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

[Barnsey]

From the macro gem Lyn Alden

https://www.lynalden.com/economic-japanification/

Putting all of this together, over the past few decades, Japan grew their broad money supply slowly while having structural current account surpluses, which together make for a rather strong currency, prone to disinflation.

“Japanification” from the early 1990s through 2019 was not the money-printing party that many folks imagine it to be. Broad money supply grew slowly, fiscal deficits remained at about 8% per year or lower, corporations deleveraged their balance sheets, and the massive rise in base money was contained in the financial system. It had issues, including zombification of aspects of the economy, but it wasn’t consumer price inflationary.

Most western nations, and certainly China as well, face a future demographics issue that looks similar to what Japan experienced over the past couple decades. That part is very true.

However, beyond that comparison, there are some notable differences. Europe going forward in many ways does look like Japan, in the sense that it’s older, slower growing, has a tendency to keep budget deficits narrow, has a structural current account surplus, and is growing its money supply more slowly than the US.

The United States, however, is on a very different path, for better or worse. With much faster broad money supply growth, a structural current account deficit, and fiscal deficits that are persistently larger mainly due to healthcare and defense differences, our economy has an inherently more inflationary aspect to it that must be considered in an economic analysis.

For comparison, as of December 2020, UK M2 had risen approx 16% since the start of this crisis Vs 26% for the U.S. Eurozone approx 10%.

[MrXxxx]

12 minutes ago, wherebee said:

It's worse than that.  Because each bank treats a deposit as 'clean', irrespective of whether it was, in fact, borrowed from a bank in the first place, the leverage balloons.

 

Imagine a Bank that has a gvt imposed capital ratio of 10%.  for each 100 pounds lent out, they have to hold 10 pounds of 'deposits'.  That 100 pounds goes up and down after Basle so that 200 pounds of 'safe' residential mortgage lending might only count for 100 pounds of lending in the capital requirements.  50 pounds of risky lending (say to one eyed pilots for a plane) might count as 100 pounds of lending, but the banks don't want that business anyway.

So I deposit 10 pounds into NEWBANK.  NEWBANK can then lend out 100 pounds.  Say 180 pounds of mortgages (90 after Basle) and 10 pounds in personal loans, which looks on the books as 100 pounds of lending.

My wife borrows the 10 pounds of lending, and goes to BANKNEW down the street and deposits that 10 pounds in her account.  BANKNEW then lends 180 pounds of mortgages and 10 pounds of personal loans.

So already from only 10 pounds of 'real' money, we have 360 pounds of lending on houses, and 20 pounds of personal loans.

That happens ten times, and we get to 3600 pounds of lending on houses and 200 pounds of personal loans.  All off one 'real' deposit.  On the bank books, all we see is a 10% capital requirement being met.  Looks safe as houses.

Now, the economy stalls and 5% of the house loans go under.  That's 180 pounds of loans gone bad across ten banks.  Hang on - suddenly each bank has lost 18 pounds!  but their capital ratios only covered 10 pounds of losses! Help!  The Banks are wiped out unless they can sell the underlying assets quick enough and high enough.

 

In short, once banks were allowed to leverage up on lending to houses, it was always going to end in tears.  The old building society approach of real money backing each loan (up until the 80's) was the only way to allow lending on houses if you didn't want to fuck the country.  But... that would mean less money for the landowners and politicans...

Cunts.

 

 

 

Basically both what I put in previous post (lending on inflated asset prices rather than real £), on top of fractional lending, plus the fact that a % of this capital is not `owned` capital its borrowed...this is crazy, helps explain so many inconsistencies I couldn't understand, and is just one massive ponzi!

[wherebee]

14 minutes ago, MrXxxx said:

Basically both what I put in previous post (lending on inflated asset prices rather than real £), on top of fractional lending, plus the fact that a % of this capital is not `owned` capital its borrowed...this is crazy, helps explain so many inconsistencies I couldn't understand, and is just one massive ponzi!

bingo.

unfortunately now you know this, you'll be a social pariah at any dinner party where house prices are mentioned as you pull back the curtain for the masses...

[spygirl]

8 hours ago, macca said:

record high non EU immigration last year..

Which is funny considering i would imagine most Tory voters are anti immigration but it goes up every year.. more slaves to drive down wages and raise asset prices?

I doubt those figures.

 

[spygirl]

40 minutes ago, wherebee said:

It's worse than that.  Because each bank treats a deposit as 'clean', irrespective of whether it was, in fact, borrowed from a bank in the first place, the leverage balloons.

 

Imagine a Bank that has a gvt imposed capital ratio of 10%.  for each 100 pounds lent out, they have to hold 10 pounds of 'deposits'.  That 100 pounds goes up and down after Basle so that 200 pounds of 'safe' residential mortgage lending might only count for 100 pounds of lending in the capital requirements.  50 pounds of risky lending (say to one eyed pilots for a plane) might count as 100 pounds of lending, but the banks don't want that business anyway.

So I deposit 10 pounds into NEWBANK.  NEWBANK can then lend out 100 pounds.  Say 180 pounds of mortgages (90 after Basle) and 10 pounds in personal loans, which looks on the books as 100 pounds of lending.

My wife borrows the 10 pounds of lending, and goes to BANKNEW down the street and deposits that 10 pounds in her account.  BANKNEW then lends 180 pounds of mortgages and 10 pounds of personal loans.

So already from only 10 pounds of 'real' money, we have 360 pounds of lending on houses, and 20 pounds of personal loans.

That happens ten times, and we get to 3600 pounds of lending on houses and 200 pounds of personal loans.  All off one 'real' deposit.  On the bank books, all we see is a 10% capital requirement being met.  Looks safe as houses.

Now, the economy stalls and 5% of the house loans go under.  That's 180 pounds of loans gone bad across ten banks.  Hang on - suddenly each bank has lost 18 pounds!  but their capital ratios only covered 10 pounds of losses! Help!  The Banks are wiped out unless they can sell the underlying assets quick enough and high enough.

 

In short, once banks were allowed to leverage up on lending to houses, it was always going to end in tears.  The old building society approach of real money backing each loan (up until the 80's) was the only way to allow lending on houses if you didn't want to fuck the country.  But... that would mean less money for the landowners and politicans...

Cunts.

 

 

 

Due to Brown's genius, previously dopey BS were running pretty leveraged, whole sale treasury.

~2007, banks like NR were holding under ~2k of capital for each 100k lent.

And most of that capital was being funded in the wholesale markets rather than as deposits or bonds.

Each 100k of 'capital' allowed ~5m of bank lending.

The lending punished house prices up, so the borrower could borrow money against the house. And buy another house.

Which is why Fatty Fergus 'bought' ~1000 IO BTL from Mortgage Works (Bradford n Bingley).

In Ye olde days, a building society would typical force a borrower to save for ~5 years, for a 10-15% deposit, then raise bonds for another ~20%, drawing down te balance ~60% from the BoE.

And they only offered repayment loans. A 80%+ LTV mortgage is pretty safe after 5 years.

The rot set in with the fuckwittery of endowment mortgages, where the capital repayment vehicle was a made up future return on a crappy WP policy.

Thats why houses went up in the mid to late 80s - people could borrow 2x more than before endowments went mainstream.

The 80s boom n bust was over in less than 10 ears -prices crashed in 89/90s, cleared by 2000.

Regulated banks should not be doing any IO lending.

The yare not for resi customers.

The IO BTL brigade need moving over to the non regulated sector.

Easily done by forcing the bank to hold more capital for IO loans, increaing the costs.

I feel this is about to happen now theyve got RIO mortgages in place fro the over 55s and moved most solvent onto repayment mortgages, leaving ~50% of IO lending (1999-2008ish) 

The 'mortgage prisoners' are goign to wish theyd took the hint and sold up.

How in fuck can anyone whos had a mortgage for 15y+ cannot remortgage at a low low rate ... Oh yes, IO and 25% cash loan on top of the mortgage.

Going forward you are going to see the BoE Rw mortgages at ~50%, requiring the bank and borrower to stub up ~50% of thecost.

 

[Harley]

11 hours ago, sancho panza said:

SO if Bank A has assets of £10,it can lend out £90 if the cash reserve ratio is 10%.If the reserve ratio gets moved to 5% it can lend out £180 etc.If a customer comes in and takes out £5 cash then at a reserve rate of 10% the bank needs to withdraw £45 of laons etc etc

I can feel some education coming my way!  I thought with a 5% reserve ratio on £10 deposits the bank can lend out £9.50.  The multiplier effect across the system will make this higher but each bank will need to retain 5%.  Except in the US where because of Covid that was reduced to 0% (on all term deposits)!

And precisely what assets can be held to meet that 5%?  A weighted risk formula across asset types applies?  What I do know is banks borrow bonds from ETFs, etc in exchange for their higher risk equity holdings in order to meet these capital requirements!  This borrowing is limited and collateralised with bank equity holdings valued at say 125% of the bond loan value - a 25% of equity margin if that makes you feel comfortable!  Suddenly that safe bond ETF doesn't feel so safe?  You buy bonds but potentially own a slug of equity.  Not all ETFs, etc lend out their holdings though.

Happy to be corrected though as Basel, etc not my thing as I don't need to open the bag as the smell is bad enough!

PS: Presumably my disconnect is not allowing a percentage of the bank loans as capital.  That is the multiplier effect is also in house as well as in the system.

 

[Transistor Man]

Rolling blackouts in Texas, due to one of the coldest winter in decades, and very high electrical heating demand. 12 GW of wind generation out due to icing.  

[Ma2]

On 14/02/2021 at 08:40, arrow said:

Many years ago I read about how after Ww2 British industry wanted trade controls against Germany as they couldn't compete. How bad do you have to be at running a company to be unable to compete against a bombed out country.

In fact many German companies has to be brought back to life by the English after the war. Not an easy task with a demoralised workforce, often lacking the skills of those who didn't come back from the war or were left on the Soviet side. But we needed Germany back on it's feet, not least to be able to pay back war reparations. Unfortunately that meant good men staying in Germany and not coming home to sort things back in the UK. Great shame but Hobson's choice.

The most famous example is Volkswagen, still the worlds largest car maker now I think (it was in 2017), which could have been disolved as being able to produce military equipment, but was saved. It is a really fascinating story especially as the company was finally offered to a British company that wasn't interested, but has since gone bust whilst VW continues.

BBC radio doc - https://www.bbc.co.uk/sounds/play/w3csywwl

From Wikipedia

1945–1948: British Army intervention, unclear future

The company owes its post-war existence largely to one man, wartime British Army officer Major Ivan Hirst, REME. In April 1945, KdF-Stadt and its heavily bombed factory were captured by the Americans and subsequently handed over to the British, within whose occupation zone the town and factory fell. The factories were placed under the control of Saddleworth-born Hirst, by then a civilian Military Governor with the occupying forces. At first, one plan was to use it for military vehicle maintenance, and possibly dismantle and ship it to Britain. Since it had been used for military production, (though not of KdF-Wagens) and had been in Hirst's words, a "political animal" rather than a commercial enterprise^{[citation needed]} – technically making it liable for destruction under the terms of the Potsdam Agreement – the equipment could have been salvaged as war reparations.^{[citation needed]} Allied dismantling policy changed in late 1946 to mid-1947, though heavy industry continued to be dismantled until 1951.^{[citation needed]}

One of the factory's wartime 'KdF-Wagen' cars had been taken to the factory for repairs and abandoned there. Hirst had it repainted green and demonstrated it to British Army headquarters. Short of light transport, in September 1945 the British Army was persuaded to place a vital order for 20,000 cars. However, production facilities had been massively disrupted, there was a refugee crisis at and around the factory, and some parts (such as carburettors) were unavailable. With striking humanity and great engineering and management ingenuity, Hirst and his German assistant Heinrich Nordhoff (who went on to run the Wolfsburg facility after the military government ended in 1949) helped to stabilize the acute social situation while simultaneously re-establishing production. Hirst, for example, used his fine engineering experience to arrange the manufacture of carburettors, the original producers being effectively 'lost' in the Soviet zone.^[19] The first few hundred cars went to personnel from the occupying forces, and to the German Post Office. Some British Service personnel were allowed to take their Beetles back to the United Kingdom when they were demobilised.^{[20][better source needed]}

In 1986, Hirst explained how it was commonly misunderstood that he had run Wolfsburg as a British Army major. The defeated German staff, he said, were initially sullen and unresponsive, having been conditioned by many years of Nazism and they were sometimes unresponsive to orders. At Nordhoff's suggestion, he sent back to England for his officer's uniform and from then on, had no difficulty in having his instructions followed. Hirst can be seen photographed at Wolfsburg in his uniform, although he was not actually a soldier at the time but a civilian member of the military government. The title of 'Major' was sometimes used by someone who had left the Army as a courtesy, but Hirst chose not to use the title.^{[citation needed]}

The post-war industrial plans for Germany set out rules that governed which industries Germany was allowed to retain. These rules set German car production at a maximum of 10% of 1936 car production.^[21] By 1946, the factory produced 1,000 cars a month—a remarkable feat considering it was still in disrepair. Owing to roof and window damage, production had to stop when it rained, and the company had to barter new vehicles for steel for production.^[22]

The car and its town changed their Second World War-era names to "Volkswagen" and "Wolfsburg" respectively, and production increased. It was still unclear what was to become of the factory. It was offered to representatives from the American, Australian, British, and French motor industries. Famously, all rejected it. After an inspection of the plant, Sir William Rootes, head of the British Rootes Group, told Hirst the project would fail within two years, and that the car "...is quite unattractive to the average motorcar buyer, is too ugly and too noisy ... If you think you're going to build cars in this place, you're a bloody fool, young man."^{[citation needed]} The official report said: "To build the car commercially would be a completely uneconomic enterprise."^[23] In an ironic twist of fate, Volkswagen manufactured a locally built version of Rootes's Hillman Avenger in Argentina in the 1980s, long after Rootes had gone bankrupt at the hands of Chrysler in 1978—the Beetle outliving the Avenger by over 30 years.

[Ma2]

On 13/02/2021 at 14:44, DurhamBorn said:

On 13/02/2021 at 11:15, Cattle Prod said:

I don't think we've discussed interest rates not going up, and the financial repression needed to do that. Theres a 14 page transcript on the macrovoices website, let me me know what you think.

I think its maybe the slightly more likely outcome now and very interesting.They want an industrial recovery,and holding down bank credit would help with that in many ways if they also add fiscal liquidity ongoing,however i think that it wouldnt work to kill inflation because its going to be cost push inflation coming through.Could it be we get both?,rates increasing maybe to say 2.5% and credit kept down.My roadmap says they need to run inflation around 3% above rates to avoid collapse,maybe they know that themselves and are aiming for it?.The key point is they need liquidity moving from bonds to production.The financial repression is needed and certain.Its a distribution cycle ahead.If they do go for holding down credit i still think we get the same result,but maybe inflation tops out at 7+% instead of 12+% and reflation/de complex areas dont go parabolic,just a very good run higher over the cycle.

Russell Naiper makes a good point about expectations in the market. So even if interest rates don't rise that much due to other (e.g. credit) controls, potentially if inflation rising is expected to lead to increased interest rates, will the mortgage companies start to front run increases before the BoE get's involved, or start to remove their longer term fixes due to uncertainty? For me when thinking about 10 year fix, waiting comes with a cost greater than not waiting if that does happen.

I've been thinking about something someone raised around the government letting you access your pension early for a house deposit. I think a more likely route would be that a % of the money (25% tax free withdrawl limit?) in your pension account could be considered as a deposit. So it stays in your pension pot until you are able to access it, at which point it becomes then mortgage lender's money.

This would have a few desireable effects in the governments eyes - more people saving into pensions (and therefore enforced bond ownership if it happens), more people able to prop up the market, assisting with the banks lending as discussed over the last few days.

Could keep the party going on a bit longer.

[harp]

41 minutes ago, Transistor Man said:

Rolling blackouts in Texas, due to one of the coldest winter in decades, and very high electrical heating demand. 12 GW of wind generation out due to icing.  

Nuclear fixes this. That’s why I’ve got uranium stocks alongside my oillies. 

[JMD]

3 hours ago, wherebee said:

bingo.

unfortunately now you know this, you'll be a social pariah at any dinner party where house prices are mentioned as you pull back the curtain for the masses...

Wherebee, you write '...pull back the curtain for the masses', a very apt metaphor - Are you referring to the great Bill Still and his 'The Secret of Oz? The video is on YouTube, bit dated now, but well worth watching. In fact it is what first informed me of the travesty that is our banking system.                                                                                  I used to naively think that the banking system was a shiny examplar of modern finance (particularly when all those brainy maths geeks were drawn there instead of 'boring old engineering'?!). Instead banking is at best merely a crutch to prop up our crippled economy. And of course the 'banking franchise' itself, as currently constituted and handed down to the banking institutions by politicians, will be reset when the opportunity arises (and as per this thread, getting closer by the day). The thing is when Id mention these things to my 'intelligent' colleagues at work (as you do!), they unfortunately had no framework to comprehend the ideas. I don't blame them for not knowing, but depressingly none seemed that interested either. I expect they thought I was spreading conspiracy talk!!!                                                                                                                Anyhow, I do think 'The Secret of Oz' is a powerful documentary, dated as i say but there are updated alternatives also out there - but I mention this in case others might want to use these type of documentaries to help inform their family/friends? The docs use the allegory of 'The Wizard of Oz' story that many commentators actually think was written as a critique of gold/silver, sound money, etc. Maybe all this sounds silly if you haven't heard before, but whatever works I say ...after all visual imagery + metaphor = 10,000 words! (...at least!! well I think so, or am i talking childish gibberish for this thread?)                                                         

[DurhamBorn]

1 hour ago, Cattle Prod said:

Blackouts in one of the most energy rich parts of the world. Tthousands of wells are flaring off natural gas while houses freeze. I sincerely hope this gets into the head of policymakers as a cautionary tale. Baseload, baseload, baseload. 

Baseload with carbon capture and also nature solutions,ie trees mostly.Thats how this folly ends up turning out.Luckily for us idiots who didnt follow all the sell orders Repsol will be making out like bandits from the Marcellus 

[DurhamBorn]

44 minutes ago, harp said:

Nuclear fixes this. That’s why I’ve got uranium stocks alongside my oillies. 

Exactly,but big oil is playing a blinder letting everyone think windmills are the answer.

[Yellow_Reduced_Sticker]

Good afternoon Boys & Girls!

 

My GOLLY ...whatever you think of Mr Hunter, his prediction is looking GOOD, Markets ROARING ahead...FFS even my portfolio TODAY is at an ALL TIME HIGH of + 31%

 

SO...BIG THANKS again to SIR @DurhamBorn AND the regular posters here, even BIG FUN aka @nirvana for selling me his RMG  *but* MOSTLY for posting sexy girly pics!

 

 

On 11/02/2021 at 16:53, DurhamBorn said:

@Yellow_Reduced_Sticker they dont have a reduced section in Aldi,they just add the 50% off stickers on where the items are so you have to wander around the shop and check.Of course check the meat section at the top first as the best items are there.Citi said sell RM at £1.50 they worth 90p  .Now they can just ramp up prices each year and it will flow direct to free cash.

 

 

50% off...that's NO good for me, as ya ALL know here I'm the MEGA TIGHT-WAD on this board, I ONLY except 90% off AND at the mo... I'm getting that discount via a TIP from my SUPER-SCRIMPER next door neighbours, SORRY i can't post the tip, its SECRET ...they told me if i post it online they WILL send a HIT MAN around!

 

Yep citi brokers MUPPET'S! RMG today... ALL TIME YEAR HIGH!

 

@leonardratso  ya posts thinking I'm Chinese are HILARIOUS...however I'm NOT Chinese BUT i do like YOU have some foreign blood ...it's 50%

 

 

[Erewhon888]

38 minutes ago, JMD said:

well I think so, or am i talking childish gibberish for this thread?)                                                         

Far from it and there is more to find.

[JMD]

2 minutes ago, Erewhon888 said:

Far from it and there is more to find.

Thanks. So what your saying is '...follow the yellow bri.....'.  Sorry couldn't resist!!                                               (Then again thinking about it, maybe I shouldn't do that! Anyway in the meantime I shall definitely buy and hold!!!)

[scepticus]

13 hours ago, Hancock said:

From wiki, but isnt it a case with QE that private bank creates shite bond (financial asset) central bank buys it, then private bank can leverage against this to lend more.-

A central bank implements quantitative easing by buying financial assets from commercial banks and other financial institutions, thus raising the prices of those financial assets and lowering their yield, while simultaneously increasing the money supply. In contrast to conventional open-market operations, quantitative easing involves the purchase of more risky assets (than short-term government bonds) and at a large scale, over a pre-committed period of time.

The central bank is typically buying longer duration government bonds off private banks and the private banks get additional reserves at the central bank in return. Government bonds are free of nominal risk and so are cash reserves at the central bank. So the longer duration bonds are only more risky due to the interest rate/duration risk. Its q bit different if they are buying equities of course.

Also this operation makes ZERO difference to the quantity of wealth held by the private sector - they have X more cash and X less bonds. For the rich, long duration bonds are arguably better stores of wealth than cash, because cash deposited in a bank account is not insured above the FSCS, but long duration bonds come with full principal protection. 

You might think that the cash can be leveraged into loans but the bonds cannot. Even given the fact this is strictly not true (bonds are used as collateral for loans), in an economy where most people are so poor and have so much debt, the demand for leveraging the extra X cash into loans is limited. 

No doubt when/if lockdown is lifted and we are genuinely free of significant COVID cases there is going to be quite a spike in spending. It remains to be seen how big. If necessary, the central bank is holding zillions of government bonds and can sell them back to banks (tapering, reverse QE or whatever you want to call it). That combined with tax rises is likely IMO to keep this short run inflation in check.

Longer term all the old issues are still there of course (falling EROEI/rising ECoE, demographic ageing, peak debt). And also, to what extent aggregate consumer social behaviour has been changed by the pandemic. I know the the dosbods are ultra skeptics about the threat of CV, but the fact is that more than half the population don't agree.

[JMD]

2 hours ago, Harley said:

I can feel some education coming my way!  I thought with a 5% reserve ratio on £10 deposits the bank can lend out £9.50.  The multiplier effect across the system will make this higher but each bank will need to retain 5%.  Except in the US where because of Covid that was reduced to 0% (on all term deposits)!

And precisely what assets can be held to meet that 5%?  A weighted risk formula across asset types applies?  What I do know is banks borrow bonds from ETFs, etc in exchange for their higher risk equity holdings in order to meet these capital requirements!  This borrowing is limited and collateralised with bank equity holdings valued at say 125% of the bond loan value - a 25% of equity margin if that makes you feel comfortable!  Suddenly that safe bond ETF doesn't feel so safe?  You buy bonds but potentially own a slug of equity.  Not all ETFs, etc lend out their holdings though.

Happy to be corrected though as Basel, etc not my thing as I don't need to open the bag as the smell is bad enough!

PS: Presumably my disconnect is not allowing a percentage of the bank loans as capital.  That is the multiplier effect is also in house as well as in the system.

 

The 'money multiplier' effect had my head spinning when I first learned of it.                                                              Thing is, where has all that newly created money ended up? Some has gone toward giving the West living standards that are unsustainable - and that scares me going forward as per the changes that will be required in order to roll this overspending back (is it just a coincidence that the great threat of 'global warming' and it's solution, all require a reset in living standards? Ie a convenient way of getting the public on board for hard choices?).                                                                                                                                                                                      But I suppose the vast majority of the new money has gone into unproductive assets and zombie companies and the derivative markets? Am I right or wrong here? And what proportions into each I wonder, or is that completely unknowable?

[scepticus]

1 minute ago, JMD said:

The 'money multiplier' effect had my head spinning when I first learned of it.                                                              Thing is, where has all that newly created money ended up? Some has gone toward giving the West living standards that are unsustainable - and that scares me going forward as per the changes that will be required in order to roll this overspending back (is it just a coincidence that the great threat of 'global warming' and it's solution, all require a reset in living standards?). But I suppose the vast majority of the new money has gone into unproductive assets and zombie companies and the derivative markets? Am I right or wrong here? And what proportions into each I wonder, or is that completely unknowable?

Prices are set by two factors : the quantity of money and how fast it changes hands - the velocity of money. Multiply one by the other and you get something like GDP (although the GDP actually reported has many complex boondogles and adjustments)

While vast quantities of new money have been created, because velocity has been falling off a cliff since 2007, the result when you multiply the two together hasn't changed that much.

[Chewing Grass]

1 minute ago, JMD said:

The 'money multiplier' effect had my head spinning when I first learned of it.                                                              Thing is, where has all that newly created money ended up? Some has gone toward giving the West living standards that are unsustainable - and that scares me going forward as per the changes that will be required in order to roll this overspending back (is it just a coincidence that the great threat of 'global warming' and it's solution, all require a reset in living standards?).

Well in the 1950s most folk went to Blackpool, by 1985 most folk went to Benidorm, perhaps they have now achieved one of their great reset objectives already.

Consumer product choice for the masses is the next one that will go.

[DurhamBorn]

24 minutes ago, Cattle Prod said:

I was putting a bit more into the Guinness Global Energy fund, and thought I'd ask them for their full holdings. I asked Merian Gold and Silver for this before, and they said no, so I was pleased to see the response. Just outside their published top ten, they have the likes of Suncor, Repsol, ENI and Schlumberger, at similar weightings to the top ten! I have to say it looks really good to me, especially for those who have inflexible SIPPs (like me).

Thats a superb fund isnt it.Id be happy to own a lot of that and then own some direct shares in a few of the holdings.I think il get myself some of it.Looks really well thought out as well.Very balanced across the sector.It lacks some of the smaller gas plays that might multi bag,but looks a solid home for capital to outflank inflation by a lot.

[scepticus]

4 minutes ago, Chewing Grass said:

Consumer product choice for the masses is the next one that will go.

I agree, but I'd say that is primarily an outcome of having more expensive energy sources. The monetarist responses by central banks are really an attempt to hide an inevitable loss of wealth in western nations due to energy being simultaneously more expensive to produce, and increased competition for what energy flow there is from developing nations.

De-complexification of the consumer economy is an inevitable result of this dynamic, and it can in theory be served with either an inflationary or deflationary gravy. The point being that it seems to be the common belief (not on this forum but generally) that the inflationary sauce is a lot easier to digest than the deflationary one.

[MrXxxx]

3 hours ago, Harley said:

What I do know is banks borrow bonds from ETFs, etc in exchange for their higher risk equity holdings in order to meet these capital requirements!  This borrowing is limited and collateralised with bank equity holdings valued at say 125% of the bond loan value - a 25% of equity margin if that makes you feel comfortable!  Suddenly that safe bond ETF doesn't feel so safe?  You buy bonds but potentially own a slug of equity. 

This is what I find incredible on both the part of the bank and the bond holder.

The former is just fraud `dressed up` as commerce, either you own the assets that are worth £x WHENEVER you need to sell them or not...the bonds are simply being borrowed and so are not part of your capital.

As for the latter, anyone who has traditionally purchased bonds is looking for security, hence the lower return. If you want to take risks (and hence higher return) you buy the equities/commods in the first place!

[Noallegiance]

56 minutes ago, Cattle Prod said:

I was putting a bit more into the Guinness Global Energy fund, and thought I'd ask them for their full holdings. I asked Merian Gold and Silver for this before, and they said no, so I was pleased to see the response. Just outside their published top ten, they have the likes of Suncor, Repsol, ENI and Schlumberger, at similar weightings to the top ten! I have to say it looks really good to me, especially for those who have inflexible SIPPs (like me).

What's the difference between the Class X fund and the Class C fund? Which list is this?

[JMD]

2 hours ago, Cattle Prod said:

Blackouts in one of the most energy rich parts of the world. Tthousands of wells are flaring off natural gas while houses freeze. I sincerely hope this gets into the head of policymakers as a cautionary tale. Baseload, baseload, baseload. 

CP, bit off on a slight tangent here perhaps... but these power blackout stories always remind me of the right-wing British journalist Peter Hitchens, because it was his writings on this very subject, but in regard to us here in the UK, that first alerted me these things happening. He has been writing about it for 10 years or so believe it or not. I think it is an example of him publishing a story that other journalist don't dare, because it doesn't fit with current modish opinion. They could report it if they wanted to, but don't, which is quiet alarming if you think about it.                                                                                                                                               But i also mention this CP because you wrote recently about the state of journalism in general being so awful. I agree with you - so I continue to read the online Hitchens posts (Sundays), not because he is right wing, but because he is I think one of the last real professional journalists left(!). And has the courage, unlike so many of his fellow jornalists, to publish unpopular and unfashionable stories and opinion. For example he writes articulately about the pandemic and the government policies which he sees as a power grab, and so very apt refers to face masks as 'face-nappies'!                                                                                                         Roll on GB News, can't arrive soon enough.