapped around it.  That kept us narrowly focused in our little box.  Not many peeped out.  I've lived in many countries where this is already the norm.  Many more boxes out there!

[nirvana]

6 hours ago, Lightscribe said:

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.

 

yup you can thank the FED for that.......why anyone still believes in centralized ideologies and centralized banking is completely beyond me 

[Harley]

6 hours ago, wherebee said:

That does not match up to a depopulation agenda.

Housing is reasonably cheap, if you mark it to the correct yardsticks.  People don't, indeed they are socialised (distracted) not to.  And probably could not handle it if they did.  It's a beautiful scam, one of the very best.

[Harley]

45 minutes ago, geordie_lurch said:

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

Tut, tut, just when you were well on message!   Unless of course you were already thinking about limited access to only that "approved" set of investments to make such a move unnecessary!

[Harley]

1 hour ago, mh9000 said:

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

Gates has bought a large chunk of the US farmland.  The rest already bought swathes of Latin American land.  It has to be slightly different in crowded UK.

[nirvana]

25 minutes ago, Green Devil said:

Funny guy!

marvellous, let's have a 'FED bashing session' 

anyone read 'The creature from Jekyll Island'???

Spoiler alert, I haven't but download incoming 

The quintessential treatise on economics. Cussed and discussed by all from notable politicians to academicians to laypersons. Do you want to know the truth about money? Creature from Jekyll Island will give you the answers to these, and other, questions: Where does money come from? Where does it go? Who makes it? The money magicians' secrets are unveiled. We get a close look at their mirrors and smoke machines, their pulleys, cogs, and wheels that create the grand illusion called money. A dry and boring subject? Just wait! You'll be hooked in five minutes. Creature from Jekyll Island Reads like a detective story which it really is. But it's all true. This book is about the most blatant scam of all history. It's all here: the cause of wars, boom-bust cycles, inflation, depression, prosperity. Creature from Jekyll Island is a "must read." Your world view will definitely change. You'll never trust a politician again or a banker.

PS I've just realised I'm downloading an audio book, wondered why it was taking so long, muppet 

[BurntBread]

27 minutes ago, Harley said:

You've created a great hypothesis to underpin this thread.  Those old strategy folk would be proud to take it forward.  It's a hypothesis though, and folk need to understand conceptually what that is and how to use it correctly to tease out all the other stuff.  It's the start of the journey, not its end.

There's a quote I always remember abut scientific theories, which I heard from David Pine of NYS university (and he didn't claim it as his own). This from a time when academics could freely say such things:

"It's OK to sleep with a theory, but you should never marry one."

[Lightscribe]

11 minutes ago, Harley said:

I appreciate this and @BurntBread considered responses.  I admit I was on the log splitter when listening to the podcast and multitasking the second time around!  I'll go for a third just in case as I didn't register much of a disconnect (if that's the take away). 

My impression was that Mr Hunt was not a million miles away and fitted with the broad thesis of this thread.  I don't think this thread has (or should have) a narrow prescriptive narrative.  That is not how things work.  Especially in regard to timings.  Mr Market (and Mrs Macro!) always likes to wrong foot us!  My biggest take away of my close work with the intellectual powerhouse that was the leading strategy company was to quickly move forward by defining a best possible hypothesis but to slave away at always keeping it under review and see where it leads.  If a hypothesis is a lightening rod, then it is the lightening that is interesting, not so much the rod!  "It was only a hypothesis"!  Intellectual pragmatism and flexibility (as it was allowed back then!).  I hope this this thread is a broad "church" with a common set of broad beliefs but also a wide array of changing nuances among its attendees. 

What particularly resonated with me was Mr Hunt's integrated view, bringing in macro+.  Lots of others do too but there was something about him that worked well for me.  An analogy would be fixating on the world of currencies in isolation without noticing all currencies are going down against say real assets.  Sure, no deep dive but such is the program format and sometimes this macro stuff is just like press reports post rationalising market moves.  Things can happen just because enough of the right people wish, expect, or make it so.  And the rich and powerful have not been floundering around all this time.

Our biggest risk is being blindsided by the very things we ignore (in practice if not in thought).  I'm steep in economics and finance but now old enough not to go down those rabbit holes.  I've bashed on about the bigger picture (i.e. political and social) to keep a sense of balance.  The biggest mistake we can make is not to think beyond the finance and economics, like say Napier stresses.  Our guesses could easily be blown out of the water by just a fraction of the covid stuff being applied to the financial world.  And IMO it will, but a lot more.  We can allready see the direct impact (RDSB, Exxon, etc) of all this stuff.  But IMO these are very early days with much more to come.  We can be right about the macro and easily still get slaughtered and IMO we probably will.  I'm engaging in the covid forums because of what it means, the bigger and broader picture, to us here.  This stuff has to become viseral to be able to deal with it because it is so foreign. 

FWIW, I believe there will be a bi (or more) polar world, and that a crash will be more than just the narrow stuff we talk about in economic and financial terms.  This other stuff will almost make that traditional crash talk irrelevant.  I see a crash as much being regulation and privatisation to non-existence (at least for us), etc.  Driven under the guise of the social and political narratives currently being seeded.  Of course Russia and China are currently being singled out by the gang!  A gang that is probably well invested (under the cloak of secrecy) in all the things they promote against!

You've created a great hypothesis to underpin this thread.  Those old strategy folk would be proud to take it forward.  It's a hypothesis though, and folk need to understand conceptually what that is and how to use it correctly to tease out all the other stuff.  It's the start of the journey, not its end.

God I love this stuff!  Makes you humble, 360 degrees wide!

Agree 100%.

To relay a quote I heard once, ‘When you take things for granted, granted things get taken’

We live in unparalleled times, we can only prepare as best as we can given past history and data. But don’t discount what may seem outlandish and crazy as we are in clown world after all. 

[DurhamBorn]

https://www.bbc.co.uk/news/business-57425281

Like iv said on this sector all along,its in play and the undervaluation is structural IMO.This is going to play out over the cycle and the sector will find ways to surface the value.Good to know we are at least in this one at half the price others are waking up.I think the likely results are that the companies will work with each other more and more rather than buyouts and that the whole sector will lift over time.

This is a Europe and South America theme more than the US.The US is more merged already and massive amounts of debt and risk through media assets.

In Europe all the big players are worth holding for the cycle,also Telenor and Telia in smaller amounts.Brasil its Telefonica Brasil and TIM the best plays.Asia is more tricky ,but Telenor is a good play there anyway.

 

[Harley]

15 minutes ago, BurntBread said:

There's a quote I always remember abut scientific theories, which I heard from David Pine of NYS university (and he didn't claim it as his own). This from a time when academics could freely say such things:

"It's OK to sleep with a theory, but you should never marry one."

Top one that!  That's why I loved economics, as an honest practitioner, and could apply the lessons far and wide!  And why the PPE course seems to have been hollowed out.  The very name of the course stresses it's nature, yet it's students seem to leave welded by stupidity and disrespect to firmly believed constructs.  If so, a lack of intellect at the very least.  Or do we just hear about the few, like those who had to go into journalism!  Or are they actually the smartest guys in the room and know in the long term we're all dead so what the eff (if you don't have kids, etc and your philosophy is more of the French utilitarian kind)!

[nirvana]

I was gonna upload the preface for a taster but I can't upload mp3 format, here have an avi I just converted

I'm sure it hasn't got a virus so listen away and enjoy

0102 - Preface - The Creature from Jekyll Island.avi

edit: it's bloody good that! get listening! 

NB I'll stick another footnote here, yeah yeah the media have the writer down as a 'conspiracy theorist', whatever, feck off and have another cup of tea.....partisans!! 

 

[Harley]

On 08/06/2021 at 14:41, JMD said:

Harley, would you have a min. tangible/intangible asset ratio, maybe even for the different individual sectors,

@JMD one thing I forgot to mention if you want to go that route is Investing.com offers (for free) the comparison of fundamental ratios against the industry average.  Take Telenor for example (a sector where this may be a good idea):

PS:  "-" for Price to Tangible Book is not good!

[Majorpain]

10 hours ago, DurhamBorn said:

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.

Might not be in near future, super tax deduction has meant there has been a lot of investment in the UK in the last 6 months, plenty of new factories planned or new equipment in current ones.  Since UK manufacturing has to complete with the world without the advantage of a depressed currency (Cough Germany/China Cough) and has therefore remained competitive, its in a relatively decent place imo.

The wildcard is what the Govt has has stashed down the back of the sofa, HM Treasury is in the rather unique position of having both a large PM market and the ability to "wash" shiny though its own mint, nothing to stop metal coming off the market and disappearing into a vault.  Unsurprisingly there is nothing to say this has happened, although a certain ex-chancellor received honors for something after trying to stab a certain current PM in the back.

[Froggy2000]

Regarding Telefonica Brasil and TIM S.A, when I look to buy those using AJ Bell I'm presented with 3 options for each:

Telefonica Brasil:

Symbol, Name

BMDB207   TELEFONICA BRASIL SPON ADS EA REPR 1 ORD SHS (SEDOL:BMDB207)

BMWC5H9   TELEFONICA BRASIL SPON ADS EA REPR 1 ORD SHS (SEDOL:BMWC5H9)

B6TTV28   TELEFONICA BRASIL SPON ADR EA REPR 1 PFD SH (SEDOL:B6TTV28)

TIM S.A:

Symbol, Name

BK531P5   TIM S.A. SPON ADS EACH REP 5 ORD SHS (SEDOL:BK531P5)

BMD5L13   TIM S.A. SPON ADS EACH REP 5 ORD SHS (SEDOL:BMD5L13)

B6RSRV8   TIM W.E. SGPS S.A COM EUR0.03 (SEDOL:B6RSRV8)

Does any one know the differences between these options and are any of them preferable over the others?

I have to admit, I've struggled to find what the difference is using the AJ Bell website and also just searching on google.

Any help much appreciated!

[nirvana]

I've found my thought for the day lol.....I still think the FED might try an IR hike but Mr Market will hit back and scare the shite of em with an almighty crash 

The fed crooks can either bankrupt the government by raising interest rates or bankrupt the Amerikan people through currency debasement ie hyperinflation. I think the crime syndicate will choose the latter

Also this geezer worth a follow on twitter

https://twitter.com/TapsCoogan

 

edit: soz, this site goes bonkers when you paste a twatter link 

[Harley]

38 minutes ago, DurhamBorn said:

https://www.bbc.co.uk/news/business-57425281

Like iv said on this sector all along,its in play and the undervaluation is structural IMO.This is going to play out over the cycle and the sector will find ways to surface the value.Good to know we are at least in this one at half the price others are waking up.I think the likely results are that the companies will work with each other more and more rather than buyouts and that the whole sector will lift over time.

This is a Europe and South America theme more than the US.The US is more merged already and massive amounts of debt and risk through media assets.

In Europe all the big players are worth holding for the cycle,also Telenor and Telia in smaller amounts.Brasil its Telefonica Brasil and TIM the best plays.Asia is more tricky ,but Telenor is a good play there anyway.

 

I don't think I've given this sector enough attention.  Conceptually lovely but hard to get into based on my criteria.  I've got a few but not enough and most of those were naive legacy purchases stuff.  I probably need to look at it differently and so challenge my way of working.  Or maybe it's telling me to wait rather than pick the winners early.  I'll report back!

[JMD]

1 hour ago, Harley said:

Housing is reasonably cheap, if you mark it to the correct yardsticks.  People don't, indeed they are socialised (distracted) not to.  And probably could not handle it if they did.  It's a beautiful scam, one of the very best.

So is housing where most of that beaten-up/redundant bond money will flow to next? ...steady long-term yield/easy 'social project' mantra sell (fund heat pumps, greenify, etc). Plus, might this 'save' the banking sector? 

[Harley]

26 minutes ago, Froggy2000 said:

Regarding Telefonica Brasil and TIM S.A, when I look to buy those using AJ Bell I'm presented with 3 options for each:

Telefonica Brasil:

Symbol, Name

BMDB207   TELEFONICA BRASIL SPON ADS EA REPR 1 ORD SHS (SEDOL:BMDB207)

BMWC5H9   TELEFONICA BRASIL SPON ADS EA REPR 1 ORD SHS (SEDOL:BMWC5H9)

B6TTV28   TELEFONICA BRASIL SPON ADR EA REPR 1 PFD SH (SEDOL:B6TTV28)

TIM S.A:

Symbol, Name

BK531P5   TIM S.A. SPON ADS EACH REP 5 ORD SHS (SEDOL:BK531P5)

BMD5L13   TIM S.A. SPON ADS EACH REP 5 ORD SHS (SEDOL:BMD5L13)

B6RSRV8   TIM W.E. SGPS S.A COM EUR0.03 (SEDOL:B6RSRV8)

Does any one know the differences between these options and are any of them preferable over the others?

I have to admit, I've struggled to find what the difference is using the AJ Bell website and also just searching on google.

Any help much appreciated!

I'm surprised you can get that much on AJB since they just trade CDIs on the LSE for international stocks(?).  SEDOL no good for me, need the stock ISIN numbers.  I had a quick look at Telefonica.  My guess is you are catching other bits of Telefonica such as Telefonica SA (not Telefonica Brasil), maybe Telefonica Deutschland Holdings AG, etc.  Also, some of these may not be available in an ISA (some brokers OK others not) or even SIPP.  I hope the one we are looking for is the Telefonica Brasil ADR listed on the NYSE (ISIN: US87936R2058?).  Investing.com is good for seeing all the instruments for say "Telefonica", including ISINs.  Just use the search box and follow the resulting stock links.  I would not rely on a broker listing as they may only list what they have, not what you want.  You may also find a "no deal" when you try and submit and order for some of these as the listing does not always mean tradeable.

PS:  There is a long list on Investing.com.  Here are just a few....

 

 

[Harley]

7 minutes ago, JMD said:

So is housing where most of that beaten-up/redundant bond money will flow to next? ...steady long-term yield/easy 'social project' mantra sell (fund heat pumps, greenify, etc). Plus, might this 'save' the banking sector? 

Maybe, or maybe we'll be forced to buy certain bonds.  That groundwork may already be being set with NEST and the touted "Green Bonds", etc.  Maybe tempting yields to start with and then.........!  They haven't taken your money, just saved you from yourself, again!

[JMD]

12 hours ago, Harley said:

...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. As for FCF, about as good as EPS.  Gotta go deeper!

 

Harley, are you saying FCF is misleading? Only i thought it was a better measure than OCF?, which i think was actually the other point that you were making? But could you clarify please, because your FCF/EPS comment has got me a little worried as i rely quiet a bit on the FCF metric. 

(hope not derailing thread, as not really macro, but fcf is always being discussed/mentioned here so would be good i think to ponder any potential positives/negatives?)

 

(following definitions are not required for this discussion i think, but just including for completeness, and in case anyone wants to add to them... 

Free cash flow is the cash that a company generates from its normal business operations before interest payments and after subtracting any money spent on capital expenditures.

Operating cash flow is cash generated from normal business operations or activities.)

[Barnsey]

Never a straight line, and quite possibly the consensus trade now which itself could be short term bearish, but wise words...(there's the 40 year disinflation cycle mentioned yet again)