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

[kibuc]

This one never stops being funny: in Q1, where every miner and his dog will be reporting record earnings, New Gold managed to post a net loss of $28mil.

[DurhamBorn]

32 minutes ago, Harley said:

Yes and he p*sses me off for living in lovely Little Cayman knocking back cocktails!  A lot to like about him.

Just started reading but this says it all to me and always has:

We now have interventionist authorities prepared to destroy (finish the destruction of) money, so who knows, but back then more money was lost after the initial fall and the sucker of all rallies.  A long slow grind down with repeatedly dashed fleeting moments of hope.  Can destroying the monetary base prevent this or just hide it?  Look at historical GBP if you want a taste of how that works.  Pulling the rug from under you.  Time to step out of the monetary box and more broadly define value and assets.  This is one big private equity scam, with the assets being sucked out and a skeleton and pile of shite left behind.  Follow the money out.

I think thats the key question.Is the 80% fall in currency or assets.Its why i think buying companies with expensive assets already paid for (or even half paid for) is crucial.I found a statement very interesting in WPPs statement today where it mentioned a decade of innovation had happened in a few weeks.

Capitalism needs destruction so it can find better ways.Could it be this virus has delivered what the CBs have been trying to stop?.Massive changes coming in the economy.I cant see how they can sustain the welfare system etc or the massive money sinks of local councils for instance.

 

[Noallegiance]

41 minutes ago, Harley said:

Yes and he p*sses me off for living in lovely Little Cayman knocking back cocktails!  A lot to like about him.

Just started reading but this says it all to me and always has:

We now have interventionist authorities prepared to destroy (finish the destruction of) money, so who knows, but back then more money was lost after the initial fall and the sucker of all rallies.  A long slow grind down with repeatedly dashed fleeting moments of hope.  Can destroying the monetary base prevent this or just hide it?  Look at historical GBP if you want a taste of how that works.  Pulling the rug from under you.  Time to step out of the monetary box and more broadly define value and assets.  This is one big private equity scam, with the assets being sucked out and a skeleton and pile of shite left behind.  Follow the money out.

There's not a lot of hiding from that graph. Let's hope we pick companies that survive the next couple of years.

[Harley]

1 hour ago, Noallegiance said:

There's not a lot of hiding from that graph. Let's hope we pick companies that survive the next couple of years.

The trap is you have a market chart that looks like the UK house prices chart in GBP but very different if you rebase it into gold or even other currencies.  The obsession with housing says it all to me.  Feeling rich, but it sucks all your money and then you go overseas and see how little that small shoddily built rabbit hutch you bought is really worth.  It's a scam.  The ultimate in "Little England" (little being the key word).  Rule #1: Be careful in defining your unit of measure, especially in today's end game fiat world.  To be totally clear, all of the past decade(s) of monetary monkey business, and in particular what is being sown right now, is just illusionary.  There is no value, indeed there's a destruction of value.  Nominal versus real.  Massive.  You need to learn how to relatively value things.  The Weimar and Venezuelan markets, to name just two, both took off in absolute terms but, relative and net, went nowhere.  It's an out and out scam.

[DoINeedOne]

Deutsche Bank introduces negative interest for deposits over 100,000 euros

[Loki]

10 minutes ago, DoINeedOne said:

Deutsche Bank introduces negative interest for deposits over 100,000 euros

Holy moly. Speechless

[Loki]

@Harley masterful post above.  (Yours that is. They should be teaching it in schools)

[Harley]

1 hour ago, DurhamBorn said:

Capitalism needs destruction so it can find better ways.Could it be this virus has delivered what the CBs have been trying to stop?.Massive changes coming in the economy.I cant see how they can sustain the welfare system etc or the massive money sinks of local councils for instance.

Funny, just back from our walk with the dog and our scheduled time to big picture things. 

My partner mentioned the CIPD predicted 21% unemployment which has now been pushed back given the extension of the furlough (so June plus 30 days consultation gives an end of July start).  That tone fitted with my comments in my earlier post about the rest of this year which I discussed with her and so we started to paint our picture.  She mentioned that the 80% for minimum wage earners is allowable (i.e. they can be paid 20% below minimum wage) and said it would hit them hard.  While agreeing, I thought that they (certain sectors such as retail aside) were the ones most likely to bounce back given they tend to do more basic and essential work.  That I would be more worried about the white collar workers who need a thriving sophisticated economy to function (the architects, accountants, consultants, etc).    

We then moved on to thinking about the opportunities (being of a SWOT mindset) this CV threat presents.  I already have one business idea for the evolving new normal.  We even discussed cruising companies (our Carnival shareholding never being far from our minds), especially given today's announcement about the idea of checking travellers before they are allowed to board.  Having initially pew-pewed it, we saw a great opportunity.  Suppose cruise liners did this and offered insurance and health care back up (e.g. fly you to a hospital if ill).  A big ask but a cruise ship may be one of the safest holidays you could go on.  All tested before you go aboard and then effectively in quarantine.  Maybe weekly or more frequent tests while on board.  Just an example of the opportunities available to the right business minds.    

But "they", the plodding unproductive just take, parasites, will be looking hard to take your hard earned.  Can't steal much more from future generations so watch out if you have been prudent despite the relentless tide going against you all these years.  They are not your friends.  They will take.  Eff you. You're nothing.  You never were.

[harp]

58 minutes ago, DurhamBorn said:

I think thats the key question.Is the 80% fall in currency or assets.Its why i think buying companies with expensive assets already paid for (or even half paid for) is crucial.I found a statement very interesting in WPPs statement today where it mentioned a decade of innovation had happened in a few weeks.

Capitalism needs destruction so it can find better ways.Could it be this virus has delivered what the CBs have been trying to stop?.Massive changes coming in the economy.I cant see how they can sustain the welfare system etc or the massive money sinks of local councils for instance.

 

Thanks for the tip DB when in the depths of the recent "crash". WPP were never on my radar or NEX (National Express) and IBST (Ibstock). I put in a fair whack into those stocks and also the big oilies when everyone was selling off. My gut was wrenching that's for sure. But they have saved my arse!

[Chewing Grass]

2 hours ago, Noallegiance said:

There's not a lot of hiding from that graph. Let's hope we pick companies that survive the next couple of years.

There is a book by a guy who was alive at the time, Galbraith who wrote it in 1955 and is a cracking read.

The bit I remember is that from the low point (stocks) it took many investors 25 years and WW2 just to get their money back, never mind a return on it.

Had a look on Amazon and I'm stunned that my £3 copy I bought just before the 2008 bust is now worth a minimum £16 for some bizarre reason and a new copy is minimum £28 for the paperback and £98 for a hardcover!!!

For some reason it must be popular...

https://www.amazon.co.uk/Great-Crash-1929-Kenneth-Galbraith/dp/014103825X

[Jesus Wept]

13 minutes ago, Chewing Grass said:

There is a book by a guy who was alive at the time, Galbraith who he wrote it in 1955 and is a cracking read.

The bit I remember is that from the low point (stocks) it took many investors 25 years and WW2 just to get their money back, never mind a return on it.

Had a look on Amazon and I'm stunned that my £3 copy I bought just before the 2008 bust is now worth a minimum £16 for some bizarre reason and a new copy is minimum £28 for the paperback and £98 for a hardcover!!!

For some reason it must be popular...

https://www.amazon.co.uk/Great-Crash-1929-Kenneth-Galbraith/dp/014103825X

One of my favourite graphs....

If you had bought at the top in 1929 it would take you 25 + 16 years = 41 years before the next secular BULL MARKET.

33 years later it’s still going ....... with the odd hiccup along the way 2001, 2008, 2020..... 

Will the DOW be 50,000 by 2030. I would bet my house on it..... 😉

[Jesus Wept]

1 hour ago, DoINeedOne said:

Deutsche Bank introduces negative interest for deposits over 100,000 euros

I thought they’d been doing that since November....

https://www.bloomberg.com/amp/news/articles/2019-11-02/deutsche-bank-to-pass-on-negative-rates-to-major-customers-fas
 

That’s why Deutsche Bank is fucked. It loses money to the CB for its deposit..... 

Negative rates are crazy. Encouraging mal-investment and massive bubbles, banks are refinancing of ‘zombie’ loans.... etc etc...

Only ‘solution’ to all of this shit is a massive dose of inflation to ‘devalue’ away all the debt and massive spending by governments on infrastructure, innovation and technology. 
 

Its fucked.....

 

[Harley]

On 24/04/2020 at 00:43, JMD said:

I note he has quarter of his liquid wealth in each of PM's/cash/bitcoin/equities.

The Permenant Portfolio for the end of cycle, where Bitcoin replaces bonds!  Neither offers yield, only one will soon offer gains and security (like bonds once did)?

[Loki]

1 minute ago, Harley said:

The Permenant Portfolio for the end of cycle, where Bitcoin replaces bonds!  Neither offers yield, only one will soon offer gains and security (like bonds once did)?

That's a really interesting take on it Harley, you might be onto something there

[Harley]

On 24/04/2020 at 09:17, Fully Detached said:

I appreciate you guys are more into profit making than wealth preservation but hope it's ok to post for some opinions here on my proposed strategy as you sure as hell know a lot more about it than I do.

My current split is approx 60% NS&I index linked savings certs, 15% land, 12% pms, 10% cash and dribs and drabs of crypto and investment funds. I'm happy with that split up until the point unless at some stage we're looking at currency collapse, in which case the index linking on my GBP is not going to be much good to me. So at that point I'll want to rotate all of that into shares.

My current plan is to go all large cap defensives, focussing on the products people will need regardless of how badly the shit hits the fan - food, utilities, pharma and defence. To that end I've identified a number of stocks in each sector (including the unmentionable one), and I'll be researching them over the coming months to identify which have lower debts because I assume that's going to be a major impediment going forwards.

Does that sounds like a reasonable strategy for preservation? I'm a little unsure whether debt would be such an issue in a highly inflationary environment, so maybe I'm barking up the wrong tree there, but I guess buying companies with less debt can't be a bad thing if you're looking at preservation rather than profit. The other thing that's bugging me now is that if I bought shares to ride out massive inflation then presumably there'd be a CGT liabiity on the "profits", so I guess there's an argument for maxxing out share ISA allowances asap and every April in the meantime. On the cash it makes sense to do that because I'm getting bugger all interest on it, but the index linked certs give a decent return because they still use RPI not CPI.

Apologies if this risks derailing the thread here - if so let me know where to post it instead and I'll delete this one.

Absolutely no apology needed.  I'm with you, at least in part as have a mix of objectives.  Indeed I see them all at play regardless.  Wealth preservation requires as much a diversified set of strategies as assets.  So, for example, I have trading, wealth preservation, and income portfolios.  For wealth preservation, I follow the Permanent Portfolio but see the PM section as being more about hard assets, ideally outside the pure financial system.  Land would be one such asset as well as PMs.  I also question the bond holding, but vacillate with my NS&I holdings (cash or bonds?).  Normal bonds are a good anchor but I worry about their interim picture as they have relatively limited scope for appreciation as they approach zero to mild negative yield.  NS&I are not true bonds as the capital is not at risk but it is as close as I comfortably want to go (other than in the short term).  Again, I agree on your equity approach (maybe some other sectors too).  I too have a financial strength/low debt focus in my selection criteria (e.g. cash flows, quick ratios, debt to capital ratios).  The key concern with debt is what it has been used for (i.e. productively not share buy backs, etc) and will they continue to have the cash flows to service that data, maybe at higher rates.  CGT has so far been a voluntary tax, as the real rich folk call it!  Alas, I thought the NS&I certificates were moving to CPI!  You are right to be concerned about the NS&I being denominated in sterling and also, a period of deflation would not be good for returns.  I however hold them as much for the relative security (HMG) and asset diversification as anything else.  Anyways, a good post thanks.

[Harley]

On 24/04/2020 at 10:02, Fully Detached said:

and my money will (probably) get spent on a house eventually,

Ah, an important consideration for any strategy!

[Harley]

On 24/04/2020 at 11:49, JMD said:

Agreed.

Can any one comment on Raul's theory/concern about how/where the boomers will find ready buyers for their over-priced assets? Is he only talking about houses here, or is it a wider thing he's talking about?

I may have misunderstood him, but surely the institutions will always be buyers of assets? Or is he simply describing/underlining the future trend of low growth for most assets? (...i.e. not the type of 'reflation assets' we are focused on here of course!)

All of it I would imagine!  People will need to draw down capital given little available yield.  House sales unlikely before death.  Downsizing is a myth.  Maybe screwed over on an equity release but that's different.    Institutions as buyers?  Only the same as everyone else - at a nice price!

[sancho panza]

5 hours ago, DurhamBorn said:

I think the SVR on mortgages will be between 7% and 11% by 2028 with fixed rates HIGHER.

 

Japan didnt see inflation because they were already a massive manufacturing economy and outsourced a lot to China etc.Different when everyone is re-tooling.

The government has just had a massive shock just because they cant produce gowns and visors.Imagine if they cant produce ships in a war.

Likely another big sell off at some point to secure the extra massive printing.It could be whole market,or mostly over valued sectors.

Just some thoughts.

 

 

I'm still getting over your 'oil to $15 in the paper market' call from Jan 20...................................

Japan is interesting because it is the walking advert for a concerted deflation that features masses of printing but no price inflation.It's that bit of evidence that stops  counters the thread thesis.I think it's something I need to think about some more and reason through it.Demogrpahics/culture/manufacturing/real estate bubble/banking sector..............................could be a lot of reasons

O a wider level,as you say covid has changed many things from a governemntal point of view,but also from consumers too.I think attitudes will undergo a seismic change from here.

I've alreay placed some calls on companies like US Steel bringing back production to the US

 

 

3 hours ago, DurhamBorn said:

I think thats the key question.Is the 80% fall in currency or assets.Its why i think buying companies with expensive assets already paid for (or even half paid for) is crucial.I found a statement very interesting in WPPs statement today where it mentioned a decade of innovation had happened in a few weeks.

Capitalism needs destruction so it can find better ways.Could it be this virus has delivered what the CBs have been trying to stop?.Massive changes coming in the economy.I cant see how they can sustain the welfare system etc or the massive money sinks of local councils for instance.

 

What about both?

Having said all that,it's fait to say the S&P bubble is mainly in a handful of stocks

[DurhamBorn]

2 hours ago, harp said:

Thanks for the tip DB when in the depths of the recent "crash". WPP were never on my radar or NEX (National Express) and IBST (Ibstock). I put in a fair whack into those stocks and also the big oilies when everyone was selling off. My gut was wrenching that's for sure. But they have saved my arse!

I sold National Express at £2.50 harp,i bought some more Go Ahead at £5 and just couldnt resist the huge profit in National Express,100%+ in a couple of weeks.Im not selling WPP though.I like the way the new management sold off a lot of companies and paid down debt.I also think they are worth £12+ break up value.They were one of the few stocks i bought that arent really reflation and they can flex spending quickly.

 

[sancho panza]

4 hours ago, Harley said:

 

We now have interventionist authorities prepared to destroy (finish the destruction of) money, so who knows, but back then more money was lost after the initial fall and the sucker of all rallies.  A long slow grind down with repeatedly dashed fleeting moments of hope.  Can destroying the monetary base prevent this or just hide it?  Look at historical GBP if you want a taste of how that works.  Pulling the rug from under you.  Time to step out of the monetary box and more broadly define value and assets.  This is one big private equity scam, with the assets being sucked out and a skeleton and pile of shite left behind.  Follow the money out.

Depressing isn't it.Was reading up on Schumpeter and the failure of capitalism yesterday.Quite prescient given he was writing some decades back.

[sancho panza]

3 hours ago, Harley said:

The trap is you have a market chart that looks like the UK house prices chart in GBP but very different if you rebase it into gold or even other currencies.  The obsession with housing says it all to me.  Feeling rich, but it sucks all your money and then you go overseas and see how little that small shoddily built rabbit hutch you bought is really worth.  It's a scam.  The ultimate in "Little England" (little being the key word).  Rule #1: Be careful in defining your unit of measure, especially in today's end game fiat world.  To be totally clear, all of the past decade(s) of monetary monkey business, and in particular what is being sown right now, is just illusionary.  There is no value, indeed there's a destruction of value.  Nominal versus real.  Massive.  You need to learn how to relatively value things.  The Weimar and Venezuelan markets, to name just two, both took off in absolute terms but, relative and net, went nowhere.  It's an out and out scam.

Great post Harley.Beuatifully put.

The search for buying real assets before our currency crumbles is the key to surviving this mess.

[DurhamBorn]

31 minutes ago, Harley said:

The Permenant Portfolio for the end of cycle, where Bitcoin replaces bonds!  Neither offers yield, only one will soon offer gains and security (like bonds once did)?

Harley what do you think about Bitcoin?.Im actually quite tempted to buy some.Iv been looking at it a bit like silver lately.Tiny amount compared to world liquidity.That means "if" people chose to it has the chance to be a Tulip bubble asset,as silver has.

[sancho panza]

pretty much what you were jsut saying about govts wanting supply nearer home DB

food for thoguht in terms of what the govt may pontentially print directly into as well

 

https://www.icis.com/chemicals-and-the-economy/2020/04/local-supply-chains-replace-global-trade-as-world-starts-to-do-more-with-less/

Something quite dramatic is happening in the global economy.  Of course, Wall Street analysts still maintain that the impact of the Covid-19 pandemic will be over by the summer.  What else can they say, given their income mostly depends on persuading the public to buy shares?

But anyone on Main Street knows that it will probably take a least a year to develop (a) an effective treatment for people who get the virus and (b) an affordable vaccine. And there is no guarantee of success in either area.

In the meantime, the chemical industry is performing its usual function of acting as a leading indicator for the global economy, as the charts from I.C.I.S. confirm:

• They show how prices have suddenly collapsed in Europe for 3 major petrochemicals
• Ethylene, used for polythene, PET and other major plastics, has dived from $750/t to $250/t
• Butadiene, used for tyre manufacture, has seen prices fall from $600/t to $50/t
• Prices for benzene, used in a wide variety of products, have fallen from over $800/t to $200/t

None of us have ever seen anything like this happen before.

One immediate result is that local supply has become much more attractive than long-distance imports. Why take the risk of buying from another continent, when prices can move so quickly and so dramatically?  And why take the risk of relying on a faraway supplier, who may well take weeks to ship product, as and when demand eventually picks up.

Clearly, therefore, it is unlikely that the world will return to “business as usual” whenever the coronavirus pandemic finally ends. When that occurs, the chemicals industry will, as usual, be in the forefront of the paradigm shift.

We are starting to learn, or relearn, that we need to do more with less. The days of globalization are behind us, and instead sustainability on a local basis is now the key driver for business.

Some argue that cheap oil will undermine the case for recycled plastics, but that is to misunderstand the nature and power of the shift now underway. After all, the Stone Age didn’t end because the world ran out of stones, and the Coal Age is already ending with coal still left in the ground. The same will be true of oil and gas as the world transitions to renewables.

The signs of the paradigm shift are all around us, most notably with the moves by brand owners to respond to consumer pressure and step up their use of recycled plastics. As a landmark study by the University of Georgia highlighted in 2018, the debate has evolved to focus on the sheer waste involved in basing the business on virgin feedstocks. As the study shows:

• The world has produced 8.3bn tonnes of plastic over the past 60 years.
• Almost all of it, 91%, has been thrown away, never to be used again.
• Even worse, this waste hasn’t simply disappeared, as plastic takes around 400 years to degrade.
• Instead, the study finds, 79% is filling up landfills or littering the environment and “at some point, much of it ends up in the oceans, the final sink.”

Nobody is claiming that this waste was created deliberately. Nobody is claiming that plastics aren’t incredibly useful — the Covid-19 pandemic has proved that to a new generation. The issue is simply that we cannot afford to keep throwing away such a valuable material.

• Recycling is the obvious next step, where communities replace waste sites with resource centers, where plastic from the local community is recycled back into usable products for resale.
• These resource centers will include 3D printing, and dramatically reduce the amount of plastic needed to make a finished product.
• It operates on a very efficient “additive basis,” only using the volume needed and producing little waste.

Essentially the economic crisis created by the pandemic will likely force us to adopt the principles of the circular economy, as the Ellen MacArthur Foundation describes them:

“Underpinned by a transition to renewable energy sources, the circular model builds economic, natural and social capital.”

The chemical industry is now in crisis, along with many other major industries. Bankruptcies are inevitable, as I have argued here since early February, when trying to highlight the risks. Unfortunately, as in 2008, few believed me.

It is not too late, however, for companies who wish to survive the crisis. As well as managing through it, they need to focus on using their skills and expertise to develop a more service-based business.

The need is to provide sustainable solutions for people’s needs in the fields of mobility, packaging and other essential areas.  The good news is that they will have a very profitable and secure future ahead of them.

 

[sancho panza]

https://www.icis.com/chemicals-and-the-economy/2020/04/the-new-normal-world-is-starting-to-emerge/

 

by Paul Hodges on 19th April 2020 in Economic growth

SHARE THIS STORY

 

Many companies and investors are still comparing today’s downturn to the 9-month hiccups seen after the 1990/91 Gulf War and the 2000/1 dotcom crash. In reality, however, this is wishful thinking, as the IMF highlighted last week in its World Economic Outlook:

“The Great Lockdown: Worst Economic Downturn Since the Great Depression”

One key question, of course, is whether Covid-19 is itself the key risk – or is it instead acting as the catalyst for a major structural change?

Our analysis focuses on the US  S&P 500 – the world’s leading stock index. It starts with the structural changes that began after the 1974 oil price crisis highlighted in the chart. It then focuses on (a) the BabyBoomer SuperCycle from 1983-2008 and (b) then the credit bubble created since 2008 by central banks in their effort to essentially ’print babies’.

The key issue for today is that the world has now lost the demographic dividend created by the vast Boomer population, as they moved into the high-spending Wealth Creator 25-54 cohort. It is instead having to confront the realities of the demographic deficit created by their move into the low spending Perennials 55+ cohort. There is no historical precedent for this development.

The Boomers are the first generation in history to have an average life expectancy beyond the age of 65. A century ago, when the pension was invented, life expectancy averaged just 46 in the West – and only 26 elsewhere.

The analysis suggests that our adult lives have been dominated by the key Phases highlighted in the second chart in respect of the Boomers’ impact, as the largest and wealthiest generation that the world has ever seen:

Phase Zero. 1974’s Arab Oil Embargo took the S&P to an inflation-adjusted low of 335 in December, and it stayed in the “Quiescent” stage till 1982, bottoming at 291
Phase 1. The “Improvement” stage then took markets into an initial recovery
Phase 2 began in 1983, and saw “Confidence” increase as the demographic dividend created by the Boomers’ move into the Wealth Creator 25-54 cohort developed. The average Western Boomer (born 1946-70) joined the cohort in 1983, and all the Boomers were in the cohort between 1995-2000. They created unstoppable growth in demand, and powered a record rise in the stock market as their pension savings were invested. Real estate also boomed as many settled down and had families.
Phase 3 continued this “Prosperity” after the minor recession of 2000/1, even though the oldest Boomers were starting to join the Perennials 55+ cohort – where spending slows, incomes reduce, and shares start to be sold to fund pension income. Sadly, the US Federal Reserve failed to recognise this demographic demand deficit, and instead created the subprime crash with its first stimulus campaign to artificially boost housing/auto markets,.
Phase 4 saw the major central banks ‘double up’ on the Fed’s failed stimulus programmes, creating “Excitement” whereby the fundamentals of supply/demand were ignored in favour of “Fed-watching” and the habit of ‘Buy on the dips’, in anticipation that the Fed would never let markets fall again. Foreign buyers dominated Western housing markets seen as ‘safe havens’, often buying “off-plan”.
Phase 5 is now in its early stages of “Convulsion”, with the bursting of the credit bubble already underway. The fall in oil prices will inevitably lead to deflation, pushing up the real cost of debt for the first time in the Boomers’ lifetime, and so collapsing house prices. Asset markets will have to rediscover their true rule of price discovery, which will likely lead to wealth destruction
Phase 6 will then see “Pressure” end the cycle, with potentially a risk of a return to “Quiescence” due to the debt built up by he central banks’ failed attempts to ‘print babies’.

The problem is that we have all wanted to believe that, somehow, the academics and investment bankers running central banks can control the economic fortunes of the world’s 7.8bn people. But common sense tells us this is fantasy.

Demographics drive demand, not central banks, as the Covid-19 crisis has confirmed. They have printed $tns of cash, but this has not created demand – for the simple reason that people are locked-down in their homes. Instead, all they have achieved is to create yet another asset bubble in financial markets.

The next few years are therefore likely to be spent in picking up the pieces from their hubris.

[Harley]

On 25/04/2020 at 10:41, DurhamBorn said:

If this thread is going,then the next several years will be about trying to work out if there are any areas to protect wealth.

We need to be doing this now.  We don't have years.  And by protecting wealth I also include investing now to increase independence and reduce the future costs of living.