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

[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. 

[TheCountOfNowhere]

Look at the comments...

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

they're fooling no one this time.

[Bricks & Mortar]

1 hour ago, JMD said:

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.

I think they've taken out the ground floor and have the upper floor supported on a steel frame.  Expect it'll be glass on 3 sides when its done.

EDIT - This post suggests they've reclaimed the house from elsewhere, transported it to site, and lifted it onto the frame.    Apparently, it's a 'Queenslander' - a traditional style of house in the area.  They were usually built on stilts to allow airflow under the house, as a means of cooling.  In that case, I guess the area underneath might not be glazed in the end.  Maybe a shady place to sit or park the cars.

https://en.wikipedia.org/wiki/Queenslander_(architecture)

[MrXxxx]

Do you know that feeling when you press Buy instead of Sell?...arghh!...good job I was only top skimming...had to resist the temptation to sell straight away though, would you experienced guys have sold?....

[Castlevania]

US Non Farm Payrolls: 2.5m jobs created. Unemployment down to 13.3%. That seems much better than I expected.

[BearyBear]

7 minutes ago, Castlevania said:

US Non Farm Payrolls: 2.5m jobs created. Unemployment down to 13.3%. That seems much better than I expected.

Yep, Gold and Silver down, it will be interesting to watch if they get defended.

[TheCountOfNowhere]

33 minutes ago, Castlevania said:

US Non Farm Payrolls: 2.5m jobs created. Unemployment down to 13.3%. That seems much better than I expected.

So when the figures went up the US stock market rallied because they thought "Hey, more free cash", given that it should fall today...but it wont..."Hey, more free cash anyway"

[Loki]

5 minutes ago, TheCountOfNowhere said:

So when the figures went up the US stock market rallied because they thought "Hey, more free cash", given that it should fall today...but it wont..."Hey, more free cash anyway"

The free cash was always a given

[BearyBear]

10 minutes ago, TheCountOfNowhere said:

So when the figures went up the US stock market rallied because they thought "Hey, more free cash", given that it should fall today...but it wont..."Hey, more free cash anyway"

Warren Buffett must be going mad,  nobody needs his pile of cash these days.

[TheCountOfNowhere]

14 minutes ago, BearyBear said:

Warren Buffett must be going mad,  nobody needs his pile of cash these days.

He shoulda bought easyjet when I said buy if it get's into the 4's

I shoulda bought easyjet when I said buy if it get's into the 4's

[Loki]

Trading212 is completely down and swamped 

(I only use it for a few CFD punts, mostly on the S&P but interesting that people will be jumping into stocks today)

[TheCountOfNowhere]

8 minutes ago, Loki said:

Trading212 is completely down and swamped 

(I only use it for a few CFD punts, mostly on the S&P but interesting that people will be jumping into stocks today)

The time to buy shares was 8 weeks ago.  Not is the time to watch and see if the virus comes back

[TheCountOfNowhere]

Woo hoo

Exxon Mobil Corporation

NYSE: XOM

53.16 USD +4.06 (8.27%)

 

People losing their jobs, great news for the Dow.  people not losing their jobs, great news for the Dow.

[Loki]

Just now, TheCountOfNowhere said:

The time to buy shares was 8 weeks ago.  Not is the time to watch and see if the virus comes back

I am so curious what the end of the year will bring.  General consensus seems to be a good summer. 

[TheCountOfNowhere]

Woo hoo, I'm less poor !!!

 

Schlumberger NV

NYSE: SLB

22.46 USD +2.13 (10.48%)