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


spunko

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@sancho panza thats right,and i think the welfare system in the UK is hugely to blame.There is no incentive for people to build capital outside of housing.My friend gets £2200 a month in benefits,you need capital of around half a mill to get that income from 60/40 type funds.An ordinary paid couple would need to save hard most of their lives to get what he gets for free.In the past welfare wasnt that nice.It was ok if you had kids,but a struggle.Not now.Of course,its so generous now people also defraud it more and more.I think around 20%+ will be fraud,government think less than 1%.Mostly single mothers who arent single.I know one who lives with a millionaire and claims full Universal Credit.Drives around in a £40k car.Its everywhere,but nothing is ever done.

Of course its a pincer movement.Government hands out more and more so needs to take more and more from the workers,so the worker gets it from both sides.I did a calculation once on a factory job and i reckoned if the worker and company werent paying for working age welfare and pensioner housing benefits and state worker pensions instead of being paid £330 a week it would of been £480.

Of course in the UK the only real weapon government have is to try to trap as many people into working as they can,and they use mortgage debt for that.Losing your home is hugely traumatic and people tend to focus on working to keep "their" house,even though its mostly the banks,HTB loan etc.

All of these things were on my roadmap of course and part of the reason why more and more printing was certain.We are getting close to end game on government spending though as printing will stop once inflation is over 3% for a while.Of course its way way over now in the real world.Needed a bucket today to re-point some brickwork on my house,1.39p were £1 a few months ago.Luckily iv got a lifetimes supply already.They didnt have ready mix mortar in stock anywhere,luckily had some in the garage.

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Noallegiance
2 minutes ago, DurhamBorn said:

We are getting close to end game on government spending though as printing will stop once inflation is over 3% for a while.

Will they attempt to replace handouts with government infrastructure jobs, d'ya think?

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Yadda yadda yadda

On the house prices discussion earlier, especially in London and in relation to working from home. Families that previously were happy with two bedrooms now want three so that one can be an office. Or an extra reception room for an office. Or more garden space to put a home office in. Some can extend but others need to buy. These are often the people who have saved a fortune during the lockdown. If people need to go into the corporate office twice per week they can't move too far from town. This is already a factor pushing up prices in midmarket to relatively cheap areas. However, you cannot easily strip that effect out from that of stamp duty removal.

Some people may yet have to return from their delightful coastal lockdown house. Could be another pool of renters and buyers. There may also be people who want and can afford a pied a terre for one or two nights per week so they can shag hookers, er, go to the office, whilst their families are safely in the countryside.

I'm not saying that London's house prices will rise, just that it may be more complicated than previously stated.

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@Cattle Prod

Thanks for replying, I agree with most of what you write, it fits in with my analysis although my approach is more bringing in all economic data, Covid and government so I defer to your incredible knowledge on oil and DB's 'proper' data driven roadmaps :)

 

I would like to reiterate what you say, there is likely to be huge gyrations that will wipe a lot of people out and everyone on this thread needs to be prepared both for swings up and crashes down. The longer term play (oil supply will not meet demand in 2-5 years) which has a much higher certainty needs a very strong hand as most people would sell out in any depression between now and then.

Quote

In the next 9-12 months there is a fair chance of a spike above $80 if demand normalises. It could happen inside 4 months. But be prepared: this will guarantee another crash, so if you don't have itchy fingers and a high risk tolerance like me, don't bother

I don't know why you think $80+ guarantees another crash but it might fit in with my current predictions. I see the BK being pushed back now. If we see $80+ oil it will be part of a gigantic everything blow-off top. This is likely to take more than 6 months to play out as it would be backed by Covid retreating and constant positive economic data.

This would then fit in with DB's prediction of tightening leading to the BK and the oil crash CP predicts. I don't see how this could all play out in less than 6 months, for one thing the central banks have said they will ignore inflation as long as possible.

If it works out this way it is going to be a horrible environment in a years time, everyone will be predicting a permanent depression and oil will be at a level that bangs more nails into the shale coffin.

This really would lay up the longer term oil trade you (CP) mention. (I think this also fits what  @sancho panza posted)

 

Anyone reading this and wondering why there is so much chance of inflation/deflation boom/busts over the next year needs to realise that the central banks, through their messing, have created a gigantically unstable system that can fall either way. Biden has stupidly given it the most almighty push when it was already rocking back and forwards.

 

@sancho panza

Addressing another of your posts, this discussion and research has made me believe that the supply shortage (which is probably a year out) is more likely to happen after some kind of crash.

It's just the chances of the economy running sensibly for a whole year seem very slim so there will be a boom-bust or just some kind of bust if Covid makes the economy tank.

I am hoping for the BP release next week to spur a re-rate for BP and drag RDS up with it. I need to exit half of my position before a major dip (I will be patient) as I don't want to hold my entire position for the next 3 years whilst BP hits 200p again.

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1 hour ago, Noallegiance said:

Just got this in. New to me. Demerger?

 

Demerger.PNG

You will get shares.Its so you can make lots of money selling coal,but Anglo can pretend they are all woke.I expect in a decade or two the big oilies might do similar.

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Just now, DurhamBorn said:

You will get shares.Its so you can make lots of money selling coal,but Anglo can pretend they are all woke.I expect in a decade or two the big oilies might do similar.

Do you think it is worth buying now for the extra shares, or simply buying both if the deflationary bust occurs?

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https://www.teletrader.com/eu-tries-to-outbid-china-in-shndia-infrastructure-deal-repor/news/details/55251126?internal=1

The European Union and India have started negotiations on a network of joint infrastructure projects, with which the bloc aims to provide India with a "partnership that would be more attractive than what China can offer," the Financial Times reported on Wednesday, citing EU diplomats.

Through the proposal, which includes research and innovation projects as well as the ones focused on infrastructure, Brussels intends to present an alternative to Beijing's Belt and Road Initiative, in an effort to prevent the Chinese economic domination in the region.

While no specific details of the talks were unveiled, the outlet noted that the deal could be "outlined during the India-EU summit," scheduled to take place virtually on May 8.

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9 hours ago, Mapper said:

Maybe there needs to be more vote buttons on this forum.

Suggestions:

- Well, that's soured my day.

- Fucking depressing.

- Pass the arsenic.

O.o

And I felt quite `chipper` this morning when I wrote it, you want to see me on a bad day...well no you don't actually, otherwise you would need a four option "Where's the tower  block to jump off?" :-) :-) :-)

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9 hours ago, Fully Detached said:

I seem to be largely alone in my opinion but I think this WFH thing is temporary, and the push to return to the office won't necessarily come from employers but from employees themselves. I've been long term WFH and it takes a certain personality type - I'm about as well suited to it as anyone I've ever met and even I find it hard at times.

But here's what convinces me. The corporate world is full of little bastards who would rape their grandmother for a job title, let alone a pay rise. I look at how my own contacts shamelessly promote themselves on LinkedIn, and how cutthroat many of them are with any interaction unless there's something in it for them. I swear many of them would tear their own colleagues throats out for a little bit of kudos within the business. These are the ones who will return to the office to crawl up the bosses arse (whether the boss is there or not), and at that point, everybody else is going to feel the pressure to do the same. If you're not seen you're going to get forgotten, and worse, you're going to get fucked by the type I describe above.

I'm seeing this play out in a very small way with a friend. One of his colleagues has continued to provide services and projects for their employer throughout the lockdown while all the others sat on furlough, and surprise surprise, now has some mickey mouse new job title which means nothing, but has riled the hell out of everybody else. Everybody else now complaining that they weren't given the chance to do anything over lock down 9_9

Put those people now in an environment where they are worried about paying their mortgage and other debts. I don't see them quietly sitting at home hoping for the best.

Granted, it still needs employers to provide office space and see the value in it, but I reckon that will come soon enough too.

And that one person I going to have to `watch their back`, as it won't be one knife, but many until the `hatchet job` is done.

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Fully Detached
9 minutes ago, MrXxxx said:

And that one person I going to have to `watch their back`, as it won't be one knife, but many until the `hatchet job` is done.

Yep, and then the next little bastard steps up to the plate, rinse and repeat.

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8 hours ago, The Idiocrat said:

Good interview with David Hunter published today (apologies if already posted).

 

Agreed, it was very good.

His timings are very tight though, he mentioned DXY going to 82 and then mentioned labour day (looked it up and it is 1st May O.o)

Also gold would have to get to 2500 and oil to $70+  in the same time frame

FED then tightens and TNX bounces to 250bps (from 120bps that it hasn't reach yet)

And the markets roll over 2nd-3rd qtr 2021 before the economy crash before the end of the year

 

This is a serious roller coaster so I hope you are all strapped in!

 

I think this is how I can fit it all in, please feel free to correct:

May-June stock market and commodity bull run

'Transitory' Inflation May - July

Markets get further worried about inflation getting out of control and call FED's bluff July

FED holds out as long as possible

FED tightens and everything springs back over next month September

FED monetary easing October

Spring back accelerates creating deflation and commodity collapse November 

FED printing like crazy Nov/Dec (inflation no longer a problem due to commodity price collapse)

Economy recession lasting 12-18 months December

Inflation takes off 2024-2025

 

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Yellow_Reduced_Sticker
6 hours ago, DurhamBorn said:

The increase in state spending is a disaster,but certain due to the macro position,but what needs to be remembered is the more the state spends the more private assets are built up.If state spending falls fast then private assets will crash,at least at first.What i see is state spending will rise but then fall back relative to the economy.

What is certain at some point is a UBI though.We have a situation now where working people are no better off than none working,that wont last.I think £100 UBI is coming,the only question is when,and how.

Our political parties are all highjacked of course now ,but they can be removed and hanged in 30 minutes if the people ever decide it.

My friend doesnt do much now on the macro front,though he does still look after a few different charities investments.I message him every now and again,but he tends to talk more about the political cycle now in the US more than anything,he is very very worried about a civil war at the end of the cycle.He thinks the left are allowed to use violence all the time,and people/media think its ok if its aimed at someone who doesnt think their way.He says the people getting on with their lives will turn though,and it could be full on civil war.Ironic is he is left leaning.

THANK YOU SO MUCH!

 

 

9 hours ago, M S E Refugee said:

Until I can see that Governments are willing to reopen their economies I will own no Stocks and be Happy.

Apart from some Gold Miners.

 
AH...but have you sold your entire RMG share holding?
 
Would be interesting to know as YOU are this boards inside-man :ph34r: at Royal Mail...
 
 
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8 minutes ago, planit said:

 

Agreed, it was very good.

His timings are very tight though, he mentioned DXY going to 82 and then mentioned labour day (looked it up and it is 1st May O.o)

Also gold would have to get to 2500 and oil to $70+  in the same time frame

FED then tightens and TNX bounces to 250bps (from 120bps that it hasn't reach yet)

And the markets roll over 2nd-3rd qtr 2021 before the economy crash before the end of the year

 

This is a serious roller coaster so I hope you are all strapped in!

 

I think this is how I can fit it all in, please feel free to correct:

May-June stock market and commodity bull run

'Transitory' Inflation May - July

Markets get further worried about inflation getting out of control and call FED's bluff July

FED holds out as long as possible

FED tightens and everything springs back over next month September

FED monetary easing October

Spring back accelerates creating deflation and commodity collapse November 

FED printing like crazy Nov/Dec (inflation no longer a problem due to commodity price collapse)

Economy recession lasting 12-18 months December

Inflation takes off 2024-2025

 

 

This prompted me to say, to you as well as the usual posters this thread has been on fire for the past few days, thanks everyone.  Too busy and/or knackered to do much but give out well-earned reps but trying to read it all.

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@planit FWIW and with no disrespect to David at all, I wouldn't be surprised if we blow through those timelines.  Even he said a few months either side would be a good call (I agree) and with that in mind, his timing tends to be late.

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Noallegiance
9 hours ago, The Idiocrat said:

Good interview with David Hunter published today (apologies if already posted).

 

Just listened.

Wonderfully meaty.

And I'm mostly vegetarian.

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7 hours ago, DurhamBorn said:

Our political parties are all highjacked of course now ,but they can be removed and hanged in 30 minutes if the people ever decide it.

My friend doesnt do much now on the macro front,though he does still look after a few different charities investments.I message him every now and again,but he tends to talk more about the political cycle now in the US more than anything,he is very very worried about a civil war at the end of the cycle.He thinks the left are allowed to use violence all the time,and people/media think its ok if its aimed at someone who doesnt think their way.He says the people getting on with their lives will turn though,and it could be full on civil war.Ironic is he is left leaning.

Armstrong writes about the Socialist revolution cycle; https://www.armstrongeconomics.com/armstrongeconomics101/economics/socialist-revolution-on-target/

The last time something like this occurred on an international contagion basis was the Revolution of 1848. Our models forecast that we would see global civil unrest in 2020, and this was 172 years on schedule..The 1848 Socialist Revolution sent people fleeing Europe to the United States for safety. Today, a takeover by the Socialists in the United States will lead to yet another migration between states, but there is no new land for people to flee. It is more likely to result in nations splitting and civil wars.

His cycles have always pointed to the break up of the US States - he wrote this in 2013 ; https://www.armstrongeconomics.com/uncategorized/224-collapsing-wave-structure-point-to-breakup-of-usa/

This Collapsing Wave structure that the United States appears to be in means it is a one-time-wonder and that the United States will break-up and the there will be no more “united” union. This is becoming self-evidence in the polarization of politics with tremendous differences in culture on a regional basis

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M S E Refugee
47 minutes ago, Yellow_Reduced_Sticker said:

THANK YOU SO MUCH!

 

 

 
 
AH...but have you sold your entire RMG share holding?
 
Would be interesting to know as YOU are this boards inside-man :ph34r: at Royal Mail...
 
 

I have still got my RMG shares through work as I can't sell them unless I want get clobbered with Tax and National Insurance.

Its been a lot quieter since the Shops reopened but it usually quietens down from now until September.

I think us delivering 7 days a week is very good news, the management and Union are very optimistic going forward and there seems to be a bit of a buzz about the place.

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1 hour ago, planit said:

 

Agreed, it was very good.

His timings are very tight though, he mentioned DXY going to 82 and then mentioned labour day (looked it up and it is 1st May O.o

 

Labour Day in the US is first week of Sep.

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17 minutes ago, BearingUp said:

Labour Day in the US is first week of Sep.

Thanks, that makes more sense.

 

What Deutsche Bank Found to Love in European Oil Giants

ENI target €11.50 ($13.80). At a current price of around €10.1, the upside potential is 11%

Total target of €46.60 ($55.94), implying an upside of 23%

Shell  target of £19.37 ($26.91). That implies upside potential to a current price of around $36.60 of 37%.

BP target of £3.13. At that price, the potential upside on BP’s stock is 3%

 

Not sure what research Deutsche has done but they don't seem very consistent if you read the comments in that article (assuming the article is a true reflection of Deutsche research).

For example they include share buybacks in the figures for ENI and Shell but don't mention it for BP. For ENI they say a renewables spin off will out the true value but for BP they imply the renewables are only potentially worth anything.

Would be good to get hold of the real analysis if anyone has access.

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One of my great interests is the American Civil War.I think mainly because it think it was a war of ideas and way of life rather than taking others resources.The great lesson of that was the fact there needed to be a Great Compromise and that was well understood until the last 15 years.The fact that the left have now moved past that,and seem to think that compromise isnt needed is the great risk of our time.As men we love life and dont give it away easily.I dont fancy a bayonet in my belly and id like to die old in my bed.However those things fall by the wayside when my history,self and cultural memory is threatened.When i see the left and the state slowly encroaching on my children and grandchildren then my ferocity would know no bounds.We are British,Roman,Pict,Scot,Viking,Saxon and Celt,the most violent,nasty races ever to walk this earth bred together and mixed in DNA.

Someone attacked my daughter once in an Asda car park over a simple parking spot and she had to ring me she was so scared locked in her car.I pulled his 16 stone through his 4x4 window and was about to pull out and eat his eyeballs until my daughter stopped me.That is the sort of thing us western men are capable of at any moment.

I think civil war is still unlikely,but its much more probable than any time since the late 1800s

 

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7 hours ago, DurhamBorn said:

@sancho panza thats right,and i think the welfare system in the UK is hugely to blame.There is no incentive for people to build capital outside of housing.My friend gets £2200 a month in benefits,you need capital of around half a mill to get that income from 60/40 type funds.An ordinary paid couple would need to save hard most of their lives to get what he gets for free.In the past welfare wasnt that nice.It was ok if you had kids,but a struggle.Not now.Of course,its so generous now people also defraud it more and more.I think around 20%+ will be fraud,government think less than 1%.Mostly single mothers who arent single.I know one who lives with a millionaire and claims full Universal Credit.Drives around in a £40k car.Its everywhere,but nothing is ever done.

Of course its a pincer movement.Government hands out more and more so needs to take more and more from the workers,so the worker gets it from both sides.I did a calculation once on a factory job and i reckoned if the worker and company werent paying for working age welfare and pensioner housing benefits and state worker pensions instead of being paid £330 a week it would of been £480.

Of course in the UK the only real weapon government have is to try to trap as many people into working as they can,and they use mortgage debt for that.Losing your home is hugely traumatic and people tend to focus on working to keep "their" house,even though its mostly the banks,HTB loan etc.

All of these things were on my roadmap of course and part of the reason why more and more printing was certain.We are getting close to end game on government spending though as printing will stop once inflation is over 3% for a while.Of course its way way over now in the real world.Needed a bucket today to re-point some brickwork on my house,1.39p were £1 a few months ago.Luckily iv got a lifetimes supply already.They didnt have ready mix mortar in stock anywhere,luckily had some in the garage.

B+M currently selling buckets with metal handles for a quid.

I asked the cashier the other day if they have portaloo since camping is currently BYO sanitation. Then [unrelated] grabbed 5 buckets. As  she rang everything through she said I'll put these in here since it hasn't been used yet and then [unneccessarily] started apologising for her sense of humour.

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5 minutes ago, BWW said:

B+M currently selling buckets with metal handles for a quid.

I asked the cashier the other day if they have portaloo since camping is currently BYO sanitation. Then [unrelated] grabbed 5 buckets. As  she rang everything through she said I'll put these in here since it hasn't been used yet and then [unneccessarily] started apologising for her sense of humour.

Il grab myself a few more,iv done a grand job on the pointing,but have some ridge tiles to take off and re-mortar,im a bit iffy about going up that high,but nows the time to do it with zero wind.

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sleepwello'nights
On 20/04/2021 at 06:28, Siggy said:

 

A while back, someone mentioned about VAT free silver from Germany (coininvest/silvertogo). I can sadly confirm that they are not letting it slip through anymore.  I scrupulously ordered less than 1k, so that there would be no customs declaration,  yet UPS sent a link for the VAT to be paid before releasing parcel for delivery. 

 

I bought some Britannias in March from Coininvest. The invoice included the following line As per "HMRC Notice 701/21A  - Investment Gold Coins - January 2009" all gold coins and bullion are VAT exempted - except 20 EURO Ireland 2008 Skellig Michael.  This delivery is free of VAT according to Art. 146 of EU directive 2006/112/EG.

The order was delivered by UPS and i haven't been charged anything other than the amount shown on the invoice. Definitely no VAT paid to UK or German authorities.

 

 

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