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

[Talking Monkey]

18 minutes ago, wherebee said:

I actually think that the north of england will be one of the better places to be if you are of working age in the next 30 years.

The drag of insane house prices in the SE, coupled with the steady loss of high paying jobs in London, will leave a lot of the SE stuck where the new generation cannot afford to live and work (been like this for a while, I know, but I think this will accelerate as the trickle down effect in the SE dries up).

In the north, I could see investment in manufacturing due to re-onshoring being a thing, which when coupled with cheaper housing stock means that you can work and live without insane debt levels.  Go north, young man.

I just can't see that over a 30 year time frame maybe the next decade, I reckon automation will take away lots of jobs at an increasing pace

[planit]

3 hours ago, Cattle Prod said:

Thanks, any idea about Israel? Markets will be watching them closely as a leading indicator especially as Pfizer set it up fpr that reason. Good piece in the Spectator about it, no sign of a drop in numbers or deaths yet...

It's a bit difficult to draw conclusions as there are a lot of aspects that affect the outcome, for one thing I don't know whether Israel are handing out the vaccines in a particular order, the important thing is what percentage of the 80 year olds have been vaccinated, in the uk most of the high risk patients have already had the vaccine. Israel might have vaccinated 25% of the population but if that equals 25% of the 80 year olds it will have less of an effect than in the UK.

The new Covid cases in Israel haven't peaked yet either so we might find the UK is the first place with solid evidence that the vaccine has worked.

The point I was trying to make was that the speed with which the outlook changes might take investors off-guard (could be any country evidence). At DOSBODS we try to never be caught off-guard 

[sancho panza]

 

11 hours ago, Cattle Prod said:

Clear link there between morbid obesity and serious corona infection. Another factor confirming that this disease wouldn't have registered even 20 years ago. In times past, we neither had the fat people nor the very old people that the virus is bringing down. This is of course why it's barely noticeable in Africa. 

So looking at it as an objective Darwinian - the virus is attacking the weakest, as has been happening since time immemorial. The problem is we are making our societies weaker. This is perhaps a new element to factor into future macro roadmapping: as we facilitate obesity and strive to perserve life in the aged way beyond it sensibily would have been in the past, we are leaving ourselves indefinitely open to the prospect of governments destroying our economies on a periodic basis every time a virus does what viruses do in taking out the weak

It's really surprised me how there's been so much tlak in the govt and MSM about the increased risk of covid to people with Hypertension,heart failure,diabetes type 2 etc without any real discussion about the role obesity plays in those illnesses.

I think western societies have become very soft.For my sins because of my job,I take a pragmatic approach to death.People have become used to being cushioned from the hard realities of life by the false and misleading promises of politicians and TV shows.That encourages the sort of indukgence that guarantees,in it's turn, the swamping of resources.

Biggest problem this country faces-along with a lot of the West is the rise and rise of Diabetes Type 2 as a result of obesity.It'll bring all sorts of problems that people will expect there to be a solution to.

10 hours ago, Harley said:

Some of us in the private sector must be looking at their equivalent public sector cohort in disbelief.  The better ones collect and crunch the data and provide feedback to improve performance.  A shocking performance, maybe to be confirmed after the 25 year public enquiry unless it's all full on 1984 by then!  There are only two doors for these people: "criminally incompetent" or "evil".

I look at the way the St Louis Fed presents it's data and it's both full and informative.Same can't really be said for the BoE or the NHS.

There are a kot of conspiracy theories about covid but I've said before,I think our political class have bumbled from one untintended consequence into another,so my vote would definitely be for criminal incompetence.

What I find alarming is that the bumbling incompetence has laid out the framework for the first totalitarian leader of the UK since Cromwell.

9 hours ago, dnb24 said:

DB, and anyone else who cares to chip in, velocity is key when we get released from these lockdowns and CB fiscal policy and M1 gets sucked out into the economy. As far as I can see - inflation is going to be a seen as requirement (from central planner). Government spending is going to be front and centre, but surely (my emphasis) there will be areas in the economy that will run hot as people spend- especially in the early days while old habits exist, has any of your cross market work highlighted these areas at all? 

The inflation turn is the key to what's coming imho.Over the last couple of decades,we've printed money relentlessly when faced with a crisis and all that's happened is that velocity has dropped which has enabled even more printing.As you allude,the problem comes when velocity starts to run-a recurring theme on this thread-and once it starts to run,I sjut don't see how they'll be able to reign it in once the public gets used to the idea of spending before their moeny becomes worth less.We've seen though that people have been paying credit cards down in 2020 and other unusal things which make predictions hard....for me at least.

I think we'll see a sugar rush when this is over but not in all sectors.And for that reason,I don't think we'll get the sort of inflation that will change the fiscal/forex/welfare position immediately but it may not be long.I can't see a way we won't be seeing it by year end.

[sancho panza]

4 hours ago, Cattle Prod said:

Thanks, any idea about Israel? Markets will be watching them closely as a leading indicator especially as Pfizer set it up fpr that reason. Good piece in the Spectator about it, no sign of a drop in numbers or deaths yet...

might be a reason for that psoted by @leonardratso elsehwhere

https://www.bloomberg.com/news/articles/2021-01-15/norway-warns-of-vaccination-risks-for-sick-patients-over-80

Norwegian officials said 23 people had died in the country a short time after receiving their first dose of the vaccine. Of those deaths, 13 have been autopsied, with the results suggesting that common side effects may have contributed to severe reactions in frail, elderly people, according to the Norwegian Medicines Agency.

1 hour ago, DurhamBorn said:

@sancho panza indeed,and i think Labour are finished in the north.They are hated in a way iv never known.Labour forgot that most of their voter base was actually conservative in a lot of their beliefs.However its also incredible to think,the Tories finally win those Labour seats,then become an absolute disaster of a government.This cycle might actually save decent working people as once the CBs disengage as they will in around a year or so the government will have a £150 billion structural deficit and nobody will lend for less than 3%,then 4%,then 5% etc.

Tories have huge structural problems(as do Labour) in that their political class isn't really representative of the constituenceis they come from.Hence populsim is here to stay until that changes.

Once upon a time,Labour MP's were people who had actually had working class jobs before parliament.

As for the Tories-I should be one-but I'd rather vote Green to help them get their deposit back than vote for them.I live 200m outside Leicester,our MP lives in London,has a huge majority.200m the other way is the Labour safe seat of Leicester East.Similar story.But underneath the surface of the water the currents are changing.I think the political class are in for a shock and when we get the BK,I think times will get very interesting-especially as the turth about Covid will be coming out and neither main party (Tory Lockdown or Labour Lockdown) will come out of it looking good.

[Yadda yadda yadda]

1 hour ago, DurhamBorn said:

@sancho panza indeed,and i think Labour are finished in the north.They are hated in a way iv never known.Labour forgot that most of their voter base was actually conservative in a lot of their beliefs.However its also incredible to think,the Tories finally win those Labour seats,then become an absolute disaster of a government.This cycle might actually save decent working people as once the CBs disengage as they will in around a year or so the government will have a £150 billion structural deficit and nobody will lend for less than 3%,then 4%,then 5% etc.

Labour in London is completely disconnected from a lot of their supporters. They will continue winning here for a while but the party is a shambles. They represent two completely different interest groups. "Liberal" middle class people including much of the public sector and the benefits class. The private sector full time working class gets nothing from them. When the choice of tax rises or spending cuts arrives they have no answer that doesn't cut them in half.

[Loki]

Sorry lads in my opinion if politics could sort anything in a decent manner this thread would not need to exist

[DurhamBorn]

5 hours ago, Loki said:

Sorry lads in my opinion if politics could sort anything in a decent manner this thread would not need to exist

Politics is driven by the economics usually,not the other way around.The problem in the west is governments have decided to keep handing out more and more freebies during a disinflation when CBs had massive capacity to print.Goverments and the people have no idea inflation,even at quite modest levels of 3% will remove that option,and that will be one of the stories of the cycle.Governments actually having to tax much more or spend much less,or both.

[Barnsey]

8 hours ago, wherebee said:

I actually think that the north of england will be one of the better places to be if you are of working age in the next 30 years.

The drag of insane house prices in the SE, coupled with the steady loss of high paying jobs in London, will leave a lot of the SE stuck where the new generation cannot afford to live and work (been like this for a while, I know, but I think this will accelerate as the trickle down effect in the SE dries up).

In the north, I could see investment in manufacturing due to re-onshoring being a thing, which when coupled with cheaper housing stock means that you can work and live without insane debt levels.  Go north, young man.

North = Coventry and above 

In complete agreement, the South is having its Emperor's New Clothes moment, not dead of course, but we could easily see a sizeable reversal of property price divergence since the 1990s. Young people are incredibly adaptable, and have had an awakening essentially to the savings to be had, trading one s****y area of London for another less s****y area in another Midlands/Northern city for less than half. That's what insane price increases will do over time combined with stagnant wages, boiling of frogs etc until breaking point.

I do think Manchester has become a little too frothy in recent years however.

 

Launches in October, going to be at least 3.5% I'd imagine.

[Barnsey]

1 hour ago, DurhamBorn said:

Politics is driven by the economics usually,not the other way around.The problem in the west is governments have decided to keep handing out more and more freebies during a disinflation when CBs had massive capacity to print.Goverments and the people have no idea inflation,even at quite modest levels of 3% will remove that option,and that will be one of the stories of the cycle.Governments actually having to tax much more or spend much less,or both.

Do you think this recent talk of scrapping council tax for property tax in line with current values will become a reality? I'm paying twice as much council tax in Staffordshire as I was in Wimbledon for the same size flat!

https://metro.co.uk/2021/01/17/rishi-sunak-urged-to-scrap-council-tax-and-stamp-duty-13918077/

[arrow]

Looks like Biden is going to talk about the Keystone oil pipeline and other pipelines in his first speeches as president. Could be an indication of what he'll do about the existing and future pipelines from canada to usa. Will affect Enbridge and TC energy.

[jamanda]

Excuse me for butting in.  I read this thread but have to confess an awful lot of it goes over my head.

I have some money in banks.  Not lots.  Am I to understand - in idiot terms please, don't hesitate to patronise I won't be offended - that when inflation starts to take off, interest rates will have to rise too.  Or have I misunderstood.

I have read the reinflation stocks information and am too scared or stupid, take your pick, to venture in, in case I lose the money.

Thank you for your patience.

[CVG]

6 minutes ago, jamanda said:

Excuse me for butting in.  I read this thread but have to confess an awful lot of it goes over my head.

I have some money in banks.  Not lots.  Am I to understand - in idiot terms please, don't hesitate to patronise I won't be offended - that when inflation starts to take off, interest rates will have to rise too.  Or have I misunderstood.

I have read the reinflation stocks information and am too scared or stupid, take your pick, to venture in, in case I lose the money.

Thank you for your patience.

Inflation will probably front run the interest rates, e.g. inflation may be 12% and interest rates 8%. So your money would lose value even though interest rates were much higher than today. It will be worse for some pensioners whose increases are capped to, say, 5%. Let's use those figures for 2 years.

£100 at 5% grows to £110

£100 at 8% grows to £116

£100 at 12% grows to £125

After 2 years the pensioner can only buy 88% of what they used to. If all their money was spent on food then they'd have to survive on 14% less than they used to.

[jamanda]

Thank you

[Popuplights]

15 minutes ago, jamanda said:

I have read the reinflation stocks information and am too scared or stupid, take your pick, to venture in, in case I lose the money.

Thank you for your patience.

Don't be silly. You are here. That makes you more clued up than 99% of the population.

There are plenty of us who are also novices in the investment game. 

I would say you need to open a stocks and shares ISA first thing, to establish a platform to invest from, and then all the income you make is shielded from tax. 

 

[Noallegiance]

2 hours ago, DurhamBorn said:

Politics is driven by the economics usually,not the other way around.The problem in the west is governments have decided to keep handing out more and more freebies during a disinflation when CBs had massive capacity to print.Goverments and the people have no idea inflation,even at quite modest levels of 3% will remove that option,and that will be one of the stories of the cycle.Governments actually having to tax much more or spend much less,or both.

This, for me, is going to be interesting at the very least. Why? Because for the first time in my life politicians will have to make decisions on winners and losers without the limited resource of the printing press. Maybe we'll see some freedom of decision making return to people as a result?

I've said to a mate for a long time that it's been decades since any politicians made a decision that didn't involve buying off people affected by a decision with extra devalued currency.

It's difficult to imagine the ramifications of that tool not being there, but it ain't gonna be pretty.

[NogintheNog]

45 minutes ago, jamanda said:

I have some money in banks

Just to be clear you mean you have money as savings in banks, not invested in bank shares ie; LLOY, HSBA etc?

[jamanda]

Yes.  Useless saving accounts.

Well - you've done it now.  I've just opened an ISA with HL and put a bit of money in.  Not the end of the world if it goes.

Got to think now where to put it.  Still traumatised from opening the bloody thing.

[wherebee]

7 minutes ago, jamanda said:

Yes.  Useless saving accounts.

Well - you've done it now.  I've just opened an ISA with HL and put a bit of money in.  Not the end of the world if it goes.

Got to think now where to put it.  Still traumatised from opening the bloody thing.

Never apologise for asking questions.  Only fools are afraid to admit when they do not know something.

The benefits of cash can be:

• Guaranteed returns
• Money for emergencies
• Money to buy assets in a fire sale (such as a property crash when you can offer hard cash and no one else can compete)
• Security for a loan
• peace of mind
• peacock rights (advertising your wealth in order to get cock/pussy)

The downside of cash can be:

• always loses value over time more than inflation (well, this has been the case for almost 75 years)
• if the bank collapses, you may lose all/some of it
• it's a nice target for government taxes/bail ins/levies
• it gets counted against you for benefits
• relatives may think you are rich and see you as a mark

I had a fair bit in cash for a while whilst I was trying to understand what was coming down the track.  With the help of this thread and a few others, I crystallised my view that inflation is a) coming and b) would fuck me in the arse if it did due to my age and limited future earnings.  So I invested in inflation stocks.  If I am wrong, I will win on the other side as my costs do not rise as much as I fear.

 

[Barnsey]

So, about that reward for working hard....

"Real income growth of 8 per cent is projected over the 15 years between 2009-10 and 2024-25 – five times less than the 38 per cent recorded during the 15 preceding years (1994-95 to 2009-10)."

https://www.resolutionfoundation.org/publications/the-living-standards-outlook-2021/

[Bobthebuilder]

33 minutes ago, jamanda said:

Yes.  Useless saving accounts.

Well - you've done it now.  I've just opened an ISA with HL and put a bit of money in.  Not the end of the world if it goes.

Got to think now where to put it.  Still traumatised from opening the bloody thing.

Take your time, no rush to jump all in from the off. Keep reading and asking questions a good entry will come along.

[jamanda]

I'm currently trawling back through this thread.  Brain ache.

[Harley]

Surging house prices in the UK are making it more difficult for younger generations to follow the most common path for accumulating wealth, widening a gap between the rich and the poor https://t.co/BMjznBOjDK pic.twitter.com/TfwcK5n63O

— Bloomberg Economics (@economics) January 18, 2021

Bloomberg Economics thinks buying a house is a path to accumulating wealth.  Believe that and I have some very expensive beans to sell you.  

 

 

[Yadda yadda yadda]

1 minute ago, jamanda said:

I'm currently trawling back through this thread.  Brain ache.

Don't rush to invest your money.

The core concept is that we're at an economic changing point. For around 40 years inflation has been getting lower and lower. Not in a straight line but a trend. Interest rates have also declined to near zero. This process means borrowers have generally prospered and asset prices soared.

If it goes into reverse, which most of us are all but certain it will, then there will be a different set of winners. Commodities including oil and gas. Gold and silver. Decomplexity means the earliest stage in the process. Not manufacturing but mining. Potash for farming.

There is a lot of talk about timing. That is the next level of learning and less important. It is about squeezing an extra 5-10%. What I would emphasise is that drip feeding your money in is less risky than buying all at once. That way you are not going to buy everything at a short term peak. You won't get it all at a trough either.

One other point is that as this cycle ends after 40 years there are very few financial professionals who have experienced an inflationary environment. That means a lot of the professionals will make mistakes. I see that as our great advantage.

Good luck. I find it fascinating as well as increasing the value of my savings over time. The people on this thread are top notch.

[Democorruptcy]

36 minutes ago, jamanda said:

Yes.  Useless saving accounts.

Well - you've done it now.  I've just opened an ISA with HL and put a bit of money in.  Not the end of the world if it goes.

Got to think now where to put it.  Still traumatised from opening the bloody thing.

Instead of useless savings accounts have a look at this NS&I ISA, for the money you don't want to put in shares. Banks have the £85k FSCS limit, at NS&I there is no limit. Rates are low now but IF they went up, it might save you paying tax on the interest income.

If your dabble in the shares ISA goes well, you can transfer from the NS&I cash ISA to your HL shares ISA. Just make sure you action the transfer early enough for the day you want to buy shares.

 

[Hardhat]

GDX looks cheap at the moment