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

[Long-game]

On 15/02/2020 at 14:12, DurhamBorn said:

Yep,exactly what i paid £200 for decent sized window each.The guys charged me about £200 each guy to fit them.They were semi retired window fitters i knew.They did one job a week so to keep under VAT threshold etc.They did my daughters as well a few months ago.Charged £300 each to fit those because she had a curved bay as well and a bit awkward,cracking job though.One of them is only doing odd windows now though not a full house,he 68 and said he cant be arsed up ladders all day anymore.

Good to get the local fitters. That's what I did with my gas boiler. An old fella who was brilliant and charged much less. 

[UnconventionalWisdom]

They are prepping the world for mad money printing.

Link to article here

On the heels of reports that U.S. household debt hit $14 trillion for the first time in history, Federal Reserve Chair Jerome Powell told lawmakers Wednesday that the central bank would use quantitative easing as the primary weapon to combat the next recession. 

With interest rates hovering around 1.50% and 1.74%, quantitative easing—injecting more cash into the economy through buying back government bonds—is the best solution available, said Powell. 

"We will have less room to cut [rates,]" Powell told the Senate Banking Committee. "That means it is much more likely that we will have to turn to the tools that we used in the financial crisis when we hit the lower bound."

[Loki]

Apologies for thread sidetrack, but any ideas what the lifespan of a hydrogen fuel cell will be compared to ICE (Miles) and batteries (Hours/fills/degradation) 

1 minute ago, UnconventionalWisdom said:

They are prepping the world for mad money printing.

Link to article here

On the heels of reports that U.S. household debt hit $14 trillion for the first time in history, Federal Reserve Chair Jerome Powell told lawmakers Wednesday that the central bank would use quantitative easing as the primary weapon to combat the next recession. 

With interest rates hovering around 1.50% and 1.74%, quantitative easing—injecting more cash into the economy through buying back government bonds—is the best solution available, said Powell. 

"We will have less room to cut [rates,]" Powell told the Senate Banking Committee. "That means it is much more likely that we will have to turn to the tools that we used in the financial crisis when we hit the lower bound."

This is the most boring rollercoaster ride ever 

[DurhamBorn]

32 minutes ago, Long-game said:

Good to get the local fitters. That's what I did with my gas boiler. An old fella who was brilliant and charged much less. 

I got a new combi in and all new radiators for £2300 .Those plastic pipes as well splitting off from the main copper ones from the boiler so if any go i can change myself.

[MrXxxx]

1 hour ago, DurhamBorn said:

The best advice is to research what happened to stocks ,inflation and rates between say 74 onward to 82.There are rare cycles where inflation goes so quick and high that bonds and most stocks fall.

Mmmm, bit young to be interested in finance in his period...I had just started college so was more interested in `booze and shagging` rather than `bonds and stocks` :-) :-) :-)

[DurhamBorn]

32 minutes ago, MrXxxx said:

Mmmm, bit young to be interested in finance in his period...I had just started college so was more interested in `booze and shagging` rather than `bonds and stocks` :-) :-) :-)

 

[Talking Monkey]

14 hours ago, MrXxxx said:

Ok, doing a bit of reading at the moment and this got me thinking.

So assuming we are just approaching the cycle crest (as suggested by disinflation), and just about to go over the top and slide down into a recession/deflation phase [please correct if I have got this wrong], then now (and until we hit the bottom) we should be buying non-cyclical income/divi payers?...then once at the bottom we should buy the unloved (and so cheap) cyclical growth stocks ready for their resurgence on the increasing inflation phase of the cycle?...correct?

Non Cyclical income/divi players- Are these energy stocks (oil etc) - What other industries would make  up this group

Cyclical growth stocks - Would these be telcos, transport, oil services - 

 

[MrXxxx]

10 hours ago, UnconventionalWisdom said:

I've been dealing with a lot lately so havent kept up with this thread for a while. Caught up by reading 10 pages a day for the past few days- @Clueless Imbecile, about 10 pages back you asked about stock allocation based on age. DB's post above shows the danger of following rule-of-thumb investment rules. 

The problem now with the dis-inflation cycle lasting decades, people have made money on passive investing where firms like vanguard tell everyone to do this. This is fine with an ever increasing economy, but when things go against the plan, everyone has their money in the same investments. When there are auto-triggers for sell-points, there is potentially a rush for the exits, which will lead to further exits. 

They paved over the cracks of a corrupt financial system by printing $4.5trillion since 08, they are now all-in and I think a lot of people following the advice from the financial section of the times, guardian or telegraph are in for a big surprise. 

UW, I can see your argument and agreed with passive trackers this would be the case IF they held the majority of the market, but they don't. In addition, if they did the financial providers would probably find a way around the dilemma you state such as the Dark market as used by high volume trades to protect price.

[MrXxxx]

8 hours ago, DurhamBorn said:

 

What's is it they say "A picture is worth a 1000 words"?...thanks.

[MrXxxx]

8 hours ago, Talking Monkey said:

Non Cyclical income/divi players- Are these energy stocks (oil etc) - What other industries would make  up this group

Cyclical growth stocks - Would these be telcos, transport, oil services - 

 

Hi TM,

I am assuming large/established essentials for the former I.e energy suppliers, transportation, essential consumers, and large/medium optional consumers, financial, and telcos for the latter BUT being a novice I am the last person to ask!...I am sure one of our experts will be along in a moment to give you a more definitive answer :-)

[DurhamBorn]

17 minutes ago, MrXxxx said:

What's is it they say "A picture is worth a 1000 words"?...thanks.

The thing to remember is negative over 10 years.Take on top of that someone in a draw down pension taking 5% a year and 2% fees.You can see why an inflation cycle with someone invested in the "safe" set up actually ends up in real trouble.They could end up with 6 years pension left at the end of the decade if they are lucky,and of course such is the capital hit (well over half) that they dont recover even if/when the cycle turns.

However an allocation into inflation loving assets (lets say some silver and oil) in the above portfolio would probably protect it as worst.

So really the question is what allocation to those areas and what companies.It could be simply a case of running a 60/40 portfolio for 60% of wealth and 40% spread across inflation loving areas.

Im looking at this on the basis of pensions/retiring,not being in my 20s and 30s building capital,because thats where i am in my life.Im not interested in making much more capital,im interested in my capital slightly outperforming inflation and providing and taking a natural yield.For others the approach might be different depending on where in life.

[UnconventionalWisdom]

22 minutes ago, MrXxxx said:

UW, I can see your argument and agreed with passive trackers this would be the case IF they held the majority of the market, but they don't. In addition, if they did the financial providers would probably find a way around the dilemma you state such as the Dark market as used by high volume trades to protect price.

Hey MrXxxx,

Must admit I'm not familiar with the dark market but I don't trust that measures like circuit breakers to save a market. 

It's prob worth the discussion here on why passive investing won't work in an inflationary environment. When I started investing a few years back, i went straight for them as it's the easiest to do and it is geared for people who know nothing about investing. But the more I thought about it the more I thought, "hang on, if everyone is doing this and then not bothering to learn anything- it's speculation where they control the flow of money". Add in the pension funds doing the same and things get dangerous. 

Quick Google on the main funds market share and there's a FT article on the influence of the big three passive fund companies- BlackRock, vanguard and state street. Google link so I hope it works here 

The global index fund industry has grown fivefold over the past decade to $11.4tn by the end of November last year, according to data compiled for the FT by the Investment Company Institute. BlackRock estimated in 2017 that there was another $6.8tn in index-tracking strategies managed internally by sovereign wealth funds, endowments and pension plans. Assuming the same growth rate since then, there are now roughly $20tn of investments that strive only to mimic an underlying index.

Regulators, politicians, academics and activists have often focused their attention on the influence of the biggest passive investment managers, BlackRock, Vanguard and State Street. But when it comes to their index funds, in practice they outsource their investment decisions to another “Big Three”: the dominant index providers MSCI, S&P Dow Jones and FTSE Russell. 

A new paper entitled “Steering capital: the growing private authority of index providers in the age of passive asset management”, by Johannes Petry, Jan Fichtner and Eelke Heemskerk at the universities of Warwick and Amsterdam, spells out why this is such a big deal, saying: “We argue that these index providers have become actors that exercise growing private authority as they steer investments through the indices they create and maintain.” 

It seems to me that they have too much influence and I fear a mad panic will destroy them. 

[Talking Monkey]

2 hours ago, MrXxxx said:

Hi TM,

I am assuming large/established essentials for the former I.e energy suppliers, transportation, essential consumers, and large/medium optional consumers, financial, and telcos for the latter BUT being a novice I am the last person to ask!...I am sure one of our experts will be along in a moment to give you a more definitive answer :-)

Thanks MrX, much appreciated

[BearyBear]

Wow, it's getting serious in HK

https://www.hongkongfp.com/2020/02/17/armed-gang-steals-toilet-rolls-panic-buying-hit-hong-kong/

[sancho panza]

On 15/02/2020 at 05:22, Castlevania said:

Banks mark loans on an accrual basis. They don’t present value. If they did all the ones balls deep in buy to let would probably be insolvent.

Thanks for that CV.That's what I was trying to say in a much more plebby way.I'll read up some more on the detail so I can be a little more educated than jsut saying mark to market/mark to model.There was a great thread on ToS re Basel/reserve ratios/risk weighting etc.I'll see if I can dig it out.

Also worth noting that some of the abnks base their risk weighting on their own default data where they have a broad enough sample-IRB- whereas the smaller players use Standardized approach.Obviously prone to being gamed.

ref BTL  a while back I posted a pretty decent summary of the state of the private rental market with some -to me- surprsing stats .Some below.Key point is that whislt I suspect a lot of the laons are underwater,the Landlords who hold them have (possibly) unknowingly set up their own residence as collateral.

 

I'm going to set up a separate bank accounting thread CV,feel free to add any links that might be worth reaidng.

 

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/775002/EPLS_main_report.pdf

Most landlords operate as private individuals rather than as part of a company or organisation.94% of landlords rent property as an individual, 4% as part of a company and 2% as part of some other organisation.

While almost half of landlords own just one property, half of privaterented sector tenancies are let by the 17% of landlords with five or more properties. 45% of landlords have just one rental property. This represents 21% of the private rented sector9. A further 38% own between two and four properties (representing 31% of the sector). The remaining 17% of landlords own five or more properties, representing 48% of the private rented sector

 

 

edit to add a psot from the basel thread

https://www.housepricecrash.co.uk/forum/index.php?/topic/208169-bcbs-risk-weights/page/10/

SA stands for "standardised approach".

Banks can use the risk weights set out under this approach to calculate how much capital they have to hold, or they can use an internal ratings based (IRB) approach based on their own models. The higher the risk weight the more capital the bank has to hold against that particular loan, and therefore, effectively, the more expensive it is for them to lend.

Under Basel III risk weights will vary by loan-to-value (LTV) which means, amongst other things, that the amount of capital a bank has to hold against a repayment mortgage will go down as the principal is paid off.

From 1st January 2022 this is what the risk weights for BTL will look like for each LTV band under the standardised approach (currently, IIRC, there is a blanket RW of 35%):

Smaller banks tend to use the standardised approach, hence the challenger banks lending into the riskier end of the BTL market are likely to be using this approach, and so will need to hold more capital against their BTL loan books.

Larger banks tend to use the internal ratings based approach. One of the interesting things that Basel III introduces is an output floor based on the standardised approach, which limits how much IRB can differ from SA in terms of capital requirements. This will be phased in from 1st January 2022, and will start by requiring that the amount of capital held based on an IRB approach will be no less than 50% of the capital that would have been required had the standardised approach been used. This will rise to 72.5% by 1st January 2027.

So in the table below the row in bold is the BTLers' LTV, the row in red is the risk weight that a bank taking the standardised approach would have to apply to that loan, and the rows underneath are the minimum risk weights that a bank using the internal ratings based approach will have to apply during each of the years that the output floor is being phased in:

The 'Residential mortgage exposures by major portfolio' table from Lloyds has an '2014 Average risk weight %' column so as an example we can see that in 2014 Lloyds's internal ratings based approach resulted, at the time, in an average risk weight for their UK buy-to-let portfolio of just 9.33%.

This is all to the best of my knowledge so if anyone else wants to chip in?

 

[MrXxxx]

12 hours ago, DurhamBorn said:

really the question is what allocation to those areas and what companies.It could be simply a case of running a 60/40 portfolio for 60% of wealth and 40% spread across inflation loving areas.

Im looking at this on the basis of pensions/retiring,not being in my 20s and 30s building capital,because thats where i am in my life.Im not interested in making much more capital,im interested in my capital slightly outperforming inflation and providing and taking a natural yield.For others the approach might be different depending on where in life.

So I suppose here it would be as for the normal advice, big/safe companies with a greater % (say 60%) towards the inflation loving stocks for the retiree, this to protect their capital?...and the opposite for the youngster to get growth, with the proviso that if some their smaller high wealth options were to fail they have the years to recover?

[sancho panza]

 

 

On 14/02/2020 at 13:04, DurhamBorn said:

Markets always hurt the most people possible.The fact "everyone" will pay whatever for a house shows who will be hurt hard.

As for a HPC, its ongoing.My son is looking at a house tomorrow,3 bed semi,built early 2000s sold for £139k then,its up for £110k.Add the inflation from 2002 ,18 years inflation + £29k nominal down thats a hell of a fall.It it has kept up with inflation it would be £227,827.Its down by over 50%.Now i dont expect that house to go up in price,i expect it to maybe hold steady and fall against inflation,maybe another inflation adjusted 50% over the cycle.However my son has £8k in silver.He can fix at 2.14% for 5 years with 10% over payments.Him and his partner will overpay by around that each year so as rates rise at the end of the 5 year fix they would owe half.If rates are 7% by then silver will likely of 400% up,he will sell the silver and clear the mortgage.Is so he will be mortgage free on a decent 3 bed semi at 28 years old.

The fact nobody cares about shares is true,its always like that just before that asset class delivers the goods.

Its like energy now.Everybody hates it because we are going green.To get green demand for other energy will go up by a lot,just after nobody has invested.Oil will be $250+ by 2027/28.

 

 

How far south does that HPC stretch DB?If that was the position around these parts of the east mids I'd consider buying somewhere.

[Bobthebuilder]

25 minutes ago, sancho panza said:

This is all to the best of my knowledge so if anyone else wants to chip in?

spygirls area me thinks.

[sancho panza]

 

On 14/02/2020 at 21:07, DurhamBorn said:

Funny enough iv been thinking long and hard over the service companies and the mid caps for that reason.I think it will be best to sell them at some point during the next cycle and no buy back.I think gas has a long term future though,at least 40 years.

I will have much more in the big oilies,because they suit my profile and age,but a scattering of mid caps that might give us some 10 baggers.

Was looking a few XOP consituents today that are 90% + off peak,haven't researched them but for the survivoirs there will likely be some ten baggers

On 15/02/2020 at 00:02, Barnsey said:

Must admit we’re now looking at increasingly cheaper houses, with the aim to pay off in 7-10 years. Having that certainty and a roof over your head well before retirement age is perhaps much better than being a slave to a dream home.

The only thing that we must consider as a potential spanner in the works for mortgage  rates heading skyward is the return of yield curve control that the Fed and others are looking to implement due to success in Japan:

https://www.google.co.uk/amp/s/www.wsj.com/amp/articles/fed-officials-weigh-new-recession-fighting-tool-capping-treasury-yields-11580050800

 

As per DB fixing in long term mortgages at theese rates makes sensde but as per your previous comments barnsey,it needs to be with someone who'll be around in ten years.

On 15/02/2020 at 17:39, JMD said:

 

For example, I'm trying to come up with a selection of telco's that have strategic assets. BT is an obvious first choice because it 'owns the exchanges'. But the mobiles are harder to rate. I suppose identifying ones with growing future income streams is one way. But i'm finding it difficult to Does anyone have different ideas or thoughts?   

 

keep us posted please.I'd be interested in that.

On 15/02/2020 at 17:55, JMD said:

Good points. I've read similar things before and find that type of macro analysis - in terms of investment decisions - fascinating.

Personally, I think China will go the way of the old USSR. My post yesterday with youtube link to documentary, contains a segment showing how the citizens of the USSR knew they were living in an artifice (ial) state, one that was deceiving them. The USSR had a relatively peaceful breakup, hope China can do same.     

Coronavirus could be there Chernobyl.Fascinating show on netflix if you havent seen it.

On 15/02/2020 at 18:45, Democorruptcy said:

Re stock picking I read a bit about a study this week that the USA stock market (Russell 3000) rose by 900% between 1983 to 2006. Just 25% of the stocks accounted for all the profits. 64% of stocks underperformed the index, 39% were down in absolute terms, 19% lost 75% or more of their value. Even in a bull market there were far more losers than winners.

Another study showed that of the stocks listed since 1926 the majority of them had a life time buy and hold performance that is less than one month of Treasuries. In terms of dollar wealth creation, the best performing 4% of listed companies explain the net gain of the entire US stock market since 1926.

Sobering thoughts stock pickers?

 

The thought that risies form thsi for me si that you could have really leveraged those indices if you'd ridden the momo sectors and left the duds alone.Perosnaly,I'm not a stock picker but a consistent 'pray n sprayer' when it comes to sectors and countries.

[MrXxxx]

12 hours ago, UnconventionalWisdom said:

Hey MrXxxx,

Must admit I'm not familiar with the dark market but I don't trust that measures like circuit breakers to save a market. 

It's prob worth the discussion here on why passive investing won't work in an inflationary environment. When I started investing a few years back, i went straight for them as it's the easiest to do and it is geared for people who know nothing about investing. But the more I thought about it the more I thought, "hang on, if everyone is doing this and then not bothering to learn anything- it's speculation where they control the flow of money". Add in the pension funds doing the same and things get dangerous. 

Quick Google on the main funds market share and there's a FT article on the influence of the big three passive fund companies- BlackRock, vanguard and state street. Google link so I hope it works here 

The global index fund industry has grown fivefold over the past decade to $11.4tn by the end of November last year, according to data compiled for the FT by the Investment Company Institute. BlackRock estimated in 2017 that there was another $6.8tn in index-tracking strategies managed internally by sovereign wealth funds, endowments and pension plans. Assuming the same growth rate since then, there are now roughly $20tn of investments that strive only to mimic an underlying index.

Regulators, politicians, academics and activists have often focused their attention on the influence of the biggest passive investment managers, BlackRock, Vanguard and State Street. But when it comes to their index funds, in practice they outsource their investment decisions to another “Big Three”: the dominant index providers MSCI, S&P Dow Jones and FTSE Russell. 

A new paper entitled “Steering capital: the growing private authority of index providers in the age of passive asset management”, by Johannes Petry, Jan Fichtner and Eelke Heemskerk at the universities of Warwick and Amsterdam, spells out why this is such a big deal, saying: “We argue that these index providers have become actors that exercise growing private authority as they steer investments through the indices they create and maintain.” 

It seems to me that they have too much influence and I fear a mad panic will destroy them. 

I am not convinced either way at the moment with the reporting on anti-passive index approach `tarring all with the same brush` and/or being selective of the facts that they report. In addition, when the S&P SPIVA reports show only 41% of active fund managers beating the indices over a year, and this dropping to a max of 22% over 10 years (and these are the Pros), it suggests active may not be safer and may even have a greater risk!...

...but as always when we quote these success/failure rates for/against a particular approach it is always from a position of `looking in the rear view mirror`, the `road ahead` could be completely different, and so give the opposite results.

[sancho panza]

#stoopidisasstoopiddoes #Deflationhurts #Fedneedsarethink

https://notayesmanseconomics.wordpress.com/2020/02/17/japan-sees-quite-a-gdp-contraction-in-spite-of-the-bank-of-japan-buying-8-of-the-equity-market/

Japan sees quite a GDP contraction in spite of the Bank of Japan buying 8% of the equity market

Posted on February 17, 2020

Overnight the agenda for today was set by news out of the land of the rising sun or Nihon. Oh and I do not mean the effort to reproduce the plot line of the film Alien ( Gaijin) for those poor passengers on that quarantined cruise ship. It was this reported by the Asahi Shimbun.

Gross domestic product declined by a seasonally adjusted 1.6 percent in the quarter from the previous three months, or an annualized 6.3 percent, the Cabinet Office figures showed.

The contraction of 6.3 percent was far worse than expectations of many private-sector economists, who predicted a shrinkage of 4 percent or so.

Just to clarify the quarterly fall was 1.6% or using the Japanese style 6.3% in annualised terms. What they do not tell us is that this means that the Japanese economy was 0.4% smaller at the end of 2019 than it was at the end of 2018. So quite a reverse on the previous trend in 2019 which was for the annual rate of growth to pock up.

The Cause

Let me take you back to October 7th last year.

After twice being postponed by the administration of Prime Minister Shinzo Abe, the consumption tax on Tuesday will rise to 10 percent from 8 percent, with the government maintaining that the increased burden on consumers is essential to boost social welfare programs and reduce the swelling national debt. ( The Japan Times )

I pointed out back then that I feared what the impact of this would be.

This is an odd move when we note the current malaise in the world economy which just gets worse as we note the fact that the Pacific region in particular is suffering. We looked at one facet of this last week as Australia cut interest-rates for the third time since the beginning of the summer.

As you can see this was a risky move and it came with something of an official denial of the economic impact.

 about a quarter of the ¥8 trillion cost of the 2014 hike, according to the government and the Bank of Japan.

The 2014 rise in the Consumption Tax ( in rough terms the equivalent of VAT in the UK and Europe) had hit the Japanese economy hard, so the official claim of that the new impact would be a quarter was something I doubted. Now let us return to the Asahi Shimbun this morning.

Japan’s economy shrank in the October-December period for the first time in five quarters, as the sales tax hike and natural disasters pummeled personal consumption, according to preliminary figures released on Feb. 17.

The exact numbers are below.

Personal consumption, which accounts for more than half of Japan’s GDP, grew by 0.5 percent in the July-September period.

But the figure plunged to minus 2.9 percent for the three months from October, when the government raised the consumption tax rate to 10 percent from 8 percent.

We had previously looked at the boost to consumption before the tax rise as electrical appliances in particular were purchased. This will have flattered the economic data for the third quarter of last year and raised the GDP growth rate. But as you can see the party has had quite a hangover. On its own this would have led to a 2.2% decline in quarterly GDP.

The spinning has continued apace.

Yasutoshi Nishimura, minister in charge of economic revitalization, gave a positive outlook for personal consumption in a statement released on Feb. 17.

“The margin of decline in personal consumption is likely to shrink,” he said.

As John Lennon points out in the song Getting Better.

It can’t get no worse

As ever there is a familiar scapegoat which is the weather.

Destructive typhoons that hit eastern Japan and the warmer winter also fueled the slowdown in personal spending, such as purchases of winter clothes.

Although as @Priapus has pointed out there was an impact on the Rugby World Cup and the Japanese Grand Prix.

Investment and Exports

These will be on people’s minds as we try to look forwards. According to the Asahi Shimbun the situation for investment is also poor.

Investment in equipment by businesses, for example, shrank by 3.7 percent, a sharp decline from a rise of 0.5 percent in the preceding quarter, while housing investment tumbled 3.7 percent from an increase of 1.2 percent.

New housing starts have also been waning since the tax hike.

Many companies’ business performances are deteriorating, particularly in the manufacturing sector.

The business investment fall was presumably in response to the trade war and the deteriorating conditions in the Pacific economy we looked at in the latter part of 2019 and of course predates the Corona Virus. By contrast the Bank of Japan like all central banks will be more concerned about the housing market.

Switching to trade itself the position appears brighter.

In contrast, external demand pushed up GDP by 0.5 percentage point.

But in fact this was due to imports falling by 2.6% so a negative and exports fell too albeit by a mere 0.1%. That pattern was repeated for the annual comparison as exports were 2.2% lower than a year before and imports 4.3% lower. It is one of the quirks of the way GDP is calculated that a fall in imports larger than a fall in exports boosts GDP in this instance by 0.4%. Thus the annual comparison would have been -0.8% without it.

Comment

Sometimes the numbers are eloquent in themselves. If we look at the pattern for private consumption in Japan we see that it fell from 306.2 trillion Yen to 291.6 trillion in the first half of 2014 as the first tax rise hit. Well on the same seasonally adjusted basis and 2011 basis it was 294 trillion Yen in the last quarter of 2019. If we allow for the fact that 2014 saw a tax based boost then decline then consumption in 2019 had barely exceeded what it was before the first tax rise before being knocked on the head again. Or if you prefer it has been groundhog day for consumption in Japan since 2013. That is awkward on two counts. Firstly the Japanese trade surplus was one of the economic world’s imbalances pre credit crunch and expanding consumption so that it imported more was the positive way out of it. Instead we are doing the reverse. Also one of the “lost decade” issues for Japan was weak consumption growth which has just got weaker.

This leaves the Japanese establishment in quite a pickle. The government has already announced one stimulus programme and is suggesting it may begin another. The catch is that you are then throwing away the gains to the fiscal position from the Consumption Tax rise. This poses a challenge to the whole Abenomics programme which intended to improve the fiscal position by fiscal stimulus leading to economic growth. I am sure you have spotted the problem here.

Next comes the Bank of Japan which may want to respond but how? For newer readers it has already introduced negative interest-rates ( -0.1%) and bought Japanese Government Bonds like it is a powered up Pac-Man to quote the Kaiser Chiefs, But the extent of its monetary expansionism is best highlighted by this from Etf Stream earlier.

According to the BoJ funds flow report for Q3 2019, the bank now owns some 8% of the entire Japanese equity market, mostly through the current ETF-buying programme.

Hence the nickname of The Tokyo Whale.They think the rate of buying has slowed but I think that’s an illusion because it buys on down days and as The Donald so regularly tweets equity markets are rallying. Just this morning the German Dax index has hit another all-time high. But what do they do next? They cannot buy that many more ETFs because they have bought so many already. As you can see they are already a material player in the equity market and they run the Japanese Government Bond market as that is what Yield Curve Control means. Ironically the latter has seen higher yields at times in an example of how water could run uphill rather than down if the Bank of Japan was in charge of it. It will be wondering how the Japanese Yen has pretty much ignored today’s news.

Also as a final point. More and more countries are finding it hard to raise taxes aren’t they?

 

 

 

https://moneymaven.io/mishtalk/economics/japan-isn-t-headed-for-recession-it-s-in-recession-YfudvrH9JESyLXEz57fmYg

Japan Isn't Headed for Recession, It's In Recession

How about a little realism here?

The Japanese economy shrank 6.3% annualized even before the coronavirus impact.

Reuters reports Coronavirus cases rise again in China as recession looms for Japan, Singapore.

The number of reported new cases of coronavirus in China’s Hubei province rose on Monday after two days of falls, as authorities imposed tough new restrictions on movement to prevent the spread of the disease which has now killed more than 1,700 people.

With no end in sight for the outbreak, Japan and Singapore appeared to be on the brink of recession with data on Monday pointing to possible contractions in the current quarter.

Across China many factories remain closed following the extended Lunar New Year holiday, disrupting supply chains around the world. Virus-related damage to Japan’s economy is expected to show up in the current quarter, stoking fears of recession in the world’s third-largest economy.

Fears of recession, or already in recession?

[Agent ZigZag]

I own my own house outright so I dont need to allocate any assets towards that area. The area I am interested is my retirement and as DB says as long as my assets keep up with inflation I am happy. I am still building my wealth largely in stocks now and my aim is to pack in work by 55. My stock portfolio is largely those areas discussed in this forum without the widows and orphans stock pickers. My aim is to have 12k for living and 12k for luxury. Trust me I need it as my council tax is about £2300 and gas electricity about £2000. In todays money that is 300k to last me 12 years to reach state retirement age. I  intend to spend that so that by 67 I have no money, on paper at least. The reason why is that the prudent it seems gets screwed by governments. If I have no assets on paper then it it is hoped I will get full state pension, council tax paid for leaving me with little trips now and then to Blackpool Baird to top up my income.

 

Note - If the facts change then so does my plan

[sancho panza]

On 14/02/2020 at 23:32, Cattle Prod said:

A little anecdotal - I had the pleasure of using a brand new Dodge Ram 2500 heavy duty with a 6.7 L V8 Cummins turbodiesel in my last trip up to the wastes of the white north. It was slow in the uptake, but Jesus when the injectors kick in....I managed a 0-60 in 9.4 seconds on a gravel road...temperature outside was -39C! That engine is an absolute beast.

Knew you were closet extinction rebellion......

Whats the mood like in the industry,lot of red on the screens at the mo.But I can see the Chinese coming out of this with the printers on full.

Are companies actively canning exploration budgets? If they are what sort of lag until supply shortage kicks in?

[MrXxxx]

22 hours ago, DurhamBorn said:

 

DB where did you get this figure from, I would like to read the source document...reading the scenarios on here makes me wonder if many of us may have to reconsider retirement dates, due to the risk of running short!

[DurhamBorn]

2 hours ago, sancho panza said:

 

 

How far south does that HPC stretch DB?If that was the position around these parts of the east mids I'd consider buying somewhere.

Down into Yorkshire.Scarborough and Brid are just above or at 2005 prices,but lots of probates coming over there so likely falls coming as the market cant pull ahead.

https://www.rightmove.co.uk/house-prices/detailMatching.html?prop=82640132&sale=90534066&country=england

Same price as 2005.

Over in Cumbria down to 2005 levels as well in most places outside of Carlisle.

https://www.rightmove.co.uk/house-prices/detailMatching.html?prop=64106340&sale=10981405&country=england

However it has to be noted the huge increase from around 1997 until 2005.

I wouldnt buy in Cumbria as its boring (and i love the Lake District).

Up here,

https://www.rightmove.co.uk/house-prices/detailMatching.html?prop=61134348&sale=90349116&country=england

Buy new in 2004,lose £30k + inflation.Inflation adjusted that would need to be £323,304 now.So inflation adjusted they lost £143k on a £209k house.

Houses only go up right?,houses are a fantastic inflation hedge right?