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

[DurhamBorn]

1 hour ago, Sugarlips said:

Is it not odd that HSBC flicked John Flint suddenly after just 18 months in the top job? Whilst they are famed for lending conservatism I wonder how prudent they really are?  In periods of global trade wars and local(HK) trouble, the ‘worlds local bank’ could surely step on a land mine at any time...like the HK housing market in a time of escalating tensions with the motherland for example.

Could be anyone,though i think City Bank could be nasty,lots of derivatives there.Not enough dollars out there for the demands,there is a brutal crunch going on,first victims should be high capital goods companies,probably top of cycle earnings for them.I think it will take 18 months to turn things up from now.The Fed is acting,but at about 1 x 40th of what it will end up doing.Probably take $3 to $4 trillion to stop a depression given the scale of the demands out there.

[MrXxxx]

10 hours ago, Moominpapa said:

on't understand this, is part of your post missing?

No, I was just making the point that 80% (il gilts, gold, cash) of your holdings were in `safe` assets.

[MrXxxx]

19 hours ago, Tdog said:

Not sure what advice he wants, does he seem to think theyll all let him off the money theyve been lending him knowing he has an asset to sell.

Either use the pension he has been squirrelling away or flog the house, pay off the debt and live the reality now the dream is over.

 

Sign of the times when the son (who has benefited from his Fathers house) doesn't even consider/mention the prospect of his Father moving in with him and then selling or renting the house to cover the debt?!...there were times (and its still the case in some Developed countries) when multi-generation families lived under the same roof, I can see us revisiting these times again.

[MrXxxx]

19 hours ago, JMD said:

maybe use dividend paying utilities companies which I believe can be viewed as a bond proxy

A bond coupon is guaranteed, you cannot say the same for a dividend that can be cut or suspended.

[Talking Monkey]

2 hours ago, DurhamBorn said:

Could be anyone,though i think City Bank could be nasty,lots of derivatives there.Not enough dollars out there for the demands,there is a brutal crunch going on,first victims should be high capital goods companies,probably top of cycle earnings for them.I think it will take 18 months to turn things up from now.The Fed is acting,but at about 1 x 40th of what it will end up doing.Probably take $3 to $4 trillion to stop a depression given the scale of the demands out there.

I wonder if the fed will do any ad hoc rate cuts, or do they only time them with Fed meetings, 4 trillion of QE would be rocketfuel to the markets

[Barnsey]

Latest Saxo Bank Q4 report just out, well worth a read as always, main focus the strong "killer" dollar:

https://www.home.saxo/-/media/documents/quarterly-outlook/q4-full-report-2019.pdf

Quote

A stronger US dollar and tight USD liquidity will weigh on global growth and create de facto disinflation despite central banks efforts to lower policy rates. Those low rates and the myopic focus on inflation targeting are adding to the damage by driving an egregious misallocation of capital that destroys productivity. The credit mechanism and productive allocation of capital are by far the most important factors for long-term growth.

Into this mix comes President Trump with his calls for a weaker USD. His first avenue for this is the clumsy attempt to bully the Fed to cut interest rates. When – and not if – his patience with the Powell Fed runs out, he could activate the 1934 Gold Reserve Act which gives the White House broad powers to intervene by selling dollars to buy foreign currency. The Treasury keeps a fund of USD 95 billion for this purpose. Furthermore, the Fed could print ‘new dollarsʼ and warehouse some of the intervention, so there is no real upper limit to the amount of intervention possible. Since 1995 the US has intervened only three times: 1998, 2000 and 2011, every time for international liquidity provision purposes.

Another important angle here is that USD intervention has bipartisan support — Elizabeth Warren is among the voices in Congress calling for a weaker dollar. In her new Economic Patriotism plan she talks about managing the dollar via taxing capital inflow.

Quote

Weakening the Killer Dollar will likely put the final nail in the coffin of the grand credit cycle that started in the early 1980s, when the US balance sheet was reset and the USD was anchored by Volcker’s victory over inflation after Nixon abandoned the gold standard in 1971. The grand cycle since then has been turbocharged by globalisation and by lending money into existence via offshore USD creation (EuroDollars). A weaker USD can only buy us some time, it won’t offer a structural solution. It’s the easiest quick fix to what ails global markets, and the one with the least political resistance. The mighty dollar is set to tumble. But be careful what you wish for, USA.

 

[sancho panza]

12 hours ago, Thorn said:

Looking into the Velocity of Money to try and understand it and I came across this which seems to explain it- M2 money explanation 

Velocity is measured by dividing GDP by the relevant supply measure.

https://inflationdata.com/articles/2011/09/17/velocity-of-money/

8 hours ago, Sugarlips said:

Is it not odd that HSBC flicked John Flint suddenly after just 18 months in the top job? Whilst they are famed for lending conservatism I wonder how prudent they really are?  In periods of global trade wars and local(HK) trouble, the ‘worlds local bank’ could surely step on a land mine at any time...like the HK housing market in a time of escalating tensions with the motherland for example.

HSBC had a mortgage a while ago,where they would lend to 4 friends apparently.They also have a lot of business in some dodgy places.

 

More worryingly,iirc about 60% of profits come from Hong Kong.At the end of this,we'll be buying them back.Just not now.

1 hour ago, Barnsey said:

Latest Saxo Bank Q4 report just out, well worth a read as always, main focus the strong "killer" dollar:

https://www.home.saxo/-/media/documents/quarterly-outlook/q4-full-report-2019.pdf

 

' Weakening the Killer Dollar will likely put the final nail in the coffin of the grand credit cycle that started in the early 1980s, when the US balance sheet was reset and the USD was anchored by Volcker’s victory over inflation after Nixon abandoned the gold standard in 1971. '

They're screwed if they don't weaken,screwed by return ,if they do.Credit deflation cometh.

[sancho panza]

14 hours ago, DurhamBorn said:

CB action is certain,the Fed is in the market already big at the short end,i think a big bank is in trouble somewhere and the Fed is trying to keep liquidity moving.

 

Looks like a reasonable explanation of what's gone on.Deutsche bank would be my pick.Their problems are relatively transparent historically.

[sancho panza]

19 hours ago, DurhamBorn said:

 

I expect the dollar to go much lower,however im not trading it because the debt deflation is in full swing now.

My business cycle indicators are flashing worse signals than 08/09 and some are seeing quicker falls than the mid 30s.If the CBs loose money doesnt get into the system very soon i see it as game on.The CBs have a few weeks to make a massive action,or it will be too late.Road map on a few indicators i track very closely have both moved across the line of no return without massive fiscal and monetary pumping.The business cycle has turned in the US.

Cross market work is showing a lot depends on how fast oil falls.If its fast then that might keep the US economy going for a bit longer as it keeps the consumer spending.However that looks like the only thing that might,lots of profit warnings ahead,and then much worse.

 

Dollar lower .Hard to see anything but as either 1) here as fed gets pushed into it 2) US economy weakens.Not sure which will come first.

As we discussed previously oil is the trade here.We've been accumualting mechanically over five weeks or so.Oil had a run up but then XLE/XOP/OIH/XLE/big oil have pulled back. eg Total picked up at prices between 43 and 48.

We've got a %age portfolio target for big oil,but if we get a sustained period of weakness to anything under $40 then that will rise substantially.Oil will do well as $weakens.If dollar doesn't weaken then I'm plain wrong on this.But we'll still sit in them.

Gradually,I'm jsut becoming a gold/oil bug.

https://uk.reuters.com/article/us-exxon-mobil-outlook/weak-oil-prices-hit-exxons-third-quarter-earnings-filing-idUKKBN1WG4YZ

Exxon Mobil Corp’s (XOM.N) operating profits fell last quarter for the fourth consecutive period, according to a regulatory filing on Tuesday that showed all three of its major businesses slumping from a year ago.

Lower oil prices, weaker results in its chemical business and the lack of a tax benefit from the year-ago period combined to cut earnings to about $4 billion for the third quarter ended Sept. 30, according to a securities filing.

On 21/09/2019 at 01:52, Cattle Prod said:

@sancho panza are you short Berkeley? This may be builders holidays, but I've seen the cranes stop moving and abandoned sites before. Any way to probe their liquidity?

 

I went from Uk short term portfolio being down 4% on Tuesday to being up 15% so I shut everything down last night.Time for a regroup.

I still like the look of BKG/BDEV/RDW/BWY.I think these shares have a long way to go down.Overinlfated balance sheets/weakening transactions in higher end areas eg Londinium.But it's going at a snails pace.Sell the tops etc

Near me there's a few developments for people fleeing Leicester and they've been stood still/progressing slowly for probably a year now.I only know because there's a lot of moaning about it.I know why it's happening but I don't say anything.

[sancho panza]

4 hours ago, MrXxxx said:

A bond coupon is guaranteed, you cannot say the same for a dividend that can be cut or suspended.

Technically,it's jsut higher up the default food chain than equity

[JMD]

16 hours ago, Moominpapa said:

The graph I meant was the multicoloured circles with the asset classes dotted on them.  

Moomingpapa, ah... so I assume the key/legend (the high/low vol. coloured blocks?) should contain numbers? Sorry to be a pest but just like to understand the graph - particularly if it has guidance re. % allocations.

 

[DurhamBorn]

8 hours ago, MrXxxx said:

Sign of the times when the son (who has benefited from his Fathers house) doesn't even consider/mention the prospect of his Father moving in with him and then selling or renting the house to cover the debt?!...there were times (and its still the case in some Developed countries) when multi-generation families lived under the same roof, I can see us revisiting these times again.

My dad can move in with me any time he wants.My partner is a nurse and my daughter who lives 2 doors away is a nurse.My partner would leave work the next day if my dad needed care,his income is higher than her wages and he would simply give her it less anything he needs.If then the worst happens what my dad left would cover any future wage losses my partner had.We plan as a family for things like this.Im back working at the minute,but if i wasnt finished when my daughter has children then id leave then and look after them for her while she worked.One of the main reasons families rely on debt and are in the crap is they have fallen for the lefty way of thinking family doesnt matter only consumption.A strong family is the most potent weapon there is in financial terms.The next cycle will see us move back to family like you say.

[Democorruptcy]

On 02/10/2019 at 12:54, JMD said:

 maybe use dividend paying utilities companies which I believe can be viewed as a bond proxy

I don't think it's quite the same. For one thing a utility company could be nationalised and shareholders paid below market value.

[Agent ZigZag]

1 hour ago, DurhamBorn said:

My dad can move in with me any time he wants.My partner is a nurse and my daughter who lives 2 doors away is a nurse.My partner would leave work the next day if my dad needed care,his income is higher than her wages and he would simply give her it less anything he needs.If then the worst happens what my dad left would cover any future wage losses my partner had.We plan as a family for things like this.Im back working at the minute,but if i wasnt finished when my daughter has children then id leave then and look after them for her while she worked.One of the main reasons families rely on debt and are in the crap is they have fallen for the lefty way of thinking family doesnt matter only consumption.A strong family is the most potent weapon there is in financial terms.The next cycle will see us move back to family like you say.

We will have to change your name from DB Durham Born to D Boswells from Bread

[Shamone]

1 hour ago, DurhamBorn said:

My dad can move in with me any time he wants.My partner is a nurse and my daughter who lives 2 doors away is a nurse.My partner would leave work the next day if my dad needed care,his income is higher than her wages and he would simply give her it less anything he needs.If then the worst happens what my dad left would cover any future wage losses my partner had.We plan as a family for things like this.Im back working at the minute,but if i wasnt finished when my daughter has children then id leave then and look after them for her while she worked.One of the main reasons families rely on debt and are in the crap is they have fallen for the lefty way of thinking family doesnt matter only consumption.A strong family is the most potent weapon there is in financial terms.The next cycle will see us move back to family like you say.

Spot on as always. My wife and I have never been big earners but we paid the mortgage off as soon as we could and we now both work 3-day weeks. One free day at her parents, one at mine. Helping out with things. 

[Yellow_Reduced_Sticker]

@sancho panza Welcome back! miss ya informative posts

BTW folks, Tescos is getting DIRE for the YRS, we had to wait for the Tesco woman with the sticker gun to stick each item before one of us could ...GRAB it!

[Yellow_Reduced_Sticker]

Quote

1 hour ago, DurhamBorn said:

My dad can move in with me any time he wants.My partner is a nurse and my daughter who lives 2 doors away is a nurse.My partner would leave work the next day if my dad needed care,his income is higher than her wages and he would simply give her it less anything he needs.If then the worst happens what my dad left would cover any future wage losses my partner had.We plan as a family for things like this.Im back working at the minute,but if i wasnt finished when my daughter has children then id leave then and look after them for her while she worked.One of the main reasons families rely on debt and are in the crap is they have fallen for the lefty way of thinking family doesnt matter only consumption.A strong family is the most potent weapon there is in financial terms.The next cycle will see us move back to family like you say.

FIRST CLASS! only wish MORE famillies were like that...

15 minutes ago, Simon said:

Spot on as always. My wife and I have never been big earners but we paid the mortgage off as soon as we could and we now both work 3-day weeks. One free day at her parents, one at mine. Helping out with things. 

Quote

We will have to change your name from DB Durham Born to D Boswells from Bread

For the young ones here check this video out, again MAGNIFICENT comedy from the 1980's!

 

 

[Castlevania]

5 hours ago, sancho panza said:

Dollar lower .Hard to see anything but as either 1) here as fed gets pushed into it 2) US economy weakens.Not sure which will come first.

As we discussed previously oil is the trade here.We've been accumualting mechanically over five weeks or so.Oil had a run up but then XLE/XOP/OIH/XLE/big oil have pulled back. eg Total picked up at prices between 43 and 48.

We've got a %age portfolio target for big oil,but if we get a sustained period of weakness to anything under $40 then that will rise substantially.Oil will do well as $weakens.If dollar doesn't weaken then I'm plain wrong on this.But we'll still sit in them.

Gradually,I'm jsut becoming a gold/oil bug.

https://uk.reuters.com/article/us-exxon-mobil-outlook/weak-oil-prices-hit-exxons-third-quarter-earnings-filing-idUKKBN1WG4YZ

Exxon Mobil Corp’s (XOM.N) operating profits fell last quarter for the fourth consecutive period, according to a regulatory filing on Tuesday that showed all three of its major businesses slumping from a year ago.

Lower oil prices, weaker results in its chemical business and the lack of a tax benefit from the year-ago period combined to cut earnings to about $4 billion for the third quarter ended Sept. 30, according to a securities filing.

I went from Uk short term portfolio being down 4% on Tuesday to being up 15% so I shut everything down last night.Time for a regroup.

I still like the look of BKG/BDEV/RDW/BWY.I think these shares have a long way to go down.Overinlfated balance sheets/weakening transactions in higher end areas eg Londinium.But it's going at a snails pace.Sell the tops etc

Near me there's a few developments for people fleeing Leicester and they've been stood still/progressing slowly for probably a year now.I only know because there's a lot of moaning about it.I know why it's happening but I don't say anything.

Shorting is a medium term game. Even if you pick the right dogs you can be short for a good few years before anything happens. Then it happens all at ounce.

44 minutes ago, Democorruptcy said:

I don't think it's quite the same. For one thing a utility company could be nationalised and shareholders paid below market value.

Only Argentina and Venezuela have apparently ever done that.

[Loki]

On 02/10/2019 at 19:25, Bricks & Mortar said:

Email from Royal Mint.

"Dear Mr B&M

As you have previously purchased Signature Silver or Signature Platinum, we are contacting you to advise you of an important update which affects future orders which you may place with The Royal Mint.

All future purchases of Signature Silver and Signature Platinum will be charged VAT at the standard rate. Both the management fee and the sell back rate for Signature Silver and Platinum remains unchanged and there is no change to any existing holdings of either Signature Silver or Signature Platinum which you may have."

So, that kills that little wheeze.  I'm not going to pay VAT on an investment if I can't claim it back, or recharge it when I come to sell.  Gold still VAT-free from them, I believe.
Possibly only a few weeks left if anyone was thinking of ordering some coins from Europe.
 

Anyone going to get an order in? I am tempted to get some more silver Britannias 

[Chewing Grass]

3 minutes ago, Loki said:

Anyone going to get an order in? I am tempted to get some more silver Britannias 

Had been mulling over buying some for a while but not got round to it, from whence does VAT apply?

[Loki]

Just now, Chewing Grass said:

Had been mulling over buying some for a while but not got round to it, from whence does VAT apply?

Brexit date I imagine! (I order from Germany to avoid VAT)

[sleepwello'nights]

8 minutes ago, Loki said:

Anyone going to get an order in? I am tempted to get some more silver Britannias 

The Royal Mint probably have the highest sales price for gold and silver coins. I won't buy from them.

[Chewing Grass]

If they are delivered to your residence then vat is charged, if you let someone else look after then in Switzerland they are vat free.

Ooh, looks like the money is made when you kick the bucket or never claim them back i.e. paper coins.

[Loki]

5 minutes ago, Chewing Grass said:

If they are delivered to your residence then vat is charged

Not on my previous orders... (from outside the UK)

[Democorruptcy]

1 hour ago, Castlevania said:

Only Argentina and Venezuela have apparently ever done that.

After the first one had done it were you reassuring investors in the 2nd?  

I just thought it worth mentioning because Labour are 4/1 to win most seats at the next election and quite open about Nationalisation being a matter of urgency if they won. 

Labour can be laid here