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


spunko

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Yadda yadda yadda
8 hours ago, Optimistic said:

Tories for instance will lose every red wall seat as soon as they tell people they need to spend £20k on a heat pump that wont work in the north,too cold in winter.!!!

My friend has been in her new build for less than a year, and has an air pump. She's had enough and is taking it out already! It can't manage to heat the downstairs and upstairs at the same time! Manufacturer said nothing is wrong with it, and the installation was apparently done properly!! She's had upmpteen people looking at it!

 

My Dad told me that a friend of his has a ground source heat pump. Supposed to be better than air source. They have to leave the internal doors open as the living room doesn't get quite warm enough on its own. Really large radiators too. They also have a log burner if it is really cold.

I wonder what the carbon cost is manufacturing transporting and installing larger radiators. Plus digging up a big chunk of garden to install the pipes.

If a technology isn't good enough on its own then it is never going to be the most efficient solution.

Perhaps air source will work in new build flats with tiny rooms? Or perhaps new builds will have the ground floor six feet below ground level for insulation. Narrow windows above for natural light.

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32 minutes ago, Yadda yadda yadda said:

My Dad told me that a friend of his has a ground source heat pump. Supposed to be better than air source. They have to leave the internal doors open as the living room doesn't get quite warm enough on its own. Really large radiators too. They also have a log burner if it is really cold.

I wonder what the carbon cost is manufacturing transporting and installing larger radiators. Plus digging up a big chunk of garden to install the pipes.

If a technology isn't good enough on its own then it is never going to be the most efficient solution.

Perhaps air source will work in new build flats with tiny rooms? Or perhaps new builds will have the ground floor six feet below ground level for insulation. Narrow windows above for natural light.

I’ve got a ground source heat pump.  Provided you can stump up the 20k to buy and have it installed, the government pays the whole lot back to you over seven years so at today’s zero interest rates you’re not really losing .  In fact I got 18 panels of solar chucked in as well to run the pump B|

It heats my ancient cob built house with ease (don’t even need to use all the rads)and yes, they provide a lot more power than air source pumps.  Problem is you need about half an acre of accessible land to lay the pipes. Alternatively you can drill down and install vertical pipes but this adds prob 50% to the cost.

But I agree the point about the carbon costs of converting.  But our oil boiler was toast and the government was going to pay!

For me it’s the same with going to an EV.  I’m not stumping up 25k for a manufacturer to mine a load of scarce minerals and create climate busting CO2 on making a car that looks and performs exactly like the one I’ve got already.  Unless I’m paid to do it....

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sleepwello'nights
15 minutes ago, Innkeeper said:

I’ve got a ground source heat pump.  Provided you can stump up the 20k to buy and have it installed, the government pays the whole lot back to you over seven years so at today’s zero interest rates you’re not really losing .  In fact I got 18 panels of solar chucked in as well to run the pump B|

 

That's the Domestic Renewable Heat Incentive. Our new house has an air source heat pump installed. The builder got the grant not me. 

I thought that the lower the temperature the more efficient the Air Source Heat Pump was. I've no idea really. Happy to be enlightened. All I know is the electricity bill for our house is going to be more than double the combined electric and gas was for our previous house. 

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12 minutes ago, sleepwello'nights said:

the electricity bill for our house is going to be more than double the combined electric and gas was for our previous house

Oof

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Bobthebuilder
5 minutes ago, Loki said:

Oof

This is what I always hear about heat pumps.

Calorific properties of gas is huge compared to electric.

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If im ever forced to get a heat pump il put a coal fire in and burn coal.Load of it still around me,plenty comes to the surface still in many places on my doorstep.I suspect it will become a great black market business.Boris is a complete plank.

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39 minutes ago, DurhamBorn said:

If im ever forced to get a heat pump il put a coal fire in and burn coal.Load of it still around me,plenty comes to the surface still in many places on my doorstep.I suspect it will become a great black market business.Boris is a complete plank.

And then what they do is make it illegal to have open fire/wood fire heating in urban areas (many london councils were planning on doing this, not sure if they did).

Of course, the rich and connected and benefits class can have heat.  Plebs?  NO!  freeze you bastards.

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desertorchid
58 minutes ago, DurhamBorn said:

If im ever forced to get a heat pump il put a coal fire in and burn coal.Load of it still around me,plenty comes to the surface still in many places on my doorstep.I suspect it will become a great black market business.Boris is a complete plank.

Yep and further proof of how (as with diversity officers) the ideology in the West causes a huge misallocation of resources and acts as a drag on the real economy. Black Markets always thrive in these situations where real consumer demand cannot be met.

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Great interview by David Hunter, posted earlier in the week by @The Idiocrat. Lots of information, including timings and targets. I have posted below my summary table, and I'll add a rough transcript for those who prefer use text for reference. I have been thinking a bit more about strategy for the months ahead, and I'll put up my conclusions later, for people to criticise.

 

 

dh.png

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David Hunter rough transcript:

DH: Last March S&P was 2200 and I called for new highs: now 4200+. Length of time taking gold to re-emerge from consolidation has been longer than expected, but markets don't always do what we want.

Expect a spectacular melt-up into Q2. This is due to liquidity injection, and fiscal stimulus. Investors have remained relatively restrained, with a wall of worry. Now see more signs that people are believers, but still some healthy scepticism, with people calling for bigger corrections than we have had. Market has been self-correcting on the way up. At true top, we will have many more true believers, saying "this is the start".

I'm looking for equity & commodity markets to make new highs. Oil correction is not yet done, but will come out of that and reach $75 by this summer. Gold & silver will reach new highs (all time high in gold). Bonds can rally. In a global bust, treasuries will make new highs. I'm expecting a bear market in stocks: 60-75% bear market, possibility of 80%, that will be the worst in post-war history.

Inflation will get a lot higher in next 6 months, and fed will have trouble ignoring it. Last July, fed felt comfortable pulling several hundred billion out of the system. That was with no inflation. They could now pull 0.5 to 1 trillion out of the system. System is fragile: needs new liquidity to keep it coming.

Q: Why is the leverage able to speed things up? DH: leverage is both debt and derivatives (people often just think about debt). From late 80s, derivatives really started growing, and is much bigger now than 2008/9 collapse. Tail wagging the dog. Derivatives can really speed up things. This can push the markets.

View on inflation/deflation cycle: Have not had a widespread deflationary downturn since 1930s.

We are very late in the cycle that started 2009 (global bust will be the end of it). A year ago, inflation close to zero could be 3-4% this year. Still relatively low this late in the cycle. If they have to tighten because of overheating, they could tip into negative if policy mistake leading to downturn. We are not starting this downturn with high inflation of 7-8%. A lot of current inflation is commodity inflation, which can fall in a hurry as demand drops. So many people worried about inflation this year (including DH), but we are close, in a longer perspective, to a deflation ... so having fed deal with a breakout of inflation on the eve of what could be a deflation, makes it a very complex situation of a central bank to handle, and they may not be up to it: could slip quickly into deflation if policy mistakes are made. Things could happen quickly. No precedent post WWII, and central bankers rely on precedent.

Downturn before year end, and could slip into deflation. Will be contained within a year, as will the deflation. Call it bust, not depression, because will be short-lived, but will have some of the characteristics and damage of depression, because of involuntary debt liquidation. Europe more precarious than US. Could be largest financial crisis (not largest downturn) in history, because of mass of leverage. Between Q4 2021 and middle 2022 worse than DH has seen in 48 years.

Don't expect to see inflation and deflation in different parts of the economy, because the bust will be quick. Hard to know if everything will deflate. Not like the 30's: it will be fast. Look at second quarter swoon 2020: it was scary. Things can go from seemingly good to bad in a hurry. Primary forecast is most assets will deflate. Even if they were quick to turn the money spigots on, it would be 9 months before it impacts the economy, and maybe another 18 months before it impacts inflation in a big way. A few months of missteps could feel like an eternity.

Will we see yield curve control? DH doesn't think so: YCC on a longer-term basis is a myth because inflation will force their hand. On a short term, they may try. Rates are going to be dropping because of the bust, and after, rates won't be an issue. Lets suppose the bust starts end of this year and carries on at least first part of next year, maybe all of 2022. You are looking at 2024 before you have another inflation concern like now where it's pushing above 4%. It will take several months to a year coming out of deflation before it goes positive, then you will be low single digits for a while. Real inflation story is mid-decade: starting 2024, by 2025-2026, that's when you start to push high single digit to double digit inflation. Having lived though Volker era, the only way to control inflation is to pour more fuel on the fire by pouring in money. That leads to more inflation.

Large parts of the economy are interest-rate sensitive: financing and home-buying, so the fed worries about that, rather than amount of money.

Dollar: Last time talked had an 85 DXY target. It got down to 89 then spent most of the year going back to 93-94. We have rolled over again. I have lower target to maybe 82. Thinks we have finished the upward consolidation. Euro looks like it will get to $1.30. CAD will get $0.90. AUS may get to $0.95. That will help fuel inflation. That move on dollar will be between now and early Sept (maybe sooner). Move to 85 and maybe 82 happens in matter of months.

Q: Do you have end of Q2 time-line for the bust to start? Not the bust: the bust is a H2 event, probably end of year. The bear market refers to the market. The bust refers to the economy. Stock market leads by several months. Stock market may top this quarter. That top may have a secondary rally. Could be mid Q3 before you see market unwinding, but could unwind quickly. Window for top is end May to early July. Top then stretches out into much of Q3. Bust may not start till late 2021. If the market unwinds more quickly, bust would be late Q3, early Q4 event. The bear market will be earlier.

Q: What happens to metals and miners? DH: Definitely correct in the bear market, but probably much less than the equity markets do. The fed will be coming back in with both feet, easing aggressively. Timing and gold and silver going back up will come before the stock market comes back up. Could have 30% pullback in metals, more in silver. Forecast for gold is $2500 for next several months. Probably a Q3 top. If you get a 30% move down from there, you're basically back here. Silver 45-50. Let's say 35% to 40% move back, again you're back here. There's not a lot of downside from here. You may re-test this during the bust. A couple of years ago, I thought gold could see $500 or $800 in the bust, but I'm not there now. It's possible it could get to $1000, but I doubt it. The many months spent in $1700 to $1800 area may serve at the floor.

Q: Why have real rates become disconnected from gold? Using CPI, real rates are rising, but looking at actual inflation, CPI is not measuring that accurately. Realistic inflation is not 1.5% to 2% - it's a lot higher than that over last few months. Nominal rates have risen: that didn't surprise me, but real rates haven't. I'm calling for 1.20% 10Y, in which case real rates are dropping. Then calling 2.5% 10Y as inflation begins to take off, but even then, inflation will be higher. Hard to see a scenario between now and early Sept where real rates rise: they will be falling even as nominal rates are going up.

Q: What are the biggest bubbles which will suffer in the bust? Certainly the equity market. We are coming to a secular peak for a run starting in 1982 (or 1974). We are in the parabolic phase, which is rare. Equities are the prime asset that will be hit hard. Also junk bonds, and toa lesser extent, real estate. RE is funny: we may be making a secular top, but don't know how fatst & hard thy will fall. We were hit hard in 2008/9, and we don't have the same subprime issues (but have others). Canada (and Aus?) are the markets which will fall hardest: they are where the US was in 2008/9. US housing will be hit hard, but I doubt it will be 2008/9 hard.

Commodities: We are in a super-cycle between 2 depressions. 1930's was the last depression. 2030s will be the next, so we have one more recovery to get us to the end of the super-cycle. By the end of the super-cycle, commodities are in for a huge run in post-bust era. It's not a straight line. The run this year has been great, and a lot of analysts are calling for a huge run from here. But, remember: that bust will interrupt the commodities cycle (i.e. the run to the end of the decade): it's like looking from the south rim of the grand canyon to the north. Sure it looks like a straight line, but there is a huge canyon in between. Thinking you can buy commodities today and they will go right on through... But beginning latter part of 2022 to the end of the decade, commodities will have a run like they have never had in history. Oil could get to $200, gold to $10000+, silver to $300+, and the pluses may make the number look silly low. Copper could go up 7-, 8-, 10-fold. The big moves coming in the next cycle are because of the money being put out.

Equities will make a secular top, meaning recovery in equities after the bust won't come close. Maybe it's 4700 for S&P at the top (or 5000 if it goes parabolic). Next cycle, if you have 80% drop and get to 1000, you could triple or quadruple from that, and still not get close to the top we have coming soon. That secular top might not be tested for decades. (2 or maybe many more). Gold and silver, next cycle, go on to much much much higher highers. Social media stocks and FAANGS and growth stocks in general will be dealing with headwind of inflation and rates. Looking at rates for 10 year, maybe 0% at top of the bond market in the bust to 15% by the end of the decade. For index funds, that rise from 0% to 15% will have a big impact on P/E multiples, so will be very hard for indexes to do well next cycle.

Q: How important is the oil price in the economy, and do you use it as a tool to analyse other markets? DH: I look at it, but it's not a primary driver. We have had O&G prices under control. Longer term, it's going to be a big factor, though. We are going to have an industrially-led cycle. Consumers will be digging themselves out from a horrendous bust (and are not strong going into it), then add on what happens if prices are $300+, gasoline will be easily double-digit. Consumer will have a problem even if wages break out. They will be following, nor leading.

Q: Lots of analysts are talking about currency resets. What is your view on crypto, digital currencies? DH: I'm not big on currency reset. If we are going to have a reset, I think it will be late in the decade. I don't see anything poised to take over in next 5 years. Dollar will be in trouble on that horizon. We have talked about dollar going to low 80s (DXY), then it will go to 120 in the depths of the bust, as everyone runs to it. Then, starting from that dollar high, I expect a long-term erosion to the end of the decade: it could be less than 50 cents. But, it won't be replaced as a reserve currency until much later in teh decade. We talked about high inflation at 15 - 20%, interest rates at 15%, and short rates at 20%. That takes all the central banks out of the game. That's why I was bullish last March: the fed was not out of bullets. The opposite end with high rates and inflation, they can't pour fuel on the fire, because it just exacerbates what they're trying to fix. End of the decade the fed cannot intervene, and that's when you can get the collapse of the system (the "Ponzi scheme" that has built up over 50 years). What comes out of that is probably a totalitarian response. That will be the resent, and you can't plan for it, you can design any currency you want.

Q: tell us about contrarianism. DH: In the 70's it was a very rare thing. Everyone today wants to be a contrarian, but it's just a psychological truth that the vast majority of people are not comfortable being outside the crowd, with conviction (actions not words). Computers have made it worse, as everyone is a "relative strength technician".

Q about sentiment for miners. DH: People become too myopic. You need to step back and broaden out the time horizon, even just a small amount sometimes. I love the gold chart and the silver chart. They are in flag formation, and when they break out they are going to do that vertically.

Q on how to decide when to sell? DH: Sentiment drives me more than anything, particularly if it is at an extreme in either direction. Fundamentals and macro also matter to me. It's a mix of all of them.

Q: can you give us some price targets towards the end of Q2 2020? DH: S&P 4700 (but won't be surprised if that's too conservative). DOW 38000. NASDAQ 17000. 10 Year 1.20% this quarter, then start pushing back up to 2.5%. 30 year 1.95% then pushing back to 3%. Gold $2500 at top (but might push beyond that). Silver $45 to $50. Longer term, gold & silver have a lot of upside, but it's not going to be a straight line. Oil probably down to low $50's, but the jury's out. It's possible we have had our consolidation in oil and it starts running again, but more likely it gets to $50-$54, before it makes another run at $75, and then down to sub $20 in the bust, maybe $10 again, before it starts the big move up coming out of the bust. GDX I have raised my target from $55 to $60. GDXJ $100. SIL probably $75. SILJ I have said $30, but now $35, and that may be low, if silver goes to $45 or $50. I think we are very close: we are starting to see the downtrend being broken, and I think gold and silver will start acting better as we move through this quarter.

Q: anything else you would like to mention? DH: Junk bond area is very frothy, because of these low yields we have had, that really reached out on the risk curve to get income, and I would cation people that equities are probably number one to be hit in the bust, but junk bonds are probably right behind them. They are the exact definition of what leverage means. Also, if we get oil back from $75 to $10, then as you know there is a lot of leverage in the shale oil area that got bailed out in March, but I think that is going to have real problems in the bust, and won't be bailed out.

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6 hours ago, sleepwello'nights said:

I thought that the lower the temperature the more efficient the Air Source Heat Pump was. I've no idea really. Happy to be enlightened. All I know is the electricity bill for our house is going to be more than double the combined electric and gas was for our previous house. 

In the case of lower outdoor temperatures, so particularly air source heat pumps, the opposite.  There is less warm air, plus electricity is needed to defrost the compressor.

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22 hours ago, JimmyTheBruce said:

Thanks for this.  Got a link?  I can't see it anywhere on the site and got nothing from them direct.

Timing is not the greatest, but a good excuse for me to have a look see if I can find anything of value.

It’s buried down in the international investing area. Not sure why they aren’t pushing it on their home page. Maybe they will once it’s live.

https://www.ii.co.uk/investing-with-ii/international-investing/trading-fee-free-us-trading

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I'm very reluctant to get into trading, as I'm sure I'll screw up, so I am following a "buy and hold indefinitely" strategy, which I hope won't be too disastrous through the economic bust. However, I do find I'm worrying about the BK, especially as DH is expecting the financial crisis to last about a year, which is not long by the standards of the great depression, but will seem like a long time as we go through it. Not only is there a danger I start fiddling with the portfolio, but also I'm finding that worrying is a distraction from my actual work: getting in some kind of financial shape is definitely beneficial to me, but I have to recognise that it's not wealth-generating, so I won't be happy with myself if I just get sucked into this stock-market stuff. That's another reason why I like the buy-and-hold approach: there is some chance I can step back from worrying about the next thing to invest in.

So, I think I need a simple strategy to get me through the next six months to a year, to keep me calm. I have had a think about the David Hunter interview, and what I'm going to do next week is just buy a fairly big chunk of GDXJ, with the intention to sell it this year, when and if it reaches $100. I'll still keep a fair chunk of cash out of the market as well. My reasoning is that there are a few different outcomes, and I'm fairly happy with all of them:

  1. GDXJ reached DH's target of $100 before falling back to roughly current levels. In this case, I end up making a profit, and have the cash available to buy back into PM miners (or other opportunities) during the bust.
  2. GDXJ rises from here, but doesn't hit $100, before falling back. In this case, I have sill bought the junior miners at a decent price, and I'm happy to hold through the cycle.
  3. GDXJ rises to $100, and then keeps going (no BK). In this case, I make a profit, and have the cash ready to go into something other then PM miners (probably industrials).
  4. GDXJ falls, and only recovers later in the cycle. I can be patient.
  5. GDXJ (and maybe everything else) falls from here and doesn't recover. In this case, the whole thesis is false, and I'm moderately screwed, but still have some cash to buy baked beans. I'm still not going to buy Amazon or Google.

A couple of random thoughts on other subjects:

I was wondering up-thread how to vote my shares on the Hargreaves Lansdown platform, since there is no obvious mechanism. For some specific actions (like the Anglo American demerger), you get a button to make a vote. In this case I voted for a split because, although it won't generate any extra value for the business, it lets investors be more granular about what they buy; and in an area as controversial as coal-mining, that might let the general-mining part rise in price, and also create a cheap, high-dividend value stock out of the coal part, both of which I'd be happy to see.

However, for general shareholder votes at the AGM, all you do is send HL a private message. There is an option where you choose the communication to be about shareholder actions or votes, and just tell them what you want. I have voted against the green stuff in the Shell AGM on 18th May, because I'm worried it is too severe and will damage the business.

Next, David Hunter is suggesting end of May as the point where stock markets hit a top (perhaps for a protracted period of a few months). If it is a sharp top, then the press will be looking for a reason for it. The reason they settle on won't actually be why the markets top, but they will feel they have to pick something anyway. So, I notice from another thread that this is the time-frame when the first forensic audit from the US general election will be completed (Maricopa county, Arizona). I'd like to predict that this is the "reason" for the stock market falls soon thereafter, and the falls could feed into a general panic about election integrity: a micro case of the economics driving the politics. Probably wishful thinking, I know.

Anyway, good luck everyone over the next couple of months!

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https://facts4eu.org/news/2021_apr_changing_Britain?fbclid=IwAR2QdmSHWZzfCuxniPieJmZVg9sM9xTwDiFmoexAVPq2PcLGG2GHMr4_g9U

On the subject of boilers!

DB, no need for coal! Put an extra jumper on!!

Better get the last of the burgers while you still can!

No cheap holidays anymore! 

Won't be able to drive round England either as only the rich will be able to own a nice electric car!

Passports required to breathe probably coming next!

I think this is the BK you have all been expecting! 

 

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10 minutes ago, Optimistic said:

https://facts4eu.org/news/2021_apr_changing_Britain?fbclid=IwAR2QdmSHWZzfCuxniPieJmZVg9sM9xTwDiFmoexAVPq2PcLGG2GHMr4_g9U

On the subject of boilers!

DB, no need for coal! Put an extra jumper on!!

Better get the last of the burgers while you still can!

No cheap holidays anymore! 

Won't be able to drive round England either as only the rich will be able to own a nice electric car!

Passports required to breathe probably coming next!

I think this is the BK you have all been expecting! 

 

But all I wanted was a sane economy and maybe a little house.

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NogintheNog

More 'Green-washing' in play;

Quote

Dear Mr (NogintheNog)

Spin Off by EVRAZ Plc

You currently hold 860 shares of EVRAZ Plc (the "Company") in your HSBC InvestDirect ISA.

We're letting you know that:

The board has given approval for the Company to move forward with a potential demerger of its coal business, via a pro rata in specie of the shares the company directly holds in PJSC RASPADSKAYA

Not sure if I'm gonna get any say in the matter, but I will get the 'coal' shares.

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16 minutes ago, Loki said:

But all I wanted was a sane economy and maybe a little house.

Ditto Loki! 

Thousands marched in London yesterday according to SOME news channels, but I read elsewhere it was close to a million! 

Covid lockdown over, welcome to the green lockdown!

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3 hours ago, BurntBread said:

Great interview by David Hunter, posted earlier in the week by @The Idiocrat. Lots of information, including timings and targets. I have posted below my summary table, and I'll add a rough transcript for those who prefer use text for reference. I have been thinking a bit more about strategy for the months ahead, and I'll put up my conclusions later, for people to criticise.

 

 

dh.png

Following this with interest although it's all about the US. IMO FAANG and Tesla which affect the indexes massively are hopelessly overpriced and overhyped so if you avoid those [I do], how can you interpret these predictions. How are people here interpreting it as affecting

a. FTSE 100-250 stocks

b. GBP-USD

Assume that most are UK based and therefore it's the gold/S&P/oil price in GBP that actually matters. Are people taking account of the currency [and tax] effects whe looking at US, CAN, etc shares or just ignoring that bit of the equation / assuming stability?

IMO GBP is still at level it was pushed to post Brexit vote and has been [artificially and incorrectly] suppressed by negative hype around Brexit effect since.. 2022/2023 numbers and new activity should be starting showing that this effect is not as negative as thought and at some point GBP vs EUR at least will regain the 10-15% it lost and more [because the EU are fucking everything up]. TBC I am looking at long term [5yr] trend, not the price in the month after the vote vs the short term blip upwards in the year preceding it which is what the MSM garbage always report.

I am currently entirely in GBP/FTSE. Part of the rationale of that choice when starting putting almost all my savings/pension dosh into the market last year was wanting to avoid all the tax admin and US forms crap. Partly annoyance at a euro investment where they had taken witholding tax and I have the choice either accept the donation of 50-100 quid a year to euro-scrounger-gov or fill in 10 page form to reclaim [I have a broker account in Euroland]. I didn't bother with the form in part because once you start they never stop and a complaints process is neccessary half the years/to get them to stop their threats. Been there several times and it's tedious/annoying. Like everywhere else the competent people work in complaints handling and were excellent.

I am way too long big oil [BP/Shell over 20% of total] but reluctant to reduce yet with small[er] profit. What are predictions from that table for BP/Shell price in GBP. If market leads I assume low is early Q2 2022 but what level. oil was 20$ average for a few months after start of lockdown1 but bottoms in BP/Shell only reached autumn/summer. Annoyingly I bought most of my BP in summer. I am feeling I should reduce those holdings by 50% or so.

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@BWW its the question that keeps us awake the most.The question is the scale.If DH is right on the scale of the bust everyone will be in trouble.Reason being even some of the best contrarian sectors and stocks have a lot of debt.For instance i think the telecom sector,and i mean the big boys here is hugely undervalued on a longer term basis.Structural undervaluation tobacco mid 90s style.

However the sector has just entered the re-paying debt part of the cycle.In other words debt is very high.Thats good during an inflation,because bond holders have funded equity holders profits,but creates danger.What if a lot of VODs counterparties on the swaps fail?.Now of course VOD unlike a lot of growth companies could simply scrap the divi for a year,as could the likes of BAT,BP etc.However if they did,what would that do to the shares?.Would they maybe go down 30%?.Then the question is do you hold through it or try to sell and buy back.My approach has been to top slice areas iv made big profits and build up a cash buffer.Whats almost certain is many growth style bubbles will be smashed.

The other really big story though for me is the same thing DH mentions.Thats rates increasing to 15% in the cycle.I dont agree with DHs inflation at 20%,i think topping at around 14% is much more likely,and i think rates will top at around 9.5%,maybe 10.5% not 15%,but even so,that will ensure most peoples draw down pensions will be destroyed,and those close to retirement in lifestyle funds.

I think those type of funds could see nominal losses of 3.5% a year over a decade at best.If you add in 1.8% IFA fees 4% drawdown the funds will empty over around 8 years if people take out the same amount.Can you imagine the politics of that.State workers seeing 10% a year pensions increases while the private sector sees their capital gone.People will see its a direct transfer of their saved labour to the state and its workers,and of course they would be right.

This is the worst part.The printed money handed out to only certain sections of society will destroy the savings of the part who mostly didnt get any.Shafted at every turn.

 

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