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


spunko

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Don Coglione
13 minutes ago, headrow said:

I know you have a nose the length of pinocchio but borrow a telescope and see if you can see beyond it you boring cunt.

Careful, he'll have the police on you...

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1 hour ago, Talking Monkey said:

The dollar index is still over 100 DB would you have expected the Fed  to have got it below that by now. Going back to the golden rule the market hurts the most people I reckon without the downward move that smashes the glamour stocks the whole correction is not over, might get a multi month up leg first linking to the non linear aspect 

I think the dollar should get below 95,so yes id like to see it below 100 pretty soon.I think there is a good chance the indexes go lower,but more sector rotation.

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leonardratso
3 hours ago, headrow said:

I sold my IBTL today , held for a year after somebody on here suggested it would be a good buy. I will come out of it with a 19k profit which i will transfer into my ISA in a a couple of weeks.

Whoever it was that posted the advice i am truly grateful.

 

I was going to use the money to double down on some of shares that have had a huge kicking , Centrica , New River Reit & Drax but i would rather hold out on them yet as they might not make it through so i will wait for another sell off and then buy Vodafone , BAT , Glaxo , HSBC, BP & Unilever in my ISA instead. I live on my dividends , quite a few in my portfolio have withdrawn them , i am looking now at companies that should continue to keep paying them.

 

Thanks agin for the IBTL recommendation.

dont mention BAT,.

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2 hours ago, Harley said:

OK, very funny, who did it?  Now down for the day!

As I previously mentioned, huge % of their revenue comes from the 2 London TOCs. Looks like things are not only getting worse there but also folks have finally got the message and ridership has collapsed, therefore word is that the timetable for most U.K. rail companies likely to see another 50% reduction in coming days.

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4 hours ago, Harley said:

OK, very funny, who did it?  Now down for the day!

Somebody on here who shall remain nameless must have bought some more :-) :-) :-)

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Yellow_Reduced_Sticker
1 hour ago, MrXxxx said:

Somebody on here who shall remain nameless must have bought some more :-) :-) :-)

I've been sussed out! xD xD xD

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UnconventionalWisdom
On 23/03/2020 at 09:03, sancho panza said:

For my cyncial side you have to sit back and look at the scale of this QE and the fact that they're managed to push it through before we've even had an economic crisis.It's as if they're front running a debt deflation.Noramlly,you get the debt defltaion,then you get the QE.This time they've suprassed themselves

There is no way you get all the central bankers to act so quickly without prior discussion. I'm not so tin-foil that I think it was all planned but they dug out their black swan file.

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UnconventionalWisdom
On 23/03/2020 at 10:56, C-gull said:

I'd probably like to move to a new city in five years or less for a new job and to be closer to the Highlands

Rent and plan your exit. If you put down roots you will increase the likelihood that you wont move to where you want to be. You'll get a promotion or something and coupling that with the hassle of selling, you'll prob convince yourself it's not worth going. 

You can think clearer if you dont have roots

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Bricks & Mortar
1 minute ago, UnconventionalWisdom said:

There is no way you get all the central bankers to act so quickly without prior discussion. I'm not so tin-foil that I think it was all planned but they dug out their black swan file.

I think it was all planned.  Perhaps not the creation of the virus itself... (outwith my ken)
But, I think they know the expected severity, and its nothing like the hysteria thats been whipped up.  You saw the UK government and other governments talk about herd immunity early on, and someone gave them a swift kick under the table and we heard no more.  But I'm pretty sure herd immunity is the endgame.  And we'll achieve that herd immunity round right about on their schedule.  Presume the plan is to swiftly move on to 'rebuilding the economy'

And as for the virus itself?  I've said whether it was man-made is beyond my understanding.  But, dang.  If that was naturally occurring just at this moment, with its reputed properties, then nature is wonderous in ways I hadn't thought possible.

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UnconventionalWisdom
On 24/03/2020 at 14:41, Simon said:

So with you there. My part-time job has laid me off for at least 4 weeks. Wife's job could prove precarious. Not sure even my mega-frugal ways can save me from this. Also struggling to keep my aged parents from losing the plot. 1st day in "lockdown" and already am losing it!

Just remember that tough times pass, even if it takes a long time, they will pass.

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UnconventionalWisdom
On 24/03/2020 at 18:15, stokiescum said:

Like the japs do didn’t help them much in the long run or am I thinking of the Chinese 

A reset will happen. Japan stagnated by governmemt buying bonds and shares. They also had the ability to export to the rest of the world. When everyone is tanking and everyone is printing like mad, there's no way the economy will survive and remain as it is. Big reset, including how people think- consumerism will go down, less support for a globalised supply-chain. More domestic manufacturing and a politically-charged need for self-reliance. We would have had this anyway, CV has just sped up the process and woken the masses up to how exposed we all are- especially those in the west.

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@sancho panza Thanks for posting that, learned something new after searching for LIBOR-OIS charts - although I couldn't find anywhere that had them as it's a, dunno what the correct term would be, meta-measurement? 

 

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Does the hive mind think that actual physical silver will do as well as big oil shares over the next decade? And also what will happen when it all goes tits up say in 2028? How will a good profit help. Or will it be reset time so only hard asset will help then?

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Bobthebuilder
1 hour ago, Bricks & Mortar said:

And as for the virus itself?  I've said whether it was man-made is beyond my understanding.  But, dang.  If that was naturally occurring just at this moment, with its reputed properties, then nature is wonderous in ways I hadn't thought possible

 The Earth is 9 billion years old, in context the dinasours happend yesterday. Its amazing isnt it.

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9 hours ago, Bricks & Mortar said:

I think it was all planned.  Perhaps not the creation of the virus itself... (outwith my ken)
But, I think they know the expected severity, and its nothing like the hysteria thats been whipped up.  You saw the UK government and other governments talk about herd immunity early on, and someone gave them a swift kick under the table and we heard no more.  But I'm pretty sure herd immunity is the endgame.  And we'll achieve that herd immunity round right about on their schedule.  Presume the plan is to swiftly move on to 'rebuilding the economy'

And as for the virus itself?  I've said whether it was man-made is beyond my understanding.  But, dang.  If that was naturally occurring just at this moment, with its reputed properties, then nature is wonderous in ways I hadn't thought possible.

Maybe?

But what if ‘herd immunity’ is not possible. 

Given that ‘herd immunity’ doe not develop for any other coronaviruses due to the high rate of mutation? 

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UnconventionalWisdom
22 hours ago, DurhamBorn said:

No,they are injecting liquidity into the system by expanding their reserves so they can buy government paper increasing the money supply so the government can stop a young family in Glasgow from starving.Its called their job.The amount of gumph youl be reading on the net about the evil CBs is just that,rubbish.They are trying to do their jobs.There are arguments about how they do it of course,and who gains most,but those are not arguments for times like this.The CBs are the fire brigade and the house is on fire.The market is simply reacting to the fact they are starting to right size policy.Open ended QE was the key like i said over and over as the market fell.

Thanks for the insight. The QE madness and rate manipulation (along with understanding the BTL model) was the reason I held off buying a small flat in the SE due to price manipulation in 2014. I then got interested in finance/economics and understanding the macro picture. Finding your thread on TOS was great as it complemented a lot of the ideas but offered a more detailed picture of cycles. 

The QE has pumped far too much currency into the system and at inflection points like now, we are seeing that there are serious issues with how the economy works.

Thanks for your insight- I've long been against QE but didnt know how I felt about now, real people suffering means they have to do something or we get absolute carnage and mass suicides. 

I think I'm realising that people in control want to remain in control and they will sacrifice wall street for main street if things get tough. 

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55 minutes ago, Vendetta said:

Maybe?

But what if ‘herd immunity’ is not possible. 

Given that ‘herd immunity’ doe not develop for any other coronaviruses due to the high rate of mutation? 

In the long run it will just be another common cold, old people with weak immune systems being exposed to a "new" virus are the only ones who should be worried.  But that's the same for every other bacteria and virus......

Its serious with the lack of immunity, but its not a showstopper.

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TheCountOfNowhere
1 hour ago, Vendetta said:

Maybe?

But what if ‘herd immunity’ is not possible. 

Given that ‘herd immunity’ doe not develop for any other coronaviruses due to the high rate of mutation? 

Have we got herd immunity for the common cold ?

 

Just saying.

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sancho panza

Debt deflation cometh series.

https://wolfstreet.com/2020/03/24/four-mortgage-reits-collapse-after-chaos-hit-16-trillion-market-for-residential-commercial-mortgage-backed-securities/

 

Four Mortgage REITs Collapse After Chaos Hit Markets for Residential & Commercial Mortgage-Backed Securities

by Wolf Richter • Mar 24, 2020 • 95 Comments

In good Financial Crisis manner, stuff blows up despite the Fed’s effort to stem the chaos. Now hoping for taxpayer bailouts.

By Wolf Richter for WOLF STREET:

Mortgage REIT # 4 so far: This afternoon, March 24, MFA Financial announced that it had received “an unusually high number of margin calls from financing counterparties,” and that by the close of business on Monday, it couldn’t meet those margin calls.

Its shares (MFA) had started out the day in the positive at just under $3 and then plunged 87% during the day, to $0.36. On February 20, before the market chaos started, shares were still over $8 a share. MFA Financial blamed the repo-market where it “had experienced higher funding costs,” and the mortgage market turmoil triggered by COVID-19.

The business model of a mortgage REIT is to buy long-term residential and/or commercial mortgage-backed securities and leverage them up by borrowing short-term, including in the repo market if they can, while posting the RMBS or CMBS as collateral. A mortgage REIT makes money off the spread between the borrowing rates and the yields of the mortgage bonds, and they multiply their profits through leverage.

During the Good Times, it was like free money, and the mortgage REITs paid big-fat yields. But suddenly, the Good Times were up.

Turmoil hit the $16 trillion markets for mortgage debts, including residential and commercial mortgage-backed securities that everyone apparently was trying to unload, and their prices dropped, and therefore collateral values dropped, and financing counterparties sent out margin calls to get more cash or collateral to make up for the dropping collateral values. And then all heck broke loose.

And MFA Financial said:

On March 23, 2020, the Company notified its financing counterparties that it does not expect to be in a position to fund the anticipated volume of future margin calls under its financing arrangements in the near term as a result of market disruptions created by the COVID-19 pandemic.

If MFA fails to meet the margin calls, the financing counterparties can take ownership of the securities that secured the margin loan. The company is now trying to get its financing counterparties to enter into forbearance agreements, where the counterparties would refrain from exercising their rights and remedies they have in case of default, but it could not “predict” whether these talks would succeed.

Mortgage REIT #3: This morning, it was mortgage REIT Investco Mortgage Capital that issued an announcement that it had failed to meet margin calls on Monday, blaming “the turmoil in the financial markets resulting from the global pandemic of the COVID-19 virus.”

The announcement caused the already beaten down shares of Investco Mortgage Capital [IVR] to crash another 53% to $2.52. Back on February 20, they were still over $18. Investco Mortgage Capital added:

Mortgage REIT # 2: On Monday, AG Mortgage Investment Trust, announced that it had not been able to meet margin calls “as a result of market disruptions created by the COVID-19 pandemic.” Shares [MITT] plunged another 24% today, to $2.14, having collapsed from over $16 on February 20.

Mortgage REIT #1 to pop: On Monday, TPG RE Finance Trust — sponsored by private-equity giant TPG which had spun it off in an IPO in 2017 — announced that it had still been able to meet margin calls by posting cash collateral, but “if the requirements to post additional cash collateral continue to be material,” there is “no certainty” it would be able to meet future margin calls. To preserve liquidity, it would “delay” paying its previously announced dividend.

TPG RE’s shares [TRTX] plunged 30% on Monday and 13% on Tuesday to $4.30 and are down nearly 80% from last glory-day February 20.

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