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


spunko

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DurhamBorn
1 hour ago, Talking Monkey said:

DB you've mentioned previously that the QE being done over the next 18 months is the last time that it can be done. With the lockdown and the government covering consumption does the fact a large portion of new QE will go to cover consumption mean less for infra spending and in turn the reflation cycle evolving differently than you would have anticipated say a year ago.

No,i think it will be on top,i think we might get £800 billion now,and remember its not just us,its everyone.China and the US are entering a cold war,massive spending,and other blocks will need to keep up.The aussies will be wanting plenty of submarines etc.A lot of the liquidity from CBs is being monetized for current spending,but a lot is still going through the capital markets.Its also not just governments spending.A simple one is the likes of BT.Government allow them to make x amount more return on building out fiber etc,they will invest.Lots will be driven by government policy,not just money.Likely they seed a lot.Most of the inflation will come when the bond markets start to rotate into assets.That will be the big story of the cycle once it gets going.

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DurhamBorn
26 minutes ago, JMD said:

DB, can you comment more about the 'wealth transfer' part? Have you some ideas on the type of policies, etc.

I think pension taxes have been mentioned before. And i suppose residential house equity will eventually be taxed? (i.e. social care costs will be 'capped' in order to 'win gullible votes', but it has to be paid for by other means)  

I guess it will be the 'easy to reach' assets that will be stolen first. So for example it would be a good idea to move money from a sipp (using tax free sum) and into isa's, because pension wealth is so massive (compared to total isa wealth, actually its quiet a stark difference) it will surely be too irresistible for government not to go after (again, again, again).

Simply inflation.Printing will force up prices and to pay for that extra cost the capital cost of houses will fall.Governments will use inflation mostly.Merging income tax and NI will likey be the main assault on earnings as that gets pensioners on larger incomes mostly (hence why pension income at 12.5k and the rest in ISAs will matter)

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DurhamBorn

“Project Defend”: major UK government review looks to end strategic dependencies. The Times reports that “Boris Johnson has ordered civil servants to draw up plans codenamed Project Defend to end Britain’s reliance on China for vital medical supplies and other strategic imports in light of the coronavirus crisis.” The initiative, led by Dominic Raab, the foreign secretary, could lead to the government intervening to support the “repatriation” of key manufacturing capabilities such as pharmaceuticals as part of a new national resilience framework.

https://www.thetimes.co.uk/edition/news/boris-johnson-wants-self-sufficiency-to-end-reliance-on-chinese-imports-bmlxnl8jl

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18 minutes ago, DurhamBorn said:

“Project Defend”: major UK government review looks to end strategic dependencies. The Times reports that “Boris Johnson has ordered civil servants to draw up plans codenamed Project Defend to end Britain’s reliance on China for vital medical supplies and other strategic imports in light of the coronavirus crisis.” The initiative, led by Dominic Raab, the foreign secretary, could lead to the government intervening to support the “repatriation” of key manufacturing capabilities such as pharmaceuticals as part of a new national resilience framework.

https://www.thetimes.co.uk/edition/news/boris-johnson-wants-self-sufficiency-to-end-reliance-on-chinese-imports-bmlxnl8jl

UK strategic dependency review is a big story. Australia begun doing this a while back. Taiwan recently stopped supplying Hauwai.  

I wonder how China will react to all this 'divestment' and onshoring ('industrial homebrewing'?, though I do hope for us in the UK it amounts to much much more). Might China go on a charm offensive for next couple years, before that is ColdWar11 begins proper?

I must add that I really admire those young Hong Kong Chinese, after all they are intelligent realists and know exactly what's coming there way. Yet still they attempt to challenge mainland China.

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Talking Monkey
14 minutes ago, JMD said:

UK strategic dependency review is a big story. Australia begun doing this a while back. Taiwan recently stopped supplying Hauwai.  

I wonder how China will react to all this 'divestment' and onshoring ('industrial homebrewing'?, though I do hope for us in the UK it amounts to much much more). Might China go on a charm offensive for next couple years, before that is ColdWar11 begins proper?

I must add that I really admire those young Hong Kong Chinese, after all they are intelligent realists and know exactly what's coming there way. Yet still they attempt to challenge mainland China.

If China is going to implode I guess it will happen in the next 10 years, I hope it does. Would be shit growing old under world domination by China

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3 hours ago, Eventually Right said:

It's the 3 year anniversary of the original thread starting on ToS today-thanks for starting it back in 2017 DB, it's been a hell of a ride so far!

Yes, but when are we going to make money!:)

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2 hours ago, JMD said:

Harley, I like (investment) formulas, purely as a guide of course... after all they can always be 'made to fit' if they don't look right! (or is that just me?!)

But have you modified your thinking on how to achieve a total return? I may be misremembering, but I thought you previously said something along the lines of achieving a total return for a sector (I believe you breakdown many sectors), by selecting 2 'good' (value, reflation) stocks and 2 'good' smart beta etfs/funds (sorry, paraphrasing you).

OK, FWIW and apologies, but one of those posts to help clarify my mind and spur me on to do it a bit more!

I loved ETFs when they first came out.  Way before they became so popular.  So much better for me than the funds, etc.  I traded them quite well (trading sectors) too.  I then got serious about investing/personal finance so set up a floor (SIPP based permanent portfolio) and an upside fund (ISA income).  Both were ETF based.  Then along came the KID nonsense, the relatively poor performance of the income ETFs , and increasing concerns on the unique risks of ETFs (spurred on by one failure).  So I've been moving away from ETFs but still have some and will probably always do so in my SIPP (using a conservative provider who does not lend securities).  My approach to the equity section of my SIPP now is to select target industries on the basis of macro trends (as often discussed here) and identify, through fundamental analysis, the top best three companies in each sector.  These companies have to deliver at least the average dividend of the top 15 or so companies in the sector, but other factors are also important such as debt levels and cash flows.  I use technical analysis to time the purchases.  So this is more of a total return focus.  My income portfolios (I manage a few) are 100% FTSE100/250 high div companies and are down badly.  They also contain companies likely/are cutting dividends under as much political pressure as anything else.  My mistake was to look for so many companies in a relatively small pool so ended up going into sectors I really did not like and should not have done.  I'm now looking at going more global with new ISA cash to provide a geo spread of those sectors I like and hopefully into countries with less pressure to cut the divs.  This will hopefully also enable me to hedge future sterling falls.   

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reformed nice guy
15 hours ago, DurhamBorn said:

Has anyone ever bought on Hargreaves on the phone for stocks they dont quote for online?

I went to buy Nexa Resources tonight,but not available on the platform yet its quoted on the NYSE.A very big zinc producer that should have a bull run in reflation,but also throws of 6 million oz of silver a year.

I have bought a few on the phone. It is quite straight forward but there is a 1% charge but its £20 minimum, £50 maximum.

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1 hour ago, DurhamBorn said:

“Project Defend”: major UK government review looks to end strategic dependencies. The Times reports that “Boris Johnson has ordered civil servants to draw up plans codenamed Project Defend to end Britain’s reliance on China for vital medical supplies and other strategic imports in light of the coronavirus crisis.” The initiative, led by Dominic Raab, the foreign secretary, could lead to the government intervening to support the “repatriation” of key manufacturing capabilities such as pharmaceuticals as part of a new national resilience framework.

https://www.thetimes.co.uk/edition/news/boris-johnson-wants-self-sufficiency-to-end-reliance-on-chinese-imports-bmlxnl8jl

Note it doesnt say - Non UK suppliers. Just China.

 

 

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https://www.cnbc.com/2020/05/22/imf-says-banks-will-struggle-to-be-profitable-through-2025.html

KEY POINTS
  • In a new report Friday, the IMF said banks across nine advanced economies will struggle to generate profits through 2025.
  • Banks’ earnings have already been hit hard by the economic shock of the coronavirus pandemic.
  • The IMF said the economic downturn will “test banks’ resilience” as they face loan losses and tighter margins from low interest rates.
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3 hours ago, DurhamBorn said:

“Project Defend”: major UK government review looks to end strategic dependencies. The Times reports that “Boris Johnson has ordered civil servants to draw up plans....

Good luck.  They're going to have to fight some powerful paid for vested interests in the Establishment.

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2 minutes ago, Harley said:

Good luck.  They're going to have to fight some powerful paid for vested interests in the Establishment.

Cummings does seem to be up for that scrap.

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2 hours ago, Harley said:

OK, FWIW and apologies, but one of those posts to help clarify my mind and spur me on to do it a bit more!

I loved ETFs when they first came out.  Way before they became so popular.  So much better for me than the funds, etc.  I traded them quite well (trading sectors) too.  I then got serious about investing/personal finance so set up a floor (SIPP based permanent portfolio) and an upside fund (ISA income).  Both were ETF based.  Then along came the KID nonsense, the relatively poor performance of the income ETFs , and increasing concerns on the unique risks of ETFs (spurred on by one failure).  So I've been moving away from ETFs but still have some and will probably always do so in my SIPP (using a conservative provider who does not lend securities).  My approach to the equity section of my SIPP now is to select target industries on the basis of macro trends (as often discussed here) and identify, through fundamental analysis, the top best three companies in each sector.  These companies have to deliver at least the average dividend of the top 15 or so companies in the sector, but other factors are also important such as debt levels and cash flows.  I use technical analysis to time the purchases.  So this is more of a total return focus.  My income portfolios (I manage a few) are 100% FTSE100/250 high div companies and are down badly.  They also contain companies likely/are cutting dividends under as much political pressure as anything else.  My mistake was to look for so many companies in a relatively small pool so ended up going into sectors I really did not like and should not have done.  I'm now looking at going more global with new ISA cash to provide a geo spread of those sectors I like and hopefully into countries with less pressure to cut the divs.  This will hopefully also enable me to hedge future sterling falls.   

Thanks Harley, so will you be turning mostly Japanese to get those divis, I hear Japan are/will be the divi king (emperor)?

When you say '...does not lend securities', in relation to etfs, are you referring to things like swaps and derivatives?

 

The US are lucky with their choice of etfs, I hear they can even buy, alongside the well known 'factor' etfs, equal weight ones, unsure of their actual name but where a fund invests equal amounts across say all 70 of biggest companies and rebalances 6-monthly; apparently back testing shows better performance than merely replicating the market ratio values of individual co's, like most standard vanilla etfs do. (I think I have made a mess of describing these)

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DurhamBorn
6 minutes ago, Harley said:

Good luck.  They're going to have to fight some powerful paid for vested interests in the Establishment.

Very much so,its going to get interesting.The economy is nowhere near large enough now to support the demands on it.Its incredible the amounts of parasites sucking the host dry.Its like the poverty industry.The civil servants push and push to get more and more for the "disadvantaged" so both they and them end up cushy,while the working tax payer pays for it.So far though the Tories arent looking very much up for it.They are failing at every turn.

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10 hours ago, DurhamBorn said:

eople 50 who were expecting equity release in 10 years and pension drawdown from their lifestyle type funds are going to be destroyed this cycle.

The thing is there are people where I work on such funds where they have the option to do a taper into bonds from 55 or stay 100% in stocks...what will they do?...nothing, and so they will automatically end up in the `safe` option of bonds and cash!

 

...and to add, if I hadn't discovered a site like this about five years ago I would still be one of them...blissfully ignorant until it was too late.

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DurhamBorn
7 minutes ago, Bricormortis said:

https://www.theguardian.com/environment/2020/may/22/uk-approval-for-biggest-gas-power-station-europe-ruled-legal-high-court-climate-planning

Drax overcomes a legal challenge from environmentalists to build Europe's biggest gas fired powered station in Yorkshire. ( may still have to fight against an appeal )

Yeah and i expect it to be converted to hydrogen at some point in the future.

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DurhamBorn

https://www.liverpoolecho.co.uk/news/uk-world-news/national-holidays-shearings-fall-administration-18299134

Lots going bankrupt,but really sorry to see these go under.My parents enjoyed many a holiday with them and they were always very good value.The irony is its likely their UK holidays would of proved very popular over the cycle.National Express will gain of course and if i was one of the big coach companies id be running the rule over the business.

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Jesus Wept

Just wondering if anyone managed to get any Silver at 46p/oz (1966) ?

It more than tripled by the year I was born in 1975...

 

36EBA09F-C807-4665-949B-AAE66FF01DF7.jpeg

5BCE670E-081C-49CB-BF72-6187D2292174.jpeg

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DurhamBorn
Just now, Loki said:

@DurhamBorn What's your gut feel on another round of covidbucks for the self employed?

Tough call,they might pay for June and maybe July then thats it.I dont think they understand the size of the job losses coming.They built the economy for 40 years on the service industry + tax credits during dis-inflation,then decided the bankrupt half if it.Lots of my friends etc enjoying the furlough in their hot tubs and gardens like its a lovely holiday.The deficit is going to run at £200 billion even after the end of "lockdown".

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3 minutes ago, DurhamBorn said:

Tough call,they might pay for June and maybe July then thats it.I dont think they understand the size of the job losses coming.They built the economy for 40 years on the service industry + tax credits during dis-inflation,then decided the bankrupt half if it.Lots of my friends etc enjoying the furlough in their hot tubs and gardens like its a lovely holiday.The deficit is going to run at £200 billion even after the end of "lockdown".

Thanks mate.  Working in construction I'd like to think I'm in a good position for the infrastructure side of the cycle...might have to get out of office fit outs though!

Be nice to get one more round of state sponsored Britannia in though. (Don't judge me, I've been honest on my tax returns so got a decent grant!) 

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4 minutes ago, Loki said:

Thanks mate.  Working in construction I'd like to think I'm in a good position for the infrastructure side of the cycle...might have to get out of office fit outs though!

Be nice to get one more round of state sponsored Britannia in though. (Don't judge me, I've been honest on my tax returns so got a decent grant!) 

Working in construction also. We heard today of a local builder going into administration. It's going to be tough but the stronger leaner firms will survive. You are correct regarding diversity (or choosing the right sector). Retail fit out for example is not the place to be!

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