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

[Yellow_Reduced_Sticker]

1 hour ago, Harley said:

On 05/06/2020 at 21:51, DurhamBorn said:

I bought more between March 10th and 16th than at any other time since i was 14 years old

Balls of steel!

EASY to pull the trigger during that CRAZY time if ya watched this: (i did every time i logged into me HL ACC, BUT then i'm this boards... NUTTER! )

BTW guys, market is flying ...SHELL not far of £15, EVEN the share that shall remain namelss is up to 46p this morning ...every DOG has its day eh guys, i'm sure we'll ALL CLEAN up on this LONG-TERM dog!!!

[TheCountOfNowhere]

3 minutes ago, Yellow_Reduced_Sticker said:

EASY to pull the trigger during that CRAZY time if ya watched this: (i did every time i logged into me HL ACC, BUT then i'm this boards... NUTTER! )

BTW guys, market is flying ...SHELL not far of £15, EVEN the share that shall remain namelss is up to 46p this morning ...every DOG has its day eh guys, i'm sure we'll ALL CLEAN up on this LONG-TERM dog!!!

6.28% £3K into profit in the space of a week, even if I sell out it'll be 6 years worth of savings.

 

if you see my list of things I did wrong,  I could have been 20% up.  Lessons learned.

[DurhamBorn]

@Yellow_Reduced_Sticker iv been very busy on the bargains.My son is moving into his new house next week so iv been all over the north east like Dominic Cummings kitting out his new house from Facebook marketplace.Got some beautiful Oak furniture land stuff for £150 that is still for sale at £950,two Next sofas for £250 for both,kitchen tables £50 still for sale at £300 etc etc.I think il of kitted their house out for around £1000 by the time im finished.I even bought a new 8m ladder so i can replace a few tiles etc rather than pay someone,i dont like heights but iv been up doing some jobs on mine,i fear handing money over more than i fear falling 

My 14 year old Pug estate has never been so busy.Iv also been buying up lots of tools and spares,etc as i think it might get harder to get good 2nd hand in a year,though at the moment there is loads of good stuff as council workers spunk their dosh on new stuff because they are rolling in it having been "working" from home.

[Agent ZigZag]

35 minutes ago, Harley said:

As I've often said it's now "the political economy stupid".  Add that to your models and forecasts.

When governments and central banks engage in printing money in order to maintain their promises they can not stop and we therefore have a mega inflationary trend. The key is working out which areas will be a beneficiary of this money printing. The last round of money printing 10 years ago I took positions in all of the key stocks discussed here especially gold and silver. So In affect I was a whole business cycle timing wise out and it has taken me the same period of time on some of my gold and silver buys to get back even. I was lucky over this period as I was working with good money and also was hedged with property and did very well. Now I have retired I really need to be on my toes as  current events suggest to me that governments will not invest all this printed money on a sound business cycle but use it for political appeasement. 

[jamtomorrow]

1 hour ago, Harley said:

PS:  Or, as DB mentions, ignore the consumer and go for direct public investment spending. Pretty clear which option is the least "difficult", that being the sole econ-political criterion these days!

Consumers feeling less propserous is politically very difficult for a sitting Government, so I see huge temptation to try and have their cake and eat it when it comes to industrial stimulus. This sort of thing:

https://www.telegraph.co.uk/news/2020/06/07/boris-johnson-considers-giving-drivers-6000-diesel-petrol-car/

(Although this particular example of course has to be taken in the context of the ongoing shadow boxing with Nissan over the Sunderland plant)

Put it this way: why stimulate industry directly when - with the right strings attached - you could do it through the consumer? NB: I'm not *advocating* for this - just asking why any Government in their right mind wouldn't try to keep the consumer afloat a bit longer?

[AWW]

59 minutes ago, Harley said:

Only this time(?) it's well organised, funded, and timely, as was the eco stuff.  And the left blows smoke about Russian collusion with Trump, etc. 

People with minority views (notably a lot of articulate white people talking on behalf of black people!) sure are getting a lot of air time.  The politics of division to weaken and overcome.

Relevant here? As I've often said it's now "the political economy stupid".  Add that to your models and forecasts.

It's all about Brexit. The only way left to stop it (/extend the transition period) is to bring down the government. The Remain lobby will have a damned good go for the rest of the year.

[Chewing Grass]

1 minute ago, jamtomorrow said:

Consumers feeling less propserous is politically very difficult for a sitting Government, so I see huge temptation to try and have their cake and eat it when it comes to industrial stimulus. This sort of thing:

https://www.telegraph.co.uk/news/2020/06/07/boris-johnson-considers-giving-drivers-6000-diesel-petrol-car/

(Although this particular example of course has to be taken in the context of the ongoing shadow boxing with Nissan over the Sunderland plant)

Put it this way: why stimulate industry directly when - with the right strings attached - you could do it through the consumer? NB: I'm not *advocating* for this - just asking why any Government in their right mind wouldn't try to keep the consumer afloat a bit longer?

Problem is last time they tried this the pensioners went and bought Hyundai i10s en-masse, 40,000 of them which did very little for UK manufacturing and a lot for Koreas.

[Sugarlips]

12 minutes ago, jamtomorrow said:

Consumers feeling less propserous is politically very difficult for a sitting Government, so I see huge temptation to try and have their cake and eat it when it comes to industrial stimulus. This sort of thing:

https://www.telegraph.co.uk/news/2020/06/07/boris-johnson-considers-giving-drivers-6000-diesel-petrol-car/

(Although this particular example of course has to be taken in the context of the ongoing shadow boxing with Nissan over the Sunderland plant)

Put it this way: why stimulate industry directly when - with the right strings attached - you could do it through the consumer? NB: I'm not *advocating* for this - just asking why any Government in their right mind wouldn't try to keep the consumer afloat a bit longer?

I can’t believe the price of new e-cars, for example 34 grand for a Corsa haha

https://www.thisismoney.co.uk/money/cars/article-8095451/Dealers-trimming-price-latest-electric-cars-9.html

‘Upto’ £6000 means you would probably only get £3000 at this price point (the larger discounts saved for the top end Jags etc) and you can negotiate that off the dealer today anyway. Pushing on a string again I reckon but then again I’m not into shiny plastic boxes, be they carbon neutral or otherwise..

Vauxhall Corsa-e 100kW Elite Nav 50kWh 5dr Auto

£34,160

[Don Coglione]

1 hour ago, Sugarlips said:

any realistic appraisal of the probable circumstances of households and businesses in the aftermath of the crisis ought to highlight the nearing of ‘credit exhaustion’, after which point furthermonetary stimulus becomes tantamount to ‘pushing on a string

Well here comes the stimulus, should prove an interesting litmus test as WA is close to CoVID free and things are quickly getting back to (the new) normal..

https://www.domain.com.au/news/wa-government-announces-444-million-housing-stimulus-961143/?utm_campaign=strap-masthead&utm_source=smh&utm_medium=link

MSM was speculating a 50k grant/bribe but no, $70k (including the stamp duty waivers)!

The average 3 bed 1 bath new first home here is $299k so for believers they get 20% “free” equity upfront if they buy & build this year, I’ll be watching take up closely.

Are you tempted, Sugarlips?

[jamtomorrow]

36 minutes ago, Chewing Grass said:

Problem is last time they tried this the pensioners went and bought Hyundai i10s en-masse, 40,000 of them which did very little for UK manufacturing and a lot for Koreas.

Lots of scope to do it different this time once we've cut loose from EU state subsidy constraints. Imagine something like a "Made in Britain" scrappage scheme.

[Chewing Grass]

13 minutes ago, Sugarlips said:

I can’t believe the price of new e-cars, for example 34 grand for a Corsa haha

https://www.thisismoney.co.uk/money/cars/article-8095451/Dealers-trimming-price-latest-electric-cars-9.html

‘Upto’ £6000 means you would probably only get £3000 at this price point (the larger discounts saved for the top end Jags etc) and you can negotiate that off the dealer today anyway. Pushing on a string again I reckon but then again I’m not into shiny plastic boxes, be they carbon neutral or otherwise..

Vauxhall Corsa-e 100kW Elite Nav 50kWh 5dr Auto

£34,160

Its worse than that, anyone who buys an electric corsa for that price is paying for the equivalent of 150-180,000 miles of motoring up front with a car that is structurally incapable of withstanding such mileage (increased weight) in the UK.

Petrol £12K OTR, Electric £34K-3K= £31K

Difference £19K or 3440 gallons of petrol

50mpg = 172,000 miles

Oh, and the car is frigging ugly as sin courtesy of being a restyled Peugeot.

Average distance to scrap of this class of car is 72,000 miles.

 

[Castlevania]

1 hour ago, DurhamBorn said:

I think you get an option of scrip,but its far better to take the stock and sell if you want the income because i dont think you pay the withholding tax,id guess it would count as capital for tax outside of a tax wrapper,mine are all in my ISA and SIPP.Im taking the shares though and keeping them,i think they will 3x over the cycle,shame they have already jumped a lot could of got the scrip cheaper.Repsol do the same where you can choose scrip and again better to take then sell if you want the divi income,on those i will sell as i intend to use all oil divis to buy silver.

I’d assume it works as a capital gain. So in theory if you owned 100 shares that had cost you £400 in total (or £4 each) and received 5 more shares as Scrip, those 5 shares would have a value of zero. So your new purchase price is £400/105 or £3.81 a share to be used in your capital gain calc if you did sell. Clearly you can ignore all the above if you hold them in a tax wrapper.

[Sugarlips]

8 minutes ago, Knickerless Turgid said:

Are you tempted, Sugarlips?

I’m not a fan of any govt interference but as the Perth market is at 2006 prices  and the supply overhang that we suffered from after the mining boom ended  in 2014 has cleared so the market is now quite balanced (at least compared to the east coast). 

it could be good timing for some if they buy well. I know a young plumber here who wants to settle down but only has a 10% deposit. with this offer that gets them to 30% and it’s easy to get a 5 year fix at 2.5% interest.

We bought our current home as a wreck in a dead market in 2010 for a third off asking when there were no incentives.

We almost sold it in Feb but CoVID killed the sale. Might be fortuitous now as we could potentially take the grant and build in the backyard as we are on an oversized plot and the zoning already permits it but I’m not a big fan of building so there would have to be significant profit margin (or yield I guess) in it and whilst that may still happen if there is a big enough reaction to this carrot, it’s a risk. I’m more likely to subdivide and sell the rear plot then move closer to the city.

[JMD]

4 hours ago, Cattle Prod said:

IMO all the social unrest currently going on is a function of the lockdown, and the killing of George Floyd was just a catalyst for simmering anger. I pointed out to Mrs there was an almost identical killing a few years ago, black man knelt on neck till he died (how stupid was that cop to do it again????). There were protests at the time, but they were protests and largely peaacful. Now we have riots, vandalism, and a castration of the police force. What is the difference? Lockdown, to me. People are fearful and resentful of government at the moment, and it is being stoked up but those who don't like the current governments (i.e. Trump and Boris).

CP, I disagree fundamentally. The problem is unfortunately far more insidious and has been building for many many years. Just look at the 'locked-down' prism within which all social topics on radio/tv are discussed these days and where the 'race card' is produced at the first opportunity - however there is no counter argument allowed because that would be denying the 'lived experience' of the protagonist (and a hate crime presumably has been committed?). Laurence Fox (from the 'lefty' acting dynasty) is the latest liberal type to speak out against these things. And guess what he was immediately called a racist!  

I know this is a financial forum, but I think these social tensions are important to flag up because I view them as good examplars of the retardation of society as predicted by Neil Howe/Fourth Turning. i.e. end of cycle rumblings.     

Identity politics and victim-culture is a toxic mix that has only served to divide people and cultures. Douglas Murray has written a lot about this subject, but he is a professional commentator. That's why I recommend watching the below video because I think an actor speaking out is a brave thing to do, and his reasoning is quiet profound - he 'gets' what is coming and says he speaks out for the sake of his children (and not to virtue signal, I hasten to add!). It begins with a song about the '1984 environment' we are living in, as Laurence fancies himself a musician, terrible voice I admit, but such powerful lyrics I think.

We are living in strange times.

btw Triggernometry is a very good podcast for current social topics.

 

[DurhamBorn]

1 hour ago, Sugarlips said:

I can’t believe the price of new e-cars, for example 34 grand for a Corsa haha

https://www.thisismoney.co.uk/money/cars/article-8095451/Dealers-trimming-price-latest-electric-cars-9.html

‘Upto’ £6000 means you would probably only get £3000 at this price point (the larger discounts saved for the top end Jags etc) and you can negotiate that off the dealer today anyway. Pushing on a string again I reckon but then again I’m not into shiny plastic boxes, be they carbon neutral or otherwise..

Vauxhall Corsa-e 100kW Elite Nav 50kWh 5dr Auto

£34,160

£6000 for my £600 Pug diesel?,no chance.Engine is a work of art on them,15 years never had a service at a garage,only service i do on it it oil and filter,original air filter and fuel filter,i just bang some fuel treatment in and flog it down to Catterick and back one a month .Still anything that pushes up the price of silver is fine by me.

[Harley]

1 hour ago, Castlevania said:

I’d assume it works as a capital gain. So in theory if you owned 100 shares that had cost you £400 in total (or £4 each) and received 5 more shares as Scrip, those 5 shares would have a value of zero. So your new purchase price is £400/105 or £3.81 a share to be used in your capital gain calc if you did sell. Clearly you can ignore all the above if you hold them in a tax wrapper.

Nice way to use your annual CGT tax free allowance.  Nothing worse than letting allowances go to waste!

[Harley]

2 hours ago, jamtomorrow said:

Lots of scope to do it different this time once we've cut loose from EU state subsidy constraints. Imagine something like a "Made in Britain" scrappage scheme.

Yes, that sort of thing.  The aim would be to control the flow of printed money at the same time as support companies and that all important employment number.  Just giving people money risks it just being hoarded or used to pay down debt.  I see channeling the money like this as a form of regulation, with winners, losers, and unintended consequences.  Fat thumbed government, all it's ever been.

Also a high risk the money is further spunked on revenue expenditure (e.g NHS salaries) rather than capital (with the usual dubious business case given we're talking HMG here!). Bread and circuses take centre stage just before the final curtain call and this needs financing.

Forget the detail of all the various schemes they'll come up with.  This is all just a more crappier version of Keynesianism than the crap versions that have gone before, now spiced with a slice of Mumbogumbo Monetary Tosspottery (MMT).  We are here because of it and it will finish us off, just like that last fix does to other junkies.

[JMD]

4 hours ago, Wheeler said:

I'm more than willing to give more detail but I think you might be disappointed! 

I've used a bottom up approach and picked a few companies I'm interested in for the cycle, allocated either 1% or 2% limit to each and then grouped in a rough category. The percentage for a category just depends on the companies of interest and doesn't reflect what I think of a particular category. This means that the 7% was the original plan but isn't necessarily an aim. 

For transport I have 4 companies that I've categorised as transport, only because they seem to fit that rather than any of the others:

• BAE Systems - fighter jets and missiles are transport after all. I expect infrastructure spending to go towards defence, and the global political climate this cycle will not be more peaceful.
• Royal Mail - letters and packets are transported. A bit of a dog this one.
• GoAhead and Stagecoach - the only genuine public transport ones in my list. Originally thought that higher oil prices would drive more people to public transport (no pun intended) but CV has put a bit of a spanner in the works. 

I've no interest in airlines. I don't see them as a substitute mode of transport for private car usage.

UBI would be of benefit personally, it's £200/week more than I get from the state currently after all, but I think it will be highly inflationary. This will be for two reasons:

• The increase in consumers money supply will push up CPI. I don't see them implementing it in a way that cancels out benefit payments and state pensions to be cost neutral. There will be additions for "deserving" cases and a transitional scheme.
• The bit they never consider, it will reduce the amount of goods and services produced and reduced supply leads to inflation. This is because some people will cut back on the amount of work they do - no need for overtime for instance - due to the UBI. Also some small businesses that don't make a lot of money for the proprietor will close - no point working 60-70 hours for £100 profit if you can get £200 for nothing.

Thanks for the full reply. I agree about that much hyped flying-car, it won't get off the ground! (sorry silly joke!)

But on UBI, I actually see it as plugging the 'employment gap' problems caused by, automation, etc. I view it as a 'top-up' payment really, because I fully expect most jobs to be part-time before end of the decade. My thinking is that gov. policy will have to mandate this, in order to keep most people at least occupied and non-idle.

[JMD]

21 minutes ago, Cattle Prod said:

JMD, I pretty much agree with everything you said, it's a strange thing to agree with someone who disagrees with me!   I just didn't really want to get into the politics of it I suppose. My view is that they really don't care about George Floyd, black people, working class people, trans people, whatever. It's all the one. These just being used as catalysis to push the overall agenda. What I see now is hundreds of thousands of people having their fears inflamed by the same crowd, and the reaction today is very different to the last time an idiot cop killed a black man by kneeling on his neck (when Obama was in charge). Maybe the agitators have just gotten better, but I suspect they have riper pastures thanks to the recent overbearing actions of governments. As you say, these things accommpany major cycle turns, so are I think important for us here to acknowledge. I guess I'm trying to err on the econnomic impact side.  I'll watch that video, thanks.

CP, hope I did not come across as making political points, as I don't really do politics. The macro trends and the economic topics discussed here, which in reality drive the whole policy agenda, are far more illuminating, interesting and dare I say it intoxicating.  

I agree that the US cop was an 'idiot cop', but the real problem is that he and others like him are backed by an idiotic and very powerful police union. The problem of powerful police unions across the US is something I have only recently learned of, they appear to behave very much like the old haulage unions (minus the mafia connections of course) that existed in the US until the 1980's. 

Anyway, Triggernometry is a good podcast, where serious topics are seriously discussed, but with a sense of humour, which I think is just like it should be.

[sancho panza]

 

4 hours ago, DurhamBorn said:

https://www.bbc.co.uk/news/business-52954741

It has to be government and fiscal.Page one of the thread.

The only question now is where it goes.If the left got their way it would all be wasted on benefits and the black hole of the NHS etc.Trump getting re-elected could be vital.The narrative is now pretty much 100% that inflation isnt a problem at all and rates are low for decades.Just how we want it,because they will over cook the cakes.

Frogive my ignorance but why is Trump getting elected potentially vital-is it in terms of how the moeny will be spent?

Must say,I saw Biden went to favourite the other day at 1.9.Trump at 2.42 suggesting an element of people thinking he's going to step down.

He's worht a nudge above evens imho.

Could be a decent money making opportunity here if the media can talk Joe up like they did hillary.

[No One]

On 07/06/2020 at 03:57, Harley said:

Raoul Pal just said something about all the new day trading accounts that have been opened (with furlough money?) and an earlier post here linked to the talk on pistonheads.  Been there, seen it before, and have the T shirt.  Says "1999" on the front and "2000" on the back!

I'm doing just this. Sold a bunch after I made 10% and used the sum to pay off the credit card. Best thing ever.

[sancho panza]

4 hours ago, jamtomorrow said:

Consumers feeling less propserous is politically very difficult for a sitting Government, so I see huge temptation to try and have their cake and eat it when it comes to industrial stimulus. This sort of thing:

https://www.telegraph.co.uk/news/2020/06/07/boris-johnson-considers-giving-drivers-6000-diesel-petrol-car/

(Although this particular example of course has to be taken in the context of the ongoing shadow boxing with Nissan over the Sunderland plant)

Put it this way: why stimulate industry directly when - with the right strings attached - you could do it through the consumer? NB: I'm not *advocating* for this - just asking why any Government in their right mind wouldn't try to keep the consumer afloat a bit longer?

The problem is that they can't be sure the public will take advantage of it.A feature of deflations is reduced demand for credit.Buying a new car is 90%+ done with credit.It's not the price but rather the monthyl direct debit that may stop consumers.

3 hours ago, Castlevania said:

I’d assume it works as a capital gain. So in theory if you owned 100 shares that had cost you £400 in total (or £4 each) and received 5 more shares as Scrip, those 5 shares would have a value of zero. So your new purchase price is £400/105 or £3.81 a share to be used in your capital gain calc if you did sell. Clearly you can ignore all the above if you hold them in a tax wrapper.

My mum holds our certificates where we accrue scrip,so I'll ask her ref the witholding tax.From memory,I'm pretty sure they take the witholding tax and then issue you the shares.

The scrip gets issued at a certain price and so the CGT attaches to the price they were issued at and the date they were issued.

[Transistor Man]

53 minutes ago, JMD said:

... backed by an idiotic and very powerful police union. The problem of powerful police unions across the US is something I have only recently learned of, they appear to behave very much like the old haulage unions (minus the mafia connections of course) that existed in the US until the 1980's. 

Ahhh ... the-get-out-of-jail, Patrolmen's Benevolent Association card.

[sancho panza]

2 hours ago, JMD said:

CP, I disagree fundamentally. The problem is unfortunately far more insidious and has been building for many many years. Just look at the 'locked-down' prism within which all social topics on radio/tv are discussed these days and where the 'race card' is produced at the first opportunity - however there is no counter argument allowed because that would be denying the 'lived experience' of the protagonist (and a hate crime presumably has been committed?). Laurence Fox (from the 'lefty' acting dynasty) is the latest liberal type to speak out against these things. And guess what he was immediately called a racist!  

I know this is a financial forum, but I think these social tensions are important to flag up because I view them as good examplars of the retardation of society as predicted by Neil Howe/Fourth Turning. i.e. end of cycle rumblings.     

Identity politics and victim-culture is a toxic mix that has only served to divide people and cultures. Douglas Murray has written a lot about this subject, but he is a professional commentator. That's why I recommend watching the below video because I think an actor speaking out is a brave thing to do, and his reasoning is quiet profound - he 'gets' what is coming and says he speaks out for the sake of his children (and not to virtue signal, I hasten to add!). It begins with a song about the '1984 environment' we are living in, as Laurence fancies himself a musician, terrible voice I admit, but such powerful lyrics I think.

We are living in strange times.

btw Triggernometry is a very good podcast for current social topics.

 

I think we're living in the political equivalent of Germany turn of the 30's/Russia 1916.

Big political changes are coming imho,Brexit/trump were the warm up acts.Number of factors here

1) politcal elite that's out of touch with what people are really thinking-EU/UK/China

2) huge economic changes coming including huge rise in poverty and food prices

3) large govt debts->currency crises.

4) large, angry sections of the population that are  unrepresented in Parliament and have no voice.

There's more but to ignore the politcal economy side of things as per @Harley suggests would be to miss a huge chunk of the issues.

[Castlevania]

1 hour ago, sancho panza said:

The problem is that they can't be sure the public will take advantage of it.A feature of deflations is reduced demand for credit.Buying a new car is 90%+ done with credit.It's not the price but rather the monthyl direct debit that may stop consumers.

My mum holds our certificates where we accrue scrip,so I'll ask her ref the witholding tax.From memory,I'm pretty sure they take the witholding tax and then issue you the shares.

The scrip gets issued at a certain price and so the CGT attaches to the price they were issued at and the date they were issued.

That doesn’t make sense to me. I thought people took scrip to avoid paying income tax on dividends? 

Edit: looks like the tax treatment changed when dividend taxation was reformed in 2016. So, it’s taxed as income. Bah!