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


spunko

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Obviously they've cocked it up but the plan works eventually. What better way to control an economy than telling everyone what they can spend and what they can spend it on and that they can still earn as much as possible but can't save more than 6k or their free money stops. It's perfect. 

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14 minutes ago, Calcutta said:

Obviously they've cocked it up but the plan works eventually. What better way to control an economy than telling everyone what they can spend and what they can spend it on and that they can still earn as much as possible but can't save more than 6k or their free money stops. It's perfect. 

Gold and silver the new cash?  

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1 hour ago, sancho panza said:

couple of anecdotals after chatting to a mate last night.He's a delivery driver for the co op.

was saying he went into the agency yesterday at 0500 and as he went in there were five blokes waiting to see if any drivers didn't turn up so they coud get the shift.Went back some time in the afternoon and those same blokes were still there....

at the co op depot,there's been fights breaking out.He didn't know why,jsut said they did an announcmenet over the tannoy for calm and 'trying to work together' etc etc

also was saying that in his block of flats(where I grew up till I was 5),there are homeless people sleeping in the corridors at night now.COuncil have been called and they jsut bought some tents(there's a large grassy area outside)

This is getting very real,very quickly.

 

Things really are getting real aren’t they? The stock market might play funny buggers for a while yet, but the real economy isn’t turning around anytime soon. It always was going to happen, but this honey badger virus has been the most severe sharpest shock anyone has seen other than war, and China now re-closing cinemas tells me this ain’t over. WTI back below $22! Deflation everywhere, these unthinkable MMT measures are only sustaining not stimulating the economy.

Be careful with your money folks. This really does seem historically unprecedented. Despite Sunak having a pretty darn good grip on things, it’s virtually impossible to look after everyone despite what everyone hopes, as this is both a government policy induced recession AND a recession/depression based on poor economic preparation and excessive debt. Just thank your merry stars we’re on this side of the pond, U.S. staring into the face of a possible 25-30% unemployment rate, dread to think what’s going to happen when they lose healthcare as a result.

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I live in a well to do-ish bit of Surrey on a street with a bit of 'keep up with the Jones' going on. I'm trying hard right now not to be a little bit smug about having the oldest car on the street and not having had the obligatory extension/conservatory done. Had a few condescending looks over the years for 'letting the side down'. Seems that cash/liquidity/real assets are king after all. I won't gloat though as there is no pleasure in seeing white van man and low wage types struggling through this.

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1 hour ago, sancho panza said:

this is getting very real.very quickly.

https://www.theguardian.com/world/2020/mar/26/universal-credit-claims-almost-impossible-as-more-than-500000-apply

Workers attempting to apply for universal credit after being laid off during the coronavirus crisis have described how it is almost impossible to complete a claim.

More than 500,000 people have applied for the vital payments in the last nine days, the Department for Work and Pensions revealed on Wednesday.

However, benefits experts have warned that only a fraction of them will have succeeded because the service is swamped and it is currently almost impossible to talk to anyone at the DWP.

First-time claimants have described calling the service between 80 and 100 times to no avail. The Guardian has been trying over the last two days, and has been unable to get through. At one stage yesterday there were queues of 145,000 people waiting to log on to the website, where all claims must start.

All those making a first application for universal credit would usually attend a meeting at their local job centre. However, since the Covid-19 crisis began, applicants have to call an 0800 number to make a phone appointment, but it is impossible, say applicants.

Anna Stevenson, a welfare and benefits expert at the financial charity Turn2Us, said claimants had been contacting the charity to report the problem, fearful that this will hold up the payments they are due.

 

 

was jsut psoting the above as you wrote.....spooky...

And when people can't get money from the state for the basics they have nothing to lose...this is when things will `kick off`.

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1 hour ago, BadAlchemy said:

I live in a well to do-ish bit of Surrey on a street with a bit of 'keep up with the Jones' going on. I'm trying hard right now not to be a little bit smug about having the oldest car on the street and not having had the obligatory extension/conservatory done. Had a few condescending looks over the years for 'letting the side down'. Seems that cash/liquidity/real assets are king after all. I won't gloat though as there is no pleasure in seeing white van man and low wage types struggling through this.

Iv still got my 05 Peugeot 2.0l diesel,but iv also got an 07 as a spare.xD ,iv actually spend over £400 on the spare last month,new brakes,disks,calipers the works,but first money iv spent on it in 4 years,6 weeks lease money to someone else.The spare is a Peugeot estate and comes in really useful at times for picking stuff up.I got rid of my old van as couldnt justify two cars and a van.My partner  has another Peugeot diesel,hers is 5 years old.She always buys one at that age then keeps it a long time.

Mine is the oldest car on the estate,but although its a lovely estate its just normal people.There are a few spread about where you can smell the debt and lease cars,but most seem pretty sensible.Its the new estates where i think the problems are.The amount of new builds on HTB with people under 30 with 2 brand new Audi's on the drive is amazing really.

Generations get into big trouble when their parents forget about recession/depression.Just like now.

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@DurhamBorn @BadAlchemy Lease would be extra wasteful now that no one is allowed to drive very far and MOTs have been extended for 6 months. The only thing worse than paying £300 a month for a car is paying that and not even being able to use it. 

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Castlevania
9 hours ago, gibbon said:

17.5% VAT on £100 would be £17.50, so just half it right if you're working out VAT on £50 so £8.75 VAT. £50 - £8.75 = £41.25 right? 

Then again your maths looks fancy so I'm probably wrong. Can someone who can add up please tell us the real answer?

The £50 price of an item inclusive of VAT is 117.5% of the price excluding VAT. So the price excluding VAT is £42.55. Or roughly 15% of the ticket price is VAT.

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Don Coglione
43 minutes ago, MrXxxx said:

How/where do people get their share buying ideas from (apart from here of course!)..are there any free websites that you can use?

Just go on the LSE or ADVFN fora and avoid any stocks under consideration there!

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Democorruptcy
2 hours ago, Barnsey said:

Just thank your merry stars we’re on this side of the pond, U.S. staring into the face of a possible 25-30% unemployment rate, dread to think what’s going to happen when they lose healthcare as a result.

There's already 28m without health insurance. That's down from 46m before Obamacare but the number has started rising again in the last 2 years.

https://www.scmp.com/news/world/united-states-canada/article/3053066/us-coronavirus-threat-what-if-you-dont-have-health

The article says the figure includes 11m undocumented migrants. I wonder how many the UK has lurking to take beds up.

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25 minutes ago, MrXxxx said:

How/where do people get their share buying ideas from (apart from here of course!)..are there any free websites that you can use?

I'd like to know this.

I frequent the Shares and Trading section of this forum but there aren't many active users there besides you me and @Ponty Mython

https://www.dosbods.co.uk/forum/21-shares-trading/

I'm trying to create an excel sheet of all the stocks and shares available on my platform to work out what stocks have dipped the most and then I'll try to filter out those who are most like to recover  and grow to gain in the upswing. So far I've had a gun ho approach  which is basically a hail-marry that they pick up on Monday after markets open based on the massive stimulus package passed Friday afternoon.

For those interested this is a thread I have going on my picks:

I am hoping to get a deposit for a house by saving in stocks and shares so they go up as house prices go down.

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20 hours ago, TheCountOfNowhere said:

Own up, who piled in yesterday ?

 

Royal Dutch Shell Plc
LON: RDSA
Follow
 

1,271.50 GBX −142.70 (10.09%)

 

I thought about it, was wondering if we'd reached the bottom.

It's just too volatile to call.

I sold yesterday, or was it Thursday? 

So I made 10% on 100 quid :D

22 hours ago, TheCountOfNowhere said:

I saw this, European stocks are down.

Cheap maybe?

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18 hours ago, DurhamBorn said:

Short term oil movements should be ignored,as should their stocks,they should be being bought in ladders and Shell last hit £9.30 and BP £2.24 so well above bottom ladders bought.

Oil target on WTI is $34 by mid summer,maybe $39 .Big oil will go up 400% from here into the end of the cycle.Watching movements now should be avoided apart from to execute buy ladders.Its time to let the cycle play out.

So buy Shell in late spring?

16 hours ago, SillyBilly said:

Had an interesting chat today with our contact at Shell, he leads their UK bitumen sales. We buy about 150 metric tonnes of bitumen a month so I know the market pretty well. Basically we discussed the severe dislocations happening for the oilies particularly with reference to the United Kingdom. Some points that may be of interest:

- We have been buying penetration bitumen from Total for decades up until last month. It came from their Lindsey oil refinery. In Feb they notified us that they would not be supplying bitumen to any customer not under contract (i.e. most apart from the biggest buyers like Tarmac) until further notice. 

- International Maritime Organisation’s (IMO) 0.5pc (from 3.5%) sulphur cap for marine fuels kicked in in Jan. Demand for HSFO (high sulphur fuel oil) falling as a result. This affects bitumen pricing/supply indirectly, it comes from sour grade crude.

- Was advised $5-6 a barrel on Kerosene is what UK refineries typically make out with. c. $2 a barrel loss on bitumen. So why process when planes are grounded (demand fell off a cliff) to sell the stuff which makes a loss? 

- Nynas are in "dire straits". To be fair this has been fairly common knowledge since the back end of last year but apparently  they are asking customers to pay upfront to allow them to purchase the feedstock. Openly advertising for immediate investment (a.k.a rescue). They are 50% owned by Venezuelan oil company PDVSA...obviously that is creating problems in itself.

- Nynas have a 50:50 JV with Shell with the Eastham refinery that produces 700,000 mt of bitumen a year. Rumour is Shell could be picking up the other half for a quid in the next few weeks.

https://www.spglobal.com/platts/en/market-insights/podcasts/crude/032320-price-collapse-fragile-us-shale

I think Shell are positioned to make most of this when the market turns. Supposedly they've took a lot of business from Total in recent weeks due to lower output from the Lindsey refinery output. Flush the weaker hands out and then up prices when the time is right.

 

13 hours ago, DurhamBorn said:

Yes its incredible the position they are in.We could see a situation where most commercial transport moves over to GTL fuels.I know its already big in Germany.People forget that Shell are actually a huge tech company,they dont just drill holes.The uses in the next cycle will expand by huge amounts.Posts like yours are what makes this thread great.It helps to show people why they should be watching daily swings in the shares.They should be looking into the next cycle and seeing that maybe a price lower than 1995 might be quite a good long term buy.

I think gas has a huge future for lots of reasons.Its why i also like Repsol as they are really big in gas.Notice yesterday they said they were holding their dividend,that might change of course if brent stays below $35 for long.

 

13 hours ago, Alifelessbinary said:

The thing that has surprised me the last few weeks was that I always thought the next bear market would largely revolve around the collapse of FAANG stocks. I’ve watch in amazement as good quality companies have collapsed 50-75% while the tech stocks have remained fairly resilient.

The big meltdown can’t happen while these tech stocks still operate on colossal PEs, although CV has driven a lot of business their way.

I've been ill this week, so missed a few opportunities but managed to load up on BP and Shell at prices I never thought I’d see. Even though part of my portfolio got smashed I’ve been able to be much more stoic, as I know I’ve managed to grab some fantastic shares.

DB and SP have been voices of calm when most commentators are screaming. When this all blows over I’ll owe you a few beers.

 

 

I missed on some big gains as I only had 400 to play with when this began. I pilled in another 1000 after the paycheck on Friday but I think I was late by then.

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Noallegiance
8 minutes ago, No One said:

So buy Shell in late spring?

 

 

 

I missed on some big gains as I only had 400 to play with when this began. I pilled in another 1000 after the paycheck on Friday but I think I was late by then.

Like DB says, short term noise can be regarded as almost irrelevant now. Position for the cycle ahead and forget it for a few years. It's what I'll be doing when HL get their finger out.

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7 minutes ago, Noallegiance said:

Like DB says, short term noise can be regarded as almost irrelevant now. Position for the cycle ahead and forget it for a few years. It's what I'll be doing when HL get their finger out.

Exactly,we simply cant know when this virus will end,or when markets will stop falling.However we can road map the response from CBs and governments.This end of cycle couldnt be any clearer that the consumer is finished,dead,dodo.Governments can default,or inflate.They will inflate because they can print as much as they want in a deflation with almost zero risk of hyper inflation,that simply isnt on the table until the end of the next cycle.

Iv got some Shell at £13.50,some at £9.30 and everything else im buying similar.The next cycle will be industrial,my road map was about 70% clear on that,now its pretty much 100%.Being locked in the house iv been doing lots of cross market work on different sectors.For instance the scale of the demand shock will push back electric car manufacture by a few years minimum.Less cars will be bought,but more older cars will stay on the road.

Supply chains are certain to return and increase energy use,but the countries seeing the loss like China will be inflating themselves.

The key point as well is that building assets is going to get more expensive,and companies who already own those assets will adjust their prices upwards.

Governments will also pull back on welfare spending going forward,and tax perks like the 40% pension one are 100% certain to go.The other certain one is NI paid on pensions etc once you retire.There is no way they will keep that.They might merge income tax and NI to make up for it.

 

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M S E Refugee
55 minutes ago, Democorruptcy said:

There's already 28m without health insurance. That's down from 46m before Obamacare but the number has started rising again in the last 2 years.

https://www.scmp.com/news/world/united-states-canada/article/3053066/us-coronavirus-threat-what-if-you-dont-have-health

The article says the figure includes 11m undocumented migrants. I wonder how many the UK has lurking to take beds up.

The virtue signalling luvvy brigade are going to have difficulty convincing anyone that someone who shouldn't even be in the country ought be given a ventilator ahead of their Granny.

I can see a public huge backlash against economic migrants, to the point where it will be unpalatable to espouse views of how wonderful open borders are.

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Agent ZigZag
8 minutes ago, DurhamBorn said:

Governments will also pull back on welfare spending going forward,and tax perks like the 40% pension one are 100% certain to go.The other certain one is NI paid on pensions etc once you retire.There is no way they will keep that.They might merge income tax and NI to make up for it.

 

I just hope they still keep in place the 25% lump sum withdrawal tax free leaving any other withdrawal under the personal tax allowance also tax free.

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Durhamborn - do you have any other book suggestions, ive downloaded the "inflation Crises" and will give a read.

I dont't see how the money printing being done everywhere is anything other than trying to keep the boat afloat - its not enough to be stimulative there must be more asset deflation, couple this in with energy price deflation - prices of essentials must surely increase in the short term though. There is no spending in the eonomy except for essentials and that will be the case for weeks if not months. Anecdotally my neighbours extensions has had all work on it stopped, its a shell and the neighbours are living elsewhere, they were going hell for leather the week before; this is either because they are adhering to the lockdown or lack of money (2 income household, wife is an air hostess on maternity, 2019 Mazda on the drive - they always seemed quite sensible to me though).

I've been working from home for the last 2 weeks as has the rest of my office, I ussually buy a hot lunch in a cafe  3 times a week and coffee everyday - which ussually cost more than i think its worth - but then they've got all those rents and rates to pay.

I've got a 5 bed HMO which always rents out quick to youngsters getting their first job after uni as its decent quality and i haven't raised the rent in 5 years. 1 works in public sector teaching, 2 in pharamceuticals, 1 jewellery shop, 1 IT technician - so far no one saying they can't pay rent which is very suprising or raised any concerns, alot of their placements are over in Augst - October though so we'll see how it goes.

Given the peak of the virus is in May June, i expect this to be a low around the 1900-1800 for the S&P purely based on sentiment. i've already bought a decent amount of precious metal miners and my overall position is up as i've been buying since 2018. i've stopped buying gold and silver since 2019. I also bought some SPOG and WNRG ETF - commodities and energy before this crash and  am down 50%, ouch - i cancelled all my ladders when i saw the speed of the crash so didn'y buy much.

I am looking to buy a decent wad of commodities in the next month though.

Southern Copper Corp Copper
Rio Tinto plc ADR Common Stock General mining
Total SA Energy
Canadian Natural Resources Ltd Energy
Nutrien Ltd Potash
BP plc Energy
Royal Dutch Shell Plc Class B Energy

Currently a lot of energy on their, looking for some more diversity. don't need any more miners as looking to add more precious metal miners. if anyone has some good Potash plays would be very interested or any other commodity companies and why you think they're good. I will start putting together an industrials list of companies at some point as they ought to do well in the next phase currently looking at illionois tool work and first solar.

Had a long list of dividend paying stock to looking into purchasing but the entire landscape of that will change over the next 12-18 months.

I also bought some short dated US notes/bills as a hedge a few days ago. glad i did given the most recent debt downgrade - i think Sunak has been more generous than the yanks in a lot of ways - this could turn in to permanent MMT very quickly.

I know we've all seen this image before1ac72b_42eab47215c84f228cd7d3ea0a5e1e69.webp

 

but... surely this is the return to normal phase and bottom must be around 1900-1800 (previous support).

image.thumb.png.1d4e5786224124582e931312b4ca1d6a.png

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Found this interesting in bold 

While neither country can survive current oil prices indefinitely, Saudi Arabia is in much worse shape. From a high level, the disparity is apparent when comparing each country’s cache of forex
+ gold reserves (chart). Since 2014, Saudi Arabia has lost $225 billion in total reserve value (31% of total reserves) and Russia has gained $61 billion (12%). For reference, over this period (2014 to present), Brent Crude has average $64/bbl.

Digging into each country’s budget reveals why these two oil-based economies are headed in different directions. Russia
ties itself to the conservative “fiscal rule.” 
The fiscal rule ties Russian budget expenditures to a “base” Urals crude oil price of ~$40/bbl. Any revenue from oil prices higher than $40 is deposited in the National Welfare Fund (NWF). This conservative approach has allowed Russia to maintain a budget surplus and add to the NWF.

 

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Talking Monkey
13 minutes ago, DoINeedOne said:

Found this interesting in bold 

While neither country can survive current oil prices indefinitely, Saudi Arabia is in much worse shape. From a high level, the disparity is apparent when comparing each country’s cache of forex
+ gold reserves (chart). Since 2014, Saudi Arabia has lost $225 billion in total reserve value (31% of total reserves) and Russia has gained $61 billion (12%). For reference, over this period (2014 to present), Brent Crude has average $64/bbl.

Digging into each country’s budget reveals why these two oil-based economies are headed in different directions. Russia
ties itself to the conservative “fiscal rule.” 
The fiscal rule ties Russian budget expenditures to a “base” Urals crude oil price of ~$40/bbl. Any revenue from oil prices higher than $40 is deposited in the National Welfare Fund (NWF). This conservative approach has allowed Russia to maintain a budget surplus and add to the NWF.

 

This one is probably for DB but does anyone know can countries like Saudi or the UAE, India, Pakistan etc do QE or is it only major currencies. The Saudi reserves have really come down from peak and at low oil prices are really going to evaporate over the next couple of years

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Glad you managed to get home safe @Cattle Prod.

I flew out of Miami just as the US announced it was closing borders, lots of panicking Brits at the airport.

Interested to hear that air travel is continuing, were there many planes taking off at the airport?

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3 hours ago, DurhamBorn said:

Iv still got my 05 Peugeot 2.0l diesel,but iv also got an 07 as a spare.xD ,iv actually spend over £400 on the spare last month,new brakes,disks,calipers the works,but first money iv spent on it in 4 years,6 weeks lease money to someone else.The spare is a Peugeot estate and comes in really useful at times for picking stuff up.I got rid of my old van as couldnt justify two cars and a van.My partner  has another Peugeot diesel,hers is 5 years old.She always buys one at that age then keeps it a long time.

Mine is the oldest car on the estate,but although its a lovely estate its just normal people.There are a few spread about where you can smell the debt and lease cars,but most seem pretty sensible.Its the new estates where i think the problems are.The amount of new builds on HTB with people under 30 with 2 brand new Audi's on the drive is amazing really.

Generations get into big trouble when their parents forget about recession/depression.Just like now.

The number of these estates in Herefordshire is amazing. I have worked with a number of people buying/bought one. Eg. A delivery van driver (21) taking the piss out of my 2 bed house when I’m 48 and how big his 3 bed will be when it’s completed with room for his 2 dogs/big garden. Not a brain cell between any of them.

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Don Coglione
27 minutes ago, Cattle Prod said:

Anecdotal.

I laid over in Seattle for about 6 hours the other day. Most shops shut down, but plenty still open. About 20% wearing masks, general atmosphere was ...normal? People chatting, laughing, etc. Got a nice burger, and they threw in fries. I can't recall any staff wearing masks, though most wore gloves. I'm not sure of the point of gloves. They are still going to transmit if you touch your mouth, and they are harder to clean than hands. It didn't feel like a bat flu hot spot, and I saw a curve yesterday for Washington State that looked like it was flattening out. I don't think they locked down the city.

About 50 people on the BA 777. I have never seen a cabin crew enjoying themselves so much, even the pilot was stifling giggles on announcements. Perhaps gallows humour, but they really didn't seem that bothered with things, and were very much enjoying having FA work to do! None wore masks. Food (business) was a brown bag with a paninni and crappy snacks. No issue with that, I brought my own food on. They gave minimal food handling as the reason, fair enough. No booze, but were perfectly capable of getting me soft drinks on ice, so I don't see why they didn't have simple booze options. I asked for a washbag - none. I said "what's that got to do with a virus?" and the steward gave me some bull about overall catering. "Are you sure it's not to do with cost saving?" ...wry smile. So BA has not let the opportunity pass to save a fiver, which is all well and good if you consider all your customers are idiots.

I asked him about their future. Some will furlough, but they've notified govt about coming redundancies, and they are currently wrangling with the unions. So I think, like many companies, they will use this crisis to solve staffing/contract/union problems. He also said they won't be getting government support as they have substantial cash reserves. I don't know what form of financial support he was referring to: bailout or salary backstop for furloughed employees? Heathrow - nothing open in T5, not even a tea or coffee. Got my bags quickly for once!

What you state about the future of BA workers is very much echoed on Flyertalk - on reflection, perhaps you wrote it?!

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