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


spunko

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On 28/02/2021 at 16:18, JMD said:

JREWING, I must say your examples are very informative. Thank you for taking the time to illustrate the tax allowances in that way. But seeing the figures laid out like that has really piqued my interest and I have posed a generic question below, really hoping that you can indulge me(!!!) in answering my question.                                                                                                                                                                                                                Since my misleading post the other day regarding the coming LTA pension changes (real thanks to those who took time to correct me), I have been reading up on tax. The thing is I would very seriously consider retiring early - well, stopping F/T paid employment, but replacing with alternative 'income streams'. If only I could get my head around the different tax allowance cutoffs, especially as they are not straightforward when attempting to combine different sources of income...                                                                        So I'd like to ask a follow up question. DurhamBorn has mentioned 'a sweet spot' (my term) for his own sipp withdrawal of £16800/year, which I think comprises the max. income and cgt (25%) withdrawal before tax needs to be paid. If I were to do something similar in terms of extracting max. tax free income from my own sipp, would there be any other tax allowances available, or would I have effectively 'exhausted them all'? I'm thinking specifically: the £2000 share dividend allowance, or company dividends (eg £8000 divis taken from a personal ltd company), or the £12300 cgt allowance.                                                                            To be clear, just looking for ways to begin strategizing. If you feel unable to answer, that's ok. But maybe you could instead recommend a good online calculator that might help me? Understanding the rules in isolation is straightforward, its when combining incomes streams, thats when it gets complicated. I think for those lucky enough to be able to structure their income to take advantage of tax system, it is a very powerful thing to do, and of course it's what the rich have been doing for centuries.

I have a sipp. But I intend cashing it out as soon as I can, I don't know too much about cashing out and withdrawal tax sweetspots buddy.

My guess is you'll still be entitled to PA, CGT A, and Div A, so £26800 unless it's all changed in the budget. All I do know is 25% is tax free. At first dibs. After that I'll take the rest in three separate amounts in three separate tax year's all under the personal allowance. HMRC can go swivel on my middle. 

 

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ThoughtCriminal

Interesting inflation thread from Michael Burry, citing Lynn Alden chart in one of them. 

 

He sees outside chance of hyperinflation but thinks probability is growing. 

 

 

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With increasing hope of the virus abating, comes rapid dovishness...

The BK theory remains in tact, with China sounding the alarm, I'm thinking it might take a real dive this year to spur true no holds barred reflation policy.

:ph34r:

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ThoughtCriminal
50 minutes ago, Barnsey said:

 

:ph34r:

Except for DB of course 😉

 

The amazing thing is, the comments on that tweet are split between people saying it means the dollar is dead or that its to infinity and beyond from this point. 

 

DB, have you updated your dollar call?? 

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1 minute ago, ThoughtCriminal said:

Except for DB of course 😉

 

The amazing thing is, the comments on that tweet are split between people saying it means the dollar is dead or that its to infinity and beyond from this point. 

 

DB, have you updated your dollar call?? 

No,still think the dollar will tag 87 yet,though not certain of course and it did get into the 80s.If they tighten now and the dollar keeps rising they will have to print even more as the economy tanks again.This is a 3 times a century cycle change and many areas of the economy are defunct and it will take much more than usual.The Titanic still sank even though its engine room was stuffed with coal .The CBs will want to sustain inflation between 2% and 3% for a year and will keep going with fiscal injections until they get that.Here in the UK there is a huge structural deficit.Massive pain once inflation goes and stays above 3% as the BOE withdraws.Dollar likely bottom around that time.However, we got 80%+ of the dollar call so far.Normally id be leaving positions now,but my main dollar play is the oilies and im not selling them yet.

 

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22 minutes ago, DurhamBorn said:

No,still think the dollar will tag 87 yet,though not certain of course and it did get into the 80s.If they tighten now and the dollar keeps rising they will have to print even more as the economy tanks again.This is a 3 times a century cycle change and many areas of the economy are defunct and it will take much more than usual.The Titanic still sank even though its engine room was stuffed with coal .The CBs will want to sustain inflation between 2% and 3% for a year and will keep going with fiscal injections until they get that.Here in the UK there is a huge structural deficit.Massive pain once inflation goes and stays above 3% as the BOE withdraws.Dollar likely bottom around that time.However, we got 80%+ of the dollar call so far.Normally id be leaving positions now,but my main dollar play is the oilies and im not selling them yet.

 

Lots of hesitancy about the fully priced in stimulus package, have to see what happens next, and delayed actions of ECB.

In other news, lots of hype about record high house prices today, but no mention of adjusting for inflation of course (-11% on 2007 peak). Yes wages are still down a bit in real terms too, but a 2 year fix back then was 6.5%, now around 1.5%. On the average house price at a sensible 75% LTV over 25 years, that's a staggering difference of £476 a month, £692 vs £1168! Worth keeping all these moving parts in perspective.

EDIT: Just realised regular pay in real terms has actually reached a new high in Oct 2020. Total pay in real terms still down a tad (bonuses etc).

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1 hour ago, Barnsey said:

image.png.75db1f0fd75a43bda5f45261a1472529.png

There is an irony to these can kicking Chancellors and money men telling the next person not to kick the can.

Reminds me of Merv King

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ThoughtCriminal
15 minutes ago, Barnsey said:

 

Absolutely striking what a divergence of opinion there is: some saying huge deflation, other calling for hyperinflation. 

 

Don't think I ever remember anything like it. 

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Talking Monkey
23 minutes ago, ThoughtCriminal said:

Absolutely striking what a divergence of opinion there is: some saying huge deflation, other calling for hyperinflation. 

 

Don't think I ever remember anything like it. 

Out of all the various narratives I still find Hunter's thesis most compelling of a near term deflationary bust followed by rising inflation eventually topping out at circa 20% annual inflation. The commentators that talk about hyperinflation I don't see it as I think the whole system would collapse well before anything seen as hyperinflation materialising.

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4 hours ago, DurhamBorn said:

Normally id be leaving positions now,but my main dollar play is the oilies and im not selling them yet.

 

I don't understand this bit ( "leaving positions" )as I thought the main thesis is to be in the reflation areas until around 2027/28.

One thing I've been wondering is about interest rates.  In the 70s they were very high and I know no-one expects that again especially if there is any financial repression in play but I do remember more recently before its demise Bradford & Bingley were paying 6% (around 2010?).  If interest rates go this high again would it not be a good idea to go at least partially into cash as this is likely to be as good a return as the stock market?   Or is it unlikely banks/building societies will be able to offer good rates to savers?

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4 minutes ago, Talking Monkey said:

Out of all the various narratives I still find Hunter's thesis most compelling of a near term deflationary bust followed by rising inflation eventually topping out at circa 20% annual inflation. The commentators that talk about hyperinflation I don't see it as I think the whole system would collapse well before anything seen as hyperinflation materialising.

Hunters narrative is what this whole topic is about, he just makes crap short term predictions on a constant basis.

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9 minutes ago, janch said:

I don't understand this bit ( "leaving positions" )as I thought the main thesis is to be in the reflation areas until around 2027/28.

One thing I've been wondering is about interest rates.  In the 70s they were very high and I know no-one expects that again especially if there is any financial repression in play but I do remember more recently before its demise Bradford & Bingley were paying 6% (around 2010?).  If interest rates go this high again would it not be a good idea to go at least partially into cash as this is likely to be as good a return as the stock market?   Or is it unlikely banks/building societies will be able to offer good rates to savers?

If the options are the status quo continuing where healthy people get paid by the govt, to sit around doing very little yet living in relative comfort (be they landlords, tax credit recipients, civil servants etc..), which means low interest rates staying in place.

Or a revert to the old norm of people having to work to fund their own lives and asset prices imploding and people not being as rich as they thought ..... as a result of double figure interest rates.

I see the latter as vastly more feasible.

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Chewing Grass

Just checked and my big pension co personal pension is down 5% since that the Americans elected their new so-called president.

Perhaps the pound is doing well and all the investments are in EuroDollars.

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1 hour ago, Hancock said:

Hunters narrative is what this whole topic is about, he just makes crap short term predictions on a constant basis.

 

1 hour ago, Talking Monkey said:

Out of all the various narratives I still find Hunter's thesis most compelling of a near term deflationary bust followed by rising inflation eventually topping out at circa 20% annual inflation. The commentators that talk about hyperinflation I don't see it as I think the whole system would collapse well before anything seen as hyperinflation materialising.

I think the issue is that the pandemic has muddied the path considerably, it's provided the perfect reason to go big.

The problem is trying to assess how much of the inflation we now see is down to supply chain issues in a temporarily desynchronised and disfunctional global economy with varying states of lockdown, and how long it'll take for pent up demand and savings to burn out. I'm not convinced we're on the path just yet ever higher inflation, a taper tantrum seems inevitable.

Not doing enough in 2022 worries me more than 2021 at this point.

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1 hour ago, janch said:

I don't understand this bit ( "leaving positions" )as I thought the main thesis is to be in the reflation areas until around 2027/28.

One thing I've been wondering is about interest rates.  In the 70s they were very high and I know no-one expects that again especially if there is any financial repression in play but I do remember more recently before its demise Bradford & Bingley were paying 6% (around 2010?).  If interest rates go this high again would it not be a good idea to go at least partially into cash as this is likely to be as good a return as the stock market?   Or is it unlikely banks/building societies will be able to offer good rates to savers?

Probably be better to switch to treasuries etc towards the end of the cycle.Im seeing signs on my road map though that says Asian currencies might flip flop western ones so it might not be as easy as buy treasuries.We have enough to worry about getting there though and its well out into the future.Next key area is inflation hitting 3% and then keeping creeping up.

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geordie_lurch

ZH reckon things are about to dive here however not sure I rate these Bank of America predictions but thought it was interesting enough to throw in the current mixed signals / ideas here :P

BofA "Sell" Signal Triggered Any Moment... The Last This Happened Time Was June 2007

Quote

we reported that Bank of America's first proprietary sell signal since February 2020 was triggered:

According to BofA., equity "barbell" strategies all the rage while (the few remaining) bears note cash levels fall to 4.0%, triggering an FMS Cash Rule “sell signal”; The last time the sell signal was triggered was in February 2020 - everyone knows what happened next.

https://cms.zerohedge.com/s3/files/inline-images/sell%20side%20indicator%20bofa_0.jpg?itok=xxv8P8IS

Why is this important? Because the last time the indicator was this close to “Sell” was June 2007 after which we generally saw 12-month returns of -13%. No wonder why Subramanian concludes that "we’ve found Wall Street bullishness to be a reliable contrarian indicator."

 

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8 hours ago, ThoughtCriminal said:

Now tell me this doesn't scream "things you don't seen when it's a bottom". 

 

6.6 million for a video clip

Reminds me of the year 2000 and the dot com bubble.

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Bricks & Mortar
4 hours ago, ThoughtCriminal said:

Absolutely striking what a divergence of opinion there is: some saying huge deflation, other calling for hyperinflation. 

 

Don't think I ever remember anything like it. 

Those hyperinflationistas will be entertaining. 

I mean, let's remember the thread thesis.  Perhaps a wee bit of meltup, of indeterminate size, as the $ falls a bit more... then wham, bam, BK you, Ma'am.

And what will those hyperinflationistas be doing as the the $ falls and melty signs appear? 

Selling their grannies and taking 3rd mortgages to get tickets on the last express to the moon.

I hope they buy my silver miners in the weeks before the top.

 

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Bricormortis

Im giving some credence to the possibility of a slow motion crash rather than a BK now. More so after watching a recent Michael Oliver video.  A miserable drawn out slow grind down with lower lows over an extended time frame until some sectors eventually begin to pull away to the upside  on the back of more stimulus. Just my thoughts atm.

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Bricormortis
7 minutes ago, PrincessDrac said:

IMG_20210302_200742.thumb.jpg.7fe21062fb275cf8bf9a5bec86e2cfdf.jpgFrom the BoE site.

Wondering going forward. How big this figure will go?

My Council Tax is rumoured to be going up. 4.99% this April.

Yet state pension is going up 2.5%.

State Pension Link.

 

 

 

What I would have certainty about is our currency being thrown under a bus.

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Bricormortis

 The govt. is giving £4.8  million to a scheme in Angelsey for using tidal power to make hydrogen for lorry fuel. Was on the news so I cant link or flesh this out with more details.

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17 minutes ago, Bricormortis said:

Im giving some credence to the possibility of a slow motion crash rather than a BK now. More so after watching a recent Michael Oliver video.  A miserable drawn out slow grind down with lower lows over an extended time frame until some sectors eventually begin to pull away to the upside  on the back of more stimulus. Just my thoughts atm.

True, nothing is certain.  Can you give a couple of key points that make you see this as more likely?

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