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

[Harley]

2 hours ago, Starsend said:

Yep you've got to see these things coming ahead of the masses.

At some point they'll force savers into their crappy bonds while they keep inflation above the yield for year after year. It's fine knowing they're going to do this kind of stuff but it's how they implement it that is the big question. For example, what if they come out with a new law saying that all pensions (including SIPPS) and ISAs must hold 40% government bonds? Wouldn't surprise with the way things are going.

I have an old overseas pension.  Most of their funds now have a "sustainable" element.  Many of my funds were rebranded as such without any warning so, for example, my Latin America fund is now the Sustainable Latin America fund!  

Yes, in the UK they'll use your savings to fund green stuff in the absence of anything else (e.g. a growing tax base through real growth).  Their spending will bring in a period like when the German Social Democrats built all those autobahns, etc.  It will probably need paying for in blood too at some point.  Only question is when, and later, who's blood.

[Lightscribe]

The PM miners finally look like they’re reacting to the inflation news.

Got a cheeky final allocation of FRES at 780 odd last week.

The mighty Panther is up 9.48% in the past 5 days. The unbelievers will be punished accordingly.

[HousePriceMania]

That was a bit of a surprise.

 

 

Sold out at 320 a few weeks ago

Any idea what's going on, time to buy again ?

[Starsend]

12 minutes ago, HousePriceMania said:

That was a bit of a surprise.

 

 

Sold out at 320 a few weeks ago

Any idea what's going on, time to buy again ?

I sold out at at 3.25 recently. I decided at the time that I would buy in again if they dipped back below 3.00. Nice big tranche this morning at 2.96.

Not sure there's anything major going on? Just the normal noise.

[JMD]

On 14/07/2021 at 16:13, HousePriceMania said:

Looking at all the graphs, info, numbers, lies, truths that are out there I have to conclude that we could easily see the mother of all collapses.

Imagine if something like an earthquake hit the US west coast, there are no end of events that could spark the mother of all crisis.

I would be looking more toward a 'political earthquake' - say something like a Chinese whistleblower/defector telling the CIA the bat-flu was released from the Wuhan labs on purpose.                                                                                                Brett Weinstein/Dark Horse pod cast, he's a biologist and is good at explaining how the covid virus is almost certainly man made, that it contains chemical markers developed by geneticists and not found in nature, plus in any case the virus itself has not been found anywhere outside of a lab - despite the MSM continuing to talk up the bat-crazy yarn. In fact Weinstein says HIV almost certainly came from Wuhan, something I'd not heard before and don't know the details of (btw he's not a conspiracist)... anyway there is a lot more political capital to come on these stories I think. 

[DurhamBorn]

2 hours ago, Lightscribe said:

The PM miners finally look like they’re reacting to the inflation news.

Got a cheeky final allocation of FRES at 780 odd last week.

The mighty Panther is up 9.48% in the past 5 days. The unbelievers will be punished accordingly.

Im down 0.03% on the Mighty Panther,its a steaming pile really and i should sell it and buy a real miner,and yet i have a strange affection for it.Its so crap you get the feeling they will hit the best vein of silver in the world or something  

[Hancock]

28 minutes ago, DurhamBorn said:

Im down 0.03% on the Mighty Panther,its a steaming pile really and i should sell it and buy a real company,and yet i have a strange affection for it.Its so crap you get the feeling they will hit the best vein of silver in the world or something  

Like INFA. 

[Lightscribe]

14 minutes ago, DurhamBorn said:

Im down 0.03% on the Mighty Panther,its a steaming pile really and i should sell it and buy a real miner,and yet i have a strange affection for it.Its so crap you get the feeling they will hit the best vein of silver in the world or something  

The GME crowd on Reddit and biz etc, are turning their attention to PM miners in the squeeze silver movement more so now.

They seem to focus on minnow silver miners like Bayhorse Silver and Silver Elephant mining however. Hopefully an inflationary reaction upswing in silver from here on may cause some other ‘certain’ silver animal miner references will catch some of the retail investor wind as it gets a name drop here and there.

With a bit of meme action anything’s possible. 

[HousePriceMania]

US Lumber back to peak 1993 prices 

 

 

[Loki]

1 hour ago, Hancock said:

Like INFA. 

 

YES.

He's HAPPY. Because he bought INFA. 

[sancho panza]

@Cattle Prod

We've supposedly 'protected the NHS' this last year.I'll leave the comments to wittier minds than mine.

cross post from Sceptics thread

https://www.bbc.co.uk/news/uk-england-57841889

West Midlands Ambulance Service has busiest day with 6.5k calls

An ambulance service said it has seen its busiest day to date receiving over 6,400 emergency calls.

On Monday, West Midlands Ambulance Service Trust said it had 6,406 emergency calls, 600 more than its previous record, set last week.

It comes as the trust is given more than £5.6m from NHS England to boost staff numbers ahead of winter.

Nathan Hudson, from the trust, said the money will help meet the "current demand pressure".

The trust said it has seen 19 of its 20 busiest days within the last month, with Monday having more calls than any New Years Eve, traditionally its busiest day.

 

https://www.theguardian.com/society/2021/jul/08/nhs-england-waiting-list-reaches-record-high-second-straight-month

NHS England waiting list reaches record high for second straight month

Experts warn 5.3m backlog could exacerbate burnout with staff facing ‘unprecedented levels of exhaustion’

The number of patients waiting for NHS treatment in England broke records for the second month in a row to reach 5.3 million, official figures show, prompting warnings the huge care backlog could exacerbate health service staff burnout.

It means the waiting list has grown by 606,501 over the last three months as patients have started using the NHS again, renewing fears it will hit 7 million before the end of the year.

The figures showed that two-thirds (67%) of patients received treatments within 18 weeks in May, far below the standard the NHS sets itself of treating 92% within this timeframe.

[sancho panza]

 

 

15 hours ago, ThoughtCriminal said:

Some choice quotes in there. 

 

"In his suburb, the neighbourhood patrol operates only at night. He has joined it, along with about 25 other men.

"Some have guns, but most of us just carry sticks, pipes and torches. I never thought I'll ever do this, but we have no choice. There are no police; no soldiers," he said.

"We block all intersections with our cars. Some of us will stand there; others will do foot patrols." 

 

32% unemployment. 

 

 

Mrs P is a Saffer.Very sad.About 200 shopping malls have been looted and loads of warehouses.Unemployment was bad before,now even worse.

They're blaming it on Zuma getting banged up but the reality is that they've had a seriously repressive lockdown and it was a powder keg looking for a spark.

Here's SKy with some vids,but there's oads online and Whatsapp.

https://news.sky.com/story/south-africa-violence-a-jailed-former-president-and-covid-19-why-people-are-rioting-and-looting-12355887

Could happen in the UK in one of the big cities-most likely Londinium-once people realsie how few police they're actually are.

[sancho panza]

12 hours ago, DurhamBorn said:

I really hope the oilies can stay down so they can buy back as many shares as possible before renewables blow up.The costs of mining the things needed for the energy transition are huge,a magnitude, and people dont undertsand the energy use in that.Each tonne you need to mine of rock has a cost on how much percentage grade is what your after.I think the cost roughly trebles compared to what you need for carbon cars etc.The  irony is the higher the carbon tax,the higher the cost of transition.A classic inflation feedback loop.

Down the line blue hydrogen will easily outprice green,and natural solutions will become huge as politicians use them to get net zero when they realise their plans are a disaster.

I see no way they will be able to force people to get a heat pump etc,its all just pie in the sky talk.

I think there's some ok value in oilies at the minute,we've got some EQNR profits to recycle but Repsol,ENI.On top of that we're recycling the divi's in so happy to get divi's on BP sub £3 for sure.

Of late,looks like some compelling value in telecoms.Telefonica Deutsch,SIng Tel,Vod,TIM,VIV,(decl long all).BT/Telstra too pricey for me.

 

[sancho panza]

The tightening meme.CB's getting forced into a corner.

https://wolfstreet.com/2021/07/14/bank-of-canada-tapers-bond-purchases-3rd-time-bank-of-new-zealand-stops-qe-cold-turkey-citing-housing-bubble-in-least-regrets-policy/

Today, the world saw announcements by two central banks about reducing or ending asset purchases: By the Bank of Canada, its third reduction, and by the Bank of New Zealand which will stop them cold turkey in 10 days – following a slew of similar announcements by other central banks, while the Fed is still fiddling as inflation burns.

he Bank of Japan, one of the biggies, has been tapering its asset purchases for months. By June, its total assets, after months of slowing growth, fell by ¥7.7 trillion ($70 billion) from May, to a still gargantuan ¥717 trillion ($6.5 trillion):

The Reserve Bank of Australia announced on July 6 that it would reduce its weekly purchases of government bonds by A$1 billion a week, to A$4 billion a week.

The Bank of England announced in May that it would reduce its bond purchases from £4.4 billion a week to £3.4 billion a week.

The Riksbank of Sweden announced in late April that it is sticking to its plan to end QE entirely by late this year.

So why is the Fed so far behind the curve, rather than leading, with inflation having surged in recent months at the red-hottest pace since 1982? Why is it still buying mortgage-backed securities, given the biggest housing bubble since this data was tracked? The convoluted rationalizations and denials coming out of the Fed trigger nothing but bewildered head-scratching.

 

as per @DurhamBorn previous psot on transport costs.

https://wolfstreet.com/2021/07/14/and-now-the-wtf-spike-in-transportation-costs/

Trucking strains as rates soar.

The average national spot rate for van-type trailers has been rising for the past 12 months and in June reached $2.67 a mile, up 47% year-over-year, according to DAT Freight & Analysis. The average national contract rate for vans jumped by 36% year-over-year, to $2.73 per mile.

The average national spot rate for flatbed trailers (hauling heavy equipment, construction materials, and the like) jumped by 52% year-over-year to $3.15 per mile. The contract rate jumped 29% year-over-year to $3.12 a mile.

Diesel prices jump.

At the end of June, the average price of diesel at the pump reached $3.33, up 37% year-over-year, but it still remains far below the $4 range in 2012 through 2014:

Transportation costs are getting passed on and feed into the broader inflation scenario. The scenario here is paralleled by the ocean freight industry. For example, average spot rates from Shanghai to Los Angeles have spiked from around $1,500 per 40-foot container in early 2020, to nearly $10,000 now, as Container Freight Rates Spike to New Extremes, with Worse Still Ahead

[leonardratso]

i recommend centrica, with price caps maybe going up next month.

I recommend you sell it sharpish, ive got rid of all of mine now at a loss, but it taught me 1 thing, lifes too short to wait for shit like that to rebuild.

[Boon]

I think unemployment is more of a problem there - it was something like 32%, and that was only the official measure - it may be worse than that.

That's a hell of a lot of people that may be poor and have nothing to lose. But there must be another political dimension as it seems it hasn't spread all over the country, or maybe it's not being reported like that, I don't know.

But I remember the London riots here and this somehow inspired other cities to do their own riots.

 

 

[Harley]

So Total Energies now pay a cash dividend rather than scrip, with WHT at 30%!   Time to move out of my ISA to possibly reclaim the tax?

[Harley]

36 minutes ago, Cattle Prod said:

Jesus Christ.

Viruses go away eventually,this problem is structural. I saw a headline with some jackass proposing a fat tax to "protect the NHS". Genie is out of the bottle now, people complied and the NHS will continue to be used this way. NHS has had massive bed and resource cuts over the years (Germany has 4x critical care beds, thats 400% more!), but rather than reform it they will lock us down as soon as it gets full. Like it will this winter with flu. I have to say I'm not comfortable in such a society. How could I be comfortable when my local paramedic is doing a new year's eve every night and wants to quit? It's a total mess, decades in the making. And once the BOE stops funding the deficit there will be no money to fix it.

It's Trough Central.

[Harley]

9 hours ago, sancho panza said:

 

 

Mrs P is a Saffer.Very sad.About 200 shopping malls have been looted and loads of warehouses.Unemployment was bad before,now even worse.

They're blaming it on Zuma getting banged up but the reality is that they've had a seriously repressive lockdown and it was a powder keg looking for a spark.

Here's SKy with some vids,but there's oads online and Whatsapp.

https://news.sky.com/story/south-africa-violence-a-jailed-former-president-and-covid-19-why-people-are-rioting-and-looting-12355887

Could happen in the UK in one of the big cities-most likely Londinium-once people realsie how few police they're actually are.

A possibly enlightening piece on TimesRadio this morning about there being a state within a state now feeling threatened by the action against Zuma.  They're potentially agitating things as many of the serious stuff (attacks against infrastructure rather than looting) is co-ordinated and needs the right resources.  However, also plenty of kindling with a long running failure to deliver to the masses and a very harsh lockdown.  I expect Africa to receive a lot of attention going forward as a Geo-political play with financial interests getting their cut.

[Harley]

18 hours ago, Lightscribe said:

The PM miners finally look like they’re reacting to the inflation news.

Got a cheeky final allocation of FRES at 780 odd last week.

The mighty Panther is up 9.48% in the past 5 days. The unbelievers will be punished accordingly.

I've consistently failed in trading GDX many times so am perfectly unqualified to comment!  Monthly momentum is up for it and the miners I hold (div payers) but MACD is not following.  GDX (in GBP) was down 14% last month so maybe just a bounce?  That said it does look like we're going through some basing in GDX and gold itself around the 2016 entry into the cup and handle pattern (long term bullish?), although there could be more downside to come in the intermediate.  Depends on your time horizon.  Mine is months.  DYOR.

[planit]

17 hours ago, HousePriceMania said:

That was a bit of a surprise.

 

 

Sold out at 320 a few weeks ago

Any idea what's going on, time to buy again ?

 

19 hours ago, Harley said:

I have an old overseas pension.  Most of their funds now have a "sustainable" element.  Many of my funds were rebranded as such without any warning so, for example, my Latin America fund is now the Sustainable Latin America fund!  

Yes, in the UK they'll use your savings to fund green stuff in the absence of anything else (e.g. a growing tax base through real growth).  Their spending will bring in a period like when the German Social Democrats built all those autobahns, etc.  It will probably need paying for in blood too at some point.  Only question is when, and later, who's blood.

These two things are connected to some extent. BP etc are being dropped by funds one after the other. A year ago nearly every pension fund would have owned some BP, now everyone is falling over themselves to say they are ESG.

At some point this will end and the share price might rerate. I have no idea how long it will take but I am hoping for substantial buybacks starting after the 1st Aug that will help mop up shares.

As DB says, the more shares that can be bought back at current prices the better. As Warren Buffet would say, they can buy $5 bills for $3.50.

Anything less than $1bn of buybacks I will be disappointed with, I think they need to be buying $1.5bn each quarter at the moment to reach their promise of 60%+ of free cash flow return to investors.

[Harley]

21 hours ago, No One said:

@DurhamBorn I have a question for you.

 

I'm seeing lot's of red. Buying opportunity or the end of the reflation trade?

Telefonica is down, would you buy more?
BP? Shell? etc

I couldn't resist a coffee and a preview of the charts before their Friday close.  It's gonna be a fun weekend as the charts are clearly bifurcating into riders and fallers.  Definite sector themes are at play.  I do wonder however how much the recent round of div payments is having an impact.  Regardless, may be a good time for me to ladder out of a good few holdings to buy back lower.

 

[Harley]

Looks like BP tested resistance (which, classically, used to be long term support) and turned tail and ran away!  That's woke for you!  Maybe better luck next time!

[Harley]

10 hours ago, sancho panza said:

I think there's some ok value in oilies at the minute,we've got some EQNR profits to recycle but Repsol,ENI.On top of that we're recycling the divi's in so happy to get divi's on BP sub £3 for sure.

Of late,looks like some compelling value in telecoms.Telefonica Deutsch,SIng Tel,Vod,TIM,VIV,(decl long all).BT/Telstra too pricey for me.

 

IMO things are looking a bit anti-thread atm.  In the UK, utilities and consumer staples (including supermarkets) look to be holding well, but not telco (including beyond the UK).  Resources, including energy, look weak as do financials.  So do the covid "good news" stocks like transports and tourism.  Bonds (e.g. IBGL) may well be turning and gold really wants to break out but keeps getting slapped back down.  The good news is we have action in our preferred sectors/stocks so can reload at some point.  At least it's not paint dry boring anymore!

[Starsend]

54 minutes ago, Cattle Prod said:

My favourite chart this morning, TIPS at all time highs and breaking up:

Gold in purple. Very tight correlation since 2018. So are TIPS signalling gold should be 2100? Maybe, and as I'm invested in gold it's tempting. But if I check my bias, I think gold is smarter than bonds. Gold front runs almost everything. So why are these 'jaws' opening up? Are TIPS wrong?

...

Few hours have passed, and I made this:

It's real rates (10y yield minus 10 year breakevens) with gold inverted. The 'jaws' are not as wide now, so I like that. Similar to Lyn Alden's measure, I think. What I see is a close correlation, with periods of gold lagging. So real rates do seem to lead. Thoughts?

What next? Real rates have been bouncing off a -1.1 level since gold topped in August 2020. Will it break lower and give us another leg in gold? Assuming the 10y yield stays between 1.2-1.5 or whatever, the second part of the equation is more interesting. 10y breakeven definition:

So market participants currently think inflation is going to average 2.32% over the next 10 years. Strongly implying that they believe the current spike is transitory. But then I saw our friend Larry Fink, who controls $10 trillion dollars worth of funds giving his staff an 8% payrise because he doesn't think inflation is transitory. So is he buying gold, or bonds?!

There is a little table added there showing the % change in gold is remarkably consistent with a bps change in real rates. An average of 4.32 bps per % increase in gold. So to get to David Hunter's $2500, and the 10y stays roughly where it is, you would meed market participants to think inflation is going to average 3.94% over 10 years. Seems like a reasonable rate to us basement dwellers, but do you think CBs would have to act before it gets there? Perhaps that would just push down the 10y and have the same result. Thoughts?

So they believe that it will only take $125.78 in 2031 to buy what $100 will buy today, roughly a quarter increase in price. Deluded. Many of my outgoings have doubled in the last ten years of "low inflation."

I wouldn't be surprised if if took $200 or even considerably more to buy what $100 will buy now - if the $ hasn't been completely destroyed that is.

I think that many people, including the investment professionals, actually believe the Government inflation figures. My own belief is that gold is the smartest money of all and over long enough periods of time tracks real inflation pretty accurately.

We all know that Governments around the world need massive inflation over the coming decade so that's exactly what we'll get while they lie to us every step of the way.