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

[Noallegiance]

I wonder if the projected jobless rate for next year includes the jobs to be lost by raising the minimum and national living wage...

[Chewing Grass]

This just popped up with numbers.

Sunak will reveal a three-year programme — the Restart Scheme — to try to assist more than a million long-term unemployed.

The scheme will give those who have been out of work for 12 months-plus regular intensive support.

But the Treasury estimates the scheme could be successful for only around 300,000, though they claim this will make it worthwhile.

That's just 70,000 more than would find work without the extra support, costing taxpayers around £42,000 for each job found.

They need to stop pretending that there is enough full time employment to go around on this over populated island.

https://www.thesun.co.uk/news/13288275/rishi-sunak-covid-package-unemployed/

[Yellow_Reduced_Sticker]

35 minutes ago, sancho panza said:

...

'Boris Johnson and Chris Whitty have to start questioning whether they are wrong.'

 

 

I don't believe that will NEVER EVER happen! I bloody well hope I'm WRONG!

 

Just LOOKING at the pic in that video of the UK's 2 BIGGEST idiots is enough to make you THROW UP!

 

I didn't even listen to the video, (only read the comments) however i have listened to some of talkradio's videos with:  Peter Hitchens, Carol McGiffin AND Richard Madeley... ALL these 3 know exactly what's going on!

 

I'll post a few comments below that video, THANKFULLY talkradio allows FREE speech unlike the rest of the MSM! Hopefully MORE folks start waking up to this UTTER BS!

 

"How come talkradio can find so many intelligent experts to talk to but the UK government can't find any?"

 

"Politely but unequivocally it's the time to start saying NO."

 

" The official WHO narrative is a joke. The official government policy is a disgrace. The lockdown is what is killing us "

 

 

AnyHOO...back on topic, otherwise i'm going to get a BOLLOCKING for being off topic!

 

Got my limit order on today to buy my final block of VOD at £102.00p LOL!

 

I bought more BT back in the summer at £1.29 ...only for it to hit the support line of 99p a couple of months latter!!!

 

I BET VOD ROCKETS just as i post this!

 

 

 

[leonardratso]

nay lad it will wait until you buy, then rocket.

 

 

(DOWN).

 

[DurhamBorn]

@Yellow_Reduced_Sticker my car is now the oldest in the car park at work out of over 500 cars.Its failed its MOT today though to my shame,a dim rear light i knew about but thought they would miss in daylight and id fix at the weekend ,just needs a new earth probably.First MOT for 18 months,and about £5 to get through.Its now cost me £11.88 a week since i bought it 11 years ago including depreciating car to zero value and all parts and repairs.Cant wait until 2030 when loads of local clubs form to keep old diesels on the road forever.

Im allowed off topic,plus for a while we were worried YRS had gone awol but he was simply waiting until his portfolio went blue to come back,

[Yadda yadda yadda]

1 hour ago, Chewing Grass said:

This just popped up with numbers.

Sunak will reveal a three-year programme — the Restart Scheme — to try to assist more than a million long-term unemployed.

The scheme will give those who have been out of work for 12 months-plus regular intensive support.

But the Treasury estimates the scheme could be successful for only around 300,000, though they claim this will make it worthwhile.

That's just 70,000 more than would find work without the extra support, costing taxpayers around £42,000 for each job found.

They need to stop pretending that there is enough full time employment to go around on this over populated island.

https://www.thesun.co.uk/news/13288275/rishi-sunak-covid-package-unemployed/

Make adult training affordable. I'd rather that was subsidised. At least the recipients would want it and have enough motivation to do something of their own accord. Work out where we have skills shortages and train people up to fill those jobs.

[janch]

@Cattle ProdI seem to come across articles about the Russians exploring in the Arctic for gas and oil especially as the permafrost is melting because of (man-made?) global warming.  There is an example here:

https://www.zerohedge.com/energy/russias-relentless-quest-arctic-oil

I don't know if the amounts mentioned are significant or not and so make any difference to the shortages in supply we are expecting.  I recall you saying in the past they wouldn't be able to get any further deposits out of the ground as it would be uneconomic but if the permafrost is melting that could make a difference. What do you think?

[BoSon]

4 hours ago, DurhamBorn said:

The problem is the state.

Yet it's all that keeps the charade going. The state grows to cover the lack of private sector jobs. The state grows to allow the government to pretend it's sustainable using historically cheap borrowing to keep the wheels turning. The state grows to cover the failing private sectors that are no longer attractive to investors in the form of renationalisation.

They may as well go the whole hog and start putting those in state paid non-jobs onto citizens income where they are then expected to perform community service if bored sat at home doing nowt.The non-jobs can become green jobs.

[DurhamBorn]

@Cattle Prod might help you graph gold,my interest rate road map says rates will lag inflation by 2.5% over the cycle as CBs run rates behind the curve all the way 

[Lightscribe]

https://earther.gizmodo.com/secret-exxon-documents-show-the-firm-may-never-recover-1845755377
 

I take it he hasn’t got Exxon in his portfolio.

[Harley]

Lynn Alden is smart, engineering smart, and I've been impressed with her past correlation work which I have used to analyse the current to good effect.

[Popuplights]

4 hours ago, DurhamBorn said:

@Yellow_Reduced_Sticker my car is now the oldest in the car park at work out of over 500 cars.Its failed its MOT today though to my shame,a dim rear light i knew about but thought they would miss in daylight and id fix at the weekend ,just needs a new earth probably.First MOT for 18 months,and about £5 to get through.Its now cost me £11.88 a week since i bought it 11 years ago including depreciating car to zero value and all parts and repairs.Cant wait until 2030 when loads of local clubs form to keep old diesels on the road forever.

Im allowed off topic,plus for a while we were worried YRS had gone awol but he was simply waiting until his portfolio went blue to come back,

Great Bangernomics! 

[Froggy2000]

Hi All, long time lurker here.  DurhamBorn I can't begin to describe how grateful I am for you sharing your knowledge like this.  I have learnt a tremendous amount about all sorts of things, not just investing, and have read both threads on here as well as the original one on TOS.

One concept I've struggled with a bit is the notion of "decomplex" trades.  I get that during a disinflation, credit is expanding as interest rates fall and lending standards loosen.  This causes bubbles in asset prices such as real estate in global cities with lots of demand, bonds, and bond proxies etc.

However when the credit expansion reverses, and central banks start printing to counteract the deflation, how does this flow into decomplex areas of the economy like telecoms, mining, agriculture etc?  In the past a lot seems to have gone into recapitalising banks (QE) after the financial crisis so didn't really impact anything and inflation remained low.  Now it seems it will go direct to government, which will spend on welfare, and some on infrastructure etc.  The infrastructure spending I imagine would drive up commodity prices to some extent, but why does that drive up prices and profits for those at the beginning of the chain rather than more evenly across the chain?  Why is it that Telcos for example couldn't really raise prices during the disinflation but can now?   And how does govt infrastructure spending impact Potash, Silver etc?  I'm still struggling a bit with that one.

Really would like to get my head around this!

I'm determined not to lurk in future, and I'll chip in if I think or see anything other may find interesting. 

Hope you find it useful!

[Popuplights]

49 minutes ago, Lightscribe said:

https://earther.gizmodo.com/secret-exxon-documents-show-the-firm-may-never-recover-1845755377
 

I take it he hasn’t got Exxon in his portfolio.

God knows I'm not a mad fan of the company, and I'm an employee!! But this bloke is a h8tr, as my kids would say.

What a fanny.

 

[Harley]

.

[Harley]

57 minutes ago, Lightscribe said:

https://earther.gizmodo.com/secret-exxon-documents-show-the-firm-may-never-recover-1845755377
 

I take it he hasn’t got Exxon in his portfolio.

Must have done a comparative analysis of their financials against their competitors!

[MrXxxx]

10 hours ago, DurhamBorn said:

The policy isnt really that important,its the fact it funnels money direct into the economy freshly printed.Watch for them trying to hold down spending on wages/services/soft areas and instead increasing spending on actually investing/making something.Thats whats happening around the world soon.Its subtle,but it means more money into things that produce,less to consumers,the backbone of econonomies.There will be some huge winners in the cycle in many areas,but the best way for ordinary investors like us to do ok/well/very well in the cycle is to de-complex things.We dont know who will win in the green energy space,but we do know as a whole it will need a massive amount of energy to get there for instance.Less carbon in the air or a slow down means millions more starve as crop yields go down,more potash needed etc.

 

 

..and lower/frozen wage increases means [consumer] inflation is staved off for longer?

[DurhamBorn]

@Froggy2000 thankyou for joining in and for enjoying the threads,we are all learning on here and thats fantastic.

You have actually answered the question yourself if you think it through.

Its all about the transfer mechanism.

In the financial crash the printing was for the banks.The Fed will of expected the money multiplier to set to work where the CB created the reserves and the banks then lend out 10x etc with fraction reserve banking.

However the money actually simply filled a hole on the banks balance sheets,the multiplier didnt work because the banks were filling the tank bank they had emptied over the prior several years.

This time the CBs are printing direct to the economy.In that i mean they are buying newly issued gilts and treasuries etc in the market from governments.They arent putting reserves into banks waiting for them to lend,they are injecting direct.They have merged monetary and fiscal policy.

Remember in most cycle ends the falls create demand falls,but this crisis has seen production falls.So production falls,but demand is growing.Demand from governments to stop revolution etc.

Now why de-complex.Its really simple for a macro strategist and a contratian angle.The de-complex areas hate dis-inflation so after a long long cycle of that the areas are on their knees,hated by investors,blamed for destroying shareholder value and every sin going.However i can track liquidity creation in the economy.I know that all that liquidity will go to de-complex areas at some point.So i know that over a cycle those areas will exerience much higher prices,because unlike dis-inflation areas it takes much longer to bring online a new mine,new telecom network,new Liquid natural gas train.

My work is all about leads and lags.Thats where we earn our butter.

[DurhamBorn]

Just now, MrXxxx said:

..and lower/frozen wage increases means [consumer] inflation is staved off for longer?

No,consumer isnt driving this cycle,its industrial driven.Input cost inflation,not consumption.

[reformed nice guy]

Here is a question @DurhamBorn and other people that ladder

What will you be doing now that all the prices have bounced up? A lot of the current prices are a good bit above the next ladders I had set

[Loki]

6 minutes ago, reformed nice guy said:

What will you be doing now that all the prices have bounced up?

One eye on David Hunter's bust next year (So keeping watch at DXY ~88, S&P ~4500) or if it's more of a sector rotation just buying on the drops.  Even then I won't try and sell everything just before the bust, just stuff that looks like it's given all it has to give anyway

Boring answer I'm afraid. 

[DurhamBorn]

12 minutes ago, reformed nice guy said:

Here is a question @DurhamBorn and other people that ladder

What will you be doing now that all the prices have bounced up? A lot of the current prices are a good bit above the next ladders I had set

Nothing,most of the stocks i own now were bought with several ladders at once in March because they fell through many at once.Ones that didnt hit bottom ladders have them still set or removed.

 

[reformed nice guy]

3 minutes ago, DurhamBorn said:

Nothing,most of the stocks i own now were bought with several ladders at once in March because they fell through many at once.Ones that didnt hit bottom ladders have them still set or removed.

 

Thanks for that DB

Im self employed and contribute any monthly excess to my SIPP. I went from 70% cash to about 5% cash during the COVID crash.

So if you were in my position, would you just keep accumulating until the next big drop even if it takes a few years?

[DurhamBorn]

10 minutes ago, Cattle Prod said:

Percolating out to the mainstream media....Bloomberg:

https://www.bnnbloomberg.ca/video/do-not-be-discouraged-by-where-these-energy-stocks-have-gone-canoe-s-tahmazian~2083981

That guy could be one of our lurkers

Incredible how in tune it is with our thesis on here.Maybe we should go mainstream and forward the thread to the MSM "there is nobody investing in this sector"

WE ARE 

 

[Noallegiance]

What's the significance and mechanism of a new infrastructure bank? Just an artery to pump copious fiat into copious infrastructure projects without retail bank involvement?