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


spunko

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geordie_lurch
7 hours ago, Sugarlips said:

I imagine you’ll go for something stealthy, we don’t want to be to showy in tough times, curious if you’ll get something ultra frugal on fuel given your predictions for oil, will you get a hybrid?

Im sticking with bangernomics for now. My $1000 (£500) ‘98 Volvo estate is going strong after 3 months of ownership, no leaks, knocks, faults of any kind touch wood, smooth and comfy, all it has cost me a pair of brake pads and new windscreen wipers which I knew when buying it - should be good for another 100,000 Kms.

Great thread on PH for those that enjoy finding and running a bargain, ideal for those who are willing to spanner themselves:

https://www.pistonheads.com/gassing/topic.asp?h=0&f=23&t=1794175&i=3080

IMG20200222121645.jpg

My budget was a bit higher and I wanted something really fun to drive so have recently picked up a 2002 (nearly 18 years old!) 180 bhp Audi TT quattro second hand and think they are great value for money. You can get them from under £1000 anywhere up to around £3000. They share the same strong and very tunable 1.8 engine across the VW group so that means if you want you can add 20% torque and BHP easily and also get cheap parts that also fit VWs, Seats and Skodas.

A lot of people like me think they are a real modern classic and have aged very well both externally and internally...

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However you will have to deal with mates taking the mick out of you for having a 'hairdressers car' etc!

 

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9 minutes ago, geordie_lurch said:

A lot of people like me think they are a real modern classic and have aged very well both externally and internally...

Myself included. I really like that deep red colour, not sure what it's called. When I have a bit more space, I would like to add one in silver. While I'd love a V6, they only made them with DSG and I'd prefer a manual.

Hairdresser comments should be aimed squarely at the convertible!

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geordie_lurch
1 minute ago, AWW said:

Myself included. I really like that deep red colour, not sure what it's called. When I have a bit more space, I would like to add one in silver. While I'd love a V6, they only made them with DSG and I'd prefer a manual.

Hairdresser comments should be aimed squarely at the convertible!

Mine is amulet red (LY3C) 👍

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DurhamBorn

On the politics,the thing to remember is they follow the cycle,they dont drive it,they are a lag on the macro.Governments splash the cash on investment when they fear unemployment,not before.BOE wont he handing the governments a penny once inflation gets over 5%.(apart from their profits)

Amercians all losing their jobs because of deflation from China is causing the new cold war.Trump didnt cause the deflation,but he was elected because of it,even though 99.9% of the people voting had no idea "why" they voted the way they did.Brexit the same (with tax credits pushing the vote over the line by sucking in Eastern Europe),

The issue over the next few years is unemployment and deficits,governments have a window to print,monetize,spend.The 70s inflation really got going because political parties feared unemployment more than inflation,we are there again,just its even more pronounced as they have zero fear of inflation,and actually want some as they are thinking they can control it later.Politicians would put another Arthur Burns in charge of the CBs if they could right now.In 2028 they will be digging up Volcker.

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DurhamBorn
15 minutes ago, Cattle Prod said:

What about Chinese investment in strategic UK assets, like Hinkley Point? I'm sure Raab is asking if we want our future baseload electricty supply in the hands of the Chinese. Here's another one - CNOOC operates arguably the most important oil field in the UK: Buzzard. It's the biggest producing field in the North Sea, and forms the largest % of the Brent blend, whose pricing sets the benchmark and is traded in the city of London etc etc, a strategic asset for sure. I recall there were some concerns about this when CNOOC took over Nexen. I'm not sure how the govt can throw their weight around on this, but they have compelled filed shut ins before (Rhum/Iran) and blocked sales/forced asset sales (Letter 1/RWE).

Our governments have been shocking.Take the gambling sector.A sector where the UK leads the world.A sector seeing huge growth.We had the best bookies,exchanges,platforms.On top of that the retail bookies provided a place where a lot of older people went every day and got to talk to people etc,perhaps their only social interaction for many.Instead of keep regs low and allowing these companies to create capital to expand around the world they over regulate,try to hold down etc.The energy companies over regulated to the point they start selling assets and under investing.Pigeons all coming home to roost now when the government sees our economy while it was doing well in many ways was holed under the surface .

Look at the FTSE 100 now.Thats the best the UK can come up with for its biggest companies.Half the index is fresh air.

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leonardratso

im still buying a small %age every month, trying to get my average down, not putting much in any more, i think my average is 97pence, but id like it to some to 40-50 pence which given the small amounts im putting it will take a long time.

Took some profit on ITM, but its now gone back up to 97% profit, i wish all my c.n.a was in ITM, pah, should have would have could have eh.

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TheCountOfNowhere

I wish I'd bought those easyjet shares at 450, my finger was hovering !!!

I bought some more shares to day.  More repsol, the channel tunnel lot, national grid, telefonica and royal mail.

I have a funny feeling we are about to see a surge.

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Talking Monkey
1 hour ago, Shamone said:

That was a very interesting read. The bit about reshoring especially, I'm skeptical on huge amounts of jobs being created, the effect of tech and automation will be huge as new factories are built in Europe and America that are largely automated

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22 minutes ago, Talking Monkey said:

That was a very interesting read. The bit about reshoring especially, I'm skeptical on huge amounts of jobs being created, the effect of tech and automation will be huge as new factories are built in Europe and America that are largely automated

I get the concept of reshoring but think it's highly unlikely on any scale.

Most folk are goldfish and will have forgotten all this in a year besides there are plenty of alternative lo-cost locations lining up, clothes in Pakistan, fridges in Phillipines and so on.

A lot of companies who moved their call centres offshore from the west to Malaysia have since moved them again to India/Phillipines etc to save even more $ so it wouldn't be without precidence.

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leonardratso
10 minutes ago, BearyBear said:

LOL, that's funny :)

https://www.zerohedge.com/markets/fed-now-proud-owner-bankrupt-hertz-bonds

The Fed Is Now The Proud Owner Of Bankrupt Hertz Bonds

 

no doubt theyll get some sort of equity swap (see junk) when it emerges from bankruptcy, are they allowed to hold junk equity.

 

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Popuplights
1 hour ago, TheCountOfNowhere said:

I wish I'd bought those easyjet shares at 450, my finger was hovering !!!

I bought some more shares to day.  More repsol, the channel tunnel lot, national grid, telefonica and royal mail.

I have a funny feeling we are about to see a surge.

What is the ticker for Telefonica? Don't want to do an MOS.....

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TheCountOfNowhere
1 minute ago, Popuplights said:

What is the ticker for Telefonica? Don't want to do an MOS.....

Do want to do a MOS you mean.  Easiest money I've ever had.

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sancho panza

 

11 hours ago, JMD said:

                                                                                                                                                                                                                                             In terms of leads and lags - and how our politicians react or are required to react, in the short term depends a great deal on changing voter sentiment and changing party loyalty. I'd suggest that the major factors at play here are that a very large proportion of working class voters are now politically homeless, and that large factions of conservative and Libdem voters are frustrated with their own parties. While British people have historically shown themselves to not be attracted to radical politics, they have unfortunately recently shown how easily they can be manipulated (subjugated even) so just 'good in parts'. Of course there has been much social conditioning over many years where many people have been taught 'what' to think and not 'how' to think. 

We know the various playbooks that msot of the current politcal/CB class are playing with.

The key issue for me is working out who's going to pay,because someone will? We know they're keen to keep the free money flowing.We know they like grandiose gestures.We know they're scared witless of Middle England in swing constituencies.It's working out hwo they will play it.For now,moeny printing has been enough but tax rises look inbound.None of the poltical class want to admit how much trouble we're in.

The game changer will be if and when an Honest Broker arrives on the politcal scene in the UK.Or we get a seismic change nearby eg EU break up.Things could change thereafter.

5 hours ago, ThoughtCriminal said:

I may show my naïveté here as currency isn’t my strong point, but given what we’re expecting to happen to sterling, aren’t we going to be better parking our cash element in something like Swiss Francs rather than sterling?

Problem is you never know what could happen eg CHF/EUR blow out.Best to keep a chunk of your spare capital in the currency you use.

Although i msut admit,I'm starting to hold an internal conversation in my head about moving a chunk of our 20% cash into GLD.Never thought I'd say that.

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sancho panza
4 hours ago, DurhamBorn said:

On the politics,the thing to remember is they follow the cycle,they dont drive it,they are a lag on the macro.Governments splash the cash on investment when they fear unemployment,not before.BOE wont he handing the governments a penny once inflation gets over 5%.(apart from their profits)

Amercians all losing their jobs because of deflation from China is causing the new cold war.Trump didnt cause the deflation,but he was elected because of it,even though 99.9% of the people voting had no idea "why" they voted the way they did.Brexit the same (with tax credits pushing the vote over the line by sucking in Eastern Europe),

The issue over the next few years is unemployment and deficits,governments have a window to print,monetize,spend.The 70s inflation really got going because political parties feared unemployment more than inflation,we are there again,just its even more pronounced as they have zero fear of inflation,and actually want some as they are thinking they can control it later.Politicians would put another Arthur Burns in charge of the CBs if they could right now.In 2028 they will be digging up Volcker.

Lot of wisdom in this psot if i may say.

I think that's the right approach to tkae on the whole.I view most polticains as steering the rudder with the tide.Very few will try a signifciantly different course.

And on the second poitn in bold,as long as the currency holds,the CB has options.Once the dam breaks,they don't so much.

I tried to explain to my (very left wing) Dad,why Brexit occurred-rising retns/declining real wages(in simpel temrs) ,Trump's election for similar reasons.But changing some peoples world view is hard and it sometiems stops them assimialting the reality.History told us these things were more likely to occur than the odds.

Same as stagflation.I started out a deflationsit but then as time and the debate here has moved on,I've accepted that some sort of stagflaitonary result appears most likely-for political reasons more than anything else.

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sancho panza
2 hours ago, Cattle Prod said:

Oh I haven't worked out the average yet, I'm joking. Not as bad as @sancho panza thought!! 

It's safe to say to say my top ladders are unassailablexD.

PS Ill come back to these graphs later,go to get kids to park.

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ThoughtCriminal
17 minutes ago, sancho panza said:

 

We know the various playbooks that msot of the current politcal/CB class are playing with.

The key issue for me is working out who's going to pay,because someone will? We know they're keen to keep the free money flowing.We know they like grandiose gestures.We know they're scared witless of Middle England in swing constituencies.It's working out hwo they will play it.For now,moeny printing has been enough but tax rises look inbound.None of the poltical class want to admit how much trouble we're in.

The game changer will be if and when an Honest Broker arrives on the politcal scene in the UK.Or we get a seismic change nearby eg EU break up.Things could change thereafter.

Problem is you never know what could happen eg CHF/EUR blow out.Best to keep a chunk of your spare capital in the currency you use.

Although i msut admit,I'm starting to hold an internal conversation in my head about moving a chunk of our 20% cash into GLD.Never thought I'd say that.

Oh I agree it’s wise to keep some cash in sterling but I can only see it heading in one direction. There must be somewhere outside of PMs that’s a safe bet.

 

 

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I this the turn we've been waiting for?

DXY 99.045

 

10 year US Treasury 0.695 (up 5.45%)

 

£/$ 1.234                                              

                                  just now

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On 25/05/2020 at 14:33, Harley said:

The genuine stories of persecution by the State (like the accommodating elasticity of the law) they told not only shocked tough old me but had me reciting in my head "First they came....".   That's all I needed to know.

Relevant to this thread for two reasons.  First, they will come for us, our hard work, our savings, our financial (and hence general) independence, and our wealth.  Second, the best political economist I ever spoke to was one of them.  He would, in a peverse way, be right at home here and would be a welcomed major contributor. 

Saw mentioned somewhere gold confiscation being mentioned as a possible but unlikely thing.

Do you have any views on whether this could happen.  It happened in the US before but back then the dollar was convertible into gold now we have fiat so different.  But can't rule anything out so guess my next question is what would happen to the price of gold.  

I have had a quick look now but the figure was reached arbitrary by President FDR in 1932/33 around about same time it was made criminal offence for individuals to own or trade.  Don't know if the quoted price jump from roughly $23 to $34 just reflects the US price or whether they had such clout they could dictate the price (and if it was higher then obviously that is where the market will be made).

The other thing is arguably we are moving -or so some lament- towards a more globalised system/ one world currency type thing.  If that comes to pass or near then definitely I see gold being raided somehow.... The price can be more easily managed in order to extract wealth from the most people or individual investors/ hoarders.  

Wonder too if something like bitcoin is an extra hedge against as long as enough people accept which seems to have been proven now.  

Just thinking out loud but do wonder what would happen to my precious few pieces of silver.  Hopefully not enough interest in - like a lot of things more people - more danger less reward.  And a bigger target for taking control of.

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9 minutes ago, janch said:

I this the turn we've been waiting for?

DXY 99.045

 

10 year US Treasury 0.695 (up 5.45%)

 

£/$ 1.234                                              

                                  just now

Gold down at the same time, if it gets to £1200 I may add a few coins to my collection :)

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1 hour ago, leonardratso said:

no doubt theyll get some sort of equity swap (see junk) when it emerges from bankruptcy, are they allowed to hold junk equity.

 

I caught some of max keiser the other day and I think I am right in saying he alluded to the fact that effectively this is what was going on.

He mentioned Herbalife that dodgy pyramid scheme beumouth that have recently taken out (or suggested) loans from the government on ultra low rates in order to buy back shares.  

Like I say not sure if this is pertinent to your question or I'm correct in following but did sound basically junk bond the way he described.

Edit - the loans maybe from banks but effectively underwritten by the gov I think.

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4 hours ago, DurhamBorn said:

On the politics,the thing to remember is they follow the cycle,they dont drive it,they are a lag on the macro.Governments splash the cash on investment when they fear unemployment,not before.BOE wont he handing the governments a penny once inflation gets over 5%.(apart from their profits)

Amercians all losing their jobs because of deflation from China is causing the new cold war.Trump didnt cause the deflation,but he was elected because of it,even though 99.9% of the people voting had no idea "why" they voted the way they did.Brexit the same (with tax credits pushing the vote over the line by sucking in Eastern Europe),

The issue over the next few years is unemployment and deficits,governments have a window to print,monetize,spend.The 70s inflation really got going because political parties feared unemployment more than inflation,we are there again,just its even more pronounced as they have zero fear of inflation,and actually want some as they are thinking they can control it later.Politicians would put another Arthur Burns in charge of the CBs if they could right now.In 2028 they will be digging up Volcker.

DB, you are correct of course, and you make an important reminder that the politics does indeed follow the economics. Although there are exceptions, and where recently the politicians threw the economy under the Corona bus, and sacrificed the economy because they were spooked by the predicted deaths, rather than sticking with their original herd-immunity plan. Then again, future policies are now very much driven by how much the economy is now damaged, so I guess everything is back on track, thus proving your point, in terms of political leads and lags.

I think my previous post perhaps still didn't articulate what I was getting at: For me, we live in a quasi-democracy, and every 5-years, politicians - in order to 'keep their visions trending' - decide/nominate/hedge(?) whether to bribe us (past form-book to date), or to scare us (enter corona virus? cold war II). The value in identifying what policies could happen is that you can hopefully decide, for example, whether an expanded NHS (bribe) is on the horizon/can be invested in; or alternatively, whether to run for the hills (figuratively speaking?) because of risk of your wealth being stolen by stealth by the state. Preparing for and investing in the next cycle may be in most part under our control, well sort of. But the crucial thing to realise is that not all voters are created/treated equal, and some individuals may enjoy merely sitting back and receiving their UBI payments, but I think for many reading this blog there will be no free lunch, and we will need to carefully monitor the (real) political intentions of our decision makers (i.e. creating the next 'utopia', despite it always being a lethal idea)     ...anyway that's me definitely done...

 

As for Corona - it really does look like it will be forever with us! I wrote very early on here that I had a nagging feeling (I admit stemming from pure worry, no theory involved on my part) that this virus would have as big an impact on us as climate change (at the time I even asked how we could benefit investment wise; but can now see how naïve that question was). However,  what do others think, was i/am I - corona catastrophising? 

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