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

[janch]

21 hours ago, Animal Spirits said:

We are now on QE5 which intuitively tells you that this flood of liquidity has not made its way into the real economy.

I'm also wondering about this as house prices are still on the rise everywhere it would seem.  The average is 12%pa in US:

https://notayesmanseconomics.wordpress.com/

Is this a temporary thing before the bust? 

[Fully Detached]

On 25/04/2021 at 23:26, DurhamBorn said:

As you say the currency would collapse,BOE has little power once the Fed moves.On housing buy one in Redcar now and move up here.Im very worried that we are going to see big house price gains up here while the south is whacked.Loads of southern accents up here now and more every day.Benefit claims of course,but also other people.

Personally I'd feel rather guilty about doing that since I know you don't want soft Southerners coming in and trashing house prices in your area.

...but that didn't stop me looking anyway 

Question - from the very limited search I did, a decent 3 bed semi looks about £160-£180k, is that about right? If so I'm thinking I can do the same in the Swansea area and i) not piss you off and ii) keep the wife happy that she's closer to her mother.

I've heard a few people lately talking about house prices in the regions "levelling up" and I'm wondering if I might be better forgetting all this investment business for now and just buying a place in Swansea area for £170k or so. The idea feels simultaneously lazy and kind of relaxing.

[DurhamBorn]

7 minutes ago, Fully Detached said:

Personally I'd feel rather guilty about doing that since I know you don't want soft Southerners coming in and trashing house prices in your area.

...but that didn't stop me looking anyway 

Question - from the very limited search I did, a decent 3 bed semi looks about £160-£180k, is that about right? If so I'm thinking I can do the same in the Swansea area and i) not piss you off and ii) keep the wife happy that she's closer to her mother.

I've heard a few people lately talking about house prices in the regions "levelling up" and I'm wondering if I might be better forgetting all this investment business for now and just buying a place in Swansea area for £170k or so. The idea feels simultaneously lazy and kind of relaxing.

You could probably get a nice one for around £140k.The racecourse area is nice and close to the train station.Im going down Asda to buy a load of Heinz tins,they have them on 50p at the moment,but il have a look later and see whats up for sale.

[Bobthebuilder]

9 minutes ago, Fully Detached said:

I've heard a few people lately talking about house prices in the regions "levelling up" and I'm wondering if I might be better forgetting all this investment business for now and just buying a place in Swansea area for £170k or so. The idea feels simultaneously lazy and kind of relaxing.

Have you had a look in the Templecombe area?

[Fully Detached]

4 minutes ago, Bobthebuilder said:

Have you had a look in the Templecombe area?

In Somerset? I did set a large search area South of Bath last year in that sort of dead area with no traffic links, but the prices were going nuts from this time last year so I dropped it. Just looking at Templecombe +10 miles now there's not much around for £180k, which is as high as I'd like to go as I want to hang on to my land and PMs and ideally the crypto. I don't mind offsetting a mortgage against some of it but I'd like to be able to clear any debt obligation quickly if I needed to (and hopefully keep the upside of the hard assets!)

[Bobthebuilder]

3 minutes ago, Fully Detached said:

In Somerset? I did set a large search area South of Bath last year in that sort of dead area with no traffic links, but the prices were going nuts from this time last year so I dropped it. Just looking at Templecombe +10 miles now there's not much around for £180k, which is as high as I'd like to go as I want to hang on to my land and PMs and ideally the crypto. I don't mind offsetting a mortgage against some of it but I'd like to be able to clear any debt obligation quickly if I needed to (and hopefully keep the upside of the hard assets!)

Yeah south Somerset, road links are a bit terrible. I just had a look and prices have definitely gone up since I last looked. Nice bit of the world though and a train station.

[Fully Detached]

3 minutes ago, Bobthebuilder said:

Yeah south Somerset, road links are a bit terrible. I just had a look and prices have definitely gone up since I last looked. Nice bit of the world though and a train station.

And ziderrr!!  

[DurhamBorn]

https://www.mtdmfg.com/news/saint-gobain-to-invest-30-million-at-its-east-yorkshire-glass-factory/?fbclid=IwAR32U8sziE5FhBQDf2qwJVnNhTWJA1uHaQRaCQxJcWdtaB1frZL9XJYcIug

See how things that cost a lot to transport are all coming back.High energy use as well glass making.

The narrative was all manufacturing would leave after Brexit/China etc.This is where macro roadmaps pick up what is about to start to happen before it does.The roadmap showed prices increasing etc so shortened supply chains would be needed.This will be ongoing for 7+ years now with some bumps in the road.

Wage increases will follow in the private sector.

 

[Harley]

3 hours ago, DurhamBorn said:

Give price reductions to overweight NHS managers while raising prices for low paid factory workers working with zero social distancing.I sometimes wander in at 6.30pm when they do reductions as nobody is ever in to fight over them.Seems like a lowly declining business.

Told me no more home deliveries and I assumed I was just filth.

[JMD]

A few reports. They might be a bit long, but well researched and well worth reading i think, especially if you are invested in energy or commodity sectors.

 

Round up of energy market, highlighting the green false narrative by the world 'authorities': 

2020.Q4 Goehring & Rozencwajg Market Commentary.pdf (hubspotusercontent40.net)

 

The Dutch have produced these two studies showing their own predicted future commodity demand in relation to them transitioning into a renewable economy. Unbiased review of how challenging it will, but this is for a small country of 17 million people. The crunch-point is there not being enough near-term commodity supply, but scale the findings up to represent 1bn Westerners (ie. no one else will be embarking on doing this mad stuff!) and how are the 2050 ambitions ever going to be possible? Actually the above report does speak about the willful twisting of stats going on, in order to make the very ambitious 'climate rescue plans' look workable, e.g. things like anticipating that energy demand in non-OECD countries over next 20 years is expected to fall by 25%!!

Metal Demand for Electric Vehicles - Metabolic

Metal Demand for Renewable Electricity Generation in the Netherlands (metabolic.nl)

 

[Harley]

7 minutes ago, JMD said:

A few reports. They might be a bit long, but well researched and well worth reading i think, especially if you are invested in energy or commodity sectors.

 

Round up of energy market, highlighting the green false narrative by the world 'authorities': 

2020.Q4 Goehring & Rozencwajg Market Commentary.pdf (hubspotusercontent40.net)

 

The Dutch have produced these two studies showing their own predicted future commodity demand in relation to them transitioning into a renewable economy. Unbiased review of how challenging it will, but this is for a small country of 17 million people. The crunch-point is there not being enough near-term commodity supply, but scale the findings up to represent 1bn Westerners (ie. no one else will be embarking on doing this mad stuff!) and how are the 2050 ambitions ever going to be possible? Actually the above report does speak about the willful twisting of stats going on, in order to make the very ambitious 'climate rescue plans' look workable, e.g. things like anticipating that energy demand in non-OECD countries over next 20 years is expected to fall by 25%!!

Metal Demand for Electric Vehicles - Metabolic

Metal Demand for Renewable Electricity Generation in the Netherlands (metabolic.nl)

 

@Frank Hovismade a very insightful post on another thread about car usage, pointing out that the authorities here and in the US have done little to prepare the infrastructure for the massive implications of increased electric vehicles, etc.  Something I have also seen mentioned on several podcasts (i.e. scratching of heads and a feeling it's almost impossible to deliver in California).  Then the penny drops - maybe they don't intend for us all to have cars, just "them".  Maybe that's how to read these things.  They're thinking of a lot more changes!  Think it best I keep my SGC, etc!

[feed]

I've been saying this for a couple of years and i expect i'll still be saying it for a while yet.

Mass private ownership of cars in the West is done

All western autos want EV's and cars as a service.  
 

[Errol]

6 hours ago, DurhamBorn said:

Should we set up  Ltd  and buy this up the road from me?.Its still got the bank vault in it,we might even be able to fit @Errol s stash in there and @Harley would be all kinds of happy renovating those locks .

https://www.rightmove.co.uk/properties/106071926#/

Love the fact that from the front it just looks like a normal shop (you could remove the Lloyds Bank sign) but underneath you could be storing hundreds of millions in precious metal.

[Loki]

44 minutes ago, feed said:

I've been saying this for a couple of years and i expect i'll still be saying it for a while yet.

Mass private ownership of cars in the West is done

All western autos want EV's and cars as a service.  
 

That's why I bought a great big petrol truck.  Pointless trying to conform to whatever emissions crap they come out with.  Go out with a bang, as it's a Toyota I hope it's the last 'fossil fuel' vehicle I have to buy.

Emissions surcharges will just be added onto my invoices.

[AWW]

18 minutes ago, Errol said:

Love the fact that from the front it just looks like a normal shop (you could remove the Lloyds Bank sign) but underneath you could be storing hundreds of millions in precious metal.

HSBC does exactly this with a derelict looking shop on Leyton high street.

[Bricormortis]

23 minutes ago, Errol said:

Love the fact that from the front it just looks like a normal shop (you could remove the Lloyds Bank sign) but underneath you I could be storing hundreds of millions in precious metal.

Fixed for you

[MrXxxx]

6 hours ago, DurhamBorn said:

@Cattle Prod i think whats interesting this cycle is how the Fed do tighten.They might actually go to interest rate increases rather than QE removal after the initial tightening.Removing liquidity will cause an incredible bust.Tightening the cost of money might not.Thats the conversation i would be having if i was on the board.Tighten slightly through rates while leaving M3 high.Not yet of course.

How's that going to work? surely the more (surplus) money in the market, the more likely the market (borrowers) are going to demand lower borrowing interest rates?...or am I missing something?

[planit]

Looks like we need to change our position on the oil outlook. Goldman have uncomfortably similar views just even more bullish. 

 

 

Goldman: Oil To Hit $80 On Largest Ever Demand Jump

Goldman Sachs expects global oil demand to realize the biggest jump ever over the next six months, the investment bank said on Wednesday, keeping its bullish forecasts for oil prices this summer.

Higher demand for travel and acceleration of vaccinations in Europe are set to result in “the biggest jump in oil demand ever, a 5.2 million barrels per day (bpd) rise over the next six months,” Reuters quoted Goldman Sachs as saying in a note to clients.

Goldman Sachs continues to see oil rising to $80 per barrel this summer and says that “The magnitude of the coming change in the volume of demand -- a change which supply cannot match -- must not be understated,” as carried by FXStreet.

At the beginning of this month, Goldman also issued a bullish note, saying that it anticipated strong demand that would require OPEC+ putting another 2 million barrels per day (bpd) on the market in the third quarter, after the around 2 million bpd that the alliance and Saudi Arabia decided to return between May and July.

[planit]

India in talks too. Everyone has realised the same thing - there is a looming huge oil shortage

(obviously this is the other way round but tie-ups in any case)

 

Saudi Aramco and India’s Reliance discuss cash and share stake deal

[Loki]

1 minute ago, Cattle Prod said:

I've been looking at hiluxes myself Loki, would you mind telling me the importer you used?

I will PM you, to save cluttering the thread, got some general Hilux JDM info you might find useful

[Chewing Grass]

7 minutes ago, Cattle Prod said:

Big geopolitical move here, China directly taking a slice of the Saudi pie. I've been saying for a while that they are going to have look beyond Iran in the ME, and that it will put them in direct conflict with India and USA. US Sec State is on the phone now threatening withdrawl of security guarantees, I bet. This could be the key move for energy in the coming years.

https://www.reuters.com/article/us-saudi-aramco-stake-china-exclusive/exclusive-major-chinese-investors-in-talks-to-take-aramco-stake-sources-idUSKBN2CF2II

Also, are these the actions of an oil consumer that has plentiful stocks and solid suppliers, or one with an enormous structural supply problem that directly threatens their political regime?

US imports from overseas jumped this week by over 1mbpd. Let's see if that's a trend.

Hence all the manic interest in Windmills, Electric Cars, Rail (HS2), fucking off Airlines via Covid, discouraging travel etc, the single worst thing they could have done would have been to say 'the oil is running out'.

[Animal Spirits]

6 hours ago, janch said:

I'm also wondering about this as house prices are still on the rise everywhere it would seem.  The average is 12%pa in US:

https://notayesmanseconomics.wordpress.com/

Is this a temporary thing before the bust? 

By DH timeline, yes. I do recall DH did stated on more than one occasion that real estate would be a beneficiary in the short term and you could argue the majority of US housing market is quasi-nationalised anyway, guess that's one of the benefits of exorbitant privilege.

Fannie Mae and Freddie Mac were taken over by the Federal Government in 2008 and are known as Government Sponsored Enterprises (GSE's). About 80% of all mortgages in the US are 30 year fixed rate so I imagine on top of what Shaun Richards and Wolf Richter have mentioned regarding the last years speculative mania and inventory shortages there would have been plenty of refinancing into more expensive properties/second homes.

It may have been mentioned in the past but the Basel accord may bear some responsibility:

Basel 1 - Mortgage risk rating of 50%

Basel 2 - Mortgage risk rating of 35%

Basel 3 - Mortgage risk rating in the US for state sponsored mortages is 0% and government debt is also considered risk free. The rest are done on a risk weighted basis depending on LTV.

If DB's longer term timeline of rising rates plays out it will remind people of the relationship between price and yield, John Hussman:

Put simply, the long-term returns that investors can expect in the future are driven by the valuations they pay for their investments, at the time of their investment. When glorious past performance is driven by an advance to rich valuations, past performance is absolutely the last thing that investors should consider, except as a contrary indicator of future prospects.

NAYME blog is good for the discussions on the discrepancy between inflation statistics and what people see every day; the use of hedonics, substitution and weighting distorting the picture. I think some ordinary folk can see it, they just aren't able to articulate it into the bigger picture. Case Shiller sales pairing vs. owner equivalent rents is a great example, where those who don't have assets need to work x amount longer to own the same asset.

Check out Aaron Layman Properties blog, here's a realtor calling things as they are:

https://aaronlayman.com/blog/

It's certainly not how I or most predicted it would run but we didn't fully anticipate they would sabotage the economy and implement forbearance and furlough schemes on the scale they did. As @DurhamBorn has mentioned before, it's all about liquidity but a misread of a situation leaves policy makers with very little room if they want to avoid deflation.

I've seen people say "they'll" never raise rates, ok but let's take this on a few steps. Lets imagine a scenario where the base rate is 0.1% and CPI is 5% or even 10% annually, that is rapid depreciation. Yes you work off debt obligations quickly through financial repression and some will do nothing and lose but what about the others? They won't hang about and that in itself will generate inflationary pressure in the assets they will flee to. It feeds on itself, people instantly get rid of the local currency in exchange for something else; this has gone on numerous times in countries like Argentina.

In this scenario the distortions would quickly filter through elsewhere and I'd suggest you'd see it in political instability or something breaks before that and it's not exactly rock solid now. You would think they'd have to defend the currency at some point even if the they maintain negative real rates for a prolonged period of time. The only possible caveat is a political one, mandated purchasing of government securities which Russell Napier has mentioned...shudder...hopefully that isnt a realistic option on a large scale.

[planit]

1 minute ago, Cattle Prod said:

Yes they realise it, like us basement dwellers have done for some time, but the vast majority of the market still doesn't. Just look at the % of energy stocks in the S&P, XOM getting kicked out of the DOW ffs... sentiment is still poor. We're not mainstream yet, thankfully.

 

The sentiment is also helping cloud judgement.

The article writers are all woke and see it as their duty to 'educate' the plebs. As we have seen with Trump and Covid, they are willing to make up shit if the end goal is achieved.

In the case of the oil sector they are looking for every reason or risk that people should not invest.

In parallel to that you have the activists hounding the funds and cancelling anyone not bending the knee.

Faced with all this negativity investors have questioned their own views and sold out. I could see it on the boards last two days with BP.

 

I am pretty happy still holding, as DB says, the more buybacks at current prices the better.

We have the shit Shell results to come tomorrow so I wonder how the market will take those, I think they hedged at $40 until 2029 LOL.

[planit]

I really hope things don't get too bad regarding an oil shortage.

The environmentalists are partly to blame for global worming by fighting against nuclear for 40 years and I don't want them to be responsible for people starving through lack of food.

 

The world might be an awful place within 3 years, there are so many problems to deal with - left gone crazy, governments gone crazy, banks gone crazy, environment gone crazy.

I have posted too much already tonight, there are no shrimps to talk to. ;)

[planit]

2 minutes ago, Cattle Prod said:

Wtf

...

 

It was a joke, their update just sounded like they screwed up 

Quote

   -- Trading and optimisation results are expected to be significantly below 
      average. 
 
   -- Approximately 80% of our term sales of LNG in 2020 have been oil price 
      linked with a price-lag of up to 6 months. The volatility of the JKM spot 
      price in January had limited impact on Adjusted Earnings.