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

[JMD]

2 hours ago, DurhamBorn said:

Not at all,i had been talking in private to SP about a few things as the thread was drifting to what i would expect on the Moneysavingexpert forum a bit and i was a bit annoyed (not with you) that just as everything the thread predicted would happen was happening that people would be more concerned that something was down from entry points,the world was ending,and everything going to zero.

The aim of this thread isnt to make people a profit. Its not trading advice etc. Its really a thread about the macro position of the cycle. Macro strategy is about trying to work out where we are, what where we are will make happen  and how what is made to happen affects things in the future.

Absolutely. And very interesting. My big takeaway from the blog is what I think you said DB very early on (I believe it was you), about this blog being mainly about positioning for the next cycle. Beyond that people can 'load up extra' (my expression!) with, for example, PM's or with oil, or other sectors, to suit their own risk/reward/sentiment.  

The macro discussions fascinate me because they comprise the economic drivers, explain the societal changes happening around, and lay bare our so-called politics (really just a bunch of administrators). But to be honest, as events have begun to unfold, I have become concerned about what the endpoint will be... not just economically or even geopolitically, but specific aspects such as the ease with which the control measures were implemented across Europe; along with our own government rushing through new detainment laws that will last for 2-years, at which point only will these laws be returned and debated in parliament, and yet these measures are meant to be for the 'temporary' cov-19 virus? So fascinating and also worrying.       

Anyway I very much appreciate the time and effort and care people exhibit in posting here, and for sharing their undoubted knowledge along with sometimes their strong feelings, which is I think equally important to hear.

  

(btw the moneysavingexpert reference mostly escapes me, unless - and i'm sticking my neck out here at risk of having it chopped off! (oh well, in for a penny...) - is it anything to do with things getting a bit hyper recently - shouty/sweary, lots of '!!!!', many one-liners, or is that just me showing my southern softie sensibilities?)

[reformed nice guy]

1 hour ago, DurhamBorn said:

Something else to watch is China.People are ignoring it now,but its coming out of this virus first and so will likely respond to the massive hit.Its highly likely they will unleash a massive spending cycle to get growth back up.Others will then follow until the whole world does.So,as well as the Fed we need to watch to see how big China goes.

Definitely. The belt and road program is another vehicle for China to print money and export their own inflation. Countries borrow large sums in Yuan, get locked into debt payments in Yuan and are forced to trade more and more in Yuan.

 

[Barnsey]

15 minutes ago, BearyBear said:

https://www.bbc.co.uk/news/business-51969708

Chancellor Rishi Sunak is to announce an employment and wage subsidy package to try to protect millions of jobs.

Talks went on into the night with business groups and union leaders, who urged the government to help pay wages amid the coronavirus pandemic.

Many firms are warning of collapse, wiping out thousands of jobs, as life in the UK is largely put on hold.

News of more help for companies pushed stock markets higher, with the FTSE 100 and FTSE 250 up 5% at one point.

The pound rose 3.3% from a 35-year low to $1.18.

The chancellor's wage package, due to be unveiled later on Friday, is the latest in a string of big fiscal attempts to ease the burden on businesses and their employees.

I'm guessing they're looking at the jobs data to be released imminently over the pond:

[BearyBear]

5 minutes ago, Barnsey said:

I'm guessing they're looking at the jobs data to be released imminently over the pond:

Trump said these won't be released  

[TheCountOfNowhere]

My vodafone sale has worked out, they're 10% down from when I sold, a small victory.

Shell down too but not much, but I claim a small victory anyway.

So £-5000+200 = approx £-5000

 

[headrow]

2 minutes ago, BearyBear said:

Trump said these won't be released  

Ohio defied him. From 4,800 last week , to 139,000 in the first 4 days this week.

[Barnsey]

9 minutes ago, BearyBear said:

Trump said these won't be released  

Indeed he did, unfortunately he can't prevent individual states reporting, which is already underway in Ohio etc

Edit: I see @headrow beat me to it, nice job 

Make sure you carefully read these from Goldman Sachs:

[TheCountOfNowhere]

And if Q2 and Q3 are wrong.....

 

Buying shares before end of Q3 is a gamble u

[Democorruptcy]

2 hours ago, DurhamBorn said:

Something else to watch is China.People are ignoring it now,but its coming out of this virus first and so will likely respond to the massive hit.Its highly likely they will unleash a massive spending cycle to get growth back up.Others will then follow until the whole world does.So,as well as the Fed we need to watch to see how big China goes.

When I posted that China would be free of virus by April Fool's Day, I was thinking it's a superb chance for them to buy lots of shares and companies in the West. 

[Barnsey]

10 minutes ago, TheCountOfNowhere said:

And if Q2 and Q3 are wrong.....

 

Buying shares before end of Q3 is a gamble u

Should have said to focus on the near term information provided in there, anything after that is complete guesswork

[BearyBear]

13 minutes ago, TheCountOfNowhere said:

And if Q2 and Q3 are wrong.....

 

Buying shares before end of Q3 is a gamble u

You're right, but if they print the equivalent of 9 months US GDP in a week, then buy all the corporate near-junk bonds and continue doing so... it's a different perspective.

From past experience, funny money goes to the stock market first.

[TheCountOfNowhere]

It seems Pishi Sunshine is going to announce another hand out/back door bailout

[DurhamBorn]

1 hour ago, headrow said:

I've loaded up on BAT for the past year on any dips under 2800p , one of my largest holdings. I notice that they have announced their dividends for the rest of the year already , do they always do this?

 

Yes they do.Doubt they would cut theirs.

[TheCountOfNowhere]

Someone just tweeted me to say

"Lenders banned from repossessing properties, no fees on mortgage holidays "

 

They are protecting their own asset wealth, fuck the £

DB.....Do you think the housing bubble will deflate ?

 

if so, when/how long ?

 

[Harley]

4 hours ago, sleepwello'nights said:

I persist with my view on UK index linked gilts. My holding of them with Vanguard showed a dramatic drop in value yesterday contrary to my logic.  

Provided they are held to maturity how can they lose? The reduction in interest rates to almost Zero seems to me to support the yield. They will now give a higher return than other cash deposits, yet the price fell.  

I posed the question to Vanguard yesterday and their reply was that everything was being sold off because institutions needed to cover the falls in equity values. Much like Gold and Silver I presume. 

Unless a revolution in the UK is imminent and the government won't redeem them what's wrong with my logic.

Surely depends if you bought them at or below par (unlikely)?   In which case you will lose some capital on redemption?

Plus that depends on the fund dynamics as you're not buying the individual gilts?

However, I've posted about an interesting dynamic on the VGOV, etc chart before which I thought had broken down (so missed the last move up) but may have just re-asserted itself. 

[Democorruptcy]

14 minutes ago, Harley said:

Surely depends if you bought them at or below par (unlikely)?   In which case you will lose some capital on redemption?

Plus that depends on the fund dynamics as you're not buying the individual gilts?

However, I've posted about an interesting dynamic on the VGOV, etc chart before which I thought had broken down (so missed the last move up) but may have just re-asserted itself. 

I thought it was the other way.

The price of the bond includes the return on it and could be inflated further by the safety of a return of money. Say a £100 bond might be trading at £120 and a bond fund might buy it at that. Then in a crisis with margin calls the bonds are sold at at a value lower than £120 so the fund incurs a loss. You cannot assume a bond fund is buying every bond as cheap as par?

[DurhamBorn]

Government going to pay the wages of people sat at home by 80%.Also increase universal credit and tax credits for some reason.The most inflationary thing you can do,pay people not to produce anything.

 

[JoeDavola]

10 minutes ago, DurhamBorn said:

Government going to pay the wages of people sat at home by 80%.Also increase universal credit and tax credits for some reason.The most inflationary thing you can do,pay people not to produce anything.

So what do we do with our cash savings? This is going to fucking ruin me by the sounds of it.

Time to move back to stocks? Where has @Frank Hovis gone these days?

[deathfunk]

1 minute ago, DurhamBorn said:

Government going to pay the wages of people sat at home by 80%.Also increase universal credit and tax credits for some reason.The most inflationary thing you can do,pay people not to produce anything.

I'm trying to estimate how much this is going to cost them every month. Then adding this to the £30bn cost of withholding VAT on companies and the £330bn package announced last week.

If 1 million average workers on £25k go off sick that is £20bn each month. 

There are 31.4m workers in the UK if half of them take on average one month off then it will cost the treasury over £310bn. I would say that was manageable. With the rest of the spending it would push our National debt to around £2.6 trillion or about 125% of our GDP.

Now, if the GDP takes a dip aswell, as it inevitably will, then this could go up further. When will Mr Market have had enough?

[PaulParanoia]

I've not seen if the government will be paying the wages for all companies or only those in targeted industries.  It will be interesting to see if my US based employer (who employs me via a UK Ltd company) can claim 80% of my wages from the UK gov, even if the company is still financially sound for the next 6 months?

On another note, at least the moneys not going straight to the bankers this time round.

[Boon]

Don't think there was specifics, aside from initial 3 months term.

Gonna be quite difficult to police, wouldn't be surprised if some small businesses could keep people working at home as well as claim the bonus.

[TheCountOfNowhere]

6 minutes ago, PaulParanoia said:

I've not seen if the government will be paying the wages for all companies or only those in targeted industries.  It will be interesting to see if my US based employer (who employs me via a UK Ltd company) can claim 80% of my wages from the UK gov, even if the company is still financially sound for the next 6 months?

On another note, at least the moneys not going straight to the bankers this time round.

Let me guess...financial services

14 minutes ago, billfunk said:

I'm trying to estimate how much this is going to cost them every month. Then adding this to the £30bn cost of withholding VAT on companies and the £330bn package announced last week.

If 1 million average workers on £25k go off sick that is £20bn each month. 

There are 31.4m workers in the UK if half of them take on average one month off then it will cost the treasury over £310bn. I would say that was manageable. With the rest of the spending it would push our National debt to around £2.6 trillion or about 125% of our GDP.

Now, if the GDP takes a dip aswell, as it inevitably will, then this could go up further. When will Mr Market have had enough?

Mr Markets getting the fuck out of Britain.

This is beyond insane.

What next, a free blow job for ever man over the age of 21.

[PaulParanoia]

Nope, enterprise software sold on a multi-year subscription model.

[Frank Hovis]

26 minutes ago, JoeDavola said:

So what do we do with our cash savings? This is going to fucking ruin me by the sounds of it.

Time to move back to stocks? Where has @Frank Hovis gone these days?

I'm about.

Retired now so mind buzzing with new plans which are pushing aside my prior pre-occupations.

Money is no longer an issue so is no longer an interest.  Maybe when the days get colder and shorter I'll start doing some share dealing again for interest.

[JoeDavola]

1 minute ago, Frank Hovis said:

Retired now so mind buzzing with new plans which are pushing aside my prior pre-occupations.

Wait....you retired? Congratulations, I missed that - when did that happen?