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

[Hancock]

5 hours ago, Noallegiance said:

 

So what are these low growth, low value stocks he talks of??

Of the 150k SIPP + 250K formerly set aside for a house .... i'm 27% stocks 73% cash.

Tempted to be the one with big bollocks to stay this way for the BIG KAHUNA.

As presumably if it happens, i can then retire

[Noallegiance]

8 minutes ago, Hancock said:

So what are these low growth, low value stocks he talks of??

Of the 150k SIPP + 250K formerly set aside for a house .... i'm 27% stocks 73% cash.

Tempted to be the one with big bollocks to stay this way for the BIG KAHUNA.

As presumably if it happens, i can then retire

I know as much as is given in the interview, so divi-paying stocks in developing nations.

[Noallegiance]

OPEC+ Talks Abandoned Without a Deal, Sending Oil Prices Higher By Bloomberg (investing.com)

[ThoughtCriminal]

7 hours ago, No One said:

Jesus christ, how did they manage to do that?

Slowly at first, then all of a sudden........... 

[DurhamBorn]

1 hour ago, Hancock said:

So what are these low growth, low value stocks he talks of??

Of the 150k SIPP + 250K formerly set aside for a house .... i'm 27% stocks 73% cash.

Tempted to be the one with big bollocks to stay this way for the BIG KAHUNA.

As presumably if it happens, i can then retire

Pretty much a lot of what we have been buying i suspect,for instance Telefonica Brasil,TIM SA etc back to nice range to ladder buy.Iv been buying Henderson Far East Income Ltd the investment trust for more Asian exposure.They sold down their chip stocks and have increased Chinese banks,but some nice value stocks mixed in.

Iv also been buying a few Takeda Pharma ,TAK ,big Jap pharma company.They have a nice spread of new drugs and they are paying down debt to a nicer range.3.2x by year end,then lower quite quickly i suspect.Our own market still has good pockets of value and as the private equity bids flowing in shows under invested from the big yank funds.

The big question is if we get a BK does the massive amount of liquidity in certain areas and bonds flow into value areas.The main risk i see for value is if counterparties fail hugely in debt derivatives.That could take down almost everything ,systemic failure.

 

[Dogtania]

On 04/07/2021 at 16:35, JMD said:

Yes, energy-information economy sounds far more descriptive. It is also very useful term because it helps highlight the fact that we don't own our own data. That is to say that many huge online companies survive - and gain more and more power - by using our data to sell products and 'influence' us,  yet we don't have any say or understanding of what's happening. We have become online serfs - anyone not appreciating this is seriously in denial. (Ie even ex-presidents can be silenced)                                                                                                                         Jamtorrow please could you elaborate more on what you mean by 'entropy economy'? I kinda understand that extracting fossil fuels increases entropy. But for the information/digital economy my - very basic understanding - is that If say a company move online... profits usually increase/marginal costs decrease so I assume that overall company utility has increased, therefore a more 'effective' company means that entropy has decreased?                                                                                                                                                                          I guess I'm using loose terminology above, however I note that many commentators in the crypto space have begun talking about entropy and tbh it turns me off a bit because the topic sounds pretentious, but perhaps maybe that's just my bad because I don't understand it?

I do agree that data and it's ubiquity and the clever manipulation of thus far seems to be a big part of the economy and order.  But I'm also thinking this has maybe run its course.  Of course all the data and advertising is primarily added value by basically selling us tat and getting more efficient at doing so.

But like this thread sets out that model, the consumer cycle is coming to an end.

One could argue that this is happening in the West but frontier or growth regions are still in play.  I'm not sure if that's true if this is a truly macro global move, which it probably will be.

Data as oil analogy etc has some merit but in the way it's been used massively has really been about servicing and drawing out the consumer economy I think(?).  Also obviously data on its own is useless it's the ability to sift through and use, and finally this data is surely infinite in nature or has the potential to be so, hence where the analogue breaks down.

Maybe I've been unduly influenced by a recent book I read that set out the decline of the US (and basically our civilization as we know it - similar say to end of Roman empire).  The author has a pretty bleak prognosis and sees the decline -which has already started- being very steep and sudden.  

https://www.goodreads.com/book/show/28818590-dark-age-america

Going back to my initial point I just don't know how useful all this information and data economy will be when we leave the consumer cycle behind (and their tapped dry).  Totally agree with the serfdom aspect (I would guess the author of the book I mentioned would say they were the lucky ones, his thesis is that more and more are living outside society now, non-players, and once this reaches a critical threshold it really starts to fall apart).

What use is there in influencing us to buy things we can't afford and don't need (it's food shelter and medicine they need not plastic tat).  Idk maybe it's all one last hurrah before lights out.

[Noallegiance]

8 minutes ago, DurhamBorn said:

The big question is if we get a BK does the massive amount of liquidity in certain areas and bonds flow into value areas.The main risk i see for value is if counterparties fail hugely in debt derivatives.That could take down almost everything ,systemic failure.

 

I've gone back and forth with this.

I'm going to be selling profit but leaving the majority of initial investment as the current market melts up and gradually sell a bit more if it stays crazy long enough.

If I miss-time it then so be it as the areas I'm in will run with the cycle anyway. What gets taken out I'll put back in after what I see as being an inevitable correction (at a minimum).

Not quite a win/win but I get more sleep that way!

KISS

[Barnsey]

3 minutes ago, Noallegiance said:

I've gone back and forth with this.

I'm going to be selling profit but leaving the majority of initial investment as the current market melts up and gradually sell a bit more if it stays crazy long enough.

If I miss-time it then so be it as the areas I'm in will run with the cycle anyway. What gets taken out I'll put back in after what I see as being an inevitable correction (at a minimum).

Not quite a win/win but I get more sleep that way!

KISS

If we know about derivatives and leverage you can bet your bottom $ the central banks do too. China already clamping down, Fed doing stealth QT for a couple months now, might be too extreme to suggest an engineered crash of sorts but seems to be underway.

[Hancock]

42 minutes ago, DurhamBorn said:

Pretty much a lot of what we have been buying i suspect,for instance Telefonica Brasil,TIM SA etc back to nice range to ladder buy.Iv been buying Henderson Far East Income Ltd the investment trust for more Asian exposure.They sold down their chip stocks and have increased Chinese banks,but some nice value stocks mixed in.

Iv also been buying a few Takeda Pharma ,TAK ,big Jap pharma company.They have a nice spread of new drugs and they are paying down debt to a nicer range.3.2x by year end,then lower quite quickly i suspect.Our own market still has good pockets of value and as the private equity bids flowing in shows under invested from the big yank funds.

The big question is if we get a BK does the massive amount of liquidity in certain areas and bonds flow into value areas.The main risk i see for value is if counterparties fail hugely in debt derivatives.That could take down almost everything ,systemic failure.

 

So you're getting out of cash or building it up for a BK?

Prior to March 2020 my intentions were to be 100% cash, then hoy it all into silver/gold mining shares ... somewhere along the line i lost my bottle and was about 60% cash .... worried it was going to get inflated away.

Thinking this time maybe i'll hold my nerve on the presumption things will crash once QT, raising interest rates happens. I know there is a crash round the corner, its just having the balls to back up what i think i know!

Edit - see you're talking about laddering again, term not used much since March 2020.

[reformed nice guy]

Saw this today https://www.smmt.co.uk/vehicle-data/car-registrations/

2017 was the peak for car sales and population continues to increase by 600,000+ per year

 

[JMD]

2 hours ago, Dogtania said:

I do agree that data and it's ubiquity and the clever manipulation of thus far seems to be a big part of the economy and order.  But I'm also thinking this has maybe run its course.  Of course all the data and advertising is primarily added value by basically selling us tat and getting more efficient at doing so.

But like this thread sets out that model, the consumer cycle is coming to an end.

One could argue that this is happening in the West but frontier or growth regions are still in play.  I'm not sure if that's true if this is a truly macro global move, which it probably will be.

Data as oil analogy etc has some merit but in the way it's been used massively has really been about servicing and drawing out the consumer economy I think(?).  Also obviously data on its own is useless it's the ability to sift through and use, and finally this data is surely infinite in nature or has the potential to be so, hence where the analogue breaks down.

Maybe I've been unduly influenced by a recent book I read that set out the decline of the US (and basically our civilization as we know it - similar say to end of Roman empire).  The author has a pretty bleak prognosis and sees the decline -which has already started- being very steep and sudden.  

https://www.goodreads.com/book/show/28818590-dark-age-america

Going back to my initial point I just don't know how useful all this information and data economy will be when we leave the consumer cycle behind (and their tapped dry).  Totally agree with the serfdom aspect (I would guess the author of the book I mentioned would say they were the lucky ones, his thesis is that more and more are living outside society now, non-players, and once this reaches a critical threshold it really starts to fall apart).

What use is there in influencing us to buy things we can't afford and don't need (it's food shelter and medicine they need not plastic tat).  Idk maybe it's all one last hurrah before lights out.

Good question. My answer would be that yes consumerism will certainly become a smaller part of the global economy, however the consumerism that prevails will be mostly transacted online, so the few monopolistic platforms operating in that space will become even more dominant and powerful. Plus it's not only online purchasing I was thinking about, ie social media is even more corrosive. It is responsible for radicalising opinion and tribalising communities. And then there is the data sharing between government depts, and the anticipated cbdc's. Centralising all this data without discussion is worrying to say the very least. And my data once online becomes a tradeable commodity, which is why I refered to a state of 'online serfdom'...  However, I'm not all doom and gloom as personally I think a solution will be found, maybe with automatic copyright ownership of all our personal data and which we can selectively choose to sell to others, implemented via blockchain tech. of course!!

[JMD]

10 hours ago, sancho panza said:

Just looking at the last proper BK ie credit deflation.Some of the oilies price action is interesting.

RDSB started the June peak at £20, in Oct 08 got as low as £12.20,but never had a monthly close below £14.44.So roughly peak to trough of 30%.

I'm reappraising my intention to sell the oilies ahead of a BK if I can identify the wave(that's a big IF).They appear to have some defensive qualities.

BP similar story,drop from £6 to £4.40 using monthlies ie 26.6% June to Mar 09

Worth noting as well that you could have picked up BP at £5.10 in  March 08.

 

 

30% down you say? Reminds me of Dave Hunter in a podcast, with Jake Ducey I think, making similar pediction  for some stocks like commodities etc, whereas most sectors will crash by 80%.

[DurhamBorn]

I think i said about a year ago i expected inflation to hit 3.8% in June this year.

Thats the exact number average across 38 OECD nations,

https://www.telegraph.co.uk/business/2021/07/05/fastest-rise-inflation-since-2008-sets-alarm-bells-ringing/

Of course we know its higher than that,but official rates still matter to sentiment and CBs etc.

The interesting part now is they all know they need to stop,but they dont want a stronger currency so dont want to go first and governments have massive structural deficits.

 

[Sugarlips]

4 hours ago, DurhamBorn said:

I think i said about a year ago i expected inflation to hit 3.8% in June this year.

Thats the exact number average across 38 OECD nations,

https://www.telegraph.co.uk/business/2021/07/05/fastest-rise-inflation-since-2008-sets-alarm-bells-ringing/

Of course we know its higher than that,but official rates still matter to sentiment and CBs etc.

The interesting part now is they all know they need to stop,but they dont want a stronger currency so dont want to go first and governments have massive structural deficits.

 

Congratulations.

How often do you review the roadmap db?

is it possible to get a Mystic Meg simpletons broad birds eye overview for the nearer term  (1-2 years)? Like:

Oil up.

Cryptos down.

growth stocks down.

Value stocks up.

Fiat down.

PM’s up.

Interest rates down.

Bonds down.

T Bills up

And so forth..?

Might help thread newbies with general direction and spur some mid-cycle debate?

[RJT1979]

7 hours ago, reformed nice guy said:

Saw this today https://www.smmt.co.uk/vehicle-data/car-registrations/

2017 was the peak for car sales and population continues to increase by 600,000+ per year

 

What is your conclusion 

[Bricormortis]

11 hours ago, Barnsey said:

If we know about derivatives and leverage you can bet your bottom $ the central banks do too. China already clamping down, Fed doing stealth QT for a couple months now, might be too extreme to suggest an engineered crash of sorts but seems to be underway.

As in the reverse repo which is draining liquidity ? Thats the current risk factor coming in to play, to my mind.

[jamtomorrow]

27 minutes ago, Bricormortis said:

As in the reverse repo which is draining liquidity ? Thats the current risk factor coming in to play, to my mind.

I wonder whether the stealth-tapering effect of RRP is somewhat irrelevant anyway. As in, it's more the Fed mopping up the overspill because the system can't take any more, than actively sucking liquidity back out of the system.

It's like when you bleed your radiators - you want a certain amount of fluid to come through to know the system is full and all the bubbles are out.

[DurhamBorn]

4 hours ago, Sugarlips said:

Congratulations.

How often do you review the roadmap db?

is it possible to get a Mystic Meg simpletons broad birds eye overview for the nearer term  (1-2 years)? Like:

Oil up.

Cryptos down.

growth stocks down.

Value stocks up.

Fiat down.

PM’s up.

Interest rates down.

Bonds down.

T Bills up

And so forth..?

Might help thread newbies with general direction and spur some mid-cycle debate?

I do it monthly usually,but just the main cycle one based on liquidity and the business cycle.Cross market stuff i tend to do when i can be bothered,or if im interested.I did huge amounts a couple of years ago,but as i positioned in the falls last year i dont bother much now.I dont do anything really short term as the closer to now the harder to get right.Oil is going to $200+ i think minimum by the end of the decade for instance,but how it gets there is never linear and it can do it in its own time.

The broad sweep of the cycle is what matters.For instance at some point in the cycle i think most cryptos will go down 99.99999%.Growth stocks will be cut in half,value stocks likely double including divis,some treble,bonds down,interest rates up.

I would keep buying good quality value where you see it,not just UK,but emerging and other markets.Keep some cash in case of a BK.When some sectors over run higher quickly,re-position in others that lag.A prime example was potash trebling and more while telcos flat lined.

Nobody can know the future,but when sentiment gets to extremes and the macro points in the other direction to those extremes patience usually rewards you.

[DurhamBorn]

23 minutes ago, jamtomorrow said:

I wonder whether the stealth-tapering effect of RRP is somewhat irrelevant anyway. As in, it's more the Fed mopping up the overspill because the system can't take any more, than actively sucking liquidity back out of the system.

It's like when you bleed your radiators - you want a certain amount of fluid to come through to know the system is full and all the bubbles are out.

Yes,i think its the market saying the injections need to be fiscal not monetary.Fiscal injections tend to kick in investment with a lag.The Fed needs to monetise most of the fiscal injections,though of course they claim thats not what they are doing.

What i think people are missing is that the CBs are simply lifting up the money base of the economy so governments dont go bust.They say the inflation is short term.Maybe increases will slow,but from  30% higher base.

[Loki]

2 minutes ago, DurhamBorn said:

.They say the inflation is short term.Maybe increases will slow,but from  30% higher base

Parallels with deficit spending there

[DurhamBorn]

https://www.telegraph.co.uk/business/2021/07/06/vauxhall-owner-build-new-electric-vans-ellesmere-port/

The interesting comment,that we have been saying for years will drive this cycle,extended supply chains in an inflation cycle dont work because each stage inflates and that does away with any wage arbitrage.

He said: “Alison made a very important point about cost inflation. We need to secure the supply chain and have it close by.

“The UK Government has to support production of batteries here at a macro level

[Barnsey]

2 hours ago, Bricormortis said:

As in the reverse repo which is draining liquidity ? Thats the current risk factor coming in to play, to my mind.

Correct!

https://corporate.nordea.com/article/66562/fx-weekly-whisperin-joe-and-his-regime-shift

Cc @Cattle Prod

[janch]

Is this the FED policy mistake ie giving some interest on the RRPs?  I can't say I fully understand this article but it seems liquidity is being drained out of the system because it can earn whilst parked in RRP.  The article doesn't mantion this but my first thought was if it's parked it won't be pushed out into the wider economy.

https://www.zerohedge.com/markets/zoltan-sees-reverse-repo-hitting-2-trillion-weeks-what-happens-then

......banks will lose deposits and reserves "which is what happens when rates on collateral-providing facilities are set above rates that are available in the bill market." Ominously, Pozar notes that "we saw this  before when the foreign repo pool was priced too generously relative to bills in 2019." Everyone remembers how catastrophically that particular episode in repo mispricing ended.

[Barnsey]

Long dated gilts coming off the boil too...

 

[janch]

3 hours ago, DurhamBorn said:

A prime example was potash trebling and more while telcos flat lined.

The only potash share I bought was K&S AG which was lagging behind doing nothing while the US companies were soaring but it's been doing well recently and looks to be catching up now