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

[reformed nice guy]

Very interesting chat about inflation. 

Cost of animal feed (corn, wheat, hay etc) are all up at least 50% from last year by the tonne

[DurhamBorn]

2 minutes ago, reformed nice guy said:

Very interesting chat about inflation. 

Cost of animal feed (corn, wheat, hay etc) are all up at least 50% from last year by the tonne

Exactly,and that then makes farmers use more potash etc because they want higher yields to cash in.I dont think people understand cost push inflation at all.Its going to blind side them.

[Bricormortis]

Anyone know how safe Wisdom Tree physically allocated silver is ? Seems HSBC hold the silver, and have a reputation for being major silver stackers...but is there a concern that a chunk of PHAG Is all bits of promissory paper ?  I cant see any reference to audits on their website.

 

 

 

 

[DurhamBorn]

8 minutes ago, Bricormortis said:

Anyone know how safe Wisdom Tree physically allocated silver is ? Seems HSBC hold the silver, and have a reputation for being major silver stackers...but is there a concern that a chunk of PHAG Is all bits of promissory paper ?  I cant see any reference to audits on their website.$2 billion

 

 

 

 

Iv got some with them and think they should be ok.They dont lend out and hold the physical.$2 billion worth and its HSBC USA who hold the bullion.

[Barnsey]

Been seeing a lot of Hydrogen buzz lately, time to sit up and take it seriously?

 

[janch]

But there's always someone to rain on your parade.  My son who is completely "woke" (and does not want to be saved) sent me this:

https://unearthed.greenpeace.org/2020/12/08/unearthed-today-why-oil-companies-want-you-to-love-hydrogen

but it's always useful to know what the opposition are thinking

[Loki]

41 minutes ago, janch said:

But there's always someone to rain on your parade.  My son who is completely "woke" (and does not want to be saved) sent me this:

https://unearthed.greenpeace.org/2020/12/08/unearthed-today-why-oil-companies-want-you-to-love-hydrogen

but it's always useful to know what the opposition are thinking

Quote

 

Gas and electric heating already compete on price. Gas which has had the carbon dioxide removed, piped and then and buried and monitored indefinitely underground is always going to be way more expensive than just gas.  

Heating our homes this way could either divert billions of ‘climate funding’ into taxpayer subsidies to support the industry which produces it or drive fuel poverty and popular resentment against climate action or probably both; either way it would make it much harder to avoid catastrophic climate change. 

 

What exactly do these freaks want?! No shit the price of energy will go up.  What did you morons think would happen? 

This whole thing is just a massive 'shit test' and we have failed.  

[Barnsey]

Hmm...

 

[Democorruptcy]

8 hours ago, Harley said:

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)?

I thought a technicals chap like you might be 61.8% next time?

The FTSE covid dip in March from the 2019 high was near enough a classic -38.2%

Fibonacci knew!

 

Quote

 

The Fibonacci sequence of numbers is as follows: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc. Each term in this sequence is simply the sum of the two preceding terms, and the sequence continues infinitely. One of the remarkable characteristics of this numerical sequence is that each number is approximately 1.618 times greater than the preceding number. This common relationship between every number in the series is the foundation of the ratios used by technical traders to determine retracement levels.

The key Fibonacci ratio of 61.8% is found by dividing one number in the series by the number that follows it. For example, 21 divided by 34 equals 0.6176, and 55 divided by 89 equals about 0.61798.

The 38.2% ratio is discovered by dividing a number in the series by the number located two spots to the right. For instance, 55 divided by 144 equals approximately 0.38194.

https://www.investopedia.com/ask/answers/05/fibonacciretracement.asp

 

 

[DurhamBorn]

@Democorruptcy that was a massive drop wasnt it when considering the FTSE big caps are quite defensive in nature.The likes of Astrazeneca only went down 13% so shows how hard it many smaller caps in the index were hit.Of course oil hit a lot of the index.

[Bobthebuilder]

3 hours ago, Loki said:

What exactly do these freaks want?! No shit the price of energy will go up.  What did you morons think would happen? 

This whole thing is just a massive 'shit test' and we have failed.  

That's quite incredible, they have no idea at all, and even get the basic math wrong. I am not sure the earth has a solution for this lot.

[Loki]

2 minutes ago, Bobthebuilder said:

That's quite incredible, they have no idea at all, and even get the basic math wrong. I am not sure the earth has a solution for this lot.

The general gist seems to be they want us to stop heating our homes to find climate "Science"
(Quotes mine )

 

They can sod off.

[Bobthebuilder]

1 minute ago, Loki said:

The general gist seems to be they want us to stop heating our homes to find climate "Science"
(Quotes mine )

 

They can sod off.

Another poster on here always says, if his son starts banging on about this he gives him a cold shower. See how he likes that.

[Loki]

2 minutes ago, Bobthebuilder said:

Another poster on here always says, if his son starts banging on about this he gives him a cold shower. See how he likes that.

I think that was @Cattle Prod and I respect him for doing so.  That will be one less young person blindly supporting New Environmentalism. (I've said already else where I am as 'green' as they come, we should focus on restorative farming, reducing pesticides, habitat destruction, plastic waste, chemical pollution, etc, etc, etc)

You just know the fuckwits at the top pushing this nonsense won't up choosing between energy for hot water and energy in the form of food.

[Bobthebuilder]

1 minute ago, Loki said:

I think that was @Cattle Prod and I respect him for doing so.  

You just know the fuckwits at the top pushing this nonsense won't up choosing between energy for hot water and energy in the form of food.

I first noticed this trend with the hipsters in east London from about 2008. Too poor to buy a razor? Grow a beard, too poor to buy a car? Ride a push-bike, too poor to eat a decent meal? Serial killer etc, etc. They had sunk every penny into a £450,000 ex council flat in E8 and couldn't afford anything else.

[Loki]

Just now, Bobthebuilder said:

I first noticed this trend with the hipsters in east London from about 2008. Too poor to buy a razor? Grow a beard, too poor to buy a car? Ride a push-bike, too poor to eat a decent meal? Serial killer etc, etc. They had sunk every penny into a £450,000 ex council flat in E8 and couldn't afford anything else.

They were LARPing.  It's easy to glamorise poverty when Mummy and Daddy can bail you out...a popular beat combo called Blur did a song about it...  Not sure about the latest, they are just following the herd (But in a unique and individualistic way)

 

[Bobthebuilder]

Thought you meant this one. "What have you got? Massed produced in somewhere hot."

 

[Loki]

@Bobthebuilder I like it.  The vid reminds me of this

 

[Harley]

14 hours ago, Democorruptcy said:

I thought a technicals chap like you might be 61.8% next time?

Interesting.  But I'm more of a dabbling rough tart in such things who likes just a bit of everything!

[Democorruptcy]

2 minutes ago, Harley said:

Interesting.  But I'm more of a dabbling rough tart who likes just a bit of everything!

The FTSE is starting from a much lower level than the US markets. The Hussman downdates seem to expect something in the range of a Fibonacci retrace for the S&P. Would be nice to know the starting top figure if it was going to happen!

[Harley]

2 hours ago, Democorruptcy said:

The FTSE is starting from a much lower level than the US markets. The Hussman downdates seem to expect something in the range of a Fibonacci retrace for the S&P. Would be nice to know the starting top figure if it was going to happen!

Cheers.  A lot to like there as a piece of analysis.  I'll need to read it a few times!

The basis of his initial analysis, inter alia, seems to be his projection for future S&P returns (workings?), the S&P (a badly weighted cap index and only one, albeit the largest market), and a focus on just some asset classes (bonds v equities) which I question the validity of doing in such an analysis.

Not to rubbish his points or conclusion but would be interesting if he went broader and explained his workings.  The option value of money is accepted, and something I stick to - although I really need to get back into equity hedging (his preferred choice).  Derivatives and cash are however not risk free.

I like a lot of his stock valuation and macro stuff.  As far as US equity value is concerned - my international screens rarely identify a US company (and not much else atm either).  US companies stand out for poor tangible book to equity valuations, high debt levels and low current ratios.  But debt (debt to equity ratio) is the most common issue.  The November equity bull seems to have killed off further international value purchases for me. 

What he says about valuations echoes as I heard someone say elsewhere that the run up in equity valuations is more about low bond yields than much else and we are now (given the current situation) at extremes.  XOM apparently having to effectively borrow to pay its div may be a canary and a sign of a yield trap (another reason for my move away to a more subtle value focus).  

I was going to post this about the 60:40 portfolio as it's well written but fear it may, on the basis of the above, end up directing people towards the guns!

https://www.ftadviser.com/investments/2020/12/08/portfolio-construction-after-the-pandemic/

PS:  Thinking some more, the article may have flowed better starting with the macro valuation stuff, then the cash option, then the policy stuff.

[Democorruptcy]

56 minutes ago, Harley said:

Cheers.  A lot to like there as a piece of analysis.  I'll need to read it a few times!

I've posted that link before and some of his other stuff. If interested you could search 'this topic' for "Hussman Downdate"

[sancho panza]

23 hours ago, dnb24 said:

https://www.telegraph.co.uk/property/house-prices/looming-threat-forced-sellers-could-hit-house-prices-despite/

 

anecdotal- family member works in Liverpool for council advising on benefits- in last 6 weeks she reports significant increase in forced sellers of property due to  savings been rinsed trying to keep afloat. 
 

#debtdeflationcometh

https://www.thetimes.co.uk/article/we-are-millionaire-mortgage-prisoners-znd3t0ttg

We are millionaire mortgage prisoners

 

[Noallegiance]

12 minutes ago, sancho panza said:

#debtdeflationcometh

https://www.thetimes.co.uk/article/we-are-millionaire-mortgage-prisoners-znd3t0ttg

We are millionaire mortgage prisoners

 

Shame

[sancho panza]

On 11/12/2020 at 10:36, Wheeler said:

Interview on Crux Investor with David Hunter:

 

 

 

I love his phrase that there are two types of investors,

'those who learn from their msitakes and those who don't.'

The rest is of the qulaity we're used to.Need to relisten to this without the kids screaming at me.

On 11/12/2020 at 22:47, Inigo said:

Speaking to someone this week who regularly ships container loads of stuff from the far east.  Apparently there are no containers left, they are all in the UK.  Cost has risen from around £1,000 to around £6,000.  Stuff cannot be unloaded at Felixstowe as it is full, with a backlog, ships waiting outside to unload and instead unloading in Zeebrugge.

Heard the same from a close firend who ships containers from CHina a lot.Exactly the same tbh.even the bit about there being no empty containers in CHina-she literally used those words

They're an online seller so had a good march/arpil but now have loads of stock lines lsited as unavailable.She also said HOnda had closed a factory because they couldn't get parts which I think @durhamborn alludes to downthread iirc

Covid/Brexit/Shipping crisis all coming at the worng time.

On 12/12/2020 at 10:06, Harley said:

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)?

I think top to bottom in the indices will be the normal 1-3 year range.I'm not sure we'll see a 3-4 motnh bottom,that would be unprecedneted but not impossible.LAst credit deflation took 3 years to bottom in 1932.I think they'll be much dip buying intially as punters have been rewarded for BTFD the last few years.It'll take some time to shake out that optimism imho

On 12/12/2020 at 10:14, Harley said:

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 .

 

For me H,it's going to be like March when the quality stuff got sold off to pay margin calls and to rasie cash.Only place I'll be hiding is UST's and cash as well as bottom rungs in oilies/goldies/telecoms/UST's.

Looking at corporate credit markets,soemthing Danielle Dimartino ahs been warning about for some time,the unwind could be very disorderly and only the big balance sheets will be safe harbours.