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

[MrXxxx]

20 hours ago, Majorpain said:

Australia's last recession was around 30 years ago, thanks to China's resource demand they skipped 2008, the problem with that is malinvestment doesn't get purged and builds up in the system until it risks collapsing the entire thing.  They have taken "you can't lose on bricks and mortar" to a whole new level and make the UK look like amateurs on the subject.

But the system doesn't run like that now anyway, malinvestment continues and when it is too `big to fail` the government bails it out, whether its the finance or housebuilding industry.

[Bricks & Mortar]

9 hours ago, Loki said:

I can't help but wonder if we're not going to get a reflation if these COVID shutdowns carry on.  It just won't be possible to get the economy moving again if the real world is in 'safe mode'.

Edit: Tell me why that's stupid and I'm stupid, me and my ISA welcome these thoughts. 

I think you're right.  No reflation until the economy opens.  The printing and spending right now isn't even treading water.   Furlough money replaces only 80% of the wages.   Loans to business aren't being invested, just covering shutdown costs.

[sancho panza]

10 hours ago, Loki said:

But is that an infrastructure reflation? That's just 2008 again isn't it?

What are they going to buy at the moment? What are they going to buy when existing stock is used up?

I think they've seen with the spike in credit card repayments during April/May that in the UK at least,consumers have shown an unnerving desire to pay down debt.That makes it likely that stimulus will be channeled into more productive areas of the economy.

They're still pushing on a string though but that's what govts do.Insert Forrest Gump quote.

[sancho panza]

44 minutes ago, Bricks & Mortar said:

I think you're right.  No reflation until the economy opens.  The printing and spending right now isn't even treading water.   Furlough money replaces only 80% of the wages.   Loans to business aren't being invested, just covering shutdown costs.

Political class are beginning to realsie the damage that the covid response has done.All around the world,lot of right of centre govts declining to even contemplate second shut down.

[Loki]

31 minutes ago, Cattle Prod said:

However, I still don't understand why Feb liquidity is currently dropping. Narrative is saying 'the Fed is focussing now on saving the real economy rather than inflating asset prices', but that doesn't make sense. Both because the real economy is not spending, is hoarding and paying down debt, and because the Fed/US govenrment consider the stock market to be the real economy!

Exactly, they just don't seem at all committed enough if you look at the state of the DXY and the media still being allowed to create fear hyping COVID wave 2. I try and take a big picture view of things and i can't see how current society would create a reflation even if liquidity was moving - which it won't in the current society!

People like me are exhausted from feeling like they're in a personal showing of a mash-up of Groundhog Day and They Live, and people who a frightened of the virus are exhausted from being on high alert for months.  How can you base a meaningful recovery on that?  (The 'foundations' on which it will be built)

 

[UnconventionalWisdom]

2 hours ago, MrXxxx said:

But the system doesn't run like that now anyway, malinvestment continues and when it is too `big to fail` the government bails it out, whether its the finance or housebuilding industry.

Or a conpany that builds planes which fall out of the sky.

[TheCountOfNowhere]

Just has my working from home electricity bill in....MASSIVELY up.  

Think on.

[Loki]

31 minutes ago, TheCountOfNowhere said:

Just has my working from home electricity bill in....MASSIVELY up.  

Think on.

Carbon neutral vegan free range electricity will be too cheap to meter

It's all good count

[MrXxxx]

4 hours ago, sancho panza said:

Political class are beginning to realsie the damage that the covid response has done.All around the world,lot of right of centre govts declining to even contemplate second shut down.

Well if they show such lack of awareness in their actions to appreciate such a scenario was likely, then they have no right to be in a position to govern...that said, I suppose that's what happens when you have career politicians rather than those with real world experience!

[Talking Monkey]

4 hours ago, sancho panza said:

Political class are beginning to realsie the damage that the covid response has done.All around the world,lot of right of centre govts declining to even contemplate second shut down.

We haven't fully reopened from the first shutdowna and its late June, say a second wave starts in late November then a second shut down would be over 6 months long at least. No economy would come back from that, and social breakdown would be guaranteed

[DurhamBorn]

3 hours ago, Loki said:

Exactly, they just don't seem at all committed enough if you look at the state of the DXY and the media still being allowed to create fear hyping COVID wave 2. I try and take a big picture view of things and i can't see how current society would create a reflation even if liquidity was moving - which it won't in the current society!

People like me are exhausted from feeling like they're in a personal showing of a mash-up of Groundhog Day and They Live, and people who a frightened of the virus are exhausted from being on high alert for months.  How can you base a meaningful recovery on that?  (The 'foundations' on which it will be built)

 

Patience.Most people think that Loki because they are macro tourists.They look at whats in front of them and project it forward at key inflection points.The reflation is nearly locked in now.Lots more dislocation to come first though.As companies go down,debt gets wiped,jobs go etc the CBs will keep the pipes full of liquidity.Its not a straight line though,markets are never linear.The greatest macro skill iv learned is to let the cycle play out.The reason most investors lose over the longer term is being whipsawed by the markets over the short term.

If you have a hungry tiger coming at you and you have an endless supply of meat in a bottomless bag you dont stop throwing the meat to it until its full and goes to sleep.Just because you have already given it a lot you dont stop,if you stop it will still kill you.The Fed know this.They are still engaged,and will be for a long time yet.There will be lots of talk of tax increases etc to "pay down the debt",and some follow through,but its liquidity full steam ahead for government,and the CBs will monetize most of it.

[sancho panza]

On 21/06/2020 at 11:12, Majorpain said:

Australia's last recession was around 30 years ago, thanks to China's resource demand they skipped 2008, the problem with that is malinvestment doesn't get purged and builds up in the system until it risks collapsing the entire thing.  They have taken "you can't lose on bricks and mortar" to a whole new level and make the UK look like amateurs on the subject.

Just heard an aussie relative has lost her job.Will likely be one of many in Oz in the not too distant.One of the problems of never having recessions is that people forget to prepare for them.

[sancho panza]

19 minutes ago, Talking Monkey said:

We haven't fully reopened from the first shutdowna and its late June, say a second wave starts in late November then a second shut down would be over 6 months long at least. No economy would come back from that, and social breakdown would be guaranteed

They're also looking at Sweden and realising the Marxists at Imperial have had them over.Imperial still havent released the code they used to predict 500,000 deaths in the UK if our govt didn't lock down. as far as Im aware.

I'll need to get in touch with our resident hospital informant and find out what the current thinking is,but I think a lot of Drs are beginning to question the govts method and hence we're getting the debate over 2m rule.Lock down opponents such as Swdeish Public Helath officals said some time back that getting out of a lock down was a lot easier than going into it.

I was chatting to and A&E consutlant and his GPwife at the park yesterday as our kids played together on the swings (well whats left of the play equipment) and he didn't seem too fussed.

[Loki]

Thanks @DurhamBorn i wasn't doubting your work, i was doubting the whole system and wondering if it really was different this time from what has gone before (and not in a good way)

@sancho panza the last few pages of the massive pandemic thread is interesting. Still plenty happy with the End of Days narrative being pushed.

[sancho panza]

26 minutes ago, MrXxxx said:

Well if they show such lack of awareness in their actions to appreciate such a scenario was likely, then they have no right to be in a position to govern...that said, I suppose that's what happens when you have career politicians rather than those with real world experience!

Sir Keir 'Take a knee' Starmer and bozza don't give me much faith that the coming banking crisis will be dealt with in the best interests of taxpayers

[DurhamBorn]

Just now, Loki said:

Thanks @DurhamBorn i wasn't doubting your work, i was doubting the whole system and wondering if it really was different this time from what has gone before (and not in a good way)

@sancho panza the last few pages of the massive pandemic thread is interesting. Still plenty happy with the End of Days narrative being pushed.

The system has been pushed very very far yes and its disguising a lot of things,but the political cycle is meeting the macro.There is always a chance we dont get a reflation,but its a very small chance now.I think the question is only really the size,length and inflation.I tend to base off cycle inflation,and im using 76% over the cycle compounded.So from now until 2029/30

[sancho panza]

Just now, Loki said:

Thanks @DurhamBorn i wasn't doubting your work, i was doubting the whole system and wondering if it really was different this time from what has gone before (and not in a good way)

@sancho panza the last few pages of the massive pandemic thread is interesting. Still plenty happy with the End of Days narrative being pushed.

It's surprising who's loving the oppression,A lot more people are sick of it but there's still a hard core who are mad for it.Mainly retired or teachers though in my experience.

Also,due to the scare stories a lot of parents are totally oblvivious to the real mortality rate for kids.

I'll get back on the sceptics thread tonight when I have time.I came on to psot about gold and 15 mins later still ranting about other things.

[sancho panza]

$1769 on the yellow stuff..........nice.Particualrly looking forward to watching the Newcrest ADR this afternoon-our biggest positon

 

[CVG]

22 minutes ago, DurhamBorn said:

If you have a hungry tiger coming at you and you have an endless supply of meat in a bottomless bag you dont stop throwing the meat to it until its full and goes to sleep.

One of your best analogies yet DB. Keep it up!

[jamtomorrow]

11 minutes ago, Loki said:

Thanks @DurhamBorn i wasn't doubting your work, i was doubting the whole system and wondering if it really was different this time from what has gone before (and not in a good way)

Wondering the same. To extend the "pipes" analogy ... the system will only respond as quickly as the pipes can deliver the liquidity. So how big are the pipes these days?

Or to put it another way: to what extent is the "real economy" of pay packets, mortgage payments and food shopping sufficiently coupled to the financialised corporate economy of stocks, bonds, swap lines, ETFs, commodities, derivatives etc that we might expect liquidity to move between one and the other like it has done before?

[leonardratso]

RDSb divi just arrived, 12.68p/share

[janch]

45 minutes ago, sancho panza said:

$1769 on the yellow stuff..........nice.Particualrly looking forward to watching the Newcrest ADR this afternoon-our biggest positon

 

I only have small positions in POG/FRES and HOC of these but I'm also watching with interest.  Hopefully they will offset some of my other (paper losses) as I wasn't able (no cash) to take full advantage of the March buying opportunity.   I think I'm lagging behind most of you guys...........LOL

[Loki]

38 minutes ago, jamtomorrow said:

to what extent is the "real economy" of pay packets, mortgage payments and food shopping sufficiently coupled to the financialised corporate economy of stocks, bonds, swap lines, ETFs, commodities, derivatives etc that we might expect liquidity to move between one and the other like it has done before?

That's a great way of putting it.  That's what i love about this thread, i can see different people's 'frames' and the questions i wouldn't think to ask

[DoINeedOne]

Random 

A man smashed up a computer in the Trafford Centre as he was angry that the company's share price had dropped.

The customer, who had invested shares in the company, was frustrated that he had lost money, police said.

Posting on Twitter, officers said the man stormed into the shopping centre demanding to speak to a manager.

When he was told that wasn't possible, he damaged a computer at the customer service desk.

In a post on Twitter, put up at 12.40pm, GMP Stretford wrote: "Officers had to attend the Trafford Centre to reports of a male causing issues due him losing money after their share price dropped.

 

 

Im not sure what's worse the share price or the fact he thought the manager at trafford would help or have the answers

 

[DurhamBorn]

1 hour ago, jamtomorrow said:

Wondering the same. To extend the "pipes" analogy ... the system will only respond as quickly as the pipes can deliver the liquidity. So how big are the pipes these days?

Or to put it another way: to what extent is the "real economy" of pay packets, mortgage payments and food shopping sufficiently coupled to the financialised corporate economy of stocks, bonds, swap lines, ETFs, commodities, derivatives etc that we might expect liquidity to move between one and the other like it has done before?

Page one of the thread.Consumers wont be driving this next cycle.Of course they will consume,but probably in different ways,and not as much credit driven.The cycle will be industrial,driven from governments mostly.The CBs are putting back all the dis-inflation into the system and a very large part of it is to government.The state stepped back from driving the economy in the late 70s and early 80s mainly because of inflation and the political cycle.Unions and workers were taking too much and investment was collapsing.Today they are at the opposite end of that cycle.The reason Cummings wasnt sacked for instance is because he delivered the northern Labour seats to the Tories.He 100% understands what needs doing.My prediction is places like Teesside will be booming later in the cycle.Spygirl might even move to Boro