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

[geordie_lurch]

36 minutes ago, DurhamBorn said:

Its insane whats going on in the west but is one of the reasons we will get high inflation.The state has captured far too much of the economy now and people have forgot that private sector wealth creation matters.They will find out later though once CBs cant QE due to rising inflation.Government then will have to tackle the structural deficit and it wont be pretty.

Thanks for all you have posted here @DurhamBorn
but just thinking out aloud... have you entertained the thought that this time could really be different and instead of a 'normal' cycle we are about to enter something truly different?

What if we in the west are all forced into using central bank digital currencies and they are running up all this debt as they know they are all going to default on it together as part of a coordinated world 'reset' 

This whole Covid thing makes so little sense on so many levels but when the debt levels are increasing so fast then Legard and others are talking about digital Euros and the cashless future and the level of tracking, inflation controls and negative interest rates such digital state currencies could create I can't help think that maybe I'm planning for the wrong future 

As you say above, the state has captured too much of the economy already in normal times and the current rules but imagine if this is only the start of what's to come and all your 'wealth' will be digitally tracked to the penny and every digital £ spent could carry a (variable) transaction fee?

 

[DurhamBorn]

17 minutes ago, geordie_lurch said:

Thanks for all you have posted here @DurhamBorn
but just thinking out aloud... have you entertained the thought that this time could really be different and instead of a 'normal' cycle we are about to enter something truly different?

What if we in the west are all forced into using central bank digital currencies and they are running up all this debt as they know they are all going to default on it together as part of a coordinated world 'reset' 

This whole Covid thing makes so little sense on so many levels but when the debt levels are increasing so fast then Legard and others are talking about digital Euros and the cashless future and the level of tracking, inflation controls and negative interest rates such digital state currencies could create I can't help think that maybe I'm planning for the wrong future 

As you say above, the state has captured too much of the economy already in normal times and the current rules but imagine if this is only the start of what's to come and all your 'wealth' will be digitally tracked to the penny and every digital £ spent could carry a (variable) transaction fee?

 

No,its never different,history proves that.We wont be forced into digital currencies,at least for a long time.There will be no reset,just that old tax inflation.This isnt the end of of a business cycle,its the end of the long dis-inflation,thats why it feels like the end of things,and scary.Trump winning again will help things along.

[Loki]

21 minutes ago, DurhamBorn said:

No,its never different,history proves that.We wont be forced into digital currencies,at least for a long time.There will be no reset,just that old tax inflation.This isnt the end of of a business cycle,its the end of the long dis-inflation,thats why it feels like the end of things,and scary.Trump winning again will help things along.

I agree but i haven't ruled any of it out for 2030ish!

[Errol]

1 hour ago, DurhamBorn said:

No,its never different,history proves that.

If it's genuinely 'never different' we are almost certainly headed towards a cataclysmic war, the death of several paper monetary systems and Empire collapse.

These things always happen and have happened at similar junctures throughout all human history.

If it didn't happen, we would be the odd one out.

[Sugarlips]

22 minutes ago, Errol said:

If it's genuinely 'never different' we are almost certainly headed towards a cataclysmic war, the death of several paper monetary systems and Empire collapse.

These things always happen and have happened at similar junctures throughout all human history.

If it didn't happen, we would be the odd one out.

Certainly a trade war. 

this is an interesting read, anti CCP sentiment is rising down under to the point that the few non-captured media outlets are starting the say stuff it, let’s bite the hand that feeds us and see what they do next...

https://www.macrobusiness.com.au/2020/11/time-australia-kicked-china-right-where-it-hursts/

[Talking Monkey]

3 hours ago, DurhamBorn said:

Its insane whats going on in the west,but is one of the reasons we will get high inflation.The state has captured far too much of the economy now and people have forgot that private sector wealth creation matters.They will find out later though once CBs cant QE due to rising inflation.Government then will have to tackle the structural deficit and it wont be pretty.

DB whats your timeframe for when QE as an option gets removed for the UK and when the government is forced to address the structural deficit/welfare bill. 

[Talking Monkey]

51 minutes ago, Errol said:

If it's genuinely 'never different' we are almost certainly headed towards a cataclysmic war, the death of several paper monetary systems and Empire collapse.

These things always happen and have happened at similar junctures throughout all human history.

If it didn't happen, we would be the odd one out.

I just cannot see the cataclysmic war due to nukes, they will act as mutual deterrent. Everything else you mention defo agree with. Just those bits happening would cause hundreds of millions of deaths from famine etc as supply chains collapsed

[DurhamBorn]

7 hours ago, Errol said:

If it's genuinely 'never different' we are almost certainly headed towards a cataclysmic war, the death of several paper monetary systems and Empire collapse.

These things always happen and have happened at similar junctures throughout all human history.

If it didn't happen, we would be the odd one out.

I think the war will be a new cold war Errol and economic war.There is a risk of proxy hot wars,even China/India.I think a lot of the real pain will come after the reflation.Losing the ability to print will be the killer.I think its the end of the reflation cycle we see a lot of Fiat go down.

[Viceroy]

8 hours ago, DurhamBorn said:

No,its never different,history proves that.We wont be forced into digital currencies, at least for a long time. There will be no reset,just that old tax inflation.This isnt the end of of a business cycle,its the end of the long dis-inflation,thats why it feels like the end of things,and scary.Trump winning again will help things along.

I can't see the whole world going digital at the same time, but Europe definitely looks to be heading in that direction

https://www.armstrongeconomics.com/markets-by-sector/foreign-exchange/euro/europe-preparing-to-cancel-all-paper-money/?utm_source=Newsletter&utm_medium=Email&utm_campaign=RSS

'Europe is moving full speed ahead to cancel all outstanding paper money and move to a digital euro. They are doing this to force all money back into the banks and to end the hoarding of cash. I strongly recommend anyone looking to keep cash around swap to the US dollar ASAP.'

 

[DurhamBorn]

6 hours ago, Talking Monkey said:

DB whats your timeframe for when QE as an option gets removed for the UK and when the government is forced to address the structural deficit/welfare bill. 

Probably around 23,maybe 24.Inflation will start slowly and build through the cycle.They might keep printing once it gets towards 3% (official) but in much smaller amounts.It wont look so bad at first because inflation in the 3%/5% range will lift tax and lower the deficit in the short term.As it moves higher though and the government needs to refinance gilts with the BOE not at the table it gets interesting.

[Barnsey]

Am I mad for thinking it might be a good time to start laddering into ABF? 

[CVG]

37 minutes ago, Barnsey said:

Am I mad for thinking it might be a good time to start laddering into ABF? 

No, you're not mad. Also think about Unilever (nice quarterly divs) and Tate&Lyle. DYOR.

[Barnsey]

Click to read entire thread (much needed perspective!)

 

[AWW]

I'm not sure everyone is all in. There are plenty of people even on this thread who have a good proportion of their wealth still in cash, just in case. Myself included.

[CVG]

Just now, AWW said:

I'm not sure everyone is all in. There are plenty of people even on this thread who have a good proportion of their wealth still in cash, just in case. Myself included.

Yep. I always aim for 20% cash. Always ready for an opportunity. Always have a portion of (any) profits off the table.

[Democorruptcy]

Morgan Stanley upgrades RDSB and BP

Quote

 

Morgan Stanley upgraded its recommendation for shares of Shell from 'equalweight' to 'overweight', telling clients that the oil major's new distribution policy revealed insiders confidence in the firm's ability to throw off cash.
"With a dividend yield of 5.4% and new guidance for annual dividend growth of 4%, Shell shares offer a steady-state total return of ~9.4% per year," they argued.

Was it just over confidence on the part of management? No, they said.

Projections for 4% annual growth were likely feasible, a 9.4% rate of return was higher than its cost of capital and its dividend yield might compress, and in so doing front-load some of those future returns.

All in all, they also bumped up their target price from 991.0p to 1,180.0p, adding that like sector peer Total's, shares now offered more than 20% potential upside.

Within the same research note, they upgraded BP from 'underweight' to 'equalweight'.

Yes, there were question marks around the firm's earnings and cash flow outlook - even if its strategy succeeded - and lack of dividend growth.

Nonetheless, "following underperformance and its yield expanding to 8.1%, we suspect these factors are also discounted."

 

https://www.hl.co.uk/shares/shares-search-results/r/royal-dutch-shell-plc-b-shares-eur0.07?tab=security_news

 

[reformed nice guy]

7 minutes ago, CVG said:

Yep. I always aim for 20% cash. Always ready for an opportunity. Always have a portion of (any) profits off the table.

Same as me. Currently 26% cash but thats due to me putting money into my SIPP without enough ladders to buy at the moment.

Hoping for some drops this week!

[Bricormortis]

If everyone s all in on reflation how come oiles are on the floor eh ? Im 50 % cash.

[AWW]

Also about 50% cash, more if you include what's sitting in my Ltd Cos.

Starting to move that cash into USD.

[jamtomorrow]

Wow -

https://www.bloomberg.com/news/articles/2020-11-03/jack-ma-s-ant-group-ipo-suspended-by-shanghai-star-board

The Shanghai leg of Ant Group Co.’s $35 billion offering has been suspended by the Chinese exchange, potentially derailing the world’s biggest initial public offering.

The Shanghai stock exchange will suspend the listing amid changes in the regulatory environment, it said in a statement Tuesday without providing further details.

[Democorruptcy]

I remember being 100% cash and I put the whole lot on a horse. At first I was only going to put 50% on and got 14/1 for it. When the price dropped to 10/1 I thought, yes it's going in today so put the other 50% on. It was 30 years ago and  I'm still annoyed I didn't go all in at 14/1 to start with.

[Harley]

Current target allocations:

Floor:  70%

. Equity: 25%

. Bonds: 25% (including some NS&I!)

. Hard: 25%

. Cash Equivalents: 25%

Upside: 30%

. Equity: 75%

. Cash Equivalents: 25%

Currently under on equity but over on cash and hards.

Actions:

. Cash to short term (1-5 year) bonds (various currencies)

. Diversify hards into other metals, crypto, ano (searching!)

. Further migrate from ETFs to stocks (but not all)

. Ladder into core industry equities (as watchlists are completed)

. Use the remaining equity allocation for trading

Achievements

. Reviewed and tweaked asset allocation model

. De-risked counterparties

. Developed systematic equity screening approach

. Developed a way of working, finance versus rest of life!

. Prepared macro roadmap with key industries of interest

. Expanded available trading options into derivatives, etc

. Developed a tax efficient model (e.g. dealing with WHT)

. Expanded access to regional markets

. Naughty stepped past mistakes!

. Created a rich array of sources for macro commentary

. Tried to pay back this thread!

[Harley]

An arguably perfect descending triangle completing in price for the US long bonds.  Usually a bearish chart pattern but that's when it's a continuation pattern of an established bearish trend.  Not here given the past bullish run.  Anything could happen.  A break to the downside while possible would be quite odd looking.  But then I had a buy signal on the yield, suggesting possible price falls ahead.  Bet whatever happens, sterling will do the opposite to dent any gains!  Gold has a similar pattern.  Will be really interesting to see, although will be difficult given the election noise/swings we'll have to contend with until say January (when I see some pattern completions).  Maybe equities will give us that "W" while the sector/asset rotation continues on the QT.

[JMD]

39 minutes ago, Harley said:

Current target allocations:

Floor:  70%

. Equity: 25%

. Bonds: 25% (including some NS&I!)

. Hard: 25%

. Cash Equivalents: 25%

Upside: 30%

. Equity: 75%

. Cash Equivalents: 25%

Currently under on equity but over on cash and hards.

Actions:

. Cash to short term (1-5 year) bonds (various currencies)

. Diversify hards into other metals, crypto, ano (searching!)

. Further migrate from ETFs to stocks (but not all)

. Ladder into core industry equities (as watchlists are completed)

. Use the remaining equity allocation for trading

Achievements

. Reviewed and tweaked asset allocation model

. De-risked counterparties

. Developed systematic equity screening approach

. Developed a way of working, finance versus rest of life!

. Prepared macro roadmap with key industries of interest

. Expanded available trading options into derivatives, etc

. Developed a tax efficient model (e.g. dealing with WHT)

. Expanded access to regional markets

. Naughty stepped past mistakes!

. Created a rich array of sources for macro commentary

. Tried to pay back this thread!

Interesting Harley, but what does the part in bold mean?...is it do with balancing commodities between the different mining sectors?   

'Diversify hards into other metals, crypto, ano (searching!)'

[JMD]

The R-rate continues to rapidly fall, week-on-week (stats below), yet the UK lock-down is still going ahead... surely this is madness?!... its this type of information - that contradicts the government's own 'follow the science' mantra - yet curiously no media outlet questions it - that screams out to me that there must be other agendas in play here.   

I noticed also that for the first time in many many weeks, last night's BBC 10 o'clock news didn't show the number of daily infections, is that because the daily infection figure has now also begun to fall? 

 

Metro article:-

'The R number is now between 1.1 and 1.3 in the UK, down from 1.2 to 1.4 last week, the Scientific Advisory Group for Emergencies (Sage) said on Friday.

Two weeks ago it was estimated to be between 1.3 and 1.5.'

https://metro.co.uk/2020/10/30/uks-coronavirus-r-rate-drops-to-as-low-as-1-1-13509358/