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

[DurhamBorn]

Oh and we are covered if this working from home stays high,as im sure it will.Telcos and energy should gain.Royal Mail of course and even the fag companies.No little Hitler saying when you can have a smoke.I guess oil would see a fall in use,but tiny in the scheme of things compared to Asian growth.Of course we didnt buy them expecting one of the bull cases to be a shift in working to home,but the macro pointed the way and the rest is the cycle playing out.

Might be time to bail some of the transports though and luckily the money press has seen those x2,x3 or more off the lows.

 

[Hancock]

4 hours ago, Loki said:

FWIW the traffic into London suggest the mass WFH is nothing but a pipe dream

Ive been on the trains into London many times over the last 12 month and they are empty, which may account for the extra cars.

[Hancock]

50 minutes ago, DurhamBorn said:

.My inflation target of 65% over the cycle might be conservative.

Is this a wage inflation target .. or just goods?

[DurhamBorn]

26 minutes ago, Hancock said:

Is this a wage inflation target .. or just goods?

RPI 

[kibuc]

4 hours ago, Barnsey said:

It's here folks...

 

I'll admit, I'm dumb and I'm not getting it. The money in my bank account is already digital. I receive and spend it electronically, mostly using my phone. How is this different?

Edit: is it a state-run blockchain, so like a castrated crypto?

[DurhamBorn]

Interesting podcast for LNG an area i see forcing gas to be a fantastic investment.China is expanding storage,that is the real signal with the lag.

This gives you a good idea of the big players who will control the industry.For Petronas the way to play them is through Repsol IMO.I need to revisit the area again to try to find a few smaller players with potential in the sector for multi baggers.The big gainers are the big stocks we own already.

https://eneken.ieej.or.jp/data/7814.pdf

[Tingles]

9 minutes ago, kibuc said:

I'll admit, I'm dumb and I'm not getting it. The money in my bank account is already digital. I receive and spend it electronically, mostly using my phone. How is this different?

CBDCs will enable automatic taxation, automatic (transactional) surveillance, automatic blacklisting and programmability (i.e. can only be spent on certain things or with specified vendors).  Add these functionality capabilities to the removal of cash and there is your difference.

[kibuc]

4 minutes ago, Tingles said:

CBDCs will enable automatic taxation, automatic (transactional) surveillance, automatic blacklisting and programmability (i.e. can only be spent on certain things or with specified vendors).

I feel like most of it can already be done.

Anyway, if it's a blockchain with state-approved validators (sounds like Ripple, huh? :P) with smart contracts and all other bells and whistles, does it mean there wouldn't be bank accounts anymore, only digital wallets? How do consumer banks feel about it?

[DurhamBorn]

Another problem the government will have with working from home is that people who cant,factories,health care,supermarkets etc will start to feel more angry as time goes by.People knackered working the night shift already hate the welfare system,imagine when they start to see their council worker neighbours etc sat in the garden all summer "working".

This change though is good news for the reflation cycle,because we have massive amounts of liquidity floating around.

Commercial real estate will be destroyed of course,and that means pension schemes that chased the yield will be stuffed.

Imagine the fact the only real inflation assets they hold,CRE are the inflation asset getting destroyed.

 

[Lightscribe]

1 hour ago, DurhamBorn said:

Agreed,its incredible the lack of work councils manage,and i mean manager level.My partners bosses are all sat at home doing nothing waiting for big pensions.The problem is i dont think they will deal with it.I think they will simply keep taking more and more from people who work.

The thing is though i dont blame people.Half the country gets welfare for doing nothing,or very little and that then makes people working think sod that.Its a creeping cancer.

I hate the system,but it drove me to understand how things work and learn.

I went for some fuses yesterday as im fixing a freezer and noticed the price increases in Homebase.I know thats a pricey shop,but even cheap items are suddenly £12 etc.

Inflation is way over the official levels,hugely so and its only just starting.My inflation target of 65% over the cycle might be conservative.

Crucial we continue on our journey of leveraging this inflation as much as we can.

 

I think your giving council workers too much credit DB.  I don’t think many actually have the ability to think of the wider picture of what others are getting on benefits over themselves. Just turn up, have a chat, bat off anything that isn’t in your job description, arrange A/L and go home to pick the kids up from school is pretty much all that concerns them, that’s my experience over the years.

Civil service jobs in decades gone by used to be easy to get and generally for the lazy. They never aspired to sky high salaries, rather just do the minimum, join the Union, take all the benefits and just retire as early as possible. When average houses were £40-50k in the 90’s, a civil service job was all you really needed for life. Now the jobs are like gold dust, even though the pay isn’t fantastically high compared to house prices, the benefits are head and shoulders above any level similar in the private sector.

I agree I don’t think it will be the councils that’ll do anything. They’ll be quite happy to just pass on increased costs to everyone. The question is when there’s an increasingly dwindling base that actually pays council tax then that’s when the wheels falls off the wagon. I think the government will have to step in more and more going forwards post corona.

The likes of Croydon is the canary in the coal mine. Absolute inept management. Billions spent on failed projects (that everyone knew wasn’t going anywhere), large demographic not paying council tax anyway and ludicrous £400k golden handshake amount handed to the CEO (who never had the necessary qualifications and only ticked the boxes anyway) doing a runner when it all blew up.

This is all quite frankly criminal and they need to be held to account by the tax payer. Pitch forks at dawn 

[Barnsey]

1 hour ago, Hancock said:

Ive been on the trains into London many times over the last 12 month and they are empty, which may account for the extra cars.

Doesn't help when the government have put out advertising campaigns explicitly saying "covid catches the train".

I really want to share your optimism @Cattle Prod but I do worry that once we're through this honeymoon period for hybrid working, efficiencies will be made.

[Chewing Grass]

2 hours ago, feed said:

Frankly i think this will delay that action down or at least defer it for a couple of years, as companies and HR department restructure their organisations based on the hybrid working model and the requirement of some people to be in an office.  All at the same time as trying to figure out what to do with the real estate that no one wants.  

The companies who rented space after selling their old office blocks are not looking so daft after all now.

The one I work for literally needs only 1/2 or 2/3 of the space going forward.

[Majorpain]

55 minutes ago, Barnsey said:

Doesn't help when the government have put out advertising campaigns explicitly saying "covid catches the train".

I really want to share your optimism @Cattle Prod but I do worry that once we're through this honeymoon period for hybrid working, efficiencies will be made.

You can add Whitty to that with his "its coming back in the Autumn" scaremongering, Govt on one hand is saying everything is going back to normal, CMO is saying end of this year you'll be turfing everyone out the office again.  I can see that being the tipping point where CRE accepts the inevitable and starts converting en masse to flats.

[Mapper]

1 hour ago, kibuc said:

I feel like most of it can already be done.

Anyway, if it's a blockchain with state-approved validators (sounds like Ripple, huh? :P) with smart contracts and all other bells and whistles, does it mean there wouldn't be bank accounts anymore, only digital wallets? How do consumer banks feel about it?

Central Bank Digital Currencies are not crypto currencies. ie. something that you can "hold" and have total control over.

For day to day use things will appear normal. You'll pay electronically, as most peopel do for almost everything these days. But, there will be no more private banking for the average Joe.

Your account will be with the central bank aka the government.

And that is where the control comes in.

You're buying too much booze... lower social credit score.  So, you're a credit risk and your borrowing costs go up.

Say something negative about the government... 20% reduction in your balance. Next time it'll be 50% etc. etc.

Even before China launched it's CBDC they had a social credit score system that had locked thousands of people out of things like buying train tickets and airline tickets and god knows what else.

Imagine how many more people the state can persecute with all the masses of data they will get from a CBDC.

Coming to a progressive democracy near you.

 

[Fully Detached]

A bit o/t but if anybody is looking to withdraw funds from NS&I before the end of the tax year, you might need to get on with it asap. Both of our transactions got hit with a security check which has taken over 3 days to get completed, and the money will only hit our bank accounts on 30th, leaving it a little tighter than I had been expecting.

NS&I are in absolute chaos - every operator I spoke to in my repeated calls over the last 3 days told me a different story, and they appear to have absolutely no understanding of just how bad it looks when they can't even give me an approximate date that the transaction might be approved, "'cos covid innit?"

I am very happy that they take the security of my money seriously but jesus christ can you imagine if Lloyds or Natwest were telling people that there was no indication of how many days it might take for them to get their money out?

[kibuc]

25 minutes ago, Mapper said:

Central Bank Digital Currencies are not crypto currencies. ie. something that you can "hold" and have total control over.

For day to day use things will appear normal. You'll pay electronically, as most peopel do for almost everything these days. But, there will be no more private banking for the average Joe.

Your account will be with the central bank aka the government.

And that is where the control comes in.

You're buying too much booze... lower social credit score.  So, you're a credit risk and your borrowing costs go up.

Say something negative about the government... 20% reduction in your balance. Next time it'll be 50% etc. etc.

Even before China launched it's CBDC they had a social credit score system that had locked thousands of people out of things like buying train tickets and airline tickets and god knows what else.

Imagine how many more people the state can persecute with all the masses of data they will get from a CBDC.

Coming to a progressive democracy near you.

 

That doesn't scare me as much as it perhaps should, because a lot of it is already possible and, in fact, going on. My bank knows all my spending habits (or so it thinks :P) and adjusts my score accordingly, which directly affects services available to me, like getting a new mobile contract or anything on finance. It has power to impose limits on how I use money in my account. It can and will share details with authorities if anything gets flagged. And the money there is not even legally mine - it belongs to the bank, and I'm only a creditor.

I reckon one of the biggest benefit CBs see is the ability to push stimulus directly to people's account.

[Bobthebuilder]

35 minutes ago, Fully Detached said:

NS&I are in absolute chaos - every operator I spoke to in my repeated calls over the last 3 days told me a different story, and they appear to have absolutely no understanding of just how bad it looks when they can't even give me an approximate date that the transaction might be approved, "'cos covid innit?"

Same with HMRC at the moment. Working from home and completely useless.

[Noallegiance]

Just now, Bobthebuilder said:

Same with HMRC at the moment. Working from home and completely useless.

So it doesn't matter where they sit then?!

[Fully Detached]

2 minutes ago, Bobthebuilder said:

Same with HMRC at the moment. Working from home and completely useless.

What amazes me is just how clueless they seem to be about their own ineptitude and how it looks from the outside. On one of my many calls I was asked what I wanted the money for, as "if it was urgent they could try to speed things up a bit" - as if anybody makes 40k withdrawals on a whim and doesn't mind waiting an unknown amount of time to see if it has landed in their bank account.

[Bricormortis]

Houthi rebels launch attack on S A oil facility ( another one ).. with armed drones..

.https://www.dailysabah.com/world/mid-east/yemens-houthi-rebels-attack-saudi-oil-facilities-military-sites

 

Venezuela loses 30,000 barrels light crude per day after gas pipeline explosion 5 days ago 

http://www.laht.com/article.asp?ArticleId=2500272&CategoryId=10717

 

 

 

[janch]

6 hours ago, sancho panza said:

Goldman msut have gone long CRE.

Yes.  Most of Rishi's mates and fellow Tories are probably rather concerned about their CRE investments.  Goodness knows what will happen to Canary Wharf and all the City offices if companies are all downsizing their office space.

 

[JREWING]

LIST LINK

 

Two of my miners may be affected?

Polymetal and CEY are on the list.

Wondered why Polymetal was having a bad few days.

Hope CEY moves north post Monday, plenty of director buys recently.

 

The list of affected shares that will be withdrawn from spread betting and CFD accounts.

2	Please close positions by Monday 29 March 2021, from which point we will start to close any remaining open positions
3	You will still be able to buy the majority of shares outright using our share dealing service You have until Monday 29 March 2021 to close your open positions on affected markets, from which point we will start to close any positions still open. Positions will be closed as soon as practical from this point, while ensuring that all reasonable steps are taken to obtain the best results for our clients.

 

[DoINeedOne]

Council tax just gone up 5.9% 

[Barnsey]

45 minutes ago, Cattle Prod said:

The simple answer there DB is that the factory workers will be paid more. A lot more, and rightly so as people who make useful stuff. The last time we had an inflationary period factory workers could raise a family, 4 bed house, a decent car, and the rest. They were unionised mind you, but that can happen again.

It is happening CP, globally. Biden paving the way with his pro union stance. UK unions seeing quite a surge in membership too.

 

[sancho panza]

5 hours ago, DurhamBorn said:

Inflation is way over the official levels,hugely so and its only just starting.My inflation target of 65% over the cycle might be conservative.

Crucial we continue on our journey of leveraging this inflation as much as we can.

 

DB I refer you to the Shaun Richards piece I posted where Andrew Sentance is quoted as talking about a GDP deflator (definiton embedded for those that aren't familair) of 6.1% as opposed to CPI of 0.4%.Two very different outcomes if compounded for ten years.

Shaun has argued for some time time that inflation measures are way out kilter wiht reality and here is one of their own all but admitting it.

Such a difference is ludricrou and very backs up what you're saying and I would argue the 6.1% is more a refelction of where we are than the 0.4% especially if you're in the bottom 50% of income deciles.

'What is Uk inflation? Measured by CPI it is currently 0.4 percent but this is the lowest of the available inflation measures. Here are the rest – CPIH 0.7pc; PPI (output) 0.9pc; RPI 1.4pc; RPIX 1.6pc; CPIY 2.0pc; PPI (input) 2.6pc; GDP deflator 6.1pc; GVA deflator 8.0pc.'

https://www.investopedia.com/terms/g/gdppricedeflator.asp

Benefits of the GDP Price Deflator

The GDP price deflator helps identify how much prices have inflated over a specific time period. This is important because, as we saw in our previous example, comparing GDP from two different years can give a deceptive result if there's a change in the price level between the two years.

 

Without some way to account for the change in prices, an economy that's experiencing price inflation would appear to be growing in dollar terms. However, that same economy might be exhibiting little-to-no growth, but with prices rising, the total output figures would appear higher than what was really being produced.

4 hours ago, kibuc said:

I'll admit, I'm dumb and I'm not getting it. The money in my bank account is already digital. I receive and spend it electronically, mostly using my phone. How is this different?

Edit: is it a state-run blockchain, so like a castrated crypto?

Good question.

3 hours ago, Lightscribe said:

 The question is when there’s an increasingly dwindling base that actually pays council tax then that’s when the wheels falls off the wagon. I think the government will have to step in more and more going forwards post corona.

The likes of Croydon is the canary in the coal mine. Absolute inept management. Billions spent on failed projects (that everyone knew wasn’t going anywhere), large demographic not paying council tax anyway and ludicrous £400k golden handshake amount handed to the CEO (who never had the necessary qualifications and only ticked the boxes anyway) doing a runner when it all blew up.

This is all quite frankly criminal and they need to be held to account by the tax payer. Pitch forks at dawn 

That's where we're going.Leicester council has a dwindling number of people in full time work.I don't know how the subsidies work and whether the govt then tops up Leicester council for all those on reduced incomes.

I genuinely think we're approaching the tipping point of where these councils can't be supported.A few (leicester has bought loads of dross CRE at the peak of the market) like Spelthorne are in imminent trouble iirc.Others not too far behind.

It really is scandalous what some council CEO's have done with taxpayers money.