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

[Jesus Wept]

32 minutes ago, DurhamBorn said:

Worth reading for everyone as it shows how these things build with lags.

I’ll be honest though @DurhamBorn I still am not fully sure, (even now after all this reading)’ on how to ‘position’ myself. There are too many uncertainties.

It is not just what to buy but when to buy. 
 

The new financial year starts on April 6th. Compared to last year I am pretty cash rich. If only I’d been in this position last March and April.
 

12 months later and lots of stocks I had put on my watch list have gone up for 50-300%.

Now I have plenty of liquidity and £58k worth of ISA allowance to invest but think that everything is overvalued. 

I want low risk, high yield diversified funds, stocks across sectors and the globe. 

....the terminal inflation, there is faltering prosperity, tightness of money, falling stock markets, rising taxes, still larger government deficits, and still roaring money expansion, now accompanied by soaring prices and ineffectiveness of all traditional remedies.....

 

[sancho panza]

1 hour ago, Lightscribe said:

 Some families will have seen what they can now get compared to working full time in low paid jobs and won’t be going back.

This.I go to a lot of care homes in my work and they're struggling for staff as it is.Quite why the govt is seeking to make that situation worse by insisting on all care workers getting the vaccine despite the fact that the vaccine doesn't affect transmission or prevent infection and loads of them don't want it.

Much like the forebearance issue,when you gone to work throughout this and watched other people sat at home not making mortgage/rent payments,it doesn't incentivize care home workers to do overtime.Anything but.

3 hours ago, Hancock said:

It does have that feeling about it; also a feeling Sunak is going to go to extreme levels for propping up "his" bubble ..... wonder when a new Term Funding Scheme will be along.

Rishi is caught between a rock and hard place.Open up and unemployment will go up,keep the economy shut and unemployment will gradually move up.All the while,the fiscal position is deteriorating to the point that the way out of the hole is just to dig a bigger one.Funding unemployment cheques with debt isn't a plan.

I think the unwind here will be quick and brutal when it eventually comes.

I could say that I feel sorry for Bozza and Rishi but I'd be lying.They've brought this fiasco upon us all.Bungled their way into it,bungled their way through it and look like they're going to bungle their way out of it.

[Yadda yadda yadda]

3 minutes ago, sancho panza said:

Much like the forebearance issue,when you gone to work throughout this and watched other people sat at home not making mortgage/rent payments,it doesn't incentivize care home workers to do overtime.Anything but.

Lack of things to spend overtime wages on must be another factor. Lots have no interest in saving so why work extra hours if that is the only option for the money? Especially when it is all taxed at marginal rate, presumably 32% all in.

Personally I'd gobble up the overtime currently. Swap spare time now when I can't do so much with it for more spare time later when I can.

[sancho panza]

13 hours ago, Froggy2000 said:

Me too.  For those interested, the link below gives a very in-depth account of the societal impact of inflation.  Both a sudden catastrophic one, and a slower one.  It's amazing, and scary to see how it can touch us in so many ways.

https://recision.files.wordpress.com/2010/12/jens-parsson-dying-of-money-24.pdf

I've jsut read the foreword and as DB says that looks like one hell of a read.I'll have to set aside some serious time thsi week for reading the whole of it.

Thanks for psoting.

[Lightscribe]

1 hour ago, Yadda yadda yadda said:

Lack of things to spend overtime wages on must be another factor. Lots have no interest in saving so why work extra hours if that is the only option for the money? Especially when it is all taxed at marginal rate, presumably 32% all in.

Personally I'd gobble up the overtime currently. Swap spare time now when I can't do so much with it for more spare time later when I can.

I don’t doubt there will be a mini boom coming out of all of this once restrictions are lifted (‘lifted’ being the word there, as I think restrictions will be with us indefinitely), although this roaring 20’s boom effect will only effect certain areas.

Pubs, bars, restaurants, holidays, weddings, (all those that haven’t gone bust) will be fully booked and packed to the rafters for the foreseeable. The likes of Saville row, Jermyn street and all the city reliant economy won’t fare so well.

No doubt we’ll see wall to wall media coverage marking it as some sort of VE Day. The nation will pat itself on the back thinking it’s all over and splurge out as a way of ‘treating’ themselves after dealing with Covid hardship for so long. Of course we all know the hardship is still to come, and will make sitting at home drinking wine in the garden for over a year seem like... well erm a picnic.

[Harley]

1 hour ago, sancho panza said:

Rishi is caught between a rock and hard place.Open up and unemployment will go up,keep the economy shut and unemployment will gradually move up.All the while,the fiscal position is deteriorating to the point that the way out of the hole is just to dig a bigger one.Funding unemployment cheques with debt isn't a plan.

The Con(ers) need to get the local and assembly elections out of the way first.

[MvR]

16 hours ago, Froggy2000 said:

Me too.  For those interested, the link below gives a very in-depth account of the societal impact of inflation.  Both a sudden catastrophic one, and a slower one.  It's amazing, and scary to see how it can touch us in so many ways.

https://recision.files.wordpress.com/2010/12/jens-parsson-dying-of-money-24.pdf

Brilliant.  Chapter 11, "Inflationary Syndrome"  is an absolute corker!

[JMD]

3 hours ago, Vendetta said:

I’ll be honest though @DurhamBorn I still am not fully sure, (even now after all this reading)’ on how to ‘position’ myself. There are too many uncertainties.

It is not just what to buy but when to buy. 
 

The new financial year starts on April 6th. Compared to last year I am pretty cash rich. If only I’d been in this position last March and April.
 

12 months later and lots of stocks I had put on my watch list have gone up for 50-300%.

Now I have plenty of liquidity and £58k worth of ISA allowance to invest but think that everything is overvalued. 

I want low risk, high yield diversified funds, stocks across sectors and the globe. 

....the terminal inflation, there is faltering prosperity, tightness of money, falling stock markets, rising taxes, still larger government deficits, and still roaring money expansion, now accompanied by soaring prices and ineffectiveness of all traditional remedies.....

 

I agree, as Harley and others here consistently remind/warn, there is little of value to buy out there. I also have lots of cash to allocate, so if we don't get a BK or similar event, then I'm going to really regret not going more into energy, telecoms, PM's. That's with hindsight of course so am not beating myself up over it.                                                                                                                                                                                        Anyway my strategy is to finalise my BK/dave-hunter-50/80%?-down watch list, but i am also going to return to my funds/etf list (mostly international/Asia/EM sectors), which I stopped part-way through competing last year, as I now figure (because I don't have nesecary skills to analyse company financials or debt profiles) its probably better for me to also use appropriately selected reflation oriented type funds. (....i know we don't do share recommendations here, so not to clutter up this thread with endless stock conversation. But if anyone wants to message me and is up for perhaps swopping their personal standby 'bk stock list' that they have maybe done company financial 'deep dives' into, in return for my fund list/bk stocks, I'd be happy to do that, so please do message if interested.)

[Noallegiance]

1 hour ago, MvR said:

Brilliant.  Chapter 11, "Inflationary Syndrome"  is an absolute corker!

It's pretty much nailed on my thinking that I need to be buying a place within the next 18-24 months so it can be inflated away. If a housing correction happens in the mean time it's a Brucie.

Starting to wish I'd mortgaged myself to the eyebrows a decade ago.

[BWW]

28 minutes ago, Noallegiance said:

It's pretty much nailed on my thinking that I need to be buying a place within the next 18-24 months so it can be inflated away. If a housing correction happens in the mean time it's a Brucie.

Starting to wish I'd mortgaged myself to the eyebrows a decade ago.

Of course this is true if you are buying with a mortgage and to live in. It's always been true because the mortgage has always been inflated away at some point if you hold long enough. Only proviso is you need to be sure to be able to make the payments so have a decent reserve, those who don't get screwed.

I still think shares of companies producing/doing essential stuff will outperform property significantly so that's where my buy-with-cash funds are sitting for a while. Proviso is that the companies don't go bust/share price to zero with restucturing which is really the same thing.

To me, unclear if there will be a BK so I'm thinking to just ride it out rather than part sell and try to buy near the bottom, will just be too much regret if no BK happens.

[planit]

The chances of severe shocks to just about anything seem to be increasing at hell of a rate at the moment. Not sure if anyone else feels the same.

 

We have forces of epic proportions pulling in all sorts of directions

• Huge increases in GDP over the last year recovering from Covid lockdowns
• Unprecedented increases in household savings
• $1.9T already starting to circulate
• $3T infrastructure plan that on top of the above we have no idea how it will affect markets.(FT reports it is 'partly funded by taxes' LOL)
• The mother of all hangovers/recessions due to job losses and government finances  being in severe deficit.
• Central banks continuing to cheat whilst convincing everyone it is honest finance

 

 

Somehow the huge amount of cash needs to find a home so if there is a premature BK all I can see is buyers coming in really quickly which might lead to the blow off top.

 

Because of the above I am just thinking about the next week:

Tanker should get freed in next 3 days as tides are rising up to Wednesday when there is a Spring tide, after that the high tides are lower which will make freeing the tanker more difficult as the days for on so it could be weeks before it is floated.

I guess the tides don't have much effect in the canal as the water level is controlled but a couple of articles I have read do mention tides so I assume they do have an effect and potentially the authorities can use them to increase water levels.

OPEC meeting, I don't know much but these countries need money and they know $65-$70 oil prices are not going to spook the markets so I am guessing they will say whatever they need to so oil ends the week in this range. As others have mentioned, they probably have enough clout in the futures markets to put the price where they want it for a while.

If everyone can forget about 10 year yields for a week perhaps the S&P will break 4000.

Friday could be a problem if the expected US employment data turns out bad, if we get a run up to Thursday I might try to top slice (that is my wishful thinking).

 

As usual please critique my thinking and help me fill in things I have missed.

 

 

[Loki]

@M S E Refugee Your Frontline thread has vanished, I tried Google too.

I'll just post this here instead.

https://www.zerohedge.com/energy/oil-tanker-rates-surge-suez-canal-blockage-continues

[Loki]

11 minutes ago, PrincessDrac said:

GOLD

Nice read.

I'm holding four miners. I'm hoping gold is at the bottom of its range. Silver aswell.

I have quite a lot of physical gold and silver.

I'm fully allocated with CEY and HOC.

Looking to add some Barrick, Polymetal and buy some Fres next week as they all look good value.

You might want to diversify just a touch 

[Castlevania]

15 minutes ago, PrincessDrac said:

Thought I had. Gold and Silver. Four different companies..

You can easily over diversify.

Not with gold miners

[Talking Monkey]

On 27/03/2021 at 14:55, kibuc said:

Integrity of people in the PM mining business is on full display again, this time thanks to Fortuna Silver who carefully selected late after-close hours on a Friday evening to inform, in two separate releases, that 1) their gold and silver reserves in Mexico went down by a quarter (!) year on year, and 2) they got an unfavorable court ruling in their dispute about missing royalty payments worth hundreds of millions. I think it's praiseworthy they didn't wait until 11pm on Good Thursday, or perhaps schedule it for the missing hour during the Summer Time switchover. 

Lovely I got some of them, I guess they'll probably halve  on Monday😃. Hey ho I was expecting a couple woukd have some dramas like this

[goldbug9999]

14 hours ago, Hancock said:

It does have that feeling about it; also a feeling Sunak is going to go to extreme levels for propping up "his" bubble ..... wonder when a new Term Funding Scheme will be along.

Its never going to be like 2008 again because they have all the machinery in place to create vast amount of money at a moments notice.

[Hancock]

2 minutes ago, goldbug9999 said:

Its never going to be like 2008 again because they have all the machinery in place to create vast amount of money at a moments notice.

Until they can't.

But that is why i stated - also a feeling Sunak is going to go to extreme levels for propping up "his" bubble ..... wonder when a new Term Funding Scheme will be along.

You're in the buy now or miss out brigade, i still think a correction of sorts is probable.

 

[goldbug9999]

3 minutes ago, Hancock said:

Until they can't.

But that is why i stated - also a feeling Sunak is going to go to extreme levels for propping up "his" bubble ..... wonder when a new Term Funding Scheme will be along.

You're in the buy now or miss out brigade, i still think a correction of sorts is probable.

Were not in the end game yet, nowhere near "extreme" in my view, that wont (IMO) happen until we have most people getting most of their income as direct government stimulus. Sounds fanciful but I cant see any politician having the stomach for any of the alternatives. The "correction" will be through a currency value collapse, not nominal falls. 

This gives the government the plausible deniability that wasn't their fault. I'm not going to give specific investment advice but holding significant amounts of cash probably isn't going to be a good idea.

[Hancock]

27 minutes ago, goldbug9999 said:

Were not in the end game yet, nowhere near "extreme" in my view, that wont (IMO) happen until we have most people getting most of their income as direct government stimulus. Sounds fanciful but I cant see any politician having the stomach for any of the alternatives. The "correction" will be through a currency value collapse, not nominal falls. 

This gives the government the plausible deniability that wasn't their fault. I'm not going to give specific investment advice but holding significant amounts of cash probably isn't going to be a good idea.

Your view is an opinion, but seems to be written as fact.

I will not be buying a house in the imminent future for fear of missing out, which is what you are more of less stating, to buy right now would be rather silly imho.

Life will be back to (new) normal come June (elections in May mean they're not going to slow the "return to normal"). We will also follow America where many states have already returned to normal; at this point real unemployment figures and closure of companies begins. Come September SDLT is reinstated, so the rush to buy houses will have faded by early July.

Then it is decision time.

[wherebee]

https://www.zerohedge.com/markets/archegos-fallout-nomura-crashes-after-reporting-record-2bn-loss-transactions-us-client

Lots of margin calls might be happening today Asia time (your morning/daytime) and US night.  Could be an interesting day.

Add in the refinery explosion in Indonesia.

Plan accordingly.  

 

[Viceroy]

Fess up. Which one of you wrote in?

https://www.armstrongeconomics.com/armstrongeconomics101/inflation/inflation-comes-when-people-see-it-is-cheaper-to-buy-today-than-tomorrow/

COMMENT: Dear Mr Armstrong,
I wanted to write in to affirm your observation of regular people buying now rather than waiting..I bought an extra freezer so we can stock up. I actually tried to buy a freezer last year and couldn’t get one at all, so I snapped one up as soon as they were available back in January.
My wife just asked me if I wanted to get a new grill for Father’s Day. I said, ‘Let’s buy that right now and put it aside. Who knows what will happen by Father’s Day.’

[Loki]

1 hour ago, Viceroy said:

Which one of you wrote in?

A new freezer?

[Barnsey]

7 hours ago, Hancock said:

Your view is an opinion, but seems to be written as fact.

I will not be buying a house in the imminent future for fear of missing out, which is what you are more of less stating, to buy right now would be rather silly imho.

Life will be back to (new) normal come June (elections in May mean they're not going to slow the "return to normal"). We will also follow America where many states have already returned to normal; at this point real unemployment figures and closure of companies begins. Come September SDLT is reinstated, so the rush to buy houses will have faded by early July.

Then it is decision time.

There are no certainties, will SDLT be reinstated in September? CRE is in decline, do the powers that be want to crash housing too? Remember who's in charge. Ever increasing noises of it being a 'bad tax' on transactions. As for unemployment, we've had a once in a century global disaster, forbearance and unemployment support being coordinated (like the vaccine development) on a global scale. Rishi and Yellen in frequent talks. Why let all of this go as soon as we have a pent up demand boom in the summer? You don't get over something so significant that fast, and I think they're playing the long game here.

We keep thinking this will play out like 2008, but that was people being reckless with borrowing, so they reigned the excess in for years. This is an exogenous, nightmarish, once in a century global health disaster. That paves the way to justify quite the opposite, much more continued spending and job support well beyond what we've been used to in our lifetimes.

[Noallegiance]

5 hours ago, wherebee said:

Add in the refinery explosion in Indonesia.

 

It's uncanny I tell thee.

[Barnsey]

On 27/03/2021 at 14:38, Bobthebuilder said:

Barely on topic but. I have just been notified of a 20% pre-order price increase in a model train from China through a UK supplier, I cancelled it. It's about time they brought production back to Margate, I will pay the higher prices then.

I've had a collectibles binge over the weekend, one of my things is TV/Movie diecast cars. Inflation does wonders for the right kind of tat