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

[DurhamBorn]

3 minutes ago, TheCountOfNowhere said:

When does the predicted deflation start? 

 

Or have we had it? 

 

Have the bankers convinced the tories to borrow and spend big so they can push the rates up and profit for decades? 

 

The UK is a proper mess now. 

 

Brexits given the tories carte blanche to bleed us dry. 

 

Holy ####. 

Deflation is happening now and will speed up ,thats the debt deflation.The inflation will be a few years down the line,starting slowly,so its ignored,almost enjoyed as it hits 3%,then 4%,and of course towards the end of the cycle when it goes up to 10%,maybe even 17%+ the real pain.

The dis-inflation has reached the end point where it changed the politics.They have no choice but to invest direct into the economy.The pension funds etc who will buy the gilts will get fleeced, as will foreign investors etc.I expect the gilts that get issued in the last stages of this cycle will see 80% losses over the cycle inflation adjusted.

The macro position is 100% clear.The backbone of the economy cant support the demands on it.That means 30% cuts in welfare and/or government wages/pensions,or massive spending on investment,the politics ensures we get the 2nd choice.

[TheCountOfNowhere]

17 minutes ago, DurhamBorn said:

Deflation is happening now and will speed up ,thats the debt deflation.The inflation will be a few years down the line,starting slowly,so its ignored,almost enjoyed as it hits 3%,then 4%,and of course towards the end of the cycle when it goes up to 10%,maybe even 17%+ the real pain.

The dis-inflation has reached the end point where it changed the politics.They have no choice but to invest direct into the economy.The pension funds etc who will buy the gilts will get fleeced, as will foreign investors etc.I expect the gilts that get issued in the last stages of this cycle will see 80% losses over the cycle inflation adjusted.

The macro position is 100% clear.The backbone of the economy cant support the demands on it.That means 30% cuts in welfare and/or government wages/pensions,or massive spending on investment,the politics ensures we get the 2nd choice.

Thanks for clarifying DB. 

I can't deny your predictions seem to be coming true. 

I've always seen the outcome of this madness as some sort of monetary collapse and quite possibly another world war 

The unregulated bankers are the problem. 

 

 

 

[JMD]

11 hours ago, Harley said:

Excellent.  Think I shall buy some more Sainsbury's.  Takes yer money in Argos and gives yer nothing back in Sainsbury's.  Perfect, nice and tight, as tested by the YRS!!!!  That Perkbox thing my partner gets with her professional body subscription works a treat at 6% off in Argos.  Plus one free movie a month with Rakuten (a bit lame film wise though).  And yep, Argos is pretty active with discounts at certain times.  Defo worth keeping an eye on.  I'm off to try Gumtree this year as a seller and purchaser.  Apart from Council and motor tax, VAT is about the only tax left for me to conquer so second hand will do nicely.  Happy to pay tax when they're happy to spend it wisely.      

Yep, Argos gets my vote, great prices, well run, etc, and the 'soviet style Q-system' you describe is (just about) tolerable, for those not wanting to pay delivery. Although for me there is still a lot to be said for being able to view/handle the product... However, the following is an abject lesson in how NOT to run a retail operation - I recently went to Currys/PCWorld intending to view and buy 2 tablets, unfortunately the items weren't in stock with the next scheduled delivery being in 3 days, I said no problem, please can you reserve said items for me, whereby the staff told me they couldn't guarantee that and i'd be better off just ordering online. However before placing my order from home, I checked Argos-online, and found they could deliver next day, so I ordered from Argos instead. Another problem Currys have which I've seen happening for many years now is Currys staff standing around chatting to each other or just walking around aimlessly, are all their stores similarly over-staffed?.. not merely a moan here - I am genuinely interested in how retail/high-street changes over next 10 years.              

 

Thanks also for the charts and explanations Harley (i'm still learning about such things). Btw for gold/silver, do your charts show evidence for price falls in say 3-months time? I ask because I thought it interesting that some comments within the The Seeking Alpha (silver) blog, posted by Ellandback 3 days back, and also DurhamBorn only couple days ago, both referred to this correction/consolidation as being a real possibility.  

 

[Majorpain]

52 minutes ago, Tdog said:

https://www.investopedia.com/terms/d/debtdeflation.asp

Where is it happening, as the mulitple bubbles ie overall stockmarket, property keep rising. As is consumer debt.

https://www.constructionenquirer.com/2020/01/07/leeds-based-broadley-group-files-for-liquidation/

https://www.constructionenquirer.com/2020/01/07/clugston-job-toll-hits-280-as-axe-swings-again/

https://www.constructionenquirer.com/2020/01/03/civil-engineering-leads-december-construction-slump/

Take your pick, its not a good time to be debt heavy and cash light construction wise.

Its simply a matter of time before the wider economy begins to be affected IMO.

[Loki]

11 minutes ago, Majorpain said:

https://www.constructionenquirer.com/2020/01/07/leeds-based-broadley-group-files-for-liquidation/

https://www.constructionenquirer.com/2020/01/07/clugston-job-toll-hits-280-as-axe-swings-again/

https://www.constructionenquirer.com/2020/01/03/civil-engineering-leads-december-construction-slump/

Take your pick, its not a good time to be debt heavy and cash light construction wise.

Its simply a matter of time before the wider economy begins to be affected IMO.

So all they have to do is try and hang on for the infrastructure spending taps to open?

[JMD]

On 05/01/2020 at 20:20, kibuc said:

I understand the approach. If we get $25 silver then whoever is still getting ounces from the ground will be flying high, so it's tempting to pick 'em up while they are still at their lowest. Still worth doing some DD, as you say, to eliminate those that are already on a death spiral.

Kibuc, its a very interesting point you raise there.

I recently found the below link (hopefully the link is working; please note it only allows 3 searches, and then you must subscribe to the site). However, the link below - when I could view it before it asking for subscription - listed on a single page most silver/gold miners, including the explorers and the producers. But what I found really interesting was the figures shown for each miners gold/silver reserves - both proven and estimated (inflated?) reserves.

I wonder could you advise if the figures are accurate? If you know of a similar source for this type of information I would be very grateful to learn of it, as this particular site (perhaps reasonably so? seeks a user subscription for this info.). 

http://www.24hgold.com/english/listcompanies.aspx?fundamental=datas&data=property&sort=production&mode=datas&visu=prod&commodity=AU&commodityname=GOLD&ms=1091362D5010

[JMD]

Hi DurhamBorn, RoyalMail is often spoken about here often as reflation stock, etc. Not sure if this question has been asked before, but do you have a view on Amazon and their impending use of delivery drones? I'm concerned that the 'infrastructure monopoly' that RM enjoys would be destroyed slowly/over-night? by Amazon, once the company had been granted national licenses to use such drone tech.

[kibuc]

23 minutes ago, JMD said:

Kibuc, its a very interesting point you raise there.

I recently found the below link (hopefully the link is working; please note it only allows 3 searches, and then you must subscribe to the site). However, the link below - when I could view it before it asking for subscription - listed on a single page most silver/gold miners, including the explorers and the producers. But what I found really interesting was the figures shown for each miners gold/silver reserves - both proven and estimated (inflated?) reserves.

 

I wonder could you advise if the figures are accurate? If you know of a similar source for this type of information I would be very grateful to learn of it, as this particular site (perhaps reasonably so? seeks a user subscription for this info.). 

http://www.24hgold.com/english/listcompanies.aspx?fundamental=datas&data=property&sort=production&mode=datas&visu=prod&commodity=AU&commodityname=GOLD&ms=1091362D5010

 

That link shows production estimates, not reserves, and I have to question accuracy of that data. For instance, New Afton (owned by well known and loved New Gold), is listed at 85koz p.a. for the next 3 years and I have no idea where it's coming from. It produced 86k in 2017, 77k in 2018 and will end up somewhere around 65k for 2019. Recent drilling activity is focused on extending life of mine, not increasing production. And it's primarily a copper mine anyway.

[Majorpain]

27 minutes ago, Loki said:

So all they have to do is try and hang on for the infrastructure spending taps to open?

Or Schools n Hospitals.  The problem is there is a 1-2 year lag whilst the planning and design gets sorted out, if your supply chain is loaded with debt it needs cashflow to service or you wont have a supply chain!  One of those companies was hit for £5m when a key subbie went bust and couldn't do the work.

8 minutes ago, Tdog said:

Then on the other hand the big house builders are more profitable than ever.

Prediction was that Housing would become poison in the next cycle, housebuilders will get kneecapped if that happens (long overdue IMO...).

[TheCountOfNowhere]

5 minutes ago, Tdog said:

Maybe if the Tories open the rigged market to small builders. But the comment was more to show that credit isnt deflating in the housing market (ie the UK economy) as of yet.

Unless your in the SE... Circa 30 million people. 

Property lion quartly asking price index is out at the weekend. It should be telling if the falls are continuing. 

[DurhamBorn]

1 hour ago, TheCountOfNowhere said:

Thanks for clarifying DB. 

I can't deny your predictions seem to be coming true. 

I've always seen the outcome of this madness as some sort of monetary collapse and quite possibly another world war 

The unregulated bankers are the problem. 

 

 

 

This is way way way out,but we do run a few really long term road maps,but the more out you go of course the more different things can be with lots of cross market events.However those road maps show complete collapse in Fiat systems around 2029.High inflation,governments unable to borrow etc.The problem is the road maps show everything goes to shit,no assets go up in price during it.There is nowhere to hide.Of course the hope is things dont get as extreme,that the macro situation gives us a few options,but i am very very worried about what it is showing then.The ending of this cycle doesnt concern me,the next one doesnt concern me,we are positioned for it,but how that ends does concern me greatly.There are policy options open still down the road,but if they dont take them its going to be terrible.

[Harley]

Update on my performance review.  I added yield data (given the objective of the account is to generate income) with a view to see if I had been buying income at the expense of capital.  My average current yield is about 7% (wow!) both based on the current yields and the yields I secured at the time I purchased the stocks.  Any difference between these two figures could be due to a mix of a company subsequently changing their yield and/or a subsequent change in the company's stock price.  Both are good performance measures to include as they account for my ability to invest in fundamentally good companies from a secure dividend POV and stock price POV and from a purchase timing POV.  Or looking at it from another way, I have an annualised hypothetical 11% total return for the year or 12% if I allow for the average days a share was held.   The fact that my figures use unweighted averages (i.e. do not take account of the relative holdings of each stock) is a relatively minor issue as I stick to a strict 4% portfolio allocation per stock.  First time I've done this type of performance review but it's proving to be an excellent exercise (feedback loop and evaluating alternative approaches).  It also raises the question as to whether I should de-risk to achieve a better risk to yield ratio given the purpose of the account.  Anyway, so far beats an annuity!

[DurhamBorn]

36 minutes ago, JMD said:

Hi DurhamBorn, RoyalMail is often spoken about here often as reflation stock, etc. Not sure if this question has been asked before, but do you have a view on Amazon and their impending use of delivery drones? I'm concerned that the 'infrastructure monopoly' that RM enjoys would be destroyed slowly/over-night? by Amazon, once the company had been granted national licenses to use such drone tech.

I never ever consider such things because for every 1 that makes a difference 200 wont.Drones might help RM.It might give them massive power over the unions to say negotiate of we are fucked.In my home town those drones might enter,but none would ever leave i doubt.

I had a big business selling on Amazon,they arent as good as people make out and their delivery network is probably worse than Hermes in my experience.Nothing new in what Amazon is trying to do,but its all been done before (and failed before) where companies try to be lots of different things.

A contrarian always looks at things like this.Its like the tobacco stocks back in the day when everyone said smoking was finished etc.I made insane profits on them (BAT bought my house for i think £7k invested).Im up nearly 40% on them again since going back in this time last year when everyone said they were finished again (until the ban vape without an expensive license,wonder who could afford to scratch backs for that).

The key iv found to investing is to have a diverse portfolio,point it at the areas likely to at least manage the next cycle,buy when they are hated (cycles always hate the stocks most at the end likely to do well in the next one) ignore the noise,and wait.Let the cycle run its course.Some will fail badly,some fail,some rocket,but the aim is to outperform inflation first,and the market second.

[Eventually Right]

1 hour ago, DurhamBorn said:

This is way way way out,but we do run a few really long term road maps,but the more out you go of course the more different things can be with lots of cross market events.However those road maps show complete collapse in Fiat systems around 2029.High inflation,governments unable to borrow etc.The problem is the road maps show everything goes to shit,no assets go up in price during it.There is nowhere to hide.Of course the hope is things dont get as extreme,that the macro situation gives us a few options,but i am very very worried about what it is showing then.The ending of this cycle doesnt concern me,the next one doesnt concern me,we are positioned for it,but how that ends does concern me greatly.There are policy options open still down the road,but if they dont take them its going to be terrible.

If the road map is still pointing to an extreme endgame, 3-4 years down the line, in around 2025, would you be tempted to buy a smallholding somewhere relatively remote, decking it out with solar panels/tinned food etc?

Slight digression into "prepper" themes, but if things do look likely to get that nasty, at least for a time, then I guess we'd want to be in real assets before things get to that point!

[Harley]

19 minutes ago, Eventually Right said:

If the road map is still pointing to an extreme endgame, 3-4 years down the line, in around 2025, would you be tempted to buy a smallholding somewhere relatively remote, decking it out with solar panels/tinned food etc?

Slight digression into "prepper" themes, but if things do look likely to get that nasty, at least for a time, then I guess we'd want to be in real assets before things get to that point!

Why wait for an endgame!  Lotta fun for some but shite for others.  Only thing is you're on your own.  Urban areas will get the food, security, etc resources.

[JMD]

2 hours ago, DurhamBorn said:

I never ever consider such things because for every 1 that makes a difference 200 wont.Drones might help RM.It might give them massive power over the unions to say negotiate of we are fucked.In my home town those drones might enter,but none would ever leave i doubt.

I had a big business selling on Amazon,they arent as good as people make out and their delivery network is probably worse than Hermes in my experience.Nothing new in what Amazon is trying to do,but its all been done before (and failed before) where companies try to be lots of different things.

A contrarian always looks at things like this.Its like the tobacco stocks back in the day when everyone said smoking was finished etc.I made insane profits on them (BAT bought my house for i think £7k invested).Im up nearly 40% on them again since going back in this time last year when everyone said they were finished again (until the ban vape without an expensive license,wonder who could afford to scratch backs for that).

The key iv found to investing is to have a diverse portfolio,point it at the areas likely to at least manage the next cycle,buy when they are hated (cycles always hate the stocks most at the end likely to do well in the next one) ignore the noise,and wait.Let the cycle run its course.Some will fail badly,some fail,some rocket,but the aim is to outperform inflation first,and the market second.

thanks DB, its good to be reminded from time to time of the basics of this thread (sage text highlighted above).

 

Regarding Amazon, I agree that big companies are seldom well run companies. Do you think the global goliathon companies will be broken up? After all, the US did this last century with the oil and telecom companies. Perhaps the next cycle will give them the excuse to do the same again, this time for amazon, google, the banks, etc.

I'm also asking because - relating this back to your other post above - am I being just far too optimistic here in assuming that any progress at all will be made - in regard to corporate reform? After all, you say that by start of next cycle, approx. 2030, we may even be looking at potential collapse of fiat system. So i'm thinking then that Western governments might be far too preoccupied stoking up spending/fighting inflation/'reducing' debt (not to mention fending off/managing China and the Middle-East) to engage in any meaningful regulatory reform?    

How can 'real capitalism' (opposed to corporatism) be rebooted, currently competition, price discovery, economic progress are pretty much defunct. Have you a view on what type of (draconian?) policies , or maybe what type of results, do governments need to achieve, in order to prevent monetary collapse?  

I guess your roadmaps wont help here as it depends on how/what our governments do, but as we are now into the deflation cycle and have also entered our own Roaring Twenties I thought i'd ask! 

 

...I notice that EventuallyRight has asked you a similar type of question but from the prepper perspective. I was asking more in terms of what your expectation was for practical reforms vs. the 'extreme' government policies that may be adopted in order to 'kick the can'/prop things up.      

[Eventually Right]

32 minutes ago, Harley said:

Why wait for an endgame!  Lotta fun for some but shite for others.  Only thing is you're on your own.  Urban areas will get the food, security, etc resources.

Wouldn't urban areas get the rioting and high crime in such a scenario?

[JMD]

2 hours ago, kibuc said:

That link shows production estimates, not reserves, and I have to question accuracy of that data. For instance, New Afton (owned by well known and loved New Gold), is listed at 85koz p.a. for the next 3 years and I have no idea where it's coming from. It produced 86k in 2017, 77k in 2018 and will end up somewhere around 65k for 2019. Recent drilling activity is focused on extending life of mine, not increasing production. And it's primarily a copper mine anyway.

thanks Kibuc, reply is much appreciated. I was looking for an straight forward way to compare miners on their reserves, to use as an additional metric for deciding which miner to invest/hold long term.

Thanks again for the info, that site does appear inaccurate, and perhaps that's why the it only allows 3 searches before locking out, hoping that you will then subscribe.

[Loki]

19 minutes ago, Eventually Right said:

Wouldn't urban areas get the rioting and high crime in such a scenario?

At this point I'll just point out that 5G could be used as a crowd control device by bumping up the amplitude - it's directional microwave based

But I'm sure it's just coincidence about the big push for it  

Those 2 big boxes you see at the bottom of 5G masts are for cooling.  Removing excess wasted heat energy also takes energy - but make sure you have LED lights and eat lentils, to save the planet of course

[JMD]

1 hour ago, Harley said:

Why wait for an endgame!  Lotta fun for some but shite for others.  Only thing is you're on your own.  Urban areas will get the food, security, etc resources.

I agree Harley, I think that actively preparing for 'an end of days' scenario is somewhat pointless (after all who knows what 'ecomomic' devastation looks like?). But i don't think it would come to that, hence my (convoluted) question to DB. I suppose I was looking to understand the potential scope of government intervention policies, particularly if it came having to aggressively save the monetary system, and then how such policies would affect me (or the average joe) over the next 10-20 years.    

[Noallegiance]

Fuck me Durhamborn you are terrifying.

You'd be less terrifying if you could be wrong every so often. Please.

[harp]

11 hours ago, MrXxxx said:

The problem there is the counterparty risks...the cost of a divorce soon erodes your assets over a very short time! :-)

Best bit of advice I've ever had was, if it flies, floats, or fucks, then rent it. Good job I got that advice as I'm a day skipper and wanted to buy a boat. I also had my PPL (Private Pilots licence). The only thing I enjoyed was renting the fuck bit...before I got married

[Loki]

5 hours ago, DurhamBorn said:

This is way way way out,but we do run a few really long term road maps,but the more out you go of course the more different things can be with lots of cross market events.However those road maps show complete collapse in Fiat systems around 2029.High inflation,governments unable to borrow etc.The problem is the road maps show everything goes to shit,no assets go up in price during it.There is nowhere to hide.Of course the hope is things dont get as extreme,that the macro situation gives us a few options,but i am very very worried about what it is showing then.The ending of this cycle doesnt concern me,the next one doesnt concern me,we are positioned for it,but how that ends does concern me greatly.There are policy options open still down the road,but if they dont take them its going to be terrible.

2029 ties in with dates I have seen mentioned in lots of other, non-financial things I research.

[Barnsey]

15 minutes ago, Loki said:

2029 ties in with dates I have seen mentioned in lots of other, non-financial things I research.

Ties in with Neil Howe's Fourth Turning time frame. I think gov-coin is definitely coming and will be a means of resetting in such a scenario, huge debt forgiveness but controlled centrally, nowhere to hide, in the name of the common good. 2032 is when many had predicted China to become the no.1 global economy however that was based on an ever rising trend which is now going the other way, and you can be damn sure the Yanks will do their best to push it out as far as possible.

As I dwell on possible getting a 10 year fix, and perhaps longer if introduced this year, what good is it if the bank goes bust and I end up on a Gov bailed out one at a high rate like the Northern Rock customers.

There are few certainties but I can't live my life in perpetual fear either, as Mr Howe often says, these turning events are not the end of the world, just a necessary process to give way for a new positive direction.

[Loki]

32 minutes ago, Barnsey said:

Ties in with Neil Howe's Fourth Turning time frame. I think gov-coin is definitely coming and will be a means of resetting in such a scenario, huge debt forgiveness but controlled centrally, nowhere to hide, in the name of the common good. 2032 is when many had predicted China to become the no.1 global economy however that was based on an ever rising trend which is now going the other way, and you can be damn sure the Yanks will do their best to push it out as far as possible.

As I dwell on possible getting a 10 year fix, and perhaps longer if introduced this year, what good is it if the bank goes bust and I end up on a Gov bailed out one at a high rate like the Northern Rock customers.

There are few certainties but I can't live my life in perpetual fear either, as Mr Howe often says, these turning events are not the end of the world, just a necessary process to give way for a new positive direction.

It's hard not to have analysis paralysis.  I can't live in stasis for the next 10 years, but decisions made now WILL echo into the future.  Things are getting strange already and we're a week into 2020