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

[arrow]

54 minutes ago, Hancock said:

Ive just been to Poundland to buy some toothpaste and some sunglasses.

Price has gone up from £1 per item to £1.50 each .... 

Anyway for those that have the time, here is why manufacturing isn't coming back to the UK anytime soon.

https://www.lrb.co.uk/the-paper/v43/n14/james-meek/who-holds-the-welding-rod 

Wow. That was a long read. Couldn't the author just have written Brexit bad, Tories evil, Europe lovely, poor pitiful third world workers must be protected and given jobs even if it bankrupts the UK.

[reformed nice guy]

https://www.dailymail.co.uk/money/markets/article-9781483/Tate-Lyle-split-private-equity-firm-swoops.html

More going private. Not the entire company, but a large part being bought up by PE

[DurhamBorn]

1 hour ago, MrXxxx said:

But is it possible to do it the other way, and would there be any disadvantages for the PAYE employee?

Yes,iv always done it myself.Everywhere iv worked for a good few years iv taken my wage down to £12.5k and paid the rest into my SIPP,the tax relief arrives in about two weeks.Iv also of course take full pension i can including matched savings etc from employers then the first thing i do when i leave is launch a transfer out into my SIPP.

 

[eek]

9 minutes ago, DurhamBorn said:

Yes,iv always done it myself.Everywhere iv worked for a good few years iv taken my wage down to £12.5k and paid the rest into my SIPP,the tax relief arrives in about two weeks.Iv also of course take full pension i can including matched savings etc from employers then the first thing i do when i leave is launch a transfer out into my SIPP.

 

You get the income tax back - you don't get the NI back... 

[AlfredTheLittle]

13 minutes ago, eek said:

You get the income tax back - you don't get the NI back... 

Yes - most tax efficient is employer contributions because of the ni saving, including employer ni at 13.8%, so there's scope to negotiate with your employer for slightly higher contributions than the salary you would get, as they make such a big saving.

You get the same tax relief however contributions are made, but if they come from income you've paid ni on you don't get that back.

[DurhamBorn]

13 minutes ago, eek said:

You get the income tax back - you don't get the NI back... 

Thats very true,i always maxed out with employers on what they would contribute,but none would pay direct to my SIPP ,HR looked at you like you were an alien.I always got my NI back by claiming JSA for 6 months and didnt mind a small amount slipping through the net as its years for state pension.I get those for free now through from Adult Specified childcare credits for looking after my grandson.2 years needed for full,but il keep claiming them incase they increase years to 40 or something.

[Harley]

1 hour ago, reformed nice guy said:

https://www.dailymail.co.uk/money/markets/article-9781483/Tate-Lyle-split-private-equity-firm-swoops.html

More going private. Not the entire company, but a large part being bought up by PE

I hold but didn't have a clue such is my level of attention!

[Harley]

10 minutes ago, DurhamBorn said:

 

 

[Harley]

37 minutes ago, DurhamBorn said:

Yes,iv always done it myself.Everywhere iv worked for a good few years iv taken my wage down to £12.5k and paid the rest into my SIPP,the tax relief arrives in about two weeks.Iv also of course take full pension i can including matched savings etc from employers then the first thing i do when i leave is launch a transfer out into my SIPP.

 

My partner about to do the same.  Twice on account of, and I kid you not, the pension company linking it to another old pension she had forgotten about!

[Castlevania]

US CPI print 5.4% yoy 

[Heart's Ease]

Crikey.

[planit]

Nice to see articles agreeing with things we were discussing here previously.

It's hard to see where the increase in supply will come from at the moment if the futures 4 months out are not high enough to divert supply from other regions. In the mean time inventory will draw down until someone blinks. Then spreads might spring back as everyone panic buys. I hope BP has a nice position to profit if this occurs.

Oilprice.com article by Zerohedge:

Spreads And Inventory Levels Suggest Oil Prices Will Go Even Higher

Quote

Using the inventory and spread picture from above, it's clear that we have now reached the point where inventory levels could become problematic. It's clear that the current pace of inventory draws cannot be sustained. Inventory draws are a result of non-normal backwardation. We are currently witnessing non-normal backwardation. Should the trend of draws continue from here through the second half of the year, the set-up for higher prices is intact.

I bought back today in anticipation of the inventory figures tomorrow. The upside outweighs the downside and I don't disagree with David Hunter on his melt up prediction.

 

ps I guess this situation is good for traders at the expense of producers as the producers sell 6 months in the future and the traders profit by taking risk and holding until just before delivery. I hope BP will have the best ever trading arm profit last qtr. If the shale producers lost $20bn from hedging, someone had to pick it up and it clearly wasn't Shell.

[Majorpain]

US CPI print is actually worse than first seems, Goods inflation is 8.7%, headline was held back by only 3.1% Service sector inflation.

So basically stuff that involves actual tangible things is starting to reflect the money printing.

[Lightscribe]

https://amp.ft.com/content/234a9b90-e4f6-4b59-9e39-c6e34ac78276
 

Pace of US inflation picks up again in test for Fed

“Consumer price index jumps 5.4% from a year ago amid debate over the risk of runaway prices

The breakneck pace of US consumer price increases seen since the start of the year accelerated in June, which could challenge the Federal Reserve’s case that the burst of inflationary pressures accompanying the economic reopening will prove temporary.

The consumer price index rose last month at the fastest pace since August 2008, up 5.4 per cent from the previous year. That is well above the 5 per cent rise reported in May and the 4.9 per cent increase that economists had forecast. 

On a monthly basis, data released by the Bureau of Labor Statistics showed price gains of 0.9 per cent, the biggest one-month jump since June 2008.

Stripping out volatile items like food and energy, “core” CPI rose from 3.8 per cent in May relative to the year before to 4.5 per cent in June.

Investors, economists and policymakers have scrutinised incoming inflation figures amid a fierce debate about the risk of runaway consumer prices fuelled by ultra-accommodative fiscal and monetary policy. 

Price jumps have so far been most significant for sectors directly affected by the coronavirus pandemic. Travel-related expenses, such as airfares, have soared, while a semiconductor shortage has contributed to a jump in used car prices. 

One-third of the rise in the CPI last month stemmed from a record jump in previously-owned vehicle prices, according to the Bureau of Labor Statistics, which appreciated 10.5 per cent in June from the previous month. 

The US central bank has long characterised elevated inflation prints as “transitory”, which will fade as Covid-19 lockdowns ease further and supply catches up with pent-up demand. Joe Biden’s administration shares this view, and a White House official expressed confidence that inflationary pressures would soon abate.

Market measures of inflation expectations also reflect ebbing concerns about runaway consumer prices, with long-dated metrics running below their short-term counterparts. But some investors warn that higher inflation could persist for longer than many anticipate. 

“Most of the increase in the monthly metrics still look related to massive supply-demand imbalances in categories that were ‘closed’ in 2020: used cars, hotel rooms, travel costs, and so forth,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott. “Supply will eventually normalise in these categories, but it could take longer than common sense suggests, meaning that somewhat elevated inflation prints could last until 2022.”

US government bonds pared back recent gains after Tuesday’s release, sending yields higher from the recent lows seen since the Fed’s meeting on monetary policy in June, which raised the prospect of a quicker withdrawal of accommodation than initially expected. 

The benchmark 10-year note traded 0.02 percentage points higher before settling around 1.38 per cent.“
 

Then the FT has this article in regards to a ‘holy grail’ of everything index fund and the comments rubbing their hands in anticipation. They really have no idea how inflation is going to rock their very existence.

https://www.ft.com/content/9a9056e1-b35e-4ea7-b9f7-7668c07469ed

 

[JMD]

On 12/07/2021 at 14:43, MrXxxx said:

Ok, what about pm miners/streamers that give a return and/or commods?

For me I'd say yes, not the same as bonds of course, but I think they are one of the asset types which will soak up some of that huge money-flow away from bonds as/when bond holders look for alternatives.

[DurhamBorn]

1 hour ago, Cattle Prod said:

So far so good for this thread. Of course this guy doesn't understand that gold isn't a commodity, but anyway...

And gas leading everything ,i expect lumber will turn back up soon as well as its a leading indicator,market thinks its short term inflation when it isnt.

[HousePriceMania]

[No One]

22 minutes ago, HousePriceMania said:

yes but adjusted for inflation what would it look like?

 

two mountains of the same size?

[JMD]

27 minutes ago, JMD said:

For me I'd say yes, not the same as bonds of course, but I think those examples you cite are one of the asset types thall will soak up some of the huge money-flow away from bonds as/when bond holders look for alternatives.

 

[JMD]

Anyone watching Gold Town (bbc2)? It's a 3 part humbrum documentary, but it's the story of Scotland's first commercial goldmine... and we do like our Goldie's here!! Apparantly It took 4 different companies, nearly 40 years, to eventually crack it and to get where they are now which is a working gold mine.                                                                                                                                                                       'Only' £200million estimated reserves, so small, however the actual land owner doesn't appear to own what's beneath his land and so won't profit directly from the discovered riches. Does anyone know if this is a 'Scottish thing', or across the whole UK, ie landowner can't benefit from minerals discovered beneath their land?

[HousePriceMania]

1 minute ago, JMD said:

Anyone watching Gold Town (bbc2)? It's a 3 part humbrum documentary, but it's the story of Scotland's first commercial goldmine... and we do like our Goldie's here!! Apparantly It took 4 different companies, nearly 40 years, to eventually crack it and to get where they are now which is a working gold mine.                                                                                                                                                                       'Only' £200million estimated reserves, so small, however the actual land owner doesn't appear to own what's beneath his land and so won't profit directly from the discovered riches. Does anyone know if this is a 'Scottish thing', or across the whole UK, ie landowner can't benefit from minerals discovered beneath their land?

As my Scottish friend says...the Queen owns the reek off yer shite.

You get the jist

It seems you can declare yourself over lord of everything and that you own everything and for 100s of years idiots play along.

https://www.mylondon.news/news/zone-1-news/why-queen-owns-swans-england-17733992

 

The remarkable reason why the Queen owns all of the swans in England

[planit]

54 minutes ago, DurhamBorn said:

And gas leading everything ,i expect lumber will turn back up soon as well as its a leading indicator,market thinks its short term inflation when it isnt.

Are you sure this could be a smooth line towards inflation? 

I don't have a roadmap but I still see the current balance as deflationary, if there is slow tightening from here we still have a hangover recession to go through. That will very quickly take the momentum out of inflation.

 

I still see a wrong footed CB move pushing into recession, resulting in repeated printing producing a more persistent inflation (I think you have said this before).

The high reading today actually makes it easier to have a 'low' surprise in the next 2 months. Second hand cars can't power the inflation on it's own forever, once new cars are available they will be a drag on inflation (price increase of new cars will take over then LOL).

[ONC]

ok, Zerohedge.  

says Goldman Sachs has aggressively sold a quarter of its proprietary equities (I think this means there own investment money). 

https://www.zerohedge.com/markets/goldman-has-aggressively-and-quietly-liquidated-quarter-its-equity-investments

I was 100% equities myself at the start of year. I have been slowly selling. Now I am 30% cash.

From the Jeremy Grantham interview posted by Noallegiance, Jeremy tells of publishing an article calling the bottom of market in 2009 titled “ investing when terrified”

Is it now time for an article called   “ Divesting when Euphoric”???

 

 

On 05/07/2021 at 14:30, Noallegiance said:

 

 

 

[dnb24]

1 hour ago, planit said:

Are you sure this could be a smooth line towards inflation? 

I don't have a roadmap but I still see the current balance as deflationary, if there is slow tightening from here we still have a hangover recession to go through. That will very quickly take the momentum out of inflation.

 

I still see a wrong footed CB move pushing into recession, resulting in repeated printing producing a more persistent inflation (I think you have said this before).

The high reading today actually makes it easier to have a 'low' surprise in the next 2 months. Second hand cars can't power the inflation on it's own forever, once new cars are available they will be a drag on inflation (price increase of new cars will take over then LOL).

It’s all I can see too, so much is on a knife edge, it’s bipolar out there- there are obviously areas of the economy marching ahead (and dbs been right all along- it’s industry and inflation from here), but other big areas have really gone off the boil or dead, and all along you have this backdrop of covid and the authoritarian government bent- I can’t see how we get to the inflation side without seeing a huge deflationary event to give a definitive direction change towards inflation.

[HousePriceMania]

I hate to keep posting this but I think it's important.

 

I thought it might take a week or two to his those 2018 highs.

The question for me us what else is going to follow it.