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

[Dogtania]

1 hour ago, M S E Refugee said:

 

I found him somehow a few weeks ago, didn't seem to have many subs or videos but looked interesting.  Found he was actually some bid hedge fund manager back in the day (well not that long ago).  And he has a fair following on other channels.  Also liked his Scottish accent for a change.  I believe he had a run of years of consecutive losses at his flagship so closed down and now lives life of Riley on a Caribbean island.

Anyway was really interesting hearing his meanderings over the two videos (haven't watched the above yet).

One thing he talked about was taking a position in a random Dutch holding? type company when he saw a commodity boom coming up that subsequently became a star multi bagger.

I understand commodity's as raw materials or foods like wheat and coffee.  I briefly looked at the company all those years ago he bet on (Amsterdam commodities) and it seemed to be a collection of companies that dealt in things like peanut butter or spices.

The thing I didn't completely get was that they seemed to be sourcers sellers (or middle men) rather than owning the fields for example.  I assume being in a strong position of expertise infrastructure or contacts that they benefit equally if there is say a commodity boom.

Just trying to frame this in light of this thread... Say these commodities can be thought of as hard assets that will also increase if we do get big inflation (but not like say Tele where the physical towers and infrastructure is already there).

Would love to be corrected and I don't know but I'd assume that as company that relies on the consumer say providing sugar paste to catering company compass would not be in the best position going forward.  Not bad but not leading the pack.

Whereas further up the chain ie supplying the actual cattle feed or fertilizer would be better in the coming environment.  Ie not consumer led but just basic things that will be needed for a large and growing world population.

Anyway glad you highlighted the vid will check out later.

[Harley]

29 minutes ago, Dogtania said:

Found he was actually some bid hedge fund manager back in the day

What Hugh Hendry?  A legend.  I'm not that old am I?

[Dogtania]

4 minutes ago, Harley said:

What Hugh Hendry?  A legend.  I'm not that old am I?

Not that long ago! 

Anyway listening to him ramble on with lee scratch Perry in the background endeared me to him

[Harley]

17 minutes ago, Dogtania said:

Not that long ago! 

Anyway listening to him ramble on with lee scratch Perry in the background endeared me to him

Well, maybe a minor legend!  He's just resurfaced.  I liked his Real Vision interview with Raoul on YouTube for the hedgie banter.

PS:  WTF, he's now on Macrovoices!

https://www.macrovoices.com/868-macrovoices-227-hugh-hendry-he-s-baaaaack

 

[sancho panza]

9 hours ago, Harley said:

Well, maybe a minor legend!  He's just resurfaced.  I liked his Real Vision interview with Raoul on YouTube for the hedgie banter.

PS:  WTF, he's now on Macrovoices!

https://www.macrovoices.com/868-macrovoices-227-hugh-hendry-he-s-baaaaack

 

He was very easy to watch.I remember his youtube clips as he explored CHina's empty skyscrapers........gripping......but he was still wrong in an epic fashion,much like Tony Dye way back in the day.

Can't believe it's 7 years since his 'bear turnes bull moment'

His leaving the hedge fund closure shows that a great macro brain doesn't necessarily beget market profits.

https://www.businessinsider.com/hugh-hendry-turns-bullish-2013-11?r=US&IR=T

 

On another matter.Some great graphs from Wolf

https://wolfstreet.com/2020/07/11/wild-ride-to-nowhere-appl-msft-amzn-goog-and-fb-soar-to-new-high-rest-of-the-stock-market-is-a-dud-has-been-for-years/

https://wolfstreet.com/2020/07/09/unemployment-claims-hit-new-record-32-9-million-state-federal-week-16-of-u-s-labor-market-collapse/

https://wolfstreet.com/2020/07/10/the-great-american-shale-oil-gas-massacre-bankruptcies-defaulted-debts-worthless-shares-collapsed-prices-of-oil-and-natural-gas/

 

[jamtomorrow]

24 minutes ago, sancho panza said:

On another matter.Some great graphs from Wolf

https://wolfstreet.com/2020/07/11/wild-ride-to-nowhere-appl-msft-amzn-goog-and-fb-soar-to-new-high-rest-of-the-stock-market-is-a-dud-has-been-for-years/

This part of the market looks so terrifyingly and exotically broken to me, I'd rather just sit it out until sanity returns. It seems to consist entirely of HFTs front-running retail front-running the Fed, with no discernable price discovery.

ZH posted this for TSLA, would love to see the same for FANGMAN -

 

[jamtomorrow]

33 minutes ago, sancho panza said:

https://wolfstreet.com/2020/07/09/unemployment-claims-hit-new-record-32-9-million-state-federal-week-16-of-u-s-labor-market-collapse/

Meanwhile (first one is long and paywalled, so just posting the tasty bits here):

https://www.wsj.com/articles/meatpackers-covid-safety-automation-robots-coronavirus-11594303535

SPRINGDALE, Ark.––Deboning livestock and slicing up chickens has long been hands-on labor. Low-paid workers using knives and saws work on carcasses moving steadily down production lines. It is labor-intensive and dangerous work.

Those factory floors have been especially conducive to spreading coronavirus. In April and May, more than 17,300 meat and poultry processing workers in 29 states were infected and 91 died, according to the U.S. Centers for Disease Control and Prevention. Plant shutdowns reduced U.S. beef and pork production by more than one-third in late April.

Meatpackers in response spent hundreds of millions of dollars on safety equipment such as personal protective gear, thermal scanners and workplace partitions, and they boosted workers’ pay to encourage them to stay on the job.

They also are searching for a longer-term solution. That quest is playing out in a former truck-maintenance shop near the Springdale, Ark., headquarters of meatpacking giant Tyson Foods Inc. There, company engineers and scientists are pushing into robotics, a development the industry has been slow to embrace and has struggled to adopt.

The team, including designers who once worked in the auto industry, are developing an automated deboning system destined to handle some of the roughly 39 million chickens slaughtered, plucked and sliced up each week in Tyson plants.

Tyson, the biggest U.S. meat company by sales, currently relies on about 122,000 employees to churn out about 1 in every 5 pounds of chicken, beef and pork produced in the country. The work at Tyson’s Manufacturing Automation Center, which opened in August 2019, is speeding the shift from human meat cutters to robotic butchers.

Over the past three years, Tyson has invested about $500 million in technology and automation. Chief Executive Noel White said those efforts likely would increase in the aftermath of the pandemic.

 

The Covid-19 pandemic has been a debacle for the $213 billion U.S. meat industry. For the first time in memory for some Americans, there wasn’t enough meat to go around. Reduced production forced grocery giants such as Kroger Co., Costco Wholesale Corp. and Albertsons Cos. to limit how much fresh meat shoppers could buy in some stores. Fast-food chain Wendy’s had to tell customers that some restaurants couldn’t serve hamburgers.

Now automation projects are racing ahead, said Decker Walker, a managing director with Boston Consulting Group, or BCG, who works with meatpackers. “Everybody’s thinking about it, and it’s going to increase,” he said.

Automation has transformed jobs such as car assembly, stock trading and farming. Meat processors, though, employ 3.2 workers per 1,000 square feet of manufacturing space, three times the national average for manufacturers, according to data compiled by BCG. While U.S. manufacturing worker density overall has held steady over the past five years, in meat plants it has increased, according to the firm.

Executives of Tyson and other meat giants, including JBS USA Holdings Inc. and Cargill Inc., say that is because robots can’t yet match humans’ ability to disassemble animal carcasses that subtly differ in size and shape. While some robots, such as automated “back saw” cutters that split hog carcasses along the spinal column, labor alongside humans in plants, the finer cutting, such as trimming fat, for now largely remains in the hands of human workers, many of them immigrants.

...

https://www.sonomamag.com/healdsburg-hotel-first-in-sonoma-county-to-employ-robot-for-room-service/

At recently opened Hotel Trio in Healdsburg, room service is a completely different experience.

You still call and place your order with the front desk, and you still get items delivered to your door. But the employee who brings the order to your room is not human – it’s a robot, aptly named Rosé.

The four foot tall, roving cylinder is the first robot concierge in Sonoma County and has quickly become a celebrity. Rosé draws a crowd as she speeds up and down hallways or rides the elevator, and guests make multiple calls for room service just so that they can interact with the friendly machine. (Hotel Trio doesn’t charge for room service delivery, and Rosé doesn’t wait around for tips.)

“In addition to Rosé being super helpful, people absolutely love her,” says Brooke Ross, director of sales and marketing at Hotel Trio. Ross notes that even non-guests swing by the 122-room hotel to see the robot in action: “We have a beautiful lobby, a really great bar, bocce balls that light up when you play at night, but Rosé is hands down the most frequently photographed feature of our hotel.”

While Rosé is a Sonoma County novelty, the hotel robot trend has been going on for a few years. Hotels across the country are increasingly turning to autonomous robots to handle menial tasks in order to free up staff for more complicated jobs. Robots similar to Rosé are now being employed to deliver room service in Chicago, Las Vegas and Silicon Valley, while other models clean floors, answer questions and perform a variety of duties.

“Ready or not, robots are going to be a part of your hotel experience,” says Henry Harteveldt, travel industry analyst at Atmospheric Research Group in San Francisco. “This is a part of travel that will see major growth in the years ahead.”

[Inigo]

26 minutes ago, jamtomorrow said:

“Ready or not, robots are going to be a part of your hotel experience,” says Henry Harteveldt, travel industry analyst at Atmospheric Research Group in San Francisco. “This is a part of travel that will see major growth in the years ahead.”

Stayed in an airport hotel with one of those room service robots.  Kids fascinated and so we had to have room service.  New hotel, so other systems in place eg so that it can interact with lifts to get to the right floor.

I'm not sure it is an improvement on a human, or necessarily cheaper.  Seems a gimmick to me.

[JMD]

10 hours ago, Harley said:

Well, maybe a minor legend!  He's just resurfaced.  I liked his Real Vision interview with Raoul on YouTube for the hedgie banter.

PS:  WTF, he's now on Macrovoices!

https://www.macrovoices.com/868-macrovoices-227-hugh-hendry-he-s-baaaaack

 

Hendry is an Interesting guy, especially his thoughts about US expanding the reserve currency is not the same as printing more money and so inflation is not produced. Is that just another way of saying governments must spend into the real economy?                                                                                                                                                                                 But I do wish he would stop 'hedging'! (old habits... I guess) and just say what he means. For example in macro voices Hendry says US won't get hyperinflation, but 'other regions' will and this will lead to great political change. Is he referring to China?

[jamtomorrow]

23 minutes ago, Inigo said:

Stayed in an airport hotel with one of those room service robots.  Kids fascinated and so we had to have room service.  New hotel, so other systems in place eg so that it can interact with lifts to get to the right floor.

I'm not sure it is an improvement on a human, or necessarily cheaper.  Seems a gimmick to me.

Agree the hospitality story smacks of the gimmick stage.

What's interesting is when this succeeds in penetrating out of "budget" and into "aspirational", where previously there's been no substitute for the personal touch.

"Formule 1" were the ultimate embodiment of automation at the budget end. I swear the one I stayed at in 1998 had one visible member of staff for 100 or so rooms. And of course an army of plumbers and electricians on standby for when one of the plastic shower & sh*t boxes broke down ... again.

[Harley]

2 hours ago, JMD said:

Hendry is an Interesting guy, especially his thoughts about US expanding the reserve currency is not the same as printing more money and so inflation is not produced.

I think his (and others) comment about USD being like gold when on the gold standard is interesting.  It's suggested the Great Depression was caused in part by a lack of gold and that today the world has a lack of USD.  The curse of being the global reserve currency.  Maybe this means they either need to print or "get off the pot"!  Printing presumably(?) would lower DXY (no free lunch forever!) but the degree of the domestic inflationary effects are unclear given the US is a bit of a closed economy. 

[Sugarlips]

13 hours ago, Harley said:

Well, maybe a minor legend!  He's just resurfaced.  I liked his Real Vision interview with Raoul on YouTube for the hedgie banter.

PS:  WTF, he's now on Macrovoices!

https://www.macrovoices.com/868-macrovoices-227-hugh-hendry-he-s-baaaaack

 

I’m yet to watch this but as Hugh referenced it in the above I figure it worth putting here.

 

[Shamone]

Got a little bit of rolls Royce this week and a little bit of BP yesterday.

[JMD]

2 hours ago, Sugarlips said:

I’m yet to watch this but as Hugh referenced it in the above I figure it worth putting here.

 

The 'Grand Japanese (Hara-Kiri) Economic experiment!', that ultimately failed - but that hopefully will warn off others from doing similar... at least that's what i thought many years ago when i first saw the documentary. Today, thanks mainly to this blog, i understand that there are no easy alternatives and all the Western leaders, etc can do - after kicking their own economic can for many years - is hope that our own looming collapse and its aftermath is historically different this time - And that there are no pitch-forks this time round, after all we are so much more civilised these days, and so the sharpest barbs will hopefully be reserved to prickly social media comment!  

But what also stood out for me was the difference in post-war justice as metered out by the US under its own influence in the pacific region. In Europe, German war criminals were hung, but in Japan many (unconvicted) 'Japanese war-criminals' were soon occupying high-ranking corporate/government positions. Ok i understand its how Empires throughout time have worked, spheres of (self) influence and all that... i get it, i accept it. I guess we should just be grateful for small mercies for how benign the US empire is, especially with the Chinese threat now looming on the horizon.

[sancho panza]

13 hours ago, jamtomorrow said:

This part of the market looks so terrifyingly and exotically broken to me, I'd rather just sit it out until sanity returns. It seems to consist entirely of HFTs front-running retail front-running the Fed, with no discernable price discovery.

ZH posted this for TSLA, would love to see the same for FANGMAN -

 

I like your phrasing in bold.Utterly broken sums it up.And the bond markets aren't any better.

Here's the robin tracker link in case you haven't got it.It's fascinating running through them and seeing where those guys are putting their moeny to work.Correlation isn't causation but still.

http://robintrack.net/symbol/MSFT

8 hours ago, Shamone said:

Got a little bit of rolls Royce this week and a little bit of BP yesterday.

Under £3 and if I wasn't alreay chock full I'd have some more.

[Boon]

A lot is made of the Robinhood traders, but assuming it is something like Freetrade, surely the average holding is going to be incredibly small like under $100?

I don't think they would make a meaningful contribution to prices for a company with the market cap of Tesla. There must be bigger institutions going in on it.

[ThoughtCriminal]

Tesla only up 700% in 9 months. No bubble here. Perfectly normal. 

[sancho panza]

 

 

He's back with more pearls...you really can't argue with the logic I think,especially as he starts off with a dig at nominal GDP with the clear implication that inflation measures are inadequate.Potential for a casacde of defaults.SOcial unrest stemming from declining propserity.

 

All things covered in this thread over time.

https://surplusenergyeconomics.wordpress.com/2020/07/06/177-poorer-angrier-riskier/

MODELLING THE CRUNCH

It became clear from a pretty early stage that the Wuhan coronavirus pandemic was going to have profoundly adverse consequences for the world economy. This discussion uses SEEDS to evaluate the immediate and lasting implications of the crisis, some of which may be explored in more detail – and perhaps at a regional or national level – in later articles.

Whilst it reinforces the view that a “V-shaped” rebound is improbable, this evaluation warns that we should beware of any purely cosmetic “recovery”, particularly where (a) unemployment remains highly elevated (there is no such thing as a “jobless recovery”), and (b) where extraordinary (and high-risk) financial manipulation is used to create purely statistical increases in headline GDP.

The bottom line is that the prosperity of the world’s average person, having turned down in 2018, is now set to deteriorate more rapidly than had previously been anticipated.

Governments, which for the most part have yet to understand this dynamic, are likely inadvertently to worsen this situation by setting unrealistic revenue expectations based on the increasingly misleading metric of GDP, resulting in a tightening squeeze on the discretionary (“left in your pocket”) prosperity of the average person.

Exacerbated by crisis effects, the average person’s share of aggregate government, household and business debt is poised to rise even more rapidly than had hitherto been the case.

These projections are summarised in the first set of charts.

Fig. 1

Consequences

The implication of this scenario for governments is that revenue and expenditure projections need to be scaled back, and priorities re-calibrated, amidst increasing popular dissatisfaction.

Businesses will need to be aware of deteriorating scope for consumer discretionary spending, and could benefit from front-running some of the tendencies (such as simplification and de-layering) which are likely to characterise “de-growth”.

The environmental focus will need to shift from ‘big ticket’ initiatives to incremental gains.

Amidst unsustainably high fiscal deficits, and the extreme use of newly-created QE money to monetise existing government debt, we need also to be aware of the risk that, in a reversal of the 2008 global financial crisis (GFC) sequence, a financial crash might follow, rather than precede, a severe economic downturn.

Methodology – the three challenges

Regular readers will be familiar with the principles of the surplus energy interpretation of the economy, but anyone needing an introduction to Surplus Energy Economics and the SEEDS system can find a briefing paper at the resources page of this site. What follows reflects detailed application of the model to the conditions and trends to be expected after the coronavirus crisis.

Simply put, SEE understands the economy as an energy system, in which money, lacking intrinsic value, plays a subsidiary (though important) role as a medium of exchange. A critical factor in the calibration of prosperity is ECoE (the Energy Cost of Energy), which determines, from any given quantity of accessed energy, how much is consumed (‘lost’) in the access process, and how much (‘surplus’) energy remains to power all economic activities other than the supply of energy itself.

Critically, the depletion process has long been exerting upwards pressure on the ECoEs of fossil fuel (FF) energy, which continues to account for more than four-fifths of the energy used in the economy. The ECoEs of renewable energy (RE) alternatives have been falling, but are unlikely ever to become low enough to restore prosperity growth made possible in the past by low-cost supplies of oil, gas and coal.

Accordingly, global prosperity per capita has turned downwards, a trend which can be disguised (but cannot be countered) by various forms of financial manipulation.

This means that, long before the coronavirus pandemic, the onset of “de-growth” was one of three main problems threatening the economy and the financial system. The others are (b) the threat of environmental degradation – which will never be tackled effectively until the economy is understood as an energy system – and (c) the over-extension of the financial system which has resulted from prolonged, futile and increasingly desperate efforts to overcome the physical, material deterioration in the economy by immaterial and artificial (monetary) means.

On these latter issues, the slump in economic activity has had some beneficial impact on climate change metrics, whilst we can expect a crisis to occur in the financial system because its essential predicate – perpetual growth – has been invalidated. The global financial system has long since taken on Ponzi characteristics and, like all such schemes, is wholly dependent on a continuity that has now been lost.

Top-line aggregates

With these parameters understood, the critical economic issue can be defined as the rate of deterioration in prosperity, for which the main aggregate projections from SEEDS are set out in fig. 2. Throughout this report, unless otherwise noted, all amounts are stated in constant international dollars, converted from other currencies using the PPP (purchasing power parity) convention.

During the current year, world GDP is projected to fall by 13%, recovering thereafter at rates of between 3% and 3.5%. This rebound trajectory, though, assumes extraordinary levels of credit and monetary support, reflected, in part, in an accelerated rate of increase in global debt.

Within debt projections, the greatest uncertainties are (a) the possible extent of defaults in the household and corporate sectors, and (b) the degree to which central banks will monetise new government issuance by the backdoor route of using newly-created QE money to buy up existing debt obligations.

This is a point of extreme risk in the financial system, where a cascade of defaults – and/or a slump in the credibility and purchasing power of fiat currencies – are very real possibilities, particularly if the ‘standard model’ of crisis response starts to assume permanent characteristics.

Fig.2

Looking behind the distorting effects of monetary intervention, it’s likely that underlying or ‘clean’ output (C-GDP) will fall by about 17% this year and, after some measure of rebound during 2021 and 2022, will revert to a rate of growth which, at barely 0.2%, is appreciably lower than the rate (of just over 1.0%) at which world population numbers continue to increase. Additionally, ECoEs can be expected to continue their upwards path, driving a widening wedge between C-GDP and prosperity.

These effects are illustrated in fig. 3, which highlights, as a pink triangular wedge, the way in which ever-looser monetary policies have inflated apparent GDP to levels far above the underlying trajectory. This is the element of claimed “growth” that would cease if credit expansion stalled, and would go into reverse in the event of deleveraging. The gap between C-GDP and prosperity, meanwhile, reflects the relentless rise of trend ECoEs. This interpretation, as set out in the left-hand chart, is contextualised by the inclusion of debt in the centre chart.

Fig. 3

Fig. 3 also highlights, in the right-hand chart, a major problem that cannot be identified using ‘conventional’ methods of economic interpretation. Essentially, rapid increases in debt serve artificially to inflate recorded GDP, such that ratios which compare debt with GDP have an intrinsic bias to the downside during periods of rapid expansion in debt.

Rebasing the debt metric to prosperity – which is not distorted by credit expansion – indicates that the debt ratio already stands at just over 350% of economic output, compared with slightly under 220% on a conventional GDP denominator. As the authorities ramp up deficit support – and, quite conceivably, make private borrowing even easier and cheaper than it already is – the true scale of indebtedness will become progressively higher, thus measured, than it appears on conventional metrics.

Personal prosperity – a worsening trend

The per capita equivalents of these projections are set out in fig. 4, which expresses global averages in thousands of constant PPP dollars per person. After a sharp (-18%) fall anticipated during the current year, prosperity per capita is expected to recover only partially before resuming the decline pattern that has been in evidence since the ‘long plateau’ ended in 2018, and the world’s average person started getting poorer.

Meanwhile, each person’s share of the aggregate of government, household and business debt is set to rise markedly, not just in 2020 but in subsequent years. By 2025, whilst prosperity per capita is set to be 17% ($1,930) lower than it was last year, the average person’s debt is projected to have risen by nearly $17,900 (45%).

These, in short, are prosperity and debt metrics which are set to worsen very rapidly indeed. The world’s average person, currently carrying a debt share of $40,000 on annual prosperity of $11,400, is likely, within five years, to be trying to carry debt of $58,000 on prosperity of only $9,450.

This may simply be too much of a burden for the system to withstand. We face a conundrum, posed by deteriorating prosperity, in which either debt becomes excessive in relation to the carrying capability of global prosperity, and/or a resort to larger-scale monetisation undermines the credibility and purchasing power of fiat currencies.

Fig. 4

In fig. 5 – which sets out some per capita metrics in chart form – another adverse trend becomes apparent. This is the fact that taxation per capita has continued to rise even whilst the average person’s prosperity has flattened off and, latterly, has turned down.

What this means is that the discretionary (“left in your pocket”) prosperity of the average person has become subject to a squeeze, with top-line prosperity falling whilst the burden of tax continues to increase.

Fig. 5

This also means that, in addition to deteriorating prosperity itself, there are two leveraging processes which are accelerating the erosion of consumers’ ability to make non-essential purchases.

The first of these is the way in which taxation is absorbing an increasing proportion of household prosperity, and the second is the rising share of remaining (discretionary) prosperity that has to be allocated to essential categories of expenditure.

These are not wholly new trends – and they help explain the pre-crisis slumps in the sales of non-essentials such as cars and smartphones – but one of the clearest effects of the crisis is to increase the downwards pressure on consumers’ non-essential expenditures.

Governments – the hidden problem

This has implications for any business selling goods and services to the consumer, particularly where their product is non-essential. It also sets governments a fiscal problem of which most are, as yet, seemingly wholly unaware.

As can be seen in fig. 6, governments have, over an extended period, managed to slightly more than double tax revenues whilst maintaining the overall incidence of taxation at a remarkably consistent level of about 31% of GDP.

This has led them to conclude that the burden of taxation has not increased materially, even though their ability to fund public services has expanded at trend annual real rates of slightly over 3%. When – as has happened in France – the public expresses anger over taxation, governments seem genuinely surprised by popular discontent.

The problem, of course, is that, over time, GDP has become an ever less meaningful quantification of prosperity. When reassessed on the denominator of prosperity, the tax incidence worldwide has risen from 32% in 1999, and 39% in 2009, to 51% last year (and is higher still in some countries). On current trajectories, the tax ‘take’ from global prosperity per capita would reach almost 70% by 2030, a level which the public are unlikely to find acceptable, especially in those high-tax economies where the incidence would be even higher.

Conversely, if (as in the right-hand chart in fig. 6) taxation was to be pegged at the 51% of prosperity averaged in 2019, the resulting ‘sustainable’ path would see taxation fall from an estimated $43tn last year to $38tn (at constant values) by 2030. At -12%, this may not seem a huge fall in fiscal resources, but it is fully 27% ($14tn) lower than where, on the current trajectory, tax revenues otherwise would have been.

Fig. 6

Politically, there seems little doubt that the widespread popular discontent witnessed in many parts of the world during the coronavirus crisis has links to deteriorating prosperity. Historically, clear connections can be drawn between social unrest and the related factors of (a) material hardship and (b) perceived inequity.

At the same time, the sharp deterioration in prosperity seems certain to exacerbate international tensions, where countries competing for dwindling prosperity may also seek confrontation as a distraction technique. These are amongst the reasons why a world that is becoming poorer is also becoming both angrier and more dangerous.

[sancho panza]

18 minutes ago, Boon said:

A lot is made of the Robinhood traders, but assuming it is something like Freetrade, surely the average holding is going to be incredibly small like under $100?

I don't think they would make a meaningful contribution to prices for a company with the market cap of Tesla. There must be bigger institutions going in on it.

AS I've said correaltion dosnt mean causation however,the most recent ramp up does seem to coincide with some generous furlough cheques landing on US hosueholder doormats.

The big players are the insto's,no doubt,but never undeestimate their willingness to separate a retial investor from his money.

[Harley]

7 hours ago, Boon said:

A lot is made of the Robinhood traders, but assuming it is something like Freetrade, surely the average holding is going to be incredibly small like under $100?

I don't think they would make a meaningful contribution to prices for a company with the market cap of Tesla. There must be bigger institutions going in on it.

Robinhood, etc make many millions of dollars selling order details or routing orders.  Details on their websites (legal requirement).  Maybe the ensuing front running is a major factor in bidding up some stocks.  This is seemingly very 2000 with all the pluses and minuses that means.  

[Donald McFlurry]

10 hours ago, Boon said:

A lot is made of the Robinhood traders, but assuming it is something like Freetrade, surely the average holding is going to be incredibly small like under $100?

I don't think they would make a meaningful contribution to prices for a company with the market cap of Tesla. There must be bigger institutions going in on it.

You can see here how many users are hodling the stock (but not the value). It's quite well correlated with the recent uptrend.

https://robintrack.net/symbol/TSLA

 

Edit: ignore this, just saw the same posted further up the thread.

[jamtomorrow]

2 hours ago, Harley said:

Robinhood, etc make many millions of dollars selling order details or routing orders.  Details on their websites (legal requirement).  Maybe the ensuing front running is a major factor in bidding up some stocks.  This is seemingly very 2000 with all the pluses and minuses that means.  

Reading around on this, came across some interesting background material.

I was trying to put the MSFT data (MSFT as good an example as any) in SP's link ( thanks SP!) into some kind of context. That increase of 250k on users holding does look like chicken feed vs 30mn daily volume on MSFT, but then I read this: https://www.cnbc.com/2017/06/13/death-of-the-human-investor-just-10-percent-of-trading-is-regular-stock-picking-jpmorgan-estimates.html

Kolanovic estimates “fundamental discretionary traders” account for only about 10 percent of trading volume in stocks. Passive and quantitative investing accounts for about 60 percent, more than double the share a decade ago, he said.

So 3mn might be nearer the mark for the denominator.

As for the retail volume numerator (i.e. how to extrapolate the RH data over the whole market?) ... well retail is bigger than I would have guessed (I would have guessed 10% tops - NB: article is from 5Y ago, would be interested in a similar more recent analysis): https://www.forbes.com/sites/richdaly/2015/05/06/small-investors-are-bigger-than-you-think/#67a72a9e6308

To borrow from Mark Twain, the death of the retail investor has been greatly exaggerated.

Recent data from the U.S. Federal Reserve shows that only 14% of U.S. households own individual stocks. To put that in context, as one news outlet did, there are more cat owners in the U.S. than retail investors.

But the number is misleading. Retail investors directly hold more equities than any other segment of investor, including mutual funds and hedge funds: $12.5 trillion in stocks, according to other data from the Federal Reserve. That means the small investor still has discretion over the single largest pool of equity capital in the world.

Granted a big chunk of that will be passives, but you can still see how this might add up to something, especially with HFT amplification.

[DurhamBorn]

@jamtomorrow the irony of the above is that like all ponzi's passive means the bigger they get the more they buy each month in passive investment.Of course disinflation cycles mask the real driver of long term equity returns and thats dividends.

If we take Amazon its going to have to get to around $100 billion in free cash flow profit a year if it is to hand out decent and growing dividends.Crazy.

Unloved sectors that have fallen then attract less passive buying,even though they are entering a new cycle.

Iv always though markets hurt the most people possible,and passive investing would really fit that in a perfect way.

QE a and forcing down the rate curve has meant lots of the huge bubble companies have got away with not paying out profits in divis and getting equity holders to fund everything.Its likely there will be massive capital loss among the big techs and likely they will never regain those highs,and divis wont claw back the loss for a very long time,if ever.

Of course at the moment everyone holding the stocks was right,but i find the market over the longer term rewards people more who are wrong wrong wrong right,than right right right wrong.At this stage of the cycle assets,not profits should be what people aim to buy while they wait for the massive money supply to feed into prices.

[DurhamBorn]

https://www.ft.com/content/9522b2e6-dc9b-49c4-853b-489e2dbef3ca

This is a really great article from probably the CEO who understands the industry as well as anyone.As iv been predicting the sector will consolidate and do a tobacco over the longer term.Interesting to see the Scandi companies mentioned.Telia and Telenor could be big merger targets,though they themselves might also try to expand instead.Telefonica will be one of the big players who does some buying i expect,and longer term that should mean much higher divis.BT likely a target for DTE,though interesting to see how that plays out.BT might themselves go for the Scandi companies,though their equity would say they are more likely a target.

Telcos need to consolidate the market before big tech can enter the market by buying up telcos and then they will have the best hand over the over the top players.

Mr Álvarez-Pallete said the group’s infrastructure was still “totally undervalued”.

[Option5]

OK long story so I'll not bother you with the detail how it all happened.

Yesterday I received a letter from London Royal (old co-op) advising me about a pension I'd forgotten all about that has a transfer value of just over £50k and has me retiring next year on my 65th birthday.

Any ideas what I should do with it?