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

[Sidd]

13 hours ago, DurhamBorn said:

I havent done much of anything as im mostly positioned for the decade with some firepower if a BK hits.I had 13 ticks down in the dollar,maybe 16 and we got 10 down so far to 90ish and it turned.I still think the probability is that it goes below 90 again,but i wouldnt trade off it.Liquidity should continue to expand in all the main blocks and that is why currency seems to be flatlining with their pairs mostly.

As we have entered the cycle the politics are now what is likely to come to the front and centre.Governments need to keep spending increases below tax increases for the first half of the cycle.Critical now we are in areas that can gain from higher gross incomes.People will be poorer,but earn more.

Thanks @DurhamBorn. When you say you see liquidity continuing to expand do you see this as the Fed not tapering anytime soon (as the Media has been playing it out recently) or is this the current QE still making its way through the plumbing as you call it, but with a lag?

[sancho panza]

14 hours ago, Barnsey said:

We ain't tightening folks...

I forget which exact one but maybe all of Luke gromen/Lyn Alden wrere mentioning that Fed Bear Kaplan was moderating his taper talk as the  Delta spreads....

Taper on,taper off........

https://www.bloomberg.com/news/articles/2021-08-20/kaplan-open-to-shifting-view-on-taper-if-delta-curbs-recovery

Dallas Fed President Robert Kaplan said he’s open to adjusting his view that the Federal Reserve should start tapering its asset-purchase program sooner rather than later if the delta variant persists and hurts economic progress.

The Fed is currently buying $80 billion per month in Treasuries and $40 billion in mortgage-backed securities in an effort to inject liquidity into the market and buoy an economy rocked by widespread lockdowns. Kaplan has said he favors gradually reducing those purchases from October, saying the support is leading to unintended consequences like an elevated housing market and higher rents.

10 hours ago, wherebee said:

I have a mate who works in the UK supermarket industry; they are world beating at screwing suppliers down to get any and all profit in the chain, so the farmers/producers have a pittance and the supermarkets gobble it all.  If a supplier got arsey, they'd be dumped for a cheaper one.  Cheaper every year was the mantra.

In an inflationary environment, I honestly don't know what will happen - are the supermarkets equipped with buyer ready to handle a non-deflationary world?

Excellent point Wherebee.I think the next few years is going to see some changes and the old way opf squeezing moeny from suppliers will have to change as suppliers will have choices.

Much as there's been some takeover,retail still gives me shivers from an invesment perpsective.

5 hours ago, Boon said:

As far as I understand with the supermarkets (Morrisons, Sainsburys) they are being bid due to their property assets which may be in excess of their balance sheet value.

For instance, with online shopping becoming more and more popular, is there any need for such massive car parks (many sites were conceived before deliveries started).

In which case siphoning off a bit of land and building some mixed retail/residential could be real valuable. 

As a business they are obiously so-so, they have little pricing power due to competition and some rising costs (minimum wage) are unavoidable. But I guess that is why they have been quite unfancied until now. I think the boat has sailed though to get invested in them now.

It'll be a rinse n repeat of all those successful takeovers by private equity liek Debenhams and Toys R us

https://www.thisismoney.co.uk/money/markets/article-9011535/How-Debenhams-never-recovered-brutal-private-equity-era.html

Debenhams is the most devastating case so far of a retailer that has suffered at the hands of vulture capitalists. Others to have experienced their aggressive business model include Maplin and Poundworld.

Private equity has infested the British high street for two decades, with stores often ruthlessly milked for profit then put into administration.

Restaurants and pub chains came in for similar treatment.

One of the most toxic episodes until Debenhams was the case of Comet, once a big name electrical goods chain.

It was taken over by private equity buyers in 2012 for a token sum. Months later the company, whose history dated back to the 1930s, collapsed with the loss of 7,000 jobs. 

The estimated cost to the taxpayer was nearly £50million in lost tax revenues and redundancy payments.

Sad to say that, in recent years, the British high street – once the home of proud names well and ethically run for decades – has become a happy hunting ground for the private equity predators.

Their exploits have left many businesses riddled with debt and in far too enfeebled a state to withstand the ravages of Covid-19. 

[HousePriceMania]

3 hours ago, Bobthebuilder said:

Must admit, I set my alarm clock this morning and sold them off. 6 months living expenses for me, as they were not in a ISA or SIPP.

Choccy croissants for me this morning.

 

[kibuc]

48 minutes ago, sancho panza said:

No idea JMD.It's a spray n pray with some profits.I looked at their holdings,royalty streams and land and thought I'd have a nudge.I think if I wnet through all their cross holdings,my brain would explode.

Scientific meh!!! When I get some profits,I liek to add some risk.

As above K,I like the risk reward with this outfit and I've been trying to gain more exposure to Canadian land and they look a reasonable play.

Agreed that thsi isn't likely a  stock pickers play.

Ref new Gold,I'd buy more at the current price if I wasn't as exposed as we are already.They've been pummelled.

Must agree that I'm tempted by Alexco/Imapct here but not backed by anything like your knowledge jsut my gut read.

Impact has been drilling this year, a reasonable 10k program, but they've hit fuck all. They've only reported once since the beginning of the campaign in Feb and those holes were unimpressive to say the least. They are a low-grade producer and can barely turn profit at current prices.

I appreciate that their low-grade profile makes them a very attractive prospect when silver rallies, but there's a good reason why they've dropped so low. On the other hand, if we cross $40 silver they can easily be a 5-bagger from this level precisely because of their recent pulldown.

A producer that's a similar low-grade play is Avino, who have also announced a drilling campaign in Feb, but it's a much larger one (upsized from 12k to over 30k after their perfectly-timed offering during the silversqueeze week - they placed at the exact top of the squeeze, somewere around CAD 2.80, crazy luck) and they actually hit some decent holes. As a result, they have traded roughly in line with their peers.

Now that I read what I wrote, it kind of makes sense to me that Impact should be a much higher-reward play (especially since Avino is just as much about copper as it is about silver) but boy, do they suck.

[Starsend]

21 hours ago, Bricormortis said:

My own take is I think there is more downside to come.

There could well be. I always keep cash in reserve in case we get some screaming bargains.

It's also why the bulk of my gold/silver miners/royalties are dividend payers, they're holds for likely the rest of this decade so they need to be making me some money while I'm waiting for them to go mental.

[DurhamBorn]

2 hours ago, Sidd said:

Thanks @DurhamBorn. When you say you see liquidity continuing to expand do you see this as the Fed not tapering anytime soon (as the Media has been playing it out recently) or is this the current QE still making its way through the plumbing as you call it, but with a lag?

As a whole liquidity will grow,some will taper,but between them all liquidity will increase.I have different scales for each currency on data going back to Bretton Woods that shows how much each economy on average can increase liquidity and the increase in GDP and inflation.GDP growth is falling away from liquidity growth and inflation growth is taking its place.When any run ahead of trend they build up snap backs.My inflation call for the cycle isnt based on anything looking forward,its based on the snap back of dis-inflation built up in economies.

So my currency work is based on not how much someone prints,but how much they can print compared to others.The UK for instance on my model can print 60% of what the Fed can and if it goes under or over turns the currency with a small lag.I dont cross market and interest rates etc just the relative increases in currency/liquidity.

I should add,its how much they can print per capita.

[DurhamBorn]

I should add on the above.They printed hardly anything after the financial crash 08/9 etc for the real economy.It was used to re-capitalise the banks balance sheets.It was a direct transfer from government to the elite.

[Talking Monkey]

2 minutes ago, DurhamBorn said:

I should add on the above.They printed hardly anything after the financial crash 08/9 etc for the real economy.It was used to re-capitalise the banks balance sheets.It was a direct transfer from government to the elite.

On  @sancho panzawork on how leveraged the banks are do you think they'll do an even bigger super sized version in a BK. Those were some scary leverage ratios.

 

[DurhamBorn]

1 minute ago, Talking Monkey said:

On  @sancho panzawork on how leveraged the banks are do you think they'll do an even bigger super sized version in a BK. Those were some scary leverage ratios.

 

I dont think they will be able to,i think the bank bond holders will be cleaned out.The big loser from any crash will be government and anyone whos income comes from it.The private sector is at a nice place in the cycle,the government is in a terrible place.

The only number i really care about is that to avoid bankruptcy,or what would be considered bankruptcy in a Fiat money system the government now needs the base of everything to inflate up 30%.Thats the level where tax will increase faster than spending without any changes.In the UK i see a 2.1x affect on inflation,so a 63% cycle inflation rate.I dont care what their quoted numbers say,if the UK isnt bust by 2030 we will of had that inflation ,or more.My roadmap range is 52% - 69% at the moment.My portfolio will catch it and in some parts leverage it.

[Talking Monkey]

9 minutes ago, DurhamBorn said:

I dont think they will be able to,i think the bank bond holders will be cleaned out.The big loser from any crash will be government and anyone whos income comes from it.The private sector is at a nice place in the cycle,the government is in a terrible place.

The only number i really care about is that to avoid bankruptcy,or what would be considered bankruptcy in a Fiat money system the government now needs the base of everything to inflate up 30%.Thats the level where tax will increase faster than spending without any changes.In the UK i see a 2.1x affect on inflation,so a 63% cycle inflation rate.I dont care what their quoted numbers say,if the UK isnt bust by 2030 we will of had that inflation ,or more.My roadmap range is 52% - 69% at the moment.My portfolio will catch it and in some parts leverage it.

Thanks DB I have a few relatives with their share isa in barclays I've been encouraging them to move them to HL, they resist as they don't want everything with HL, I will give them another nudge. 

[JMD]

4 hours ago, No One said:

True but wrong thread for that, unless theres a "play" in the market associated with this.

Systemic risk would be he goes completely senile as there is a market crash and the USG is unable to pump as usual due to lack of co ordination.

I do think the contrast in media reporting between the two presidencies is worth noting. But my point was really that the media has/still is covering up the US president's frailty - physical and mental. So yes systemic risk there. I agree, perhaps none of this is a thread discussion point in itself… However, Biden's recent actions regarding Afghanistan - especially his enfeebled/total inability in recent interviews to justify policies - might just start to give markets the jitters?

I also note that Kamala Harris has started to make hawkish speeches regarding China/Taiwan... rather arrogantly - imho anyway - stating that Afghanistan is kinda yesterday's news now, and that US policy is now shifting firmly toward SE Asia... Again, not meant as a discussion point, but I think worth underlining in terms of what this thread has been predicting to happen regionally for some time, i.e. 'five-eyes' plus Japan; oil demand crunch between China-Japan/India, etc. ...Looks like it’s all beginning to reveal(unravel?) itself.    

[JMD]

4 hours ago, sancho panza said:

My Mum was satying buy M&S a while back.her reasoning was that the low end will blossom and eventually Waitrose will give up the ghost,Sainsburys/Morrisons/Asda will start to compete with the lwoer end and M&S will hoover her pals up.

There's a logic to it.

Yes, interesting thesis from your Mum that does make sense to me. Food is a very crowded market currently, especially nowadays with the Lidle/Aldi newcomers.

Am i right in saying M&S are mainly on the high-street? Perhaps they should head 'out-of-town' (not in the Jack Hargreaves TV show sense!) and become the go-to high-end food/clothes/home/luxury goods brand... and then go head to head (medieval..!!) with the John Lewis/Waitrose partnership, and the other high street laggards... oops, i'm getting a far too carried away with this CEO strategising!!  

[MrXxxx]

18 hours ago, reformed nice guy said:

https://www.bbc.co.uk/news/business-58303679

"Prisoners to plug worker shortage in meat industry"

Seeing things like this is a good sign to me. If the government is wanting to empty jails to get people chopping meat, irrespective of how their knife wielding skills are, then it should bode well for wage inflation

It said Covid, Brexit and perceptions over career paths had caused a looming "recruitment crisis"

Oh, so nothing to do with paying a pittance and so you can get the labour then?!...you can encourage almost anyone to do any job (police force included) if you make the incentive worthwhile.

[Hancock]

24 minutes ago, MrXxxx said:

It said Covid, Brexit and perceptions over career paths had caused a looming "recruitment crisis"

Oh, so nothing to do with paying a pittance and so you can get the labour then?!...you can encourage almost anyone to do any job (police force included) if you make the incentive worthwhile.

Govt are still paying best part of 2 million to sit at home on most their wages.

https://www.gov.uk/government/news/numbers-on-furlough-fall-to-lowest-level-since-start-of-pandemic

[DurhamBorn]

4 hours ago, MrXxxx said:

It said Covid, Brexit and perceptions over career paths had caused a looming "recruitment crisis"

Oh, so nothing to do with paying a pittance and so you can get the labour then?!...you can encourage almost anyone to do any job (police force included) if you make the incentive worthwhile.

Im amazed at how much our prediction on this is coming true.My partner works for the council.Half of her bosses in her service have now put in to retire.Nice 18 months sat in the garden doing nothing,now dont fancy coming back.My partner is out in the community.They are hugely short staffed but cant get anyone.Advert running for months.Only once candidate was suitable,they need 12.They didnt turn up the first day.Younger staff leaving,pension isnt as attractive when the age is going to 68.

Myself,3 job offers today.3,in a day.All desperate for people,all nowhere near on pay.To top it off i even got a message from a company i worked for last year,i just ignored them.They had 30 new staff when i went there,two left now of those,in a year.

Down the road and up the road we have two new massive Amazon centres 2000 jobs between them,more over crimbo.They are now offering £1000 sign on bonus for pickers.Thats right,pickers.

https://www.dailymail.co.uk/money/news/article-9922683/Amazon-offers-1-000-joining-bonus-new-warehouse-workers.html

The crap factories around here who used to treat temporary workers like shit now cant get any.Amazon pay better etc.The poles have gone home,and the new immigrants will never work a day in their lives.

Companies are waking up to what happens when a dis-inflation cycle ends.The facts are instead of a race to cut costs and screw workers,its going to be a case of put wages up and swallow the margin loss or increase prices.

This will end up meaning some sectors can increase their prices because people need the service and its starting from a low level.

£1 an hour more is £27 after tax extra wages.£112 a month.10% increase in the phone bill is only £2.70 a month.

 

 

[Hancock]

1 hour ago, DurhamBorn said:

Companies are waking up to what happens when a dis-inflation cycle ends.The facts are instead of a race to cut costs and screw workers,its going to be a case of put wages up and swallow the margin loss or increase prices.

This will end up meaning some sectors can increase their prices because people need the service and its starting from a low level.

I dont think the management are capable, or think low level manual workers deserve a wage they could just about survive on, but not enough to buy a house.

Whats gone on in the last 25 years has taken us back to the Victorian levels of inequality.

But there are plenty of office/admin staff who aren't needed, along with shareholders getting less profit, and management having to take a cut in pay.

[MrXxxx]

8 hours ago, DurhamBorn said:

Im amazed at how much our prediction on this is coming true.My partner works for the council.Half of her bosses in her service have now put in to retire.Nice 18 months sat in the garden doing nothing,now dont fancy coming back.My partner is out in the community.They are hugely short staffed but cant get anyone.Advert running for months.Only once candidate was suitable,they need 12.They didnt turn up the first day.Younger staff leaving,pension isnt as attractive when the age is going to 68.

Myself,3 job offers today.3,in a day.All desperate for people,all nowhere near on pay.To top it off i even got a message from a company i worked for last year,i just ignored them.They had 30 new staff when i went there,two left now of those,in a year.

Down the road and up the road we have two new massive Amazon centres 2000 jobs between them,more over crimbo.They are now offering £1000 sign on bonus for pickers.Thats right,pickers.

https://www.dailymail.co.uk/money/news/article-9922683/Amazon-offers-1-000-joining-bonus-new-warehouse-workers.html

The crap factories around here who used to treat temporary workers like shit now cant get any.Amazon pay better etc.The poles have gone home,and the new immigrants will never work a day in their lives.

Companies are waking up to what happens when a dis-inflation cycle ends.The facts are instead of a race to cut costs and screw workers,its going to be a case of put wages up and swallow the margin loss or increase prices.

This will end up meaning some sectors can increase their prices because people need the service and its starting from a low level.

£1 an hour more is £27 after tax extra wages.£112 a month.10% increase in the phone bill is only £2.70 a month.

 

 

Yep, the more automated/technically driven the business the better...robots don't expect wage rises or go on `sickies`. The difference is, the employers of such have to pay their engineers properly other the business falters...perhaps we are finally realizing that being an engineer is not a `dirty word`, and deserves more respect/salary than some chav estate agent?!

[King Penda]

15 hours ago, DurhamBorn said:

 

The only number i really care about is that to avoid bankruptcy,or what would be considered bankruptcy in a Fiat money system the government now needs the base of everything to inflate up 30%.Thats the level where tax will increase faster than spending without any changes.In the UK i see a 2.1x affect on inflation,so a 63% cycle inflation rate.

Spending will plummet and saint Marcus of rashford will be crying think of the kiddies.

[King Penda]

8 hours ago, DurhamBorn said:

Im amazed at how much our prediction on this is coming true.My partner works for the council.Half of her bosses in her service have now put in to retire.Nice 18 months sat in the garden doing nothing,now dont fancy coming back.My partner is out in the community.They are hugely short staffed but cant get anyone.Advert running for months.Only once candidate was suitable,they need 12.They didnt turn up the first day.Younger staff leaving,pension isnt as attractive when the age is going to 68.

Myself,3 job offers today.3,in a day.All desperate for people,all nowhere near on pay.To top it off i even got a message from a company i worked for last year,i just ignored them.They had 30 new staff when i went there,two left now of those,in a year.

Down the road and up the road we have two new massive Amazon centres 2000 jobs between them,more over crimbo.They are now offering £1000 sign on bonus for pickers.Thats right,pickers.

https://www.dailymail.co.uk/money/news/article-9922683/Amazon-offers-1-000-joining-bonus-new-warehouse-workers.html

The crap factories around here who used to treat temporary workers like shit now cant get any.Amazon pay better etc.The poles have gone home,and the new immigrants will never work a day in their lives.

Companies are waking up to what happens when a dis-inflation cycle ends.The facts are instead of a race to cut costs and screw workers,its going to be a case of put wages up and swallow the margin loss or increase prices.

This will end up meaning some sectors can increase their prices because people need the service and its starting from a low level.

£1 an hour more is £27 after tax extra wages.£112 a month.10% increase in the phone bill is only £2.70 a month.

 

 

Amazon won’t fuck about if that does not get staff they will put it up again and get recruitment guys in job centres.they have a rule that you can’t do more than 60 hours a week for more than 4 weeks in a row.I surpose they could bin that the pay is 50% more after 40 hours and double pay after 50.nights also pay more

[DurhamBorn]

2 hours ago, MrXxxx said:

Yep, the more automated/technically driven the business the better...robots don't expect wage rises or go on `sickies`. The difference is, the employers of such have to pay their engineers properly other the business falters...perhaps we are finally realizing that being an engineer is not a `dirty word`, and deserves more respect/salary than some chav estate agent?!

Its one of the reasons the companies with high fixed assets depreciating at a fixed level and debt fixed are such good investments in these cycles.They have already paid for most of what they need to operate or bond holders have at 3% coupons or less.Companies with high staff levels etc have an ongoing cost that is increasing fast.

Shelves are going empty now and its not just Brexit etc.People are deciding to do less or choose when to work.Employers who think they can carry on as before are in huge trouble.

[Barnsey]

 

[Hancock]

22 minutes ago, Barnsey said:

 

Isn't it more a case whats happening in America and what the FED does that matters, and this time we have to copy.

[Barnsey]

6 minutes ago, Hancock said:

Isn't it more a case whats happening in America and what the FED does that matters, and this time we have to copy.

Certainly a big part, but we've been doing better on the virus front of late which removes that "excuse" to keep things easy to an extent.

[Hancock]

Just now, Barnsey said:

Certainly a big part, but we've been doing better on the virus front of late which removes that "excuse" to keep things easy to an extent.

I believe Friday is the day when Powell speaks up about the FED's intentions.

[Starsend]

12 hours ago, DurhamBorn said:

Im amazed at how much our prediction on this is coming true.My partner works for the council.Half of her bosses in her service have now put in to retire.Nice 18 months sat in the garden doing nothing,now dont fancy coming back.My partner is out in the community.They are hugely short staffed but cant get anyone.Advert running for months.Only once candidate was suitable,they need 12.They didnt turn up the first day.Younger staff leaving,pension isnt as attractive when the age is going to 68.

Myself,3 job offers today.3,in a day.All desperate for people,all nowhere near on pay.To top it off i even got a message from a company i worked for last year,i just ignored them.They had 30 new staff when i went there,two left now of those,in a year.

Down the road and up the road we have two new massive Amazon centres 2000 jobs between them,more over crimbo.They are now offering £1000 sign on bonus for pickers.Thats right,pickers.

https://www.dailymail.co.uk/money/news/article-9922683/Amazon-offers-1-000-joining-bonus-new-warehouse-workers.html

The crap factories around here who used to treat temporary workers like shit now cant get any.Amazon pay better etc.The poles have gone home,and the new immigrants will never work a day in their lives.

Companies are waking up to what happens when a dis-inflation cycle ends.The facts are instead of a race to cut costs and screw workers,its going to be a case of put wages up and swallow the margin loss or increase prices.

This will end up meaning some sectors can increase their prices because people need the service and its starting from a low level.

£1 an hour more is £27 after tax extra wages.£112 a month.10% increase in the phone bill is only £2.70 a month.

 

 

What I don't get though is where have all these people gone? I mean presumably they were there and working pre-covid.

Is a combination of things? Brexit and their supply of slave labour being interrupted, older people getting a taste of freedom and deciding to downgrade/retire early? Seems to me that this isn't enough to explain the big labour shortages we're reading about - unless actual millions of EU slaves have gone home.

If it's caused by EU slaves going home then this whole thing is temporary. The Government will be getting angry calls from their mates at the head of big companies demanding they find them some more slaves. The Government will start scouring the world again. I predict that wages will be being screwed down again within a year or two.