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

[Hancock]

10 minutes ago, Loki said:

Both - BK this year, currency collapse (Dollar?) end of the decade after durhamborn's reflationary cycle 

I thought his reasoning for the BK, was going to be due to the FED raising interest rates when the economy was flying.

Thus the markets seeing an end to the free money.

 

[Loki]

Just now, Hancock said:

I thought his reasoning for the BK, was going to be due to the FED raising interest rates when the economy was flying.

Thus the markets seeing an end to the free money.

 

As far I remember it was Fed tightening at the wrong time/wrong speed/wrong way, rather than rates, but I could be wrong.

[Hancock]

1 minute ago, Loki said:

As far I remember it was Fed tightening at the wrong time/wrong speed/wrong way, rather than rates, but I could be wrong.

Raising rates is the FED tightening.

[Loki]

Just now, Hancock said:

Raising rates is the FED tightening.

Oh right, I assumed he meant less BRRRRRRRRR

[Noallegiance]

24 minutes ago, Hancock said:

Raising rates is the FED tightening.

Reducing liquidity is tightening as well.

50 minutes ago, Fully Detached said:

As a beginner to this thread can someone tell me does this David Hunter guy see a a short melt up before a BK, or a longer melt up to eventual currency collapse?

DH sees major deflationary bust where nothing will remain untouched. Fed withdrawing liquidity wouldn't help.

He sees a melt-up to a top in markets in the next 3-6 months. By his own estimation his targets of 4700 S&P, 37000 DJIA and 17000 Nasdaq could be conservative, which may also apply to his metals targets, too. Bust possible maybe by year-end. Top could last a little while, bust with a depression feel but a recession length (12-24 months).

The response could be God-like levels of money printing in a recovery.

[Hancock]

1 hour ago, Loki said:

As far I remember it was Fed tightening at the wrong time/wrong speed/wrong way, rather than rates, but I could be wrong.

I think you're more right then me ... but i'm sure not so long ago he said it was going to be the FED raising rates as inflation went higher .... then having to bring them down when it all crashed.
https://contrarianpod.com/content/podcasts/season3/david-hunter-markets-to-peak-q2-2021-before-bust/

[leonardratso]

thought his last BK estimate was Q2 2021, mind you that covers 3 months, i assume end of Q2, but im sure that was Q1 2021 last year in his estimates. His timing is a bit lousy i suppose, but theres little doubt the stuff does look like it gets to where he said it would (or close) eventually i suppose. Thats no consolation though if you are too late or too early, think id rather be early on a BK to be honest, big problem to sit on your hands with a huge wedge of cash burning a hole in your pocket.

And by big i mean 8.32 great british pounds. Yes more than 5.

 

[Talking Monkey]

3 hours ago, Hancock said:

If you could give them to the council to put their tenants in and let them deal with damage, otherwise it seems like a lot of hassle for a crashing asset class.

BTL deposits are closer to 25% these days if you're wanting a good mortgage deal.

https://www.money.co.uk/mortgages/buy-to-let-mortgages.htm?track=885127&gclid=CjwKCAjw3pWDBhB3EiwAV1c5rM3sLM2kgZARvPCna16NJ2GC6r71rw3ss7YjjXpereIcaV9rQ7fx1hoC6gEQAvD_BwE

I didn't know that was an option if the council deals with it all could be doable

[goldbug9999]

1 hour ago, Noallegiance said:

 

The response could be God-like levels of money printing in a recovery.

Money printing is the only tool that anyone in control of govs and ecbs in developed countries has any stomach for now. It seem to me that global monetary policy has entered a Nash Equilibium https://en.wikipedia.org/wiki/Nash_equilibrium from which it cannot escape.

[goldbug9999]

16 minutes ago, goldbug9999 said:

Money printing is the only tool that anyone in control of govs and ecbs in developed countries has any stomach for now. It seem to me that global monetary policy has entered a Nash Equilibium https://en.wikipedia.org/wiki/Nash_equilibrium from which it cannot escape.

Of course one way to break the equilibrium is for some country to default on its debt and switch to direct government issued non-debt currency, if I was in charge thats what I would do anyway.

[Don Coglione]

16 minutes ago, goldbug9999 said:

Money printing is the only tool that anyone in control of govs and ecbs in developed countries has any stomach for now. It seem to me that global monetary policy has entered a Nash Equilibium https://en.wikipedia.org/wiki/Nash_equilibrium from which it cannot escape.

 

 

[Noallegiance]

20 minutes ago, goldbug9999 said:

Money printing is the only tool that anyone in control of govs and ecbs in developed countries has any stomach for now. It seem to me that global monetary policy has entered a Nash Equilibium https://en.wikipedia.org/wiki/Nash_equilibrium from which it cannot escape.

Well! What do you get if you cross a Nash Equilibrium with a Zugzwang?!

Answers on a postcard...

[DurhamBorn]

4 hours ago, ThoughtCriminal said:

I've mentioned before that I'm considering doing the same just down the road from you in teesside, inspired by you and your wrongthink 😂

 

3 bed ex council terraces here for 60k and 500 a month rent. 

 

How would you do it DB? Hypothetically speaking of course. 

 

10-15% deposit then one of those 10 year fixes? 

 

 

If we bought two it would be cash.If four maybe cash or 50% LTV.My dad has to be careful with inheritance tax though and so do i.Being not married i only have the one allowance and the owner occupier allowance so my SIPP is very important as im on the IHT allowance outside of SIPP.We have a trust set up we can use,but its not tax efficient unless the person taking the income has their tax allowance spare though i have now.

[Hancock]

1 hour ago, Talking Monkey said:

I didn't know that was an option if the council deals with it all could be doable

Yes they do.

My friend and his young family became homeless, so the council put them in some shithole half way house that was full of smackheads. It was 2 rooms for a family of 5 with a shared bathroom and kitchen ... it was truly disgusting.

After 6 weeks there, the council then moved them to what is deemed another form of half way house or emergency accommodation .... but to you and I it was a 3 bed council house in a shit estate.

Anyway the person who owned this "emergency accommodation" bought it off the council several years earlier for a fraction of the market price as they were a previous long term tenant ..... Then he was renting back to the council at what would have been about twice the market rate.

In simplistic terms the council sold it to him for £30,000 in the 90s, and were renting it back for £1000 a month in the early 00s.

As it was "emergency accommodation the council were paying far more in rent and far more than they'd normally pay in housing benefit.

[SpectrumFX]

4 minutes ago, Hancock said:

Yes they do.

My friend and his young family became homeless, so the council put them in some shithole half way house that was full of smackheads. It was 2 rooms for a family of 5 with a shared bathroom and kitchen ... it was truly disgusting.

After 6 weeks there, the council then moved them to what is deemed another form of half way house or emergency accommodation .... but to you and I it was a 3 bed council house in a shit estate.

Anyway the person who owned this "emergency accommodation" bought it off the council several years earlier for a fraction of the market price as they were a previous long term tenant ..... Then he was renting back to the council at what would have been twice the market rate.

In simplistic terms the council sold it to him for £30,000 in the 90s, and were renting it back for £1000 a month in the early 00s.

One of my first jobs was working for the job centre, and while I was there they were in the process of selling all of their estate and renting it back.

Madness. But I'm sure somebody dressed it up as a good idea and got a fat bonus out of it.

[JMD]

5 hours ago, Harley said:

Indeed.  I just scan the markets using these sorts of metrics for my holds (i.e. longer term trades).  Some are maddeningly tough (for today's new normal) like a Price to Tangible Book value of under 2 which takes out most stocks, the US in particular.  I do however flex the metrics now and then to see how many companies I'm losing out on (result: a surprisingly small number given this "nuts nuts" has spread everywhere).  I don't want to be blinkered and led by just the "talk" but do cull those in the very wrong industries without a good story.  I also avoid buying even those that pass when the charts have the prices as overbought.

Not sure about the Debt to Equity ratio - would it not remain as-is (it not being based on the share price), and for most would it not (economically) become even even harder, maybe even critical if covenants are broken?  Debt is fixed, everything else is more flexible, especially in a downward manner (e.g. asset valuations). 

So yes, these are my sort of rules and it's a no bid for long term holds atm, hence my break.  But time to take a look.  I'm far more flexible for trades though but have now decided to "pursue other interests"!  I was nicely up on my trading but didn't have the constant focus and b*gger all else to do to enjoy it!  Why bother with a small position on say Zoom for a 20% uplift when I could be 89% up on some longer term Russia steel company paying good divs with a one off trade! 

PS:  At 50% off the glow from my scans would be seen from Mars!

Yes good spot, I was confusing the debt to equity ratio with ev/EBITDA, or maybe another ratio entirely! As I regularly mention, i am not good at the financials and with hindsight should have paid for a subscription service where I could have made full use of stock screener tech. However think wouldn't be that useful for me now as I am much more allocated.

[JMD]

5 hours ago, Harley said:

Cheers.  A fair bit of work on your part (don't I know!) so all the best.  I note you mentioned the access problem twice.  Going for SIPPS and ISA tax wrappers do limit you, although the most flexible SIPP to me seems II and the most flexible ISA Saxo.  Flexible in terms of market access.  I did this spreadsheet back when I was looking so might be out of date now (so DYOR and please check):

Green cells are the cheapest commissions.  I think I assumed a trade of £5,000 at £10 per share (the table suggested otherwise but certainly not £50k!).  Interactive Brokers (tiered pricing) was the best on coverage and costs.  They don't do Scandinavia but Degiro (lovely interface) do.  Alas none have ISAs or SIPPS (IB can be linked with a SIPP but not for the likes of me).  A few others around but clearly weren't in the running unless anyone has any suggestions. 

The access problem I experienced after doing so much research for the royalty companies did annoy me. But my own fault I suppose for deciding to run just a hl/ISA and ii/sipp. These do provide me with my stock choices 95%+ of the time, Japan/asia being a notable problem area. But as the stocks are all long term holds i initially decided that I should just settle for using the lowest cost/and most tax sheltered way of buying. Your above table however - not meant as advise I know - is showing me that I should/could have had a separate trading account, and perhaps I may give more thought to doing this after all. 

[JMD]

5 hours ago, Cattle Prod said:

Political winds have shifted. Yesterday Keir Starmer hinted he would vote against covid passports, and today, the Tories put forward one of their most prominent politicans to say the following:

Yes, there is a caveat in there, but he well knows that viruses vary toward more prevalence and less lethality. They've lied and lied to us, but the whole thing has sat on Whitty supporting policy, IIRC he threatened to quit early doors. I think this is a real signal. 

Yes, Whitty started saying this back in January at the covid press conferences. Talk about cognitive dissonance?! But on a macro level truly frightening and sinister really - why do I say this? - my take is that this is precisely how beurocratic statist medical professionals think/act/myopically justify things... I shan't say anymore than that, else I run the risk of invoking Godwin's law!?! ...Suffice to say it is simplistic beurocratic policies like lockdown that give me sleepless nights when imagining our future world.

[JMD]

1 hour ago, SpectrumFX said:

One of my first jobs was working for the job centre, and while I was there they were in the process of selling all of their estate and renting it back.

Madness. But I'm sure somebody dressed it up as a good idea and got a fat bonus out of it.

Madness I agree. But it's an example of the 'financialisation' of the economy, whereby long term saving and securing productive assets simply doesn't exist. Instead we have consumer credit and risk assets, and that's just the everyday prosaic stuff. 'Above us' we have the so called 'lords of finance' and their impossibly clever derivatives, mbs, cds, etc. 

[Sugarlips]

6 hours ago, Cattle Prod said:

Super post. I'm trying to bone up on game theory atm, think it's key at major inflection points.

I'm still learning every day so am not 100% convinced it's all inflation next but enjoyed the latest macrovoices podcast where Steven Van Metre spent an hour outlining the science of why it's deflation from here (velocity of money etc) but Erik demolished the whole theory in a few sentences simply by observing inflation is more of a perspective than technicals and logic - if enough people realise the costs are rising it quickly takes hold in the collective and becomes self perpetuating.

[Lightscribe]

8 hours ago, SpectrumFX said:

One of my first jobs was working for the job centre, and while I was there they were in the process of selling all of their estate and renting it back.

Madness. But I'm sure somebody dressed it up as a good idea and got a fat bonus out of it.

I think Right to buy was perhaps the most damaging policy ever implemented, but combined with tax credits it’s actively destroyed a whole productive generation.

RTB enabled a phenomenon of ‘council house millionaires’ for those that took advantage in the 90’s around the likes of London which will never be seen in history again.

Tax credits in principle would have been a sound policy. The downfall was to make it too generous and economically more beneficial the more children you had. The added time bomb which we’ll start to see now (at the possibly worst time) is homelessness of 50+ year old mothers in private rental when their income drops off a cliff when all children are above 18.

In turn, BTL combined with low interest rate policy has enabled 2.5million economically advantaged older generation to feed off the younger generation through taxation supporting benefits, HPI and increasing rents.

These policies have spelled disaster for a whole generation through housing and birth rates. Young professionals struggle to afford a home without massive debt and are having one child if any at late 30s/40s. Those dependent for life on government support were actively encouraged to have multiple children spread across decades up to 40+.

Overall in the councils eyes, whose foresight extends to the next budget/government, it was a short term win. Sell off all the council housing and take the maintenance costs off their books. Looks good on paper, and someone else can deal with the ramifications later down the line.

[wherebee]

41 minutes ago, Sugarlips said:

I'm still learning every day so am not 100% convinced it's all inflation next but enjoyed the latest macrovoices podcast where Steven Van Metre spent an hour outlining the science of why it's deflation from here (velocity of money etc) but Erik demolished the whole theory in a few sentences simply by observing inflation is more of a perspective than technicals and logic - if enough people realise the costs are rising it quickly takes hold in the collective and becomes self perpetuating.

I'm having some work done next year and the builder, who is a mate, is pulling forward the purchase of materials as from June 1st there is an across the board 15% rise for many of the items we need.  we talked about it a lot the past six months, so he called me when his supplier told him.  He'll store it for me, and if I don't use it I can always sell back into the market.  Will save me about 5k aussie overall - not a small amount.

If tradies and working class see inflation hitting in that very visible way, then patterns of spending will change.

[Ash4781b]

41 minutes ago, Sugarlips said:

I'm still learning every day so am not 100% convinced it's all inflation next but enjoyed the latest macrovoices podcast where Steven Van Metre spent an hour outlining the science of why it's deflation from here (velocity of money etc) but Erik demolished the whole theory in a few sentences simply by observing inflation is more of a perspective than technicals and logic - if enough people realise the costs are rising it quickly takes hold in the collective and becomes self perpetuating.

From what I can see there’s definitely short term inflation coming. Once the great opening comes there is going to be a demand issue that distorts the cpi index (flight prices, garden furniture, holiday costs, pub beer prices, restaurant prices,etc). I don’t know whether council tax is in the index but that is pretty much guaranteed to rise at +4% a year( that is with an uplift cap in place god knows what it would be rising at without it). Whether the rises are sustained I’m not sure as I think they will let the cpi rip and then it falls out of the year on year. For some it’s going to be a reduction in living standards - end of overseas holidays for some sadly seems a possibility . It will probably also cause a lot of media anger on need to raise benefits.

[sancho panza]

19 hours ago, DoINeedOne said:

@Harley@JMD @sancho panza @DurhamBorn and others  Whilst we don't seem to be able to access this in the UK, got me wondering

We can create our own versions or see what they are buying selling etc....

How about if i set up some code to monitor these ETF's we all like for changes then i can post what changed if it's actually a decent change not change a small changes

should not be to difficult i have it email me when there's a change to the page

If so what ETF's should i'll add if there's a url to there holdings post it

1st i'll add this one

https://horizonkinetics.com/products/etf/infl/#holdings

I use the below for ETF holdings Dino.My coma score lists are all based on the relevant ETF holdings although there's some crossover once from different sectors especailly media/telecoms.

ALl I obssess with is the sectors I'm into -oil,gold,potash,telecoms

https://www.etf.com/GDX#efficiency

18 hours ago, JMD said:

(whilst i'm freewheeling ideas, i think you have mentioned family trusts before. I'm no expert, but perhaps worth considering to mitigate IHT; plus once in a trust setup, why not buy a dozen houses/flats and pass that real-asset property-wealth down through the generations... you could even put your own name plaque on the buildings, or at least a QR-code linking to this thread!!!... that way you ensure your immortality... well kinda!)   

Trusts are in my expereicne a very tax inefficient vehicle in that they may alleviate IHT but you get whacked with income tax and CGT throughout using them.Their are also legal/accoutning costs that can add up to.Better to think out of the box and move domicile if IHT is an issue.

 

14 hours ago, Cattle Prod said:

Political winds have shifted. Yesterday Keir Starmer hinted he would vote against covid passports, and today, the Tories put forward one of their most prominent politicans to say the following:

Yes, there is a caveat in there, but he well knows that viruses vary toward more prevalence and less lethality. They've lied and lied to us, but the whole thing has sat on Whitty supporting policy, IIRC he threatened to quit early doors. I think this is a real signal. 

Very interesting development there CP.Made me laugh to be honest.The flu deaths tally is a lot higher than 9000 as I understand it

They've basically run out of road.At my work,they've vaccinated all the people who wanted one and have left the refusniks alone.In some hosptial trusts and care homes,there's been significant managment pressure but the level of people declining was forcing them into a conflict with a decent size chunk of the workforce some of whom would likely take legal action where the govt would likely lose.Also,looking at the scenes from the weekend,I think the govt are fearing more trouble in terms of unrest if they don't start easing off.

I like your description of Whitty,the Chief Medical Officer,apt and amusing in equal measure.Sums the situation up well.

Prof John Ioannidis has done some sterling work throughout this mess and has been saying since the Diamond Princess back in Feb/March last year that the then WHO infection fatality rate estimate of 3.4% was way out and that it was more like 0.20% or so (ie Flu levels).WHO are now accepting his IFR.Here's a link the WHO page.You'll see that it was submitted on May 20th 2020..................................................they've known the real postion for some time.

'follow the science,follow the science'......we're led by imeciles.

https://www.who.int/bulletin/online_first/BLT.20.265892.pdf

 

[JimmyTheBruce]

8 hours ago, JMD said:

Yes good spot, I was confusing the debt to equity ratio with ev/EBITDA, or maybe another ratio entirely! As I regularly mention, i am not good at the financials and with hindsight should have paid for a subscription service where I could have made full use of stock screener tech. However think wouldn't be that useful for me now as I am much more allocated.

Harley/JMD, you're both looking into this far too much.  You need to follow Amy Lee, she has a foolproof strategy:

https://reut.rs/3sIDZbe

I started off laughing at the article, but ended up wondering how a Deliveroo rider could afford to lose more than me 😪