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


spunko

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http://theeconomiccollapseblog.com/archives/12-signs-that-the-economy-is-seriously-slowing-down-as-2020-begins

The following are 12 signs that the economy is seriously slowing down as 2020 begins…

#1 The U.S. Manufacturing Purchasing Managers Index has been in contraction for 5 months in a row, and it is now at the lowest level we have seen since June 2009.

#2 Last month, manufacturing employment fell at the fastest pace we have seen since August 2009.

#3 Last month, new manufacturing orders fell at the fastest pace we have seen since April 2009.

#4 Chicago PMI has been contracting for 4 months in a row.

#5 European manufacturing PMI declined again in December.

#6 Borden Dairy, one of the largest dairy companies in the entire world, declared bankruptcy just a few days ago.

#7 Earlier this month, the Baltic Dry Index had its worst day in 6 years.

#8 Overall, the decline in the Baltic Dry Index this month is the largest that we have seen since 2008.

#9 The auto recession just continues to get even worse.  Thanks to the substantial slowdown we witnessed during the second half of 2019, the total number of cars and trucks sold in the United States during all of 2019 was actually below the level that we witnessed back in 2000 when our population was significantly smaller.

#10 Used heavy duty truck prices have fallen “as much as 50%“.

#11 Macy’s just announced that they will be closing 28 stores.

#12 To start the year, AT&T is laying off thousands of workers, and according to Robert Reich those being laid off “will have to train their foreign replacements“.

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On 18/01/2020 at 12:06, DurhamBorn said:

Telcos

Vod,BT,Telia,Telefonica,

Oil,

BP,Shell,Repsol ,Plains All American Pipeline,Southwestern Energy Company (SWN) Schlumberger,Vermillion Energy inc NPV,DPM Midstream

Potash etc

K+S ,Mosaic Co,OCI NV ,Intrepid Potash Inc (speculative but also produces langbeinite and de-icing for oil wells etc)

Transport,

Stagecoach, Go ahead,Cargotec Corporation,Royal Mail,Halfords (bought a tiny stake this week)

Chems

Evonik Industries,Solway SA

Steel

SSAB Svenskt Stal AB Ser B NPV 

I'm struggling to find some of the more exotic ones on the list.  Do you have tickers and markets please.

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Democorruptcy

Have we had the Surplus Energy Economics latest?

Quote

 

The most pertinent connection to be made here is that, just as prior growth in prosperity has driven growth in complexity, the deterioration in prosperity is going to have the opposite effect, initiating a trend towards a reduction in complexity. One term for this is ‘simplification of the supply chain’. Another, with applications far beyond commerce, is de-layering.

This has two stark and immediate implications for businesses.

First, a business which can front-run de-layering, simplifying its operations before others do so, can gain a significant competitive advantage.

Second, if a business is one that might get de-layered, it would be a good idea to get into a different business.

https://surplusenergyeconomics.wordpress.com/2020/01/13/162-the-business-of-de-growth/

 

 

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Democorruptcy
4 minutes ago, TheCountOfNowhere said:

Another car one.... As people are forced back into old bangers..... They'll need breakdown cover.... The aa? 

What if instead of being 'forced back into old bangers' it's 'forced to walk, cycle or catch a bus'?

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10 hours ago, sancho panza said:

http://theeconomiccollapseblog.com/archives/12-signs-that-the-economy-is-seriously-slowing-down-as-2020-begins

The following are 12 signs that the economy is seriously slowing down as 2020 begins…

#1 The U.S. Manufacturing Purchasing Managers Index has been in contraction for 5 months in a row, and it is now at the lowest level we have seen since June 2009.

#2 Last month, manufacturing employment fell at the fastest pace we have seen since August 2009.

#3 Last month, new manufacturing orders fell at the fastest pace we have seen since April 2009.

#4 Chicago PMI has been contracting for 4 months in a row.

#5 European manufacturing PMI declined again in December.

#6 Borden Dairy, one of the largest dairy companies in the entire world, declared bankruptcy just a few days ago.

#7 Earlier this month, the Baltic Dry Index had its worst day in 6 years.

#8 Overall, the decline in the Baltic Dry Index this month is the largest that we have seen since 2008.

#9 The auto recession just continues to get even worse.  Thanks to the substantial slowdown we witnessed during the second half of 2019, the total number of cars and trucks sold in the United States during all of 2019 was actually below the level that we witnessed back in 2000 when our population was significantly smaller.

#10 Used heavy duty truck prices have fallen “as much as 50%“.

#11 Macy’s just announced that they will be closing 28 stores.

#12 To start the year, AT&T is laying off thousands of workers, and according to Robert Reich those being laid off “will have to train their foreign replacements“.

But......but......greatest economy in the history of economies?

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Democorruptcy
10 hours ago, sancho panza said:

Check out the stat on UK credit card debt...............up four times in 7 years to £225bn...........what could go worng running that up on the back of endless fiscal deficits.

 

Sorry to not let some fake Wolf doom slip by but that is bollocks. He says:

Quote

"Credit card balances have multiplied by a factor of four in seven years, from the post-Financial Crisis low of £55 billion in 2012 to £225 billion in November 2019. UK households, among the most solvent a generation ago, are now among the most indebted. Retailers and economists cherish that. "

In his own "credit card balances" link it contradicts the way he has spun it

Quote

 

Despite the first net repayment in credit card borrowing for years, the Bank said that consumers still have around £72.1bn in credit card debts outstanding, significantly higher than in recent years. Borrowing has gradually been rising since 2012, when credit card debt hit a post-financial crisis low of around £55bn. Overall consumer borrowing remains above pre-financial crisis levels at more than £225bn.

https://www.theguardian.com/money/2020/jan/03/uk-credit-card-debts-fall-for-first-time-since-2013

 

Credit card balances are not the same as total unsecured debt. Unsecured debt includes other things. Credit card balances (or outstanding debt) has only risen from £55bn to £72bn

 

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21 hours ago, TheCountOfNowhere said:

Are they in debt? 

 

Might be a buy on Monday 

Not sure i see a long term future for Halfords.  Shorter term maybe, but don’t see how they survive the change that’s taking place in the auto industry.  We’re not going to enter an era of people running cars longer, they’re just not going to own cars.

The future for Auto’s isn’t the same as the past.  The future is ride and lift sharing. Large corps, small local companies, councils and even employers for their employees.  There may be a place for large scale public transport, but I’m not even sure about that longer term. Without government subsidy I don’t see how they’ll be able to compete. As every large Auto wants to stop being a manufacturer and become a mobility company.  Competition for your journey will get intense.  

We will see mainstream fully autonomous for freight transportation.  Depot to depot, or depot to distribution hub.  Passenger vehicle will be semi-autonomous, with the drivers there to manage the transition between the driven areas and the full autonomous main highways, as well as manage the customers.   And most peoples journey will be as customers not drivers.  

20 years, ICE ownership will be for the wealthy, niche and hobbyist.  Electric vehicles will become increasingly modular and people will be swapping out modules not replacing components.  

 

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On 18/01/2020 at 12:18, Harley said:

Any questions on setting up and living such a rural (and increasingly self sufficient) lifestyle.......!!!!!!

PS:  But just between the two (three?) of us!!!!!

Well, I’m a few years off.  So for the moment I have console myself with turning my garden into full food production.  A summer project, but still learning for if I ever move to something a bit more goodlife.  
 

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TheCountOfNowhere
1 hour ago, Democorruptcy said:

What if instead of being 'forced back into old bangers' it's 'forced to walk, cycle or catch a bus'?

The government has created a society that, for 90 %, living without a car is untenable. 

 

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My credit card is maxed out. Mainly due to two terms of unemployment in 2019.

 

it was a bad year.

 

im trying to pay it off as quickly as possible before shit hits the fan.

 

 

any one know of any decent weekend work one can do ?

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TheCountOfNowhere
43 minutes ago, No One said:

My credit card is maxed out. Mainly due to two terms of unemployment in 2019.

 

it was a bad year.

 

im trying to pay it off as quickly as possible before shit hits the fan.

 

 

any one know of any decent weekend work one can do ?

Have you seen any of those police programs? 

 

They're so over stretch if you burlge some houses in the country side on a Saturday night 10 miles or so from a large town then they won't get there till Sunday afternoon by such time you'll have sold it all down the local pub. 

 

This is not advice 

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1 hour ago, TheCountOfNowhere said:

Have you seen any of those police programs? 

 

They're so over stretch if you burlge some houses in the country side on a Saturday night 10 miles or so from a large town then they won't get there till Sunday afternoon by such time you'll have sold it all down the local pub. 

 

This is not advice 

Speaking from experience ?

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20 minutes ago, janch said:

palladium was mentioned a few pages back and here is an article about the recent price surge from the So-Called BBC: https://www.bbc.co.uk/news/business-51171391

Makes me wonder about phys gold.

Apparently, this is an example of what happens to price when a physical thing is needed but there isn't much about.

Only thing keeping gold down is the 62,000 paper contracts per ounce because nobody wants it yet. The derivative pricing the asset. Barmy.

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5 hours ago, TheCountOfNowhere said:

Another car one.... As people are forced back into old bangers..... They'll need breakdown cover.... The aa? 

I don't know tbh, a lot of these breakdown firms now state no car older than 10 years. cheeky sods

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OK so let's start with a technical look at Halfords.  But first the caveats: I'm only looking at one technical aspect, momentum as represented by the Stochastic and the MACD (many other indicators available).  This is no silver bullet, things can go up further even when overbought and down further even when oversold.  There can also be false breakouts.  Then there is the time period we're looking at as we usually have different pictures for different timing periods.  This is a commentary, for discussion and educational purposes only.  At best, it may provide a catalyst for further thought and study.  It is absolutely not a suggestion to buy, hold, or sell or any other action.  I accept no responsibility and your personal decisions need to consider many more factors than this personal interpretation which follows (a slither of dubious data!), including the opinions of those who could quite reasonably disagree.

The monthly chart.  The stock price is at an all time low, as is the MACD and (almost) the Stochastic. A Stochastic of below 20 (as here) is usually interpreted as oversold.  The MACD is very negative.  Both indicators are however now pointing upwards while the price is heading back down (but a double bottom?).  This could be the start of a genuine breakout in price or a false breakout like those starting in March 2011.  It did eventually breakout back then but in July 2012!  The current indicators could even turn around and head even lower!  People often wait for a better risk:reward when the Stochastic breaks above 20 and (optionally, but often a little further thereafter) for the MACD lines to cross (a positive histogram).

Halfords.thumb.PNG.f9cbbdf33ea143855ad13bcc1daa87af.PNG

The weekly chart.  An interesting chart as we had a divergence between the price and the two technical indicators since say Aug 2019 (arguably even earlier).  Price was falling but the technical indicators were strengthening, giving a buy signal in Nov 2019.  There was then a 12% price increase which then collapsed with the Stochastic topping out in the overbought zone at just over 80%.  The Stochastic is still heading down towards the oversold area so could pull the price down with it, although the price is currently rising.  The MACD has not yet crossed to the downside so things are not that clear.  The technicals could turn around here and support the rising price, or could pull the price down. 

Halfords.thumb.PNG.5e0627beb50f665f14a8718c8804a7fe.PNG

Overall:  Not a very clear picture at the moment on either chart.  Its price is historically cheap, but it could get cheaper still.  Or it may be close to bottoming for a rise of unknown strength.  A little bit more time will tell (at the cost of a bit of lost gain if indeed it has bottomed but vice versa if not!).  But then this is just one consideration.  Other indicators, fundamental data, etc may paint a different picture.  Certainly one to watch given the some potentially bullish observations on both charts.

Don't worry, I won't post so much on the other stocks.  I'm just feeling my way (been off for a while) and providing an example of what I'm doing.  I need to come up with a more summary scoring system.

 

 

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19 hours ago, Harley said:

As everything, get the service manuals off the web!

Get an OBD bluetooth reader, you can get pretty good ones for around £20-£30 and a lot of the apps will let you get fault codes with a free version. If you have a ford then get one with a HS/MS switch and spend a few quid on the Forscan app.

Owners forums are a great source of anyformation on just about anything.

Regular servicing has never been easier.

Some jobs are still tricky without a car lift. My days of jacking up cars on axle stands and chaging gearboxes are long gone.

Avoid diesels with DPFs.

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13 hours ago, Democorruptcy said:

Have we had the Surplus Energy Economics latest?

 

Havent seen that before DM.Very well written.Superb even.

 

'The reality of deteriorating prosperity

A necessary precondition for the formulation of effective responses is the recognition of where we really are, and there are two observations with which this needs to start.

The first is the ending and reversal of meaningful “growth” in prosperity. Any businessman or -woman who believes that economic “growth” is continuing ‘as usual’, or can somehow be restored, needs to reframe his or her interpretation radically. Indeed, it’s been well over a decade (and, in many instances, nearer two decades) since the advanced economies of the West last achieved genuine growth in economic prosperity.

For illustration, the deterioration in average personal prosperity in four Western countries, both before and after tax, is set out in the following charts. Examination of the trend in post-tax (“discretionary”) prosperity in France, in particular, does much to explain widespread popular discontent.

Worse still, from a business perspective, a similar downturn is now starting in the hitherto fast-growing EM economies, including China, India and Brazil.

#162 business 01

Sales of a broadening number of product categories, from cars and smartphones to chips and components, have turned down. Debt continues to soar (which is hardly surprising in a situation in which people are being paid to borrow), and questions are starting to be asked about credit ratings, debt servicing capability and the possible onset of ‘credit exhaustion’ (the point at which borrowers no longer take on any more credit, however cheap it may be).

 

Understanding value

The second reality requiring recognition is that the prices of capital assets, including stocks, bonds and property, have risen to levels that are both (a) wholly unrelated to fundamental value, and (b) incapable of being sustained, under present or conceivable economic conditions.

 

The most pertinent connection to be made here is that, just as prior growth in prosperity has driven growth in complexity, the deterioration in prosperity is going to have the opposite effect, initiating a trend towards a reduction in complexity. One term for this is ‘simplification of the supply chain’. Another, with applications far beyond commerce, is de-layering.

This has two stark and immediate implications for businesses.

First, a business which can front-run de-layering, simplifying its operations before others do so, can gain a significant competitive advantage.

Second, if a business is one that might get de-layered, it would be a good idea to get into a different business.

 

First awareness

In this discussion we have established three critical understandings:

– Prosperity is deteriorating, for reasons which mainstream interpretation has yet either to recognise or to understand.

– Attempts to ‘fix’ this physical reality by means of financial gimmickry have resulted only in increases in risk, many of them associated with the over-pricing of assets.

– As prosperity decreases, the economy will de-complexify.

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13 hours ago, Democorruptcy said:

Sorry to not let some fake Wolf doom slip by but that is bollocks. He says:

In his own "credit card balances" link it contradicts the way he has spun it

Credit card balances are not the same as total unsecured debt. Unsecured debt includes other things. Credit card balances (or outstanding debt) has only risen from £55bn to £72bn

 

Point taken DM.AS I read it I thought £225bn sounded rather large but my faith in ye old Wolf knows no limits. I faithfully reprinted it without a smidgen of circumcision.

Thanks for correcting my error.

I preusme Wolf got confussed with revolving debt/credit card debt.

No excuses for me though.Tried googling for the data but foudn some o/t items of interest.Looks like student loans have been the main driver of financial debt growth

 

https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/householddebtingreatbritain/april2016tomarch2018

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image.png.25f66a0f5a63d80bb5df08f5824568d7.png

image.png.11629eae91b56c54199d2483895aedd4.png

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@sancho panza   ,love that term in the article, "de-complexify".I keep saying you want to be at the basic stage in a reflation,but iv never really thought of it in the terms of de-complexify,but that really does explain the same thing.If your selling the potash you dont give a toss how Supermarkets set up their supply chains or who goes under.A lot of what we see from a macro point on a reflation is money pulling back from say a factory in China,to  someone laying fibre cables in Kendal.Iv never looked at that as anything other than a macro situation based on political need and the point in a cycle,but actually that as well is a "de-complexify" situation.Really fascinating way to look at it.Im going to try to think of some way to put this in to cross market work,maybe a score on complexity,lower the complexity,higher the score.

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