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


spunko

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1 hour ago, DurhamBorn said:

For anyone holding Telefonica,here are the details on the tax situation of the divis.

Do nothing and take the rights no tax,

Elect to take the cash Spanish Withholding tax of 19%

Sell the rights,no withholding tax,but telephone dealing charges,with Hargreaves these are 1% with a minium of £20/max £40.

I would guess Repsol will be the same.

So option two is a no no of course,so its let the rights become shares,or sell the rights.Repsol do this most years,hopefully Telefonica will as well going forward.

 

It is possible to reclaim the WHT for ISAs, Sipps and investment acounts. See here: https://the-international-investor.com/investment-faq/reclaim-withholding-tax-foreign-dividends-isa-sipp

I will be taking the rights (long term holder).

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23 minutes ago, Cattle Prod said:

Good counters, Jam. this is supposed to be what science is like. Not settled, but debated to an ever better view.

Taleb would also say that even if one set of modelling outcomes turned out to be approximately right, this doesn't mean the other model outcomes were going to be right if they had happened; like do nothing = 500,000 deaths. As he says above, if the government had done nothing, the people would have self regulated, which Ferguson didn't capture in his assumptions. This was demonstrated by Sweden (I'd maintain that Sweden is a valid control for a lockdown/non lockdown experiement with a country of similar population density), and other countries without lockdowns: the model was way off because this assumptions did not account for patterns of human behaviour. It assumed us to be a bunch of idiots (much like classical economics assumes us to be rational etc), randomly interacting with fresh population of new strangers every day (that might apply to the mixing of people at protests, though), with no tweaks to personal hygiene or individual behaviour. I genuinely think this was idealogically driven, State knows best. I was going through airports using hand gel in January and February, avoiding handrails etc. Basic tweaks most of us know. More frequent and careful hand washing would have accounted for a lot of it, I think.

Perhaps he didn't account for these variances because his code was rubbish, and couldn't handle it? Negligent.

It was his graphs about the overwhelming of ICUs that gave the excuse to governments to panic, as Italy was struggling at the time. The media took Italy, with it's own unique issues which I highlighted here at the time, and set about a fear campaign for the UK. And back to the topic of this thread, they speed of the government response was telling - I've never seen them move so fast to pump money out: they were prepared and ready to take advantage of this crisis.

 

Maybe Cummings reads this thread,after all his family live near me.Political cycle is flashing red and has been for a while.Parties of the left dont understand it at all,but some people and parties on the right do start to get it.I think Cummings is one.BJ spent a lot of political capital to keep him,and rightly so,because it was Cummings who told the Tories exactly what people were feeling in working class areas.While the left was calling everyone who voted for Brexit (pretty much everyone up here outside of students and government workers) racists,all the guys i worked with in a factory were voting Tory,a lot for the first time ever,and one of the reasons is as they all used to say,"i like that Priti Patel,shes one of us",,.So people the left were calling racist were voting for the Tories because they wanted Priti in government,and seeing her as "one of us".A complete miss-read from the left.Not one of those guys gave a toss about the colour of Priti's skin,or her heritage,as far as they were concerned she understood them and was one of them.

The economy has lots of business cycles inside a longer cycle,but the real key inflection points are when the long sweep of deflation (really dis-inflation) and inflation (often more re-flation) turn.In political terms the left is looking the wrong way at a key turn.

 

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leonardratso
1 hour ago, geordie_lurch said:

Might want to remove that bit @DurhamBorn :ph34r:

I will just let my meagre amount of shares turn into new ones :D

you now have to delete that as well. Not that you can after a few hours.

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jamtomorrow
34 minutes ago, Cattle Prod said:

As he says above, if the government had done nothing, the people would have self regulated, which Ferguson didn't capture in his assumptions. This was demonstrated by Sweden (I'd maintain that Sweden is a valid control for a lockdown/non lockdown experiement with a country of similar population density), and other countries without lockdowns: the model was way off because this assumptions did not account for patterns of human behaviour.

I think you've hit the nail on the head - that Table 4 column is labelled "Do nothing" - as if the Government "doing nothing" is the same thing as "nobody changes their behaviour". Whereas we know behaviour changed before Governments "did something" in most cases, and I bet you're right about Sweden too - it's a valid control in the sense of "this is what that population would have done anyway", as opposed to the fantasy control set up by the paper.

I LOVE THIS THREAD! (shouted in the style of Steve Ballmer going nuts on stage at some MSFT event)

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1 hour ago, geordie_lurch said:

Might want to remove that bit @DurhamBorn :ph34r:

I will just let my meagre amount of shares turn into new ones :D

Soon mount up compounding on top of each other and then can turn on the income tap if ever needed.Il be taking the shares as well on them as i think the sector is structurally undervalued and lots of mergers and alliances will happen through the cycle.Lots of increase in free cash to come.They all need to keep paying down their debt though while their coupons are so low because they are going to increase a lot through the cycle.

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9 minutes ago, jamtomorrow said:

I think you've hit the nail on the head - that Table 4 column is labelled "Do nothing" - as if the Government "doing nothing" is the same thing as "nobody changes their behaviour". Whereas we know behaviour changed before Governments "did something" in most cases, and I bet you're right about Sweden too - it's a valid control in the sense of "this is what that population would have done anyway", as opposed to the fantasy control set up by the paper.

I LOVE THIS THREAD! (shouted in the style of Steve Ballmer going nuts on stage at some MSFT event)

I interpreted "Do Nothing" as "No change" - this Gov and the people dont change anything. In that scenario, the numbers may make sense, however ludicrous that scenario is.

If it meant "Gov does nothing" and the "People's behaviour changes", then Sweden is more appropriate and the numbers are way off.

From a report writing perspective (when I write risk assesment reports), there is always a "Do nothing" and that is always what would happen if nothing changes.

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jamtomorrow
1 hour ago, DurhamBorn said:

Maybe Cummings reads this thread,after all his family live near me.Political cycle is flashing red and has been for a while.Parties of the left dont understand it at all,but some people and parties on the right do start to get it.I think Cummings is one.BJ spent a lot of political capital to keep him,and rightly so,because it was Cummings who told the Tories exactly what people were feeling in working class areas.While the left was calling everyone who voted for Brexit (pretty much everyone up here outside of students and government workers) racists,all the guys i worked with in a factory were voting Tory,a lot for the first time ever,and one of the reasons is as they all used to say,"i like that Priti Patel,shes one of us",,.So people the left were calling racist were voting for the Tories because they wanted Priti in government,and seeing her as "one of us".A complete miss-read from the left.Not one of those guys gave a toss about the colour of Priti's skin,or her heritage,as far as they were concerned she understood them and was one of them.

The economy has lots of business cycles inside a longer cycle,but the real key inflection points are when the long sweep of deflation (really dis-inflation) and inflation (often more re-flation) turn.In political terms the left is looking the wrong way at a key turn.

 

Cummings is a first class data-behavioural-political scientist. He's taken Google's concept of A/B testing and applied it to political campaigning, with stunning results. 

Does that mean he gets it? Measured by political outcomes, yes of course. Does he get it at the level of knowing how to enact that as a programme for Government? For me, that remains to be seen - at this stage, all we can say for sure is his creation passes the political Turing test.

Edit to add: this all overlaps amusingly with a fave topic of mine, automation. Who needs armies of policy wonks when you can rent a handful of AWS instances and let the data take the strain (*and* get better results)? I expect what Cummings is really wrestling with is: can those same automation concepts that worked so well for campaigning be made to work for Government too?

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3 hours ago, DurhamBorn said:

For anyone holding Telefonica,here are the details on the tax situation of the divis.

Do nothing and take the rights no tax,

Elect to take the cash Spanish Withholding tax of 19%

Sell the rights,no withholding tax,but telephone dealing charges,with Hargreaves these are 1% with a minium of £20/max £40.

I would guess Repsol will be the same.

So option two is a no no of course,so its let the rights become shares,or sell the rights.Repsol do this most years,hopefully Telefonica will as well going forward.

 

So I should hold off buying until people sell their rights? Just need to know when they get them, but then the charts may show that (if so)!

I spent a happy day getting up to speed with the tax implications (withholding taxes) for dividends from stocks bought on overseas exchanges.  Bit of a pain in most cases so rights/scrip makes sense.  Not sure about any sale (CGT) taxes though.  I bought BASF on a German market and will have to pay withholding tax.  Not great.  I'll need to be more careful what and where I buy if dividends are material.

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13 hours ago, JMD said:

Interesting Harley, as I am about to do a personal review of etfs/funds/trusts to hold, for my own self identified next-cycle themes/sectors/regions. I'm doing this because I haven't the skills to select a suitable number of individual stocks, so want to use funds to add more diversification. As you have amply shown in previous postings, there are so few 'good' funds out there, and the ones worth owning are in a small minority.

FYI, the LSE (the exchange not London South East!) provides a full detailed list as a Excel download which ensures you have the complete list and lost of pre-populated data (BTW, same for ADRs, etc).  And justetf.com provides some useful analysis of (KID) permitted ETFs (although not all ETFs like the Wisdom commodity ones, hence my earlier comment!).

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10 hours ago, RickyBacker said:

Just a quick one relating to the 'big idea' of DB's incredible thread. This guy doesn't have that many followers on You Tube, but his content is astounding. His latest 2 minute video shows that the FED are locked and loaded and ready to fire the infrastructure spending bullet.

Ta.  Sounded original.  I'll add to my Youtube subscriptions.  I have an Android TV box which makes keeping up to date and watching such stuff on my TV great.  Re-enforces me not needing a TV licence!

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5 hours ago, The_Doc said:

Absolutely right. The problem here was that the MSM picked up on the big number (big numbers make big headlines) and ignored the associated probability.

What, like the "expected probability"!  FFS, they shouldn't be allowed out!  The more I listen, the more uneducated I find them all.  Had one the other day where a well informed caller correctly said something that conflicted with the interviewer's "opinion" to which the interviewer replied something like "well you can think that if you like"!  Any models estimating how many deaths, etc the uneducated-or-otherwise-blinded-by-rhetoric MSM have caused?

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3 hours ago, jamtomorrow said:

I'd want to see data on behavioural change in Sweden (or lack of) before chalking it up as a control experiment. There's good evidence that Government-proclaimed lockdowns elsewhere in Europe were a lagging indicator - a chunk of the population made up their own minds (rightly or wrongly) and changed their behaviour pre-emptively.

Here's Taleb's tweet on the topic this brought to mind: 

 

One of the many questions of the ICL model.  Did it code such behaviour as the default scenario or assume the desired to-be situation where everyone in the UK is a dumbed down thicko!  Amazing what can happen when you treat people like adults.  No wonder "they" hated Sweden! 

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3 hours ago, geordie_lurch said:

Might want to remove that bit @DurhamBorn :ph34r:

I will just let my meagre amount of shares turn into new ones :D

Pointless now you've quoted it! :)

He probably thought taking a "0" off was sufficient.

Could all be a headfake!

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4 minutes ago, Harley said:

Did it code such behaviour as the default scenario or assume the desired to-be situation where everyone in the UK is a dumbed down thicko!  Amazing what can happen when you treat people like adults.

Of course it treated everyone as an oinking dumbo, incapable of independent thought - Ferguson is an avowed leftie!

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2 hours ago, DoINeedOne said:

Just seen the message in my HL account option 1 for me 

Reminds me.  It's somewhat amusing how people focus on the (income) taxation of returns yet many funds and ETFs offer accumulation versions which would be subject to the (currently!) largely voluntary Capital Gains tax instead.  In theory you could in one year take divs up to your personal allowance (plus the free bit) and then take up to the annual CGT allowance limit (currently £12.300) and pay zero tax, all other things being equal (zero)?  CGT is how the rich stay rich.

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2 hours ago, The_Doc said:

It is possible to reclaim the WHT for ISAs, Sipps and investment acounts. See here: https://the-international-investor.com/investment-faq/reclaim-withholding-tax-foreign-dividends-isa-sipp

I will be taking the rights (long term holder).

I looked into it in detail for one country and lost the will to live!  For another, their link to their web page did not even work!

The best is US stocks in a SIPP as apparently no WHT on dividends as it's viewed by them as a 401K.

One of the attractions of funds and ETFs as they often reside in say Ireland where I believe there are some good tax treaties with other countries so low WHT rates.

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1 hour ago, The_Doc said:

From a report writing perspective (when I write risk assesment reports), there is always a "Do nothing" and that is always what would happen if nothing changes.

Depends who's doing nothing!  Is assuming a scenario where you do nothing and assuming there are no consequential (e.g. behavioural) changes which could be reasonably(?) be expected truly the base case?  Like assessing the replacement options for a "burning platform" and assuming it does not burn down as the "do nothing option".  My point is there is no such thing as do nothing or anything else.  Just a series of scenarios based on assumptions.  The assumptions are always necessary and key.  No assumptions allowed about the assumptions!  In this case the rigour would require a do nothing scenario to assume many other things such as behavioural changes.  To imply such things are implicit in the term is very poor science.  Indeed, a decent model would have a behavioural element in them.  Hence the poor economic models assuming "rational" consumers whatever that was (where subsequent research showed "rational" to be something completely different from what was implicitly expected as part of the models).  Rule #1, as originally told by my physics teacher, list your assumptions, all of them.  Rule #2 as later told by my economics lecturer, read and question the assumptions first, then test their sensitivity. 

PS: And I post this here because such things are 100% relevant to the macro thinking on which this thread is based.  We need to construct models to make sense and analyse things but we always need to question the assumptions, constantly review their validity, and test their sensitivity (i.e. "what if I'm wrong"?).

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5 hours ago, jamtomorrow said:

Those are just raw excess deaths over the period, regardless of cause.

Which of course means that lockdown itself might be a factor/cause of some of those deaths e.g. patients denied access to life-saving diagnostics/treatment, elderly dying of loneliness/isolation.

Strong correlation between excess deaths and lockdown timing would suggest that's a weak effect at best:

Screenshot_20200624-083508_Chrome.thumb.jpg.3f77784a3273fb9aff86b022046db73e.jpg

Source: https://www.ft.com/content/3c53ab12-d859-4ceb-b262-f6a0221ca129

The problem is that its so multi-factorial getting a definitive answer is probably as likely as winning the lottery! :-)

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11 minutes ago, Harley said:

Depends who's doing nothing!  Is assuming a scenario where you do nothing and assuming there are no consequential (e.g. behavioural) changes which could be reasonably(?) be expected truly the base case?  Like assessing the replacement options for a "burning platform" and assuming it does not burn down as the "do nothing option".  My point is there is no such thing as do nothing or anything else.  Just a series of scenarios based on assumptions.  The assumptions are always necessary and key.  No assumptions allowed about the assumptions!  In this case the rigour would require a do nothing scenario to assume many other things such as behavioural changes.  To imply such things are implicit in the term is very poor science.  Indeed, a decent model would have a behavioural element in them.  Hence the poor economic models assuming "rational" consumers whatever that was (where subsequent research showed "rational" to be something completely different from what was implicitly expected as part of the models).  Rule #1, as originally told by my physics teacher, list your assumptions, all of them.  Rule #2 as later told by my economics lecturer, read and question the assumptions first, then test their sensitivity. 

Yep. The figures suggest there is no behavioural element in the "Do Nothing" scenario, which is clearly ludicrous for the real world. What should have been presented for the "Do Nothing" scenario is as Rule 1 and 2 above. The issue with that is that it would have had wide confidence intervals as trying to predict human behaviour in this particular scenario is difficult as has been shown by their attempts to predict how many would "follow the lockdown guidance" (in reality more did than they expected). But it certainly would have been a more sensible approach.

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