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

[nirvana]

I'm paying a 1% exchange rate charge with those shysters at youinvest....but with a 'round trip deal' that's 2% in exchange fees, cocks! I imagine this is the norm but anything cheaper out there?

PS I'm going liquid, BK incoming 

[Castlevania]

1 minute ago, nirvana said:

I'm paying a 1% exchange rate charge with those shysters at youinvest....but with a 'round trip deal' that's 2% in exchange fees, cocks! I imagine this is the norm but anything cheaper out there?

PS I'm going liquid, BK incoming 

I’m disappointed in you. I thought you were a big hitter. Not fannying about with small buys and sells. It’s tiered. So buy bigger lots

Or find a cheaper broker.

[23rdian]

16 minutes ago, Fully Detached said:

So for now the options I guess are:

1. Stay in cash/bonds and risk taking a hit until it's clear whether a BK will occur, then get into stocks

2. Jump into stocks and risk temporarily losing a load to a BK

3. Try to time the market

3 is out, I don't have the balls or the skills for that. 2 is out, I don't have the discipline to stay in when I'm double digits down. So it's a squeaky bum number one for me.

Thing is you got to be in it until it makes no sense to be any longer. The best thing you can do is make your exit as swift as possible when the writing is on the wall.

I don't think we are there yet. For me that means not having too many open positions which I need to sell. Mainly using funds/ETFs for growth stuff. Only buying single shares which I want to keep regardless for the value stuff. Trying anyway. Don't know if this is a bit naive though. I'm sure everyone is keeping one eye on selling. But still not selling. 

I need more PMs for sure.

[nirvana]

1 minute ago, Castlevania said:

I’m disappointed in you. I thought you were a big hitter. Not fannying about with small buys and sells. It’s tiered. So buy bigger lots

Or find a cheaper broker.

lol yeah it was just a quick 5k play with coinarse for a 10% gain .....not liking the look of the Nasdaq but I'm sure it'll bounce from here......anyway I'm going all in crypto so either I'll be stinking rich soon or you won't hear from me again cos I've jumped up and down on my computer 

[Lightscribe]

 

[nirvana]

11 minutes ago, Castlevania said:

Or find a cheaper broker.

as an aside, can you actually move ISAs around? And I know there is a 20k limit pa but what's stopping you from opening more than one? what happens when you say to them, gimme my money please, I'm off to the Caribbean?

cheers and good trading!

[Castlevania]

6 minutes ago, nirvana said:

as an aside, can you actually move ISAs around? And I know there is a 20k limit pa but what's stopping you from opening more than one? what happens when you say to them, gimme my money please, I'm off to the Caribbean?

cheers and good trading!

You have to do it via a transfer

HMRC match/reconcile to NI number I believe

You can keep an ISA open if not a U.K. resident, but can’t continue to pay in. Depending on the country you move to, you may be liable for dividend, capital gains or wealth taxes on the investments within the ISA. I don’t think any countries other than the U.K. recognise them as a tax shelter where you’re exempt from tax.

[nirvana]

thanks @Castlevaniainteresting

US looking very heavy, good luck out there 

In other news, shocking new video proof that animals have now formed a government and that racoons work for it!

 

[janch]

https://www.reuters.com/article/us-usa-stocks/wall-st-drops-at-open-as-strong-inflation-stokes-rate-hike-fears-idUSKBN2CT1AD

Token rate hike incoming perhaps?  Hopefully a drop in Wall Street doesn't cross the pond.

[nirvana]

8 minutes ago, janch said:

Token rate hike incoming perhaps?

can't see that happening bro* it'll kill the markets dead!

*have to call everyone bro now cos I'm a learning bout crypto innit bro....

[nirvana]

RED ALERT! spoos, nasty, Dow all breaking lower.....it's gonna take Gold n Silver with it if you ask me......

and fecking Cable, that was a 'big short' yesterday 

[Popuplights]

1 hour ago, Fully Detached said:

3. Try to time the market

3 is out, I don't have the balls or the skills for that. 2 is out, I don't have the discipline to stay in when I'm double digits down. So it's a squeaky bum number one for me.

Shame, I was hoping for some red hot tips....

[Agent ZigZag]

3 hours ago, DurhamBorn said:

Carbon capture and nature based offsets will become massive when the world wakes up to the fact renewables wont cut it alone

Would love to know what industries would benefit from this as this will be massive. My guess is it will be the landowners. At least our streets, roads, motorways and countryside will be lined with trees that will make it a green and pleasant land that will be free to look at to lift the spirits.

[nirvana]

1 hour ago, Fully Detached said:

1. Stay in cash/bonds and risk taking a hit until it's clear whether a BK will occur, then get into stocks

that's not a bad option actually, sitting on the fence is a valid position! Sometimes it's better being out thinking you should have been in, than in wishing you were out!

You could look into some 'bombed out crypto' too post BK.....the digital future is here whether you like it or not...

as someone posted on twitter earlier 

They are rapidly building a digital electronic prison for us all. The time is running out to stop it. You either understand this or you don't. If you're still arguing inside the red v blue political charade then you clearly don't understand the actual threat AND problem.

[Fully Detached]

21 minutes ago, nirvana said:

that's not a bad option actually, sitting on the fence is a valid position! Sometimes it's better being out thinking you should have been in, than in wishing you were out!

You could look into some 'bombed out crypto' too post BK.....the digital future is here whether you like it or not...

as someone posted on twitter earlier 

They are rapidly building a digital electronic prison for us all. The time is running out to stop it. You either understand this or you don't. If you're still arguing inside the red v blue political charade then you clearly don't understand the actual threat AND problem.

Yep I have some crypto that I am trying to ride a little further into this before I get out, so I am trying to time the market to some extent, just with a smaller downside risk that I would be if I piled into stocks now. I think for me the risk of losing cash to inflation is at least quantifiable, against the potentially enormous losses in a BK, so I will try to stay out until a BK either occurs or is clearly not going to happen.

[Lightscribe]

1 hour ago, nirvana said:

I'm paying a 1% exchange rate charge with those shysters at youinvest....but with a 'round trip deal' that's 2% in exchange fees, cocks! I imagine this is the norm but anything cheaper out there?

PS I'm going liquid, BK incoming 

But I thought my top call was looney 

Key thing is not to get carried away yet. Not saying that the SP500 couldn’t retest highs it’s early days, but wider factors like inflation hitting hard and showing itself this quickly, gaining media panic and attention is what sends my spider sense tingling.

[Lightscribe]

45 minutes ago, Agent ZigZag said:

Would love to know what industries would benefit from this as this will be massive. My guess is it will be the landowners. At least our streets, roads, motorways and countryside will be lined with trees that will make it a green and pleasant land that will be free to look at to lift the spirits.

If I can recommend something to watch is seaspiracy on Netflix. Not normally my kind of thing, but very sobering watching.

Brings it home how important our sea is for carbon capture and how it is being wiped out by mega corp commercial fishing and dredging. When only one part of the food chain is taken out it kills the rest. It was never about micro plastics and straws that all these sustainable organisations raking it in would have you believe. It’s a pure corporate money machine, that is silenced from the top down.

https://www.netflix.com/gb/title/81014008

 

[BurntBread]

1 hour ago, Agent ZigZag said:

At least our streets, roads, motorways and countryside will be lined with trees that will make it a green and pleasant land that will be free to look at to lift the spirits.

That's an interesting thought. However, I think that a lot of towns and motorway verges are already well planted with trees; certainly looking out across the town I live in, from some elevation, most of what I can see is greenery rather than buildings, and the council is always complaining about tree maintenance.

So, in a spirit of corporate cynicism, I wonder whether we will see all the greenery removed, just in time for the councils to claim green subsidies from planting new saplings, so we have to spend the next 10 to 15 years in a concrete wasteland without the pleasant views and cleaned air.

[nirvana]

1 hour ago, Lightscribe said:

But I thought my top call was looney 

 

well one day you can be a genius and the next a looney....it's a tough market

I think it's good to play devil's advocate with yourself occasionally and be a bit of a looney sometimes too!

Good trading to you, BRO!! 

PS panic over https://www.zerohedge.com/markets/stellar-10y-auction-eases-market-fears

buy back everything I sold tomorrow 

[Hancock]

Seems as if Doombrose has been reading this topic.

Rarely in recent decades have the inflationary warning signs flashed quite as strongly as they are now, and rarely have central bankers appeared quite so determined to ignore them.

Consciously or otherwise, it’s beginning to look suspiciously like another outbreak of “financial repression”, the term coined in the 1970s to describe deliberately keeping interest rates well below the rate of inflation so as to erode debt – great for debtors, terrible for creditors.

But for how long will markets tolerate such a state of affairs, before taking matters into their own hands and forcing rates upwards?

Vaccine success is enabling economies to recover much more rapidly than generally anticipated even a few months back; orders and confidence are rising across the board. Central banks and City economists are scrambling to update their growth forecasts.

Not so much forecasts of inflation, however, where the consensus view remains very much that the present surge in prices is largely a base effects phenomenon that will subside, eventually leaving inflation close to target. No need, in other words, to do much about it.

If genuinely believed, this seems to me close to delusional. The US economy has already put the pandemic behind it, and is quite plainly booming again. All over the shop, from oil to steel, copper and shipping rates, input costs are rising.

Now admittedly, commodity prices have done this before without long-lasting inflationary consequences. The difference this time around is that the pandemic was an induced recession, not a natural one. Yet it has been treated as if it were a repeat of the Great Depression, with unprecedented amounts of fiscal support, much of the consequent debt build up monetised by central banks.

In America, the new president, Joe Biden, keeps his foot flat down on the accelerator, even though the US economy is likely to be back at pre-Covid levels of output by the end of this quarter at the latest, and according to many projections will have recovered all the growth lost to Covid by the end of the year.

By running the economy “hot”, he hopes to achieve a jobs rich transformation in US prospects. But he might also trigger an inflationary surge that would be his political undoing.

The idea that higher input costs will not be passed on because demand is too weak to sustain increased prices is poppycock. Already, they are finding their way into myriad consumer prices, from peanut butter to toilet paper. As the price of goods and services rise, wages will be dragged up behind them.

Last week’s decidedly disappointing jobs report in the US does admittedly give some pause for thought. Nor do I find the two explanations widely ventured by way of dismissing its significance entirely plausible – that labour is too much enjoying bumper unemployment cheques to want to work, and that refusal by powerful teachers’ unions to resume in person teaching in many schools is keeping parents at home.

Whatever the reason, the fact is that employers are struggling to fill abundant job vacancies, and that of itself is going to be inflationary. By the way, much the same phenomenon can be observed here in Britain, where there is a serious mismatch between the jobs on offer and the skills needed to fill them.

Many workers have found furlough to their liking, and would prefer not to give it up. The latest vacancies survey by the Recruitment and Employment Confederation (REC) and KPMG found that hiring activity for permanent staff rose last month at the fastest rate since the survey began in 1997.

For how long central banks can get away with this mix of rising inflationary pressures but still rock bottom interest rates remains to be seen. One thing is for sure; governments – and the economy at large – are already so heavily indebted after more than a year of Covid spending that they cannot afford any significant rise in borrowing costs.

Bank of England has announced £450bn of QE since Covid struck But it is slowing down the pace as it gets towards its £895bn total

Far from saving them from this predicament, seemingly endless central bank money printing has only further increased their vulnerability. This is because the effect of buying up government bonds under quantitative easing programmes is to shift the cost of servicing the debt from the pre-existing coupon onto bank rate.

As long as official rates remain at rock bottom, or even negative in some cases, this is extremely helpful to governments. The cost of servicing national debt burdens has fallen even as their size mushrooms. But if official rates start to rise, then these same governments are in some difficulty.

By engaging in QE, central banks have potentially dug a very large hole for themselves, one in which keeping rates low becomes a matter of necessity, rather than choice – regardless of the inflationary consequences – for fear of bankrupting their political masters.

Policy of this sort is called “financial repression”. In the past, it has been helpful to governments in eroding big public debt overhangs. But it also amounts to a stealth tax that punishes creditors and rewards debtors.

Whether possible in today’s world – where central bank inflation targeting is the presiding economic orthodoxy and global markets reign supreme, is an interesting question. It wouldn’t take much to shatter credibility. I suspect we are about to find out.

[MrXxxx]

7 hours ago, JMD said:

Yes agreed. But i think the motivation for Raoul Pal is that he makes a lot 'risk-free' money from his channel subscriptions/fees. 

Yes, but unlike Lyn Alden he isn't transparent with his investments...with her subscription channel she has `skin in the game`, with his you don't know whether you are being `played` or not.

[DurhamBorn]

17 minutes ago, Cattle Prod said:

Thanks DB, makes sense. Entertaining to watch yields get bid up, they are like chicks in a nest with their mouths open waiting for the bird to come and give them a worm.

If negative 3% sinks in, obviously our commodity stocks will continue to do well, but would gold also not react to that? I'm intrigued that you said you wouldn't buy gold here. Or did you just mean there are better things to buy (and there probably are, I agree)?

Id buy the miners and silver over gold here.Dollar will look like its breaking up,but will instead then head towards 85.Fed will have to stop buying new treasuries and instead buy longer dated ones.This is where the government starts to worry about selling bonds as the Fed moved to yield curve control over buying new treasuries.Inflation will rip up though and tax will follow removing some pressure.Distribution cycle is now underway i think,no stopping it now apart from maybe a very sharp market and credit deflation.The like of Amazon etc can stay where they are and be terrible from here.No divi,and 65% cycle inflation is not a good brew for all those passive funds.

Debt structure is key now for companies and they will be paying down,not increasing,debt deflating everywhere.

We are looking fine.

[goldbug9999]

18 minutes ago, Hancock said:

Consciously or otherwise, it’s beginning to look suspiciously like another outbreak of “financial repression”, the term coined in the 1970s to describe deliberately keeping interest rates well below the rate of inflation so as to erode debt – great for debtors, terrible for creditors.

But for how long will markets tolerate such a state of affairs, before taking matters into their own hands and forcing rates upwards?

"beginning to look like" LOL - this is has an entirely deliberate and barely denied policy since 2008/9 in all the major economies. And exactly what are the markets going to do to force IRs up ?.

[Talking Monkey]

4 hours ago, sancho panza said:

I think what's really hit me with both this Lyn Alden piece(she's widely read,puts a lot out for free and features on a lot of interweb shows like George Gammon) and also the Michael Kao interview is that a year or two back,the only place I knew of talking like that was this very basement being educated by your good self.There will have been others but the alt media you tube types weren't on it.

This supply deficit thesis is going mainstream soon and when it does,we could see some interesting firewroks in energy markets.

The other intriguing thing is that you come at the problem from a sub surface geology perspective. @DurhamBorn comes at it from a macro roadmapping/liquidity flow perspective. Both pointing the same way with very convincing arguments.

 

Luke gromen's analysis is top drawer.A while back in a Macrovoices podcast he raised the prospect of the fed revaluing gold up to $50k per ounce as one way of dealing with their debt problems.Makes a lot of sense when you look at the situation.For msot otehr countries,the defaults will occur and either bond holders will get wiped out (unlikely as the 1% have a lot in the bond market) or there'll be a soft default in bonds and/or a lot of ordinary joes who are expecting a epnsion when they retire will get wiped out.

Number 2+3 look a raging certainty.There's going to be a lot of dissappointed people either way.

Absolutely.I think the West is much more exposed on that basis.the dislocation will occur as a result of declining real incomes.Brexit was the warm up for the political class.

SP when you talk about pensions getting wiped out do you mean state type pensions both public sector and old age or company pensions. 

[nirvana]

1 hour ago, goldbug9999 said:

And exactly what are the markets going to do to force IRs up ?

I agree they'll do fook all! the last thing they want is interest rates to go up and spoil all that lovely free money they get given all the time......yeah bro, more free coke and hookers