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

[TNS]

Amazing the bashing Shell is getting from all angles ala woke and climate change. It's an oil company ffs!

It’s time to nationalize Shell. Private oil companies are no longer fit for purpose | Johanna Bozuwa and Olúfẹ́mi O. Táíwò | The Guardian

[Lightscribe]

Avoid deviating from the ‘high inflation’ thread. It’s not just minimum wage workers with kids that have learnt this last year how much better off they are now than working.

https://www.ft.com/content/118f5258-c9d0-41cc-a8dd-ec27fd8724b4

One look at the comments and the panic has set in. ‘No way I’m going back, otherwise I’ll look for a job that’s permanent WFH’ etc. I suspect a lot will be able to take the financial hit too through the increasingly skewed growth of bubble assets, savings from the commute and city spending and early retirement.

I was once an avid hotel, airline and status collector (play the game for freebies) and I can tell on those forums, no ones interested anymore. They’ve had the time to reflect on the point of it all. Sitting in a plush airport lounge knocking back a couple of expensive ‘free’ whisky(e)s in a plush lounge or hotel room, doesn’t hold a candle to no commute and finishing up a zoom call early whilst on the Cornish coastline with hours to decide what to do with yourself. One thing I learnt from my ex-partner high up in BA is that business class pays for the flights.

I can also offer my own experience too that older civil service staff will be taking essentially early retirement and never returning to the office. 

This isn’t just a UK thing either, it’s happening in most westernised nations (Although you could argue that the UK is the worst of all due to the economic incentive not to)

https://www.theguardian.com/business/2021/feb/10/european-office-workers-dont-expect-to-return-before-summer

Essentially city centres will be hollowed from the inside out, restaurants, office lets (as they downsize and merge), service industry businesses, cafes and retailers. The travel, airline and hotel industry will be decimated if lockdown continues for the rest of the year. The damage will be laid bare to major sectors of the economy once the furlough veil is lifted.

To put it blankly, either there will be a large inflationary shock which causes major hardship and will force the masses back into reality desperate for work. Or else it will hasten the implementation of UBI and the economic transition to the 4th industrial revolution.

The government must have known what the outcome of all this would be.

[Hancock]

17 minutes ago, Lightscribe said:

 

To put it blankly, either there will be a large inflationary shock which causes major hardship and will force the masses back into reality desperate for work. Or else it will hasten the implementation of UBI and the economic transition to the 4th industrial revolution.

The government must have known what the outcome of all this would be.

I doubt Boris or his gang know what side of the bed they're predicted to get out of in the morning.

The one thing about UBI which i cant get my head around is, how can we in Britain be gifted enough money to survive on ... yet workers in most of the rest of the planet have to continue to graft their bollocks off for shite housing, minimal education, health care, social security and barely enough food to survice etc...

Not even our property market can work hard enough to gift us this kind of easy money.

[Bobthebuilder]

15 minutes ago, Lightscribe said:

Essentially city centres will be hollowed from the inside out, restaurants, office lets (as they downsize and merge), service industry businesses, cafes and retailers. The travel, airline and hotel industry will be decimated if lockdown continues for the rest of the year. The damage will be laid bare to major sectors of the economy once the furlough veil is lifted.

This is much the same as happens in any recession, people leave cities as the work dries up because they cannot afford the rent etc. It is one of the best times to be working in a city as the demand goes through the roof for the remaining services and not to many people about to do the work. 2008-2013 was a money making machine in London for good trades, I made more money then than in any other boom time period when everyone and their dog is grabbing the coins.

Same with office based firms, I have no doubt some young go getter types are planning to start business in say London and they will outperform the WFH lot, probably cost them their jobs.

A Cornish sea view is good for the soul, but it don't pay the bills.

[Lightscribe]

10 minutes ago, Hancock said:

I doubt Boris or his gang know what side of the bed they're predicted to get out of in the morning.

The one thing about UBI which i cant get my head around is, how can we in Britain be gifted enough money to survive on ... yet workers in most of the rest of the planet have to continue to graft their bollocks off for shite housing, minimal education, health care, social security and barely enough food to survice etc...

Not even our property market can work hard enough to gift us this kind of easy money.

Boris knows alright.

It’s no wonder this global tax rate has come out of thin air (just as the FAANGs and tech fall out of favour in a BK and inflationary environment).

In the result of a ‘great reset’ those ‘issues’ you mention are on the schedule of the roadmap. Pie in the sky or grand plan we shall see.

[Lightscribe]

8 minutes ago, Bobthebuilder said:

This is much the same as happens in any recession, people leave cities as the work dries up because they cannot afford the rent etc. It is one of the best times to be working in a city as the demand goes through the roof for the remaining services and not to many people about to do the work. 2008-2013 was a money making machine in London for good trades, I made more money then than in any other boom time period when everyone and their dog is grabbing the coins.

Same with office based firms, I have no doubt some young go getter types are planning to start business in say London and they will outperform the WFH lot, probably cost them their jobs.

A Cornish sea view is good for the soul, but it don't pay the bills.

Yes but in a recession infinitely amplified with a combined end of 40 year disinflation cycle into an inflationary one and trillions created in QE that never resolved 2008 and only delayed the inevitable.

We’re in an inverted pyramid, and there’s not the below support of population growth, younger generation asset ownership and money flow to support the top heavy economic environment to see it through to the other side.

It may or may not be imminent but it’s coming and I suspect they know it too.

[Bobthebuilder]

I agree @Lightscribe.

@DurhamBorn, I also have been turning down work here in Londinium. Got a phone call today from someone a hours drive away, wanted a gas fire removed. Could not be arsed for £100, thought about you and will just say £200 next time.

[Don Coglione]

4 minutes ago, Bobthebuilder said:

I agree @Lightscribe.

@DurhamBorn, I also have been turning down work here in Londinium. Got a phone call today from someone a hours drive away, wanted a gas fire removed. Could not be arsed for £100, thought about you and will just say £200 next time.

The guy who serviced my boiler in Salisbury wouldn't even go inside the ring road unless he was guaranteed off-street parking (we are talking a distance of less than 2 miles!).

He drives a BMW M4...

[Bobthebuilder]

9 minutes ago, Don Coglione said:

The guy who serviced my boiler in Salisbury wouldn't even go inside the ring road unless he was guaranteed off-street parking (we are talking a distance of less than 2 miles!).

He drives a BMW M4...

Yep, no parking=no job.

I love Salisbury, miss the Lotus garage that used to be on the Blandford road.

[Loki]

15 minutes ago, Don Coglione said:

The guy who serviced my boiler in Salisbury wouldn't even go inside the ring road unless he was guaranteed off-street parking (we are talking a distance of less than 2 miles!).

He drives a BMW M4...

Good on him.  I hate going into London with van/tools.  They seem to think we do it to spite them. Fuck that place.

[Hancock]

1 hour ago, Lightscribe said:

Boris knows alright.

It’s no wonder this global tax rate has come out of thin air (just as the FAANGs and tech fall out of favour in a BK and inflationary environment).

In the result of a ‘great reset’ those ‘issues’ you mention are on the schedule of the roadmap. Pie in the sky or grand plan we shall see.

Reminds me of Trivial Pursuit.

[DurhamBorn]

2 hours ago, Bobthebuilder said:

I agree @Lightscribe.

@DurhamBorn, I also have been turning down work here in Londinium. Got a phone call today from someone a hours drive away, wanted a gas fire removed. Could not be arsed for £100, thought about you and will just say £200 next time.

I got another call today,another job and another i turned down.Now of course im mostly retired so me turning down the jobs isnt the relative thing,todays was actually good money.However the fact that im getting so many shows that these employers and agencies simply cant get the people.The government is in for a massive shock as are employers.

Government has two choices really,welfare reform or mass EU Visas and the 2nd wont go down too well because whats happening is exactly what the red wall voted Brexit for.Employers treat them like shit for 30 years because they had endless supplies EU workers.Different game now.

[mh9000]

6 minutes ago, DurhamBorn said:

I got another call today,another job and another i turned down.Now of course im mostly retired so me turning down the jobs isnt the relative thing,todays was actually good money.However the fact that im getting so many shows that these employers and agencies simply cant get the people.The government is in for a massive shock as are employers.

Government has two choices really,welfare reform or mass EU Visas and the 2nd wont go down too well because whats happening is exactly what the red wall voted Brexit for.Employers treat them like shit for 30 years because they had endless supplies EU workers.Different game now.

Are these employers going to be to considering moving plants overseas to the EU workers (or further afield) if govt won’t give the visas?

 

 

[DurhamBorn]

Noticed today house prices are starting to really move up here.Any decent 3 bed semi that comes up is selling very quickly.I suspect what we expected is starting to play out as southerners sell up and move north.It should show up in house prices increasing north by more than south,then south in outright falls.Roadmap said an inflation pulse would see this happen and looks like its started now.

[Lightscribe]

1 hour ago, Hancock said:

Reminds me of Trivial Pursuit.

We’ll see no doubt eventually. But maybe it is on a grand scale, only you’re not playing. 

[DurhamBorn]

1 minute ago, mh9000 said:

Are these employers going to be to considering moving plants overseas to the EU workers (or further afield) if govt won’t give the visas?

 

 

I dont think so.We have cost push inflation and that means transport costs etc eliminate anycost advantages,inflation hammers extended supply chains,the dis-inflation that they gained from is a pendulum now swinging the other way.Plants returning from the east will easily outdo any going to Europe as well.

[Hancock]

46 minutes ago, Lightscribe said:

We’ll see no doubt eventually. But maybe it is on a grand scale, only you’re not playing. 

Oh they want me to play, but my willingness to fight, and tell authority to get fucked all my life means ive opted out of their shitty game. 

I'll have my kids school fees set aside by the end of August to pay for her to attend until end of summer 2024, 150k in a SIPP, soon to have 250K in inflationary shares ... and a soon to be sourced new fund to buy a house in BKK.

Not to mention a job where i can work several a year for 30k, of which i'll have to save another £45k in school fees to pay for school up until aged 16.

Im trying to get my head around it, but at age 46, It would seem i'm almost able to cash my chips in and live the good life (though frugal), and get my kid a top end education. (more importantly kids happy)

Not bad for someone with a dreadful work ethic, that can't work for a boss, making me unemployable for a PAYE job, uneducated, ex-con, thats raised a kid alone. 

[sancho panza]

4 hours ago, Bobthebuilder said:

This is much the same as happens in any recession, people leave cities as the work dries up because they cannot afford the rent etc. It is one of the best times to be working in a city as the demand goes through the roof for the remaining services and not to many people about to do the work. 2008-2013 was a money making machine in London for good trades, I made more money then than in any other boom time period when everyone and their dog is grabbing the coins.

Same with office based firms, I have no doubt some young go getter types are planning to start business in say London and they will outperform the WFH lot, probably cost them their jobs.

A Cornish sea view is good for the soul, but it don't pay the bills.

random anedotal here Bob but a mate was jsut at Wells by the sea(never heard of it),somehwere down south.Says the local pub landlord is paying bar staff £12-50 an hour as people jsut won't work for less.SHortage of local kids....

 

[Sasquatch]

1 hour ago, DurhamBorn said:

Noticed today house prices are starting to really move up here.Any decent 3 bed semi that comes up is selling very quickly.I suspect what we expected is starting to play out as southerners sell up and move north.It should show up in house prices increasing north by more than south,then south in outright falls.Roadmap said an inflation pulse would see this happen and looks like its started now.

When we bought our new house a couple of months ago, there were 6 other houses in the village on the market. Two more came up for sale in the next month, making 8 in total. They've all sold. I'm actually quite surprised as some had been for sale for quite a while. However it does fit into your theory of money moving northwards. The last one to sell, had been on the market for a week and will easily have achieved the highest asking price ever for the location. And there was me thinking we paid too much for ours.....

[sancho panza]

On 04/06/2021 at 19:14, planit said:

@sancho panza

 

Since I will do an exam on this next week I will have a go

I assume the 2 figures come from different places so they are a measure of different things, a bit like space in a car with one person measuring the storage space and the other the seating space, they are for different things.

 

So the 2 things are:

a) the share price market cap

and

b) the 'Equity' section on the "Statement of financial position".

 

Extra note:

These days there are financial instruments that could be classed as equity or liability and would therefore be allocated to the relevant section on the balance sheet. So there could be a type of loan with benefits that needs to be stuck in the equity section making the Equity bigger and the liabilities smaller.

You can read here if you want [too much] more information.

 

Here is what happened at the last BP agm, really interesting as the shareholder was peeved but as Looney points out, BP has no choice in this allocation.

I hope I am correct and this helps.

Intersting points there Planit.for me they both measure the rough market value of the company.The more realistic is the market cap as that's what people in the trade think it's worth.Thats my point really.

Barclays(or Nat West whatever) are claiming shareholder equity of £40 bn but Mr Market says £20bn.....

The other point you make is bang on and one I hadnt pondered ie the treatment of hybrids.Amazing find in that BP AGM....really does make you realsie the importance of spray n pray investing when these go wrong as they sometimes do.

[sancho panza]

On 05/06/2021 at 05:04, Castlevania said:

Loan book accounting for distressed debts is very backward looking. The market seems to be pricing in significant write downs. I haven’t checked in a while but Barclays used to trade at a discount to RBS, despite having a stronger presence in credit cards (the high interest rates charged, more than cover the credit risk over the cycle) and a big investment bank that should make money regardless of the credit/economic cycle.

That was my view CV(although without the nuance or udnerstadning).I started using this Dowd Buckner ratio last year when I read their paper and I must sya it really does explode a lot of the myths with regard to bank accoutning and it's amazing how it really does pull back the covers on what they're claiming the business is worth

Looks like SE Asia exposure and credit cards are doing worse than the banks that are overextended to UK mortgage borrowers.

Truly,they are as deep in the mire as 2006/7.

Barclays 31.3/1,349=2.3%

RBS 24.3/799=3%

HSBC 91/2,984=3%

Stan Char=15.6/789=1.9%

[Yadda yadda yadda]

28 minutes ago, sancho panza said:

random anedotal here Bob but a mate was jsut at Wells by the sea(never heard of it),somehwere down south.Says the local pub landlord is paying bar staff £12-50 an hour as people jsut won't work for less.SHortage of local kids....

 

Wells is that posh that it is called Wells Next The Sea rather than by it. North Norfolk coast. Doesn't surprise me that local kids there won't work behind the bar for less.

[sancho panza]

On 06/06/2021 at 09:31, DurhamBorn said:

 

The risk of course moves over to the asset side of things as you boost the base money up.I had and have a distribution cycle kicking in with that kind of liquidity lift.People will soon need to start selling assets to finance life as they dont produce enough income.

Fed prints and it enters the economy through the financial system,the pipes,so assets gain first.Later though those assets are sold down as the money is then passed to people  providing goods and services.

As iv said one of my main takes from my roadmap is that over the next decade 60/40 40/60 type pensions will be a disaster and anyone just entering drawdown now could see their pension empty over the decade,or at best reduce to much lower levels.

 

The bit in bold and then some DB.

Just had a bit of a run in with my LL.Nothing major.But it suddenly dawned on me how little he's making every month with Section 24,repairs(my kids wreck everything even if it's tested as kid proof),jsut had to stick scaffolding up for the roof and all of it financed by what is a current 3% gross yield.And then there's the mortgage financed at about 3%...........

By the end of it,I was feeling bad about the guy.And he doesn't even know his main home is on the line if he defaults on my house..I suspect he's running at barely any profit and that's before rates rise for BTLers.

The outlook for him and so many with these 60/40 funds is jsut pistpoor in a rising inflationary environment..

Sold EQNR today after a lot of thought.Proceeds with get recycled into some inflation hedges.

As ever thanks to DB and all those basement dwellers who've educated and enlightened me in equal measure and helped me fight the machine.

[sancho panza]

.

[Starsend]

7 hours ago, sancho panza said:

US rig count nowhere near where it needs to be.

Debating selling EQNR to pile back into some of the laggards.It's $23 today,so higher than pre covid.First big oilie sale of the campaign thus far.

https://rigcount.bakerhughes.com/static-files/559d8d90-b5de-4911-b383-a08a0785764a

The Canadian mid tiers are cheap.