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

[Sasquatch]

12 minutes ago, Chewing Grass said:

Make your own and cut out the middleman and the government.

Back in the day, my dad made a mean parsnip wine. 

It tasted fine after the 3rd glass.

 

[Harley]

41 minutes ago, DurhamBorn said:

Sooner or later this will lead to massive bank failures of course,and maybe some insurance ones.That would be interesting insurers of annuities etc going under.

Brexit or derivative or..... related?  Why Brexit related?  Agree about supply lines, although more Covid related in my experience when trying to buy kit (managed to get that table saw in the end, nice!).

[Harley]

7 hours ago, TheNickos said:

I'm just after a decent portfolio that yields 5%+ for the next 10 years, anything else is a bonus. Oil and Telcos so far, hoping for a little pull back to add voda, pharma and potash.

 

Mining recs also welcome!

I did the same pre covid but, given my covid experience, have lowered that to 3% for macro bullish value stocks as I look more for total return.  Still hold my high div stocks but many would fail my value criteria, and DBs comment about derivatives and insureres has got me thinking some more.

[Harley]

People going to start blaming all the covid fallout on brexit to cya on the covid mismanagement?  Double bonus for most of the MSM, if anyone is still listening.

[Loki]

Just now, Harley said:

People going to start blaming all the covid fallout on brexit to cya on the covid mismanagement?  Double bonus for most of the MSM.

I'd never have thought it possible but people's idiocy has amazed me for the past 9 months.

[Hunty]

Link MS

If central banks buy $1.3B assets every 60 minutes, how long until they own all the assets?  The idea behind QE is to buy the assets at high prices no-one else will pay using their fiat dollars to keep 'liquidity' in the market.  Is that right?  So if you're a central bank and you can print an infinite amount of fiat, doesn't this eventually end with the FED (or ECB, et. al) owning everything?  

It seems like this program allows people get to the exits and cash out of what would otherwise be a painful re-pricing of assets, but it seems extremely short sighted to me, because the FRN's are debased with all the printing and all the real-world assets are going to end up on the FED's ledger.  Doesn't this end with everyone holding bags of worthless toilet paper and you paying rent to the FED because they own your house, your car, the company you work for?

[Hunty]

Fat fingers

[Harley]

18 hours ago, Wheeler said:

Interview on Crux Investor with David Hunter:

 

 

 

That was really good.  Filled a few gaps I had.  I got a more rounded perspective of the guy and his thoughts rather than just the snippets from his and others posts, interviews to date, etc. 

Most of all, given DBs info, there is clearly plenty of analysis behind all this which does not come out in the interview - which begs the question - how true is that for other commentators who can speak with similar conviction but.....?

Really helped me sharpen up my focus and planning just at a time when Mr Market is being seductive with a great November.  If I chase it now (I'm not yet fully invested) it'll be a liquid trade in a handful of instruments while safe harbouring (least bad place) the rest. 

Regarding safe harbours, even US bonds (long or short?) looking good in the run up to the BK and will their ETFs be safe, especially those who've  lent the holdings to banks(!), etc? 

Commodities look good later but only if not derivative based (PMs) until the BK then best to wait until any derivative unwind?  As DB says, if supplemented with commodity company equities, stay close to the source (i.e, producers) but still expect a hit? 

But key point from the interview - maybe has to be a game of two halves (pre and post BK) as anything bought now for the part 2 inflation will get irrevocable hit in part 1, either on a fundamental basis or as collateral damage as part of margin calls and other rushes for liquidity?  But is that the least bad as will the alternative (cash) be gone in part 1?  As DB says, a hard few months to navigate - a minefield!

[Harley]

4 hours ago, Hunty said:

Link MS

If central banks buy $1.3B assets every 60 minutes, how long until they own all the assets?  The idea behind QE is to buy the assets at high prices no-one else will pay using their fiat dollars to keep 'liquidity' in the market.  Is that right?  So if you're a central bank and you can print an infinite amount of fiat, doesn't this eventually end with the FED (or ECB, et. al) owning everything?  

It seems like this program allows people get to the exits and cash out of what would otherwise be a painful re-pricing of assets, but it seems extremely short sighted to me, because the FRN's are debased with all the printing and all the real-world assets are going to end up on the FED's ledger.  Doesn't this end with everyone holding bags of worthless toilet paper and you paying rent to the FED because they own your house, your car, the company you work for?

"You will own nothing and be happy"!

[Harley]

5 hours ago, Loki said:

I'd never have thought it possible but people's idiocy has amazed me for the past 9 months.

Indeed 100%.  Idiots, with the rest who aren't being shut down.  It's the 1920s and 193Os all over again.  What arm bands will some of us have to wear this time and for what?  Will they go digital (like in China)?  After all history only rhymes (yeah sure)!  

[jamtomorrow]

8 hours ago, Harley said:

People going to start blaming all the covid fallout on brexit to cya on the covid mismanagement?  Double bonus for most of the MSM, if anyone is still listening.

Or the other way round, hide botched Brexit in botched Covid?

At this point it scarcely matters, the segue will be so seamless punters won't realise it's a new track.

[Lightscribe]

9 hours ago, Harley said:

People going to start blaming all the covid fallout on brexit to cya on the covid mismanagement?  Double bonus for most of the MSM, if anyone is still listening.

Timing was very favourable for some, China vs India economy, US elections and Brexit.
 

[Lightscribe]

4 hours ago, Harley said:

Indeed 100%.  Idiots, with the rest who aren't being shut down.  It's the 1920s and 193Os all over again.  What arm bands will some of us have to wear this time and for what?  Will they go digital (like in China)?  After all history only rhymes (yeah sure)!  

Digital blockchain currency is inevitable. 
 

https://www.weforum.org/whitepapers/bridging-the-governance-gap-dispute-resolution-for-blockchain-based-transactions

[Green Devil]

4 hours ago, Harley said:

That was really good.  Filled a few gaps I had.  I got a more rounded perspective of the guy and his thoughts rather than just the snippets from his and others posts, interviews to date, etc. 

Most of all, given DBs info, there is clearly plenty of analysis behind all this which does not come out in the interview - which begs the question - how true is that for other commentators who can speak with similar conviction but.....?

Really helped me sharpen up my focus and planning just at a time when Mr Market is being seductive with a great November.  If I chase it now (I'm not yet fully invested) it'll be a liquid trade in a handful of instruments while safe harbouring (least bad place) the rest. 

Regarding safe harbours, even US bonds (long or short?) looking good in the run up to the BK and will their ETFs be safe, especially those who've  lent the holdings to banks(!), etc? 

Commodities look good later but only if not derivative based (PMs) until the BK then best to wait until any derivative unwind?  As DB says, if supplemented with commodity company equities, stay close to the source (i.e, producers) but still expect a hit? 

But key point from the interview - maybe has to be a game of two halves (pre and post BK) as anything bought now for the part 2 inflation will get irrevocable hit in part 1, either on a fundamental basis or as collateral damage as part of margin calls and other rushes for liquidity?  But is that the least bad as will the alternative (cash) be gone in part 1?  As DB says, a hard few months to navigate - a minefield!

😂

80% crash in the stock market next year? 

Inflation 20%, interest rates 15%.

Come on... I could see inflation at 20%, but the rest is pure fantasy. 

[Wheeler]

From Reuters:

 

In boost to climate action, Britain to stop backing overseas oil and gas projects

LONDON (Reuters) - British Prime Minister Boris Johnson will pledge to end direct government support for overseas fossil fuel projects at a U.N. summit on Saturday, aiming to spur similar moves by other countries to help tackle climate change, his office said.

...

The government said the new policy would come into effect “as soon as possible” and would mean no further state support for oil, natural gas or coal projects overseas, including via development aid, export finance and trade promotion.

There would be “very limited exceptions” for gas-fired power plants within “strict parameters” in line with the Paris deal, the statement said.

 

 

[DurhamBorn]

9 hours ago, Hunty said:

Link MS

If central banks buy $1.3B assets every 60 minutes, how long until they own all the assets?  The idea behind QE is to buy the assets at high prices no-one else will pay using their fiat dollars to keep 'liquidity' in the market.  Is that right?  So if you're a central bank and you can print an infinite amount of fiat, doesn't this eventually end with the FED (or ECB, et. al) owning everything?  

It seems like this program allows people get to the exits and cash out of what would otherwise be a painful re-pricing of assets, but it seems extremely short sighted to me, because the FRN's are debased with all the printing and all the real-world assets are going to end up on the FED's ledger.  Doesn't this end with everyone holding bags of worthless toilet paper and you paying rent to the FED because they own your house, your car, the company you work for?

No,because they dont own any assets really,they own debt.Most of the recent CB action has been to help governments with fiscal injections.I would agree lots of bonds etc will be re-priced down by a lot.I think inflation adjusted people buying 10 or 15 year government debt will lose between 50% and 80% inflation.Asset allocation prices will simply adjust up and down on the amount of liquidity and the moves from consumtion to investment in assets.

The next cycle will see inflation rocket,that is what will eat savings etc,unless people have allocation to some inflation loving areas.Most dont have any,or very little.The woke funds selling out of big oil is a prime exampls.Tesla wont protect anyone from inflation.

I should add,there is still a year window for bonds to have one last run up in a big kahuna.

[DurhamBorn]

32 minutes ago, Green Devil said:

😂

80% crash in the stock market next year? 

Inflation 20%, interest rates 15%.

Come on... I could see inflation at 20%, but the rest is pure fantasy. 

David will be putting out the things he sees in the structure of the macro position.It could be a lot of the market goes down 80% but some holds its own or even goes up.

David worked for the best equity team who ever lived.He was trained by the best macro strategists of the last 50 years.As with Steve Kaplan its best for everyone to enjoy their work and form their own thoughts,but take a lot from those guys.I rate them both as two of the best contrarian investors out there,and among the very few who have seen cycles like the one likely ahead.Nobody under 40 has any memory of whats likely ahead.I can just remember.

[Harley]

44 minutes ago, Green Devil said:

😂

80% crash in the stock market next year? 

Inflation 20%, interest rates 15%.

Come on... I could see inflation at 20%, but the rest is pure fantasy. 

So no BK (TBF, he did say between 80% and say 65%) in your roadmap then, just straight to inflation?  Fair enough.  It's very helpful to map out a number of scenarios and look for any alignment in potential actions.  Nothing is certain, everything has a probability, outcome, and expected outcome.

[Harley]

One thing I'm not clear on (maybe once explained but the brain has shrunk too much to retain) - what actually causes a BK (trigger and then ensuing process)?  And by BK I am assuming we mean a worldwide equity market fall in prices of say 65-80% of 3 to 4 months duration.  I can posit from some classic economics, including Austrian School, but I think the rationale is different.  Is it a solvency/liquidity crisis where the first grain of sand (a company) can no longer fund its debt and we have a cascade effect (an unwinding)?

[Green Devil]

4 minutes ago, Harley said:

So no BK (TBF, he did say between 80% and say 65%) in your roadmap then, just straight to inflation?  Fair enough.  It's very helpful to map out a number of scenarios and look for any alignment in potential actions.  Nothing is certain, everything has a probability, outcome, and expected outcome.

We're already in asset inflation. Its just not showing in wages or food etc. There's always a crash due to some external events so a dip is certainly possible, but a year long bust? We had corona crash and that only lasted 2 months FFS! Can it get much worse? Anyone who talks about rates rising still thinks we're in the old monetary system. IMO we're not.

 

[Harley]

Assuming a BK event (as defined above), has anyone mapped out the likely price consequences of each asset type before and after said event (after being the period until the next major event)?

Specifically:

US, EU and UK long term government bonds

US, EU and UK corporate bonds

Silver and gold

Regional equity markets (US, EU, APD, EM)

Sectors (Materials, energy, etc)

Currencies (GBPUSD. GBPEUR, GBP.....)

Commodities

UK bank deposits

Etc

I assume everything goes down initially as people liquidate positions to pay margin calls, etc so I'm thinking a bit further post BK, to after the initial dust has settled, say a month(?) - say like a building collapse - the initial effects all of that dust versus the longer term effects of the pollution of the toxic dust .

 

[Harley]

36 minutes ago, Green Devil said:

We're already in asset inflation. Its just not showing in wages or food etc. There's always a crash due to some external events so a dip is certainly possible, but a year long bust? We had corona crash and that only lasted 2 months FFS! Can it get much worse? Anyone who talks about rates rising still thinks we're in the old monetary system. IMO we're not.

TBF, DH said a 3 to 4 month BK - as opposed to the old normal in that regard.  His point is a big fall is hard to crawl out of despite the rebound (just like many of my positions post the CV crash which are still under despite some recent major upswings).  I agree with that in the sense of things are speeding up (and more volatile) - like a ship being overweight (money/debt) and prone to capsize quickly once it gets going).  A basis for that profile in systems theory. 

Totally agree with the point about asset inflation (but TBF plus some leakage into food, etc via shrinkflation).  I see that as very much a velocity of money thing tied to the unequal distribution of this recent "wealth" and the marginal propensity to consume/spend (rich people can only buy so much bog roll whereas most of us don't buy fine art).  That makes behavioural aspects a key driver of this show as it's velocity which is the champion for behaviour in the otherwise mechanistic price of money formulae.

I'm also uncertain about rates  - as you say, that is defo the old normal and we seem to be off somewhere else now, with MMT, etc so maybe it will be different this time, least for quite a while. 

More importantly I agree with the underlying sentiment (something I have also banged on about) - a real danger is we stay in the burning building (or box) sticking to the old normal reference points and way of doing things when that is falling away all around us - Mr Market likes to hurt the most people but even Mr Market has his devil/master - my Russian doll analogy!

A key (often forgotten) thing is economics and life generally - take time to identify the function you wish to optimise as that function has many attributes beyond just the variables, like time (temporal) and the base unit of measure (value).  A poor function optimised is sub-optimal!

[Talking Monkey]

14 hours ago, Heart's Ease said:

Just checked to see if XOM dividend has arrived in HL and can't see anything yet.  Arrived to Freetrade account this afternoon.  Anyone else got XOM in HL?

Ive checked an hour or so ago and cannot see the Dividends for Exxon or Chevron in HL, is this normal do they have a delay.  Has anybody ever experienced a Divi not turning up and having to chase HL admin.

[Green Devil]

11 minutes ago, Harley said:

TBF, DH said a 3 to 4 month BK - as opposed to the old normal in that regard.  His point is a big fall is hard to crawl out of despite the rebound (just like many of my positions post the CV crash which are still under despite some recent major upswings).  I agree with that in the sense of things are speeding up (and more volatile) - like a ship being overweight (money/debt) and prone to capsize quickly once it gets going).  A basis for that profile in systems theory. 

Totally agree with the point about asset inflation (but TBF plus some leakage into food, etc via shrinkflation).  I see that as very much a velcoty of money thing tied to the unequal distribution of this recent "wealth" and the marginal propensity to consume/spend (rich people can only buy so much bog roll whereas most of us don't buy fine art).  That makes behavioural aspects a key driver of this show as it's velocity which is the champion for behaviour in the otherwise mechanistic price of money formulae.

I'm also uncertain about rates  - as you say, that is defo the old normal and we seem to be off somewhere else now, with MMT, etc so maybe it will be different this time, least for quite a while. 

More importantly I agree with the underlying sentiment (something I have also banged on about) - a real danger is we stay in the burning building (or box) sticking to the old normal reference points and way of doing things when that is falling away all around us - Mr Market likes to hurt the most people but even Mr Market has his devil/master - my Russian doll analogy!

They have already mapped out what happens. They will switch from dollar to CBDC and when they do they will wipe out government and company debt. The only mugs left swimming out when the tide recedes will be those with big fat mortgages as we know pricing of housing is the one thing they will keep constant. They might give all those endebted a sweetner, ie holiday for a few years. But their debts will stand to ensure their compliance in the future. Happy days. Buy bitcoin now while its under 100k.

[Harley]

11 minutes ago, Talking Monkey said:

Ive checked an hour or so ago and cannot see the Dividends for Exxon or Chevron in HL, is this normal do they have a delay.  Has anybody ever experienced a Divi not turning up and having to chase HL admin.

I heard in some podcast XOM had to effectively borrow to pay its div - maybe held up at the bank!