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

[Shamone]

On 03/06/2020 at 14:05, janch said:

From the Telegraph article above:

 

"every measure restraining public behaviour should be examined for whether it really is necessary, bearing in mind that rules such as the two-metre requirement for social distancing are keeping millions of people from earning money and paying taxes. We urgently need to keep a lid on the recession we are facing. Restaurants, bars, shops, factories, tradesmen and offices are all hampered. If at all possible, they should get back to business. This matters not just for now but for the next decade."

 

The reason for all the absurd rules is because of Health & Safety and companies/organisations frightened they will be sued if anyone catches the dreaded lurgey.  The left have truely put a massive spanner in the works of the economy.

This. Went back to work Monday. Signs everywhere. Sanitizer. 2m. Reality? People close as normal. Bullshit as usual. 

[leonardratso]

41 minutes ago, AWW said:

It's all about who you know, DB. I'm an IT contractor; I design and build algorithmic trading systems for a living. I've worked at probably ten different banks. The people in them are nothing special; in fact many of them are completely useless and I wouldn't employ them to clean my toilet. Come work experience fortnight, in come all the teenagers to get a Big Bank on their CV. Some of them are alright, but most are completely entitled and think they're far cleverer than they are. Then, after they've done the obligatory useless degree, they get their feet under the table in Sales or on one of the trading desks and get very well paid for doing nothing special at all. I could tell you (and the PRA) stories of incompetence and negligence that you would not believe.

I'm grossly overpaid compared to what I'd earn building platforms in any other industry.

Oh by the way, my "in" was via a software company I used to work for. And I still say "bath" rather than "barth" :-)

peasant. hahaha, dont worry, they will be the first to be eaten come the apocalypse.

[AWW]

23 minutes ago, 5min OCD speculator said:

ooh that's an interesting and timely post lol

Do you just do these algos for 'in house' systems or do you go after clients 'stops'? And how do you do it?

PM me if you want, I keep secrets well 

My speciality is automated hedging of FX risk. It's not as complicated as you might think - speed is all.

[nirvana]

9 minutes ago, AWW said:

My speciality is automated hedging of FX risk. It's not as complicated as you might think - speed is all.

So I short cable, you take the other side of the bet? Or if it's 'big' you'll pass it on?......interesting IG just announced big profits...fleecing retail at the moment

Edit: will an ECN broker be more likely to pass my order direct to market? or do those robbers just take the other side of your trade too? 

[Shamone]

8 hours ago, Bobthebuilder said:

@sancho panza, Thank you for those bank posts, i really appriciate your hard work. Once again thank you for posting, very informative.

Seconded. Respect. Was thinking of a 500 squid punt on hsbc. It’s up a bit now, mind. You owe me a farthing or a couple of penneth.
 

[AWW]

41 minutes ago, 5min OCD speculator said:

So I short cable, you take the other side of the bet? Or if it's 'big' you'll pass it on?......interesting IG just announced big profits...fleecing retail at the moment

Edit: will an ECN broker be more likely to pass my order direct to market? or do those robbers just take the other side of your trade too? 

Nothing like that - simply managing FX risk resulting from other trading activities.

[DurhamBorn]

3 hours ago, Bobthebuilder said:

Would that include oillies, tobacco, utilities profits? Not advice just interested.

I sold 25% of Shell when they went over £14,mainly because id bought too many,had an average price of £11.30 and i wasnt happy with the holding size.I sold some of the transports i bought when they doubled as i think the nature of the crash might hold them back and be difficult for a few years.I sold a lot of ITV after bagging the bottom at 55p.I sold some Playtech (while keeping a lot) on just shy of a double as id bought a very big holding in the £1.70 area and it was prudent to trim.I sold some Royal Mail i bought at £1.22 simply to lower my loss on the ones i kept and several other trims.I also sold a few silver miners,some were up 150%.Iv put around 10 years living expenses into cash so if i want i can go the whole cycle without selling anything or having to force sell anything.Iv only sold BAT and Imperial once in my life and luckily it was close to the all time highs on both.Having bought them back at what i consider great prices (Bat under £25 and Imperial average £16.40) i doubt il ever sell them.I dont see them as fantastic investments anymore,but they have been very kind to me over the decades and i like owning them.

 

[No One]

On 02/06/2020 at 22:51, DurhamBorn said:

Remember that this thread started about a coming debt deflation.

Well how about the biggest paying off of consumer debt in history.?.How many in the MSM or anywhere else would of expected that.People in lockdown being paid furlough money and paying down their debts.

Notice BearyBear has already posted it above,worth a read.

 

I've done this. Next payment 0 debt.

[DurhamBorn]

https://www.dailymail.co.uk/money/markets/article-8389267/Bank-Englands-money-printing-set-hit-1trillion.html

They think £350 billion is coming,but likely £700 to £900 billion in total before they stop.

[Barnsey]

47 minutes ago, DurhamBorn said:

https://www.dailymail.co.uk/money/markets/article-8389267/Bank-Englands-money-printing-set-hit-1trillion.html

They think £350 billion is coming,but likely £700 to £900 billion in total before they stop.

https://amp.theguardian.com/business/2020/jun/04/bank-of-england-faces-calls-to-overhaul-restrictive-remit

[Bricks & Mortar]

Aussie Government grant aid for house building and renovations. 
Pretty much my wildest dream come true, if not actually in my own country yet.
https://www.theguardian.com/australia-news/2020/jun/04/who-is-eligible-for-homebuilder-grants-and-how-much-will-they-have-to-spend

[DurhamBorn]

7 hours ago, Barnsey said:

https://amp.theguardian.com/business/2020/jun/04/bank-of-england-faces-calls-to-overhaul-restrictive-remit

"Lyons said inflation was gong to remain low for a long time and so would interest rates. Inflation in April tumbled to 0.8%, its lowest level in four years, as the demand for goods collapsed during the lockdown."

 

I love these people,a complete miss-understanding of the macro situation.Demand for goods have collapsed,but that is transient.Notice how they are all now saying they should aim for 4% GDP growth after inflation and remove the 2% inflation target.They are all falling into the 70s trap as expected where they fear unemployment more and think if inflation goes a little over 2% its easy to control after.I love the way they think the BOE controls interest rates.They do around the margins,but the US long bond is a magnitude more important.

I really love how the cycles and the macro make people think certain ways without understanding why.Its fascinating.Long may it continue as we are making out like bandits 

[DoINeedOne]

So apparently they are sending stimulus money out on pre paid cards in America easier to spend than save it 

https://www.eipcard.com/

 

[DurhamBorn]

6 minutes ago, Cattle Prod said:

Oil is due a pullback. The trigger will be news of shut in production in the US coming back on stream, or OPEC disagreement. I really hope it does, it's necessary for a healthy bull market. I have no issue with shut in production coming back on (and there are rumblings that it has already started). This will keep a lid on new frac and drilling activity, which is far more important to keep down. I don't want to see rig or frac spread numbers bouncing back for a few months yet. If shut in production coming back keeps a lid on things for a few more months, then natural decline rates will hobble shale once and for all. The lost production will never be caught up, and the perception of infinite shale supply will change. This is far more important in the medium term than the short term volatility we are likely to see soon.

Yes and for the full bull we want the narrative to move away from the US being energy self sufficient as it will help push the dash for assets elsewhere.We want the bond markets to be wary of funding carbon energy projects as well.I would assume the US frack industry would be losing money below $50 without any expansion capex?

[NogintheNog]

Anyone see the interview on Channel 4 news last night with economic historian Niall Ferguson and professor of economics at Stony Brook, Stephanie Kelton. She's advised Democrat presidential candidate Bernie Sanders – as well as the progressive Congresswoman Alexandria Occasional-Cortex. She’s now advising Joe Biden’s campaign.

The interview is here;

https://www.channel4.com/news/economist-stephanie-kelton-on-us-unemployment-crisis-the-only-game-in-town-is-the-federal-government

Any thoughts???

[Loki]

9 hours ago, DurhamBorn said:

https://www.dailymail.co.uk/money/markets/article-8389267/Bank-Englands-money-printing-set-hit-1trillion.html

They think £350 billion is coming,but likely £700 to £900 billion in total before they stop.

What time frame do you think? This year seems to be serving up enough excuses.  

At what point do you think you'll stop buying, when DXY starts bouncing back from the 80s?

[DurhamBorn]

https://moneyweek.com/economy/uk-economy/601426/stealth-debt-jubilees-are-here-and-thats-a-good-thing?utm_campaign=money-morning-newsletter&utm_medium=email&utm_source=newsletter

Merryn gets it.

This is exactly what is happening and what was always going to happen.Debt deflation by CBs taking it on and monetizing it.Tiny coupons that are mostly refunded to government anyway and 30 years to inflate it away.Of course you have to pay the piper and bonds and rates will take the pain as the cycle unfolds.Divi cuts to de-leverage and the defaults.

Most of the MSM and the public have no idea a key inflection point has been reached.As i said from the start,during the end of a long dis-inflation CBs (and governments) can spend and spend and spend and they will,because its their job to do it.Later this cycle though they will be fighting high inflation as things collapse,and that will be a horror show.

 

[DurhamBorn]

33 minutes ago, NogintheNog said:

Anyone see the interview on Channel 4 news last night with economic historian Niall Ferguson and professor of economics at Stony Brook, Stephanie Kelton. She's advised Democrat presidential candidate Bernie Sanders – as well as the progressive Congresswoman Alexandria Occasional-Cortex. She’s now advising Joe Biden’s campaign.

The interview is here;

https://www.channel4.com/news/economist-stephanie-kelton-on-us-unemployment-crisis-the-only-game-in-town-is-the-federal-government

Any thoughts???

She is right,sort of,the only game in town is if the CBs monetize for the governments fiscal pulse.Luckily they are,and will continue to do so until all the dis-inflation has been removed onto government and CB balance sheets where it can then be inflated away.

There is a glut of savings in the world and the CBs and governments need to force the hands to use them more productive than sitting in treasuries/gilts.They are ringing the bell in macro terms loud and clear.Invest them in more productive areas,or we will monetize them away and hand to government to do it for you.

[Sasquatch]

Was chatting to an architect yesterday during a site visit to a construction project. He's in the middle of moving house. A sensible guy running a successful small architectural practice (Ltd Co). He'd had to go through a mortgage broker to get an offer from a lender, partly because of the difficulties of properly explaining a relatively low salary + dividends to a lender. Lots of 'computer says no' issues. Anyway, he's got his offer (Barclays I think) and was going for a 5 year fix. The house they are moving to is a long term bet (he's late 30's with young children so probably looking at at least 15 years in residence. Family all local). 

I suggested that he might want to look at a 10 year fix. Tried to gently explain that the marketplace could look very different in 5 years when he comes off the fix and that rates/inflation could be a lot higher by then. I think he got the picture (in that he didn't start backing away with a wild look in his eyes ). 

I hope that's my good deed for the week sorted out.

 

[Barnsey]

1 hour ago, DurhamBorn said:

"Lyons said inflation was gong to remain low for a long time and so would interest rates. Inflation in April tumbled to 0.8%, its lowest level in four years, as the demand for goods collapsed during the lockdown."

 

I love these people,a complete miss-understanding of the macro situation.Demand for goods have collapsed,but that is transient.Notice how they are all now saying they should aim for 4% GDP growth after inflation and remove the 2% inflation target.They are all falling into the 70s trap as expected where they fear unemployment more and think if inflation goes a little over 2% its easy to control after.I love the way they think the BOE controls interest rates.They do around the margins,but the US long bond is a magnitude more important.

I really love how the cycles and the macro make people think certain ways without understanding why.Its fascinating.Long may it continue as we are making out like bandits 

Following on from this DB (apologies behind a paywall but you get the jist)

It’s exactly this complete lack of fear of any inflation that’s staggering right now, peak complacency.

[DurhamBorn]

4 minutes ago, Sasquatch said:

Was chatting to an architect yesterday during a site visit to a construction project. He's in the middle of moving house. A sensible guy running a successful small architectural practice (Ltd Co). He'd had to go through a mortgage broker to get an offer from a lender, partly because of the difficulties of properly explaining a relatively low salary + dividends to a lender. Lots of 'computer says no' issues. Anyway, he's got his offer (Barclays I think) and was going for a 5 year fix. The house they are moving to is a long term bet (he's late 30's with young children so probably looking at at least 15 years in residence. Family all local). 

I suggested that he might want to look at a 10 year fix. Tried to gently explain that the marketplace could look very different in 5 years when he comes off the fix and that rates/inflation could be a lot higher by then. I think he got the picture (in that he didn't start backing away with a wild look in his eyes ). 

I hope that's my good deed for the week sorted out.

 

The TSB 10 year flexi mortgage is the one.After 5 years no tie at all but still fixed for 5 years,so you can re-mortgage at any time if by some miracle rates hadnt moved much.10% overpayments for the first 5 years.My son moves in in two weeks and got that one 2.64%.Hopefully they will pay it down,then flog his silver to pay the rest off.Silver at $48 would pay if off on the amount he has.

[DurhamBorn]

3 minutes ago, Barnsey said:

Following on from this DB (apologies behind a paywall but you get the jist)

It’s exactly this complete lack of fear of any inflation that’s staggering right now, peak complacency.

It sure is and its exactly what we want.My road map says inflation will start to get towards 3% in 2022/23,5% 2025,8% 2027,12% 2028.Those are minimum numbers later in the cycle and outliers are 25%,though most of the inflation comes later in the cycle.Unwinding QE is tricky,they might or might not.People are walking into the biggest trap since the 70s expecting rates to stay at nothing for a decade.

[TheCountOfNowhere]

Im in the green 

0.84%

 

Glencore, Schlumberger, Total and Vodafone were my big winner.

BT and the nameless share are still my dogs.

 

 

[JMD]

1 hour ago, Bricks & Mortar said:

Aussie Government grant aid for house building and renovations. 
Pretty much my wildest dream come true, if not actually in my own country yet.
https://www.theguardian.com/australia-news/2020/jun/04/who-is-eligible-for-homebuilder-grants-and-how-much-will-they-have-to-spend

B&M, great example I agree of what's coming here soon. Btw, the picture caption says the house is undergoing renovation, but how come its up on stilts?

I've always thought the housing sector would be protected. DurhamBorn says governments biggest fear - when it comes to the electorate - is mass unemployment, but surely there are other things that make people very restless/skittish. For example, Gordon Brown could raid the pensions, and almost everyone cheered, and I expect that type of policy to happen again. But people's 'biggest asset', their 'pride and joy', their 'castle', must be protected at all costs it seems to me, with many newspapers repeatedly plastering (rendering?!) house price (scare) stories across their front pages.

[Shamone]

47 minutes ago, Cattle Prod said:

I got this from TSB almost exactly 2 years ago @2.53 for 10 years (not sure if it has a 5 year opt out mind yu). I thought the once in a lifetime finance deal was more important than the cost of the house (SE prices). I simply don't care about what it's now worth, much to my mother in laws consternation (you've done a lot of work on it, you should get it valued!!). All I care about is how I am going to clear the mortgage in 8 years with silver/commodity investments/overpayments), same as your son. I sleep very well at night.

10 year fix is great for peace of mind. We did a lot of overtime and paid it off early. Took a small hit but it was the same as the interest would have been.3.99%. Now we both work part time and pay very little  income tax.