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

[DurhamBorn]

6 minutes ago, Harley said:

I read his bio saying he spends a fair amount of time each year in China so attach some credence, combined with the general impression I get of someone reasonably well connected. 

Heard today about a company filing going concern due to lack of liquidity.  Maybe the start of the trend?  I still hold this time will be about the neglected subject of balance sheets.

DH does not profess to be a great timer and timing, rather than sequencing, is a mugs game.  So I thought they were similar.

Another reason I had the impression the gentleman knew his stuff was how he wove together a number of areas I had only heard disparately from detailed geo-political strategists and the like.

But it was his upfront point that they (I should have said governments not CBs) are crashing the system because they know it'll be replaced resonated and had me hooked.

Was that the EV maker Harley running out of cash?,interesting to see how quickly it spreads and if rights issues spread instead of more debt.

[Harley]

44 minutes ago, DurhamBorn said:

I think on the debt its to be expected at the end of dis-inflation and actually a good signal,though crucial the companies can generate good free cash even in a big downturn,and also that the debt is structured well and not lumpy.Im watching all mine now as they should mostly be de-leveraging ,even if slowly.Ingredion id prefer lower,but opened small position.Im full on the Brazil telcos,i didnt use ladders on them i just bought them a while ago in two tranches.Im going to enjoy that interview you put up as i i think you make a very good point about the fact they are doing as much as they can because they know its nearly the end game.I still expect its at the end of this cycle,but open to it being sooner.

I've read hundreds of cash flow statements, etc and yes have been impressed by how some companies have already materially changed their debt ratios.  But I often find there are better looking companies out there in the sector where I can sidestep this issue, although maybe not in frontier stuff. 

27 minutes ago, DurhamBorn said:

Was that the EV maker Harley running out of cash?,interesting to see how quickly it spreads and if rights issues spread instead of more debt.

I believe it was!  Think it was on RealVision.  Great interview there.  I got the impression the interviewee and I share a similar approach given his comments.

PS: To add, in this theme of cash flow and general liquidity, if anyone is going to look at OCF, look at the actual OCF and not the one netted off with changes in working capital.  You may get a heads up of upcoming fundamental trouble by how hard they screw working capital to make the numbers.  I'm seeing some potential gaming already.  As for FCF, about as good as EPS.  Gotta go deeper!

[Harley]

3 hours ago, BurntBread said:

The big risk, of course, is how well it gets through any debt-deflation in the short term. I think the David Hunter view is to wait for the BK before buying US industrials, and I've been trying to sit on my hands to do just that. What worries me is DB's comment that most companies go bust during the recovery. I can see myself loaded up with lots of yellow-sticker stocks, only to find half of them have fallen through the holes in my shopping basket on the way home.

That's a good worry.  And fall through your shopping basket to be bought privately by our old and new lords and ladies.

[DurhamBorn]

26 minutes ago, Harley said:

That's a good worry.  And fall through your shopping basket to be bought privately by our old and new lords and ladies.

The problem i have Harley is if the things in that video come to pass i cant really roadmap it because i mostly stem from dollar liquidity and then cross market others against that.If we suddenly get a two polar world then that becomes a new ball game.

Its also important to try to understand what a crash of the financial system actually means.Plenty say it,but dont explain it.Do they mean the banking system,the Fiat system itself,bond markets,insurance ,or any company who cant roll over a bond.

I agree we will move from debt to equity,that is almost certain as only productive will be rewarded is part of the debt deflation we expect.

In simple terms of course what this all means is soon currencies are going to be priced against real assets depending on how much they have seen printed.The more woke,the more printing the bigger the hit on living standards.

For us in the UK its likely the only defence we would have would be higher rates than others.Irony as usual of course that that would smash the main asset in this country,housing wealth.

Chinese and Russian assets seem the hedge if the thesis is even partly right,and of couse the areas we already mostly own.

[reformed nice guy]

TC Energy scraps KXL project after President Biden revokes key permit

https://www.reuters.com/business/energy/tc-energy-terminates-keystone-xl-pipeline-project-2021-06-09/

Might cause a wobble, but ultimately it must drive up oil price? Also drives up the "Energy Costs of Energy" that the surplus energy blog talks about.

[DurhamBorn]

32 minutes ago, reformed nice guy said:

TC Energy scraps KXL project after President Biden revokes key permit

https://www.reuters.com/business/energy/tc-energy-terminates-keystone-xl-pipeline-project-2021-06-09/

Might cause a wobble, but ultimately it must drive up oil price? Also drives up the "Energy Costs of Energy" that the surplus energy blog talks about.

They just ship it by trains that Buffet owns,complete lunacy,unless you own the trains and sub the democrats.

[Lightscribe]

https://www.wsj.com/articles/if-you-sell-a-house-these-days-the-buyer-might-be-a-pension-fund-11617544801
 

Well looks like like a BK correction in house prices could be cancelled after all. In the US the big pension firms are buying up swathes of real estate above asking apparently, completely obliterating any individuals buying a home.

Here next no doubt following Lloyds already laid out plans to become the UKs biggest landlord. ‘You will own nothing’ and all that playing out in real time. 

https://www.wsj.com/articles/invitation-rockpoint-forge-1-billion-rental-home-venture-11602067500?redirect=amp#click=https://t.co/QY3dzdI8QU
 

(deleted the Twitter link as he seemed a bit of a nutter)

[wherebee]

11 minutes ago, Lightscribe said:

https://www.wsj.com/articles/if-you-sell-a-house-these-days-the-buyer-might-be-a-pension-fund-11617544801
 

Well looks like like a BK correction in house prices is cancelled after all. In the US the big pension firms are buying up swathes of real estate above asking apparently, completely obliterating any individuals buying a home.

Here next no doubt. ‘You will own nothing’ and all that playing out in real time. 

 

That does not match up to a depopulation agenda.

[Lightscribe]

2 minutes ago, wherebee said:

That does not match up to a depopulation agenda.

True. Putting aside conspiracies however you could argue that they’re successfully doing that in developed western nations already.

The 2.4 family unit for domestic population growth is a thing of the past as it’s both unaffordable and unachievable for most of the younger generation nowadays.

[macca]

Gold price in weimar germany as the currency crashed!  In fairness this could be a loaf of bread chart.. but still loving those lines.. 

[Castlevania]

6 hours ago, DurhamBorn said:

They just ship it by trains that Buffet owns,complete lunacy,unless you own the trains and sub the democrats.

Got to keep your backers rolling in dosh. Same with the “infrastructure” bill they’re trying to get passed. It mainly seems to be a way of funnelling a load of money to the companies that fund them.

[geordie_lurch]

Well I'm pleased a few of you are finally starting to take the deliberate crash of the current Fiat money system seriously via the 'well timed' Covid 'pandemic' and the never before seen levels of money printing that will 'inevitably' lead to the new CBDCs they want to force on as many of us as possible Let's hope they don't force all our savings, investments and other assets over to the new system and link that to your 'social credit' score like they have been using in China to stop anyone who tries to 'dissent' against the state from using public transport, accessing their own bank accounts etc

[mh9000]

5 hours ago, Lightscribe said:

https://www.wsj.com/articles/if-you-sell-a-house-these-days-the-buyer-might-be-a-pension-fund-11617544801
 

Well looks like like a BK correction in house prices could be cancelled after all. In the US the big pension firms are buying up swathes of real estate above asking apparently, completely obliterating any individuals buying a home.

Here next no doubt following Lloyds already laid out plans to become the UKs biggest landlord. ‘You will own nothing’ and all that playing out in real time. 

https://www.wsj.com/articles/invitation-rockpoint-forge-1-billion-rental-home-venture-11602067500?redirect=amp#click=https://t.co/QY3dzdI8QU
 

(deleted the Twitter link as he seemed a bit of a nutter)

As someone still looking to buy this is all we need.

Does beg the question to me though why didn’t they do it 2008-9? They were too broke themselves to do it?

 

[Sugarlips]

Jaco reckons the outcome of the Arizona audit will be revealed on the 14th. Are the press just going to bury it or is this a suitably large black swan to rock markets?

[Lightscribe]

21 minutes ago, mh9000 said:

As someone still looking to buy this is all we need.

Does beg the question to me though why didn’t they do it 2008-9? They were too broke themselves to do it?

 

Because it was the right time to start QE at that point but wasn’t the right time to do this:

[Harley]

10 hours ago, DurhamBorn said:

The problem i have Harley is if the things in that video come to pass i cant really roadmap it because i mostly stem from dollar liquidity and then cross market others against that.If we suddenly get a two polar world then that becomes a new ball game.

Its also important to try to understand what a crash of the financial system actually means.Plenty say it,but dont explain it.Do they mean the banking system,the Fiat system itself,bond markets,insurance ,or any company who cant roll over a bond.

I agree we will move from debt to equity,that is almost certain as only productive will be rewarded is part of the debt deflation we expect.

In simple terms of course what this all means is soon currencies are going to be priced against real assets depending on how much they have seen printed.The more woke,the more printing the bigger the hit on living standards.

For us in the UK its likely the only defence we would have would be higher rates than others.Irony as usual of course that that would smash the main asset in this country,housing wealth.

Chinese and Russian assets seem the hedge if the thesis is even partly right,and of couse the areas we already mostly own.

I appreciate this and @BurntBread considered responses.  I admit I was on the log splitter when listening to the podcast and multitasking the second time around!  I'll go for a third just in case as I didn't register much of a disconnect (if that's the take away). 

My impression was that Mr Hunt was not a million miles away and fitted with the broad thesis of this thread.  I don't think this thread has (or should have) a narrow prescriptive narrative.  That is not how things work.  Especially in regard to timings.  Mr Market (and Mrs Macro!) always likes to wrong foot us!  My biggest take away of my close work with the intellectual powerhouse that was the leading strategy company was to quickly move forward by defining a best possible hypothesis but to slave away at always keeping it under review and see where it leads.  If a hypothesis is a lightening rod, then it is the lightening that is interesting, not so much the rod!  "It was only a hypothesis"!  Intellectual pragmatism and flexibility (as it was allowed back then!).  I hope this thread is a broad "church" with a common set of broad beliefs but also a wide array of changing nuances among its attendees. 

What particularly resonated with me was Mr Hunt's integrated view, bringing in macro+.  Lots of others do too but there was something about him that worked well for me.  I've talked to senior people like that and learnt to listen.  Sure, no deep dive but such is the program format and sometimes this macro stuff is just like press reports post rationalising market moves.  Things can happen just because enough of the right people wish, expect, or make it so.  And the rich and powerful have not been floundering around all this time.

Our biggest risk is being blindsided by the very things we ignore (in practice if not in thought).  I'm steep in economics and finance but now old enough not to go down those rabbit holes.  I've bashed on about the bigger picture (i.e. political and social) to keep a sense of balance.  The biggest mistake we can make is not to think beyond the finance and economics, like say Napier stresses.  Our guesses could easily be blown out of the water by just a fraction of the covid stuff being applied to the financial world.  And IMO it will, but a lot more.  We can already see the direct impact (RDSB, Exxon, etc) of all this stuff.  But IMO these are very early days with much more to come.  We can be right about the macro and easily still get slaughtered and IMO we probably will.  I'm engaging in the covid forums because of what it means, the bigger and broader picture, to us here.  This stuff has to become viseral to be able to deal with it because it is so foreign. 

FWIW, I believe there will be a bi (or more) polar world, and that a crash will be more than just the narrow stuff we talk about in economic and financial terms.  This other stuff will almost make that traditional crash talk irrelevant.  I see a crash as much being regulation and privatisation to non-existence (at least for us), etc.  Driven under the guise of the social and political narratives currently being seeded.  Of course Russia and China are currently being singled out by the gang!  A gang that is probably well invested (under the cloak of secrecy) in all the things they send their drones to promote against!

You've created a great hypothesis to underpin this thread.  Those old strategy folk would be proud to take it forward.  It's a hypothesis though, and folk need to understand conceptually what that is and how to use it correctly to tease out all the other stuff.  It's the start of the journey, not its end.

God I love this stuff!  Makes you humble, 360 degrees wide!

[Green Devil]

Funny guy!

 

[Harley]

6 hours ago, Lightscribe said:

https://www.wsj.com/articles/if-you-sell-a-house-these-days-the-buyer-might-be-a-pension-fund-11617544801
 

Well looks like like a BK correction in house prices could be cancelled after all. In the US the big pension firms are buying up swathes of real estate above asking apparently, completely obliterating any individuals buying a home.

Here next no doubt following Lloyds already laid out plans to become the UKs biggest landlord. ‘You will own nothing’ and all that playing out in real time. 

https://www.wsj.com/articles/invitation-rockpoint-forge-1-billion-rental-home-venture-11602067500?redirect=amp#click=https://t.co/QY3dzdI8QU
 

(deleted the Twitter link as he seemed a bit of a nutter)

Good shout out.  You see how Mr Market, Mrs Macro, and the rest of the family just love to wrong foot us all.  It was only ever about a crash or not, with all the boomer bashing and other social noise wrapped around it.  That kept us narrowly focused in our little box.  Not many peeped out.  I've lived in many countries where this is already the norm.  Many more boxes out there!

[nirvana]

6 hours ago, Lightscribe said:

Well looks like like a BK correction in house prices could be cancelled after all. In the US the big pension firms are buying up swathes of real estate above asking apparently, completely obliterating any individuals buying a home.

 

yup you can thank the FED for that.......why anyone still believes in centralized ideologies and centralized banking is completely beyond me 

[Harley]

6 hours ago, wherebee said:

That does not match up to a depopulation agenda.

Housing is reasonably cheap, if you mark it to the correct yardsticks.  People don't, indeed they are socialised (distracted) not to.  And probably could not handle it if they did.  It's a beautiful scam, one of the very best.

[Harley]

45 minutes ago, geordie_lurch said:

Let's hope they don't force all our savings, investments and other assets over to the new system and link that to your 'social credit' score like they have been using in China to stop anyone who tries to 'dissent' against the state from using public transport, accessing their own bank accounts etc

Tut, tut, just when you were well on message!   Unless of course you were already thinking about limited access to only that "approved" set of investments to make such a move unnecessary!

[Harley]

1 hour ago, mh9000 said:

Does beg the question to me though why didn’t they do it 2008-9? They were too broke themselves to do it?

Gates has bought a large chunk of the US farmland.  The rest already bought swathes of Latin American land.  It has to be slightly different in crowded UK.

[nirvana]

25 minutes ago, Green Devil said:

Funny guy!

marvellous, let's have a 'FED bashing session' 

anyone read 'The creature from Jekyll Island'???

Spoiler alert, I haven't but download incoming 

The quintessential treatise on economics. Cussed and discussed by all from notable politicians to academicians to laypersons. Do you want to know the truth about money? Creature from Jekyll Island will give you the answers to these, and other, questions: Where does money come from? Where does it go? Who makes it? The money magicians' secrets are unveiled. We get a close look at their mirrors and smoke machines, their pulleys, cogs, and wheels that create the grand illusion called money. A dry and boring subject? Just wait! You'll be hooked in five minutes. Creature from Jekyll Island Reads like a detective story which it really is. But it's all true. This book is about the most blatant scam of all history. It's all here: the cause of wars, boom-bust cycles, inflation, depression, prosperity. Creature from Jekyll Island is a "must read." Your world view will definitely change. You'll never trust a politician again or a banker.

PS I've just realised I'm downloading an audio book, wondered why it was taking so long, muppet 

[BurntBread]

27 minutes ago, Harley said:

You've created a great hypothesis to underpin this thread.  Those old strategy folk would be proud to take it forward.  It's a hypothesis though, and folk need to understand conceptually what that is and how to use it correctly to tease out all the other stuff.  It's the start of the journey, not its end.

There's a quote I always remember abut scientific theories, which I heard from David Pine of NYS university (and he didn't claim it as his own). This from a time when academics could freely say such things:

"It's OK to sleep with a theory, but you should never marry one."

[Lightscribe]

11 minutes ago, Harley said:

I appreciate this and @BurntBread considered responses.  I admit I was on the log splitter when listening to the podcast and multitasking the second time around!  I'll go for a third just in case as I didn't register much of a disconnect (if that's the take away). 

My impression was that Mr Hunt was not a million miles away and fitted with the broad thesis of this thread.  I don't think this thread has (or should have) a narrow prescriptive narrative.  That is not how things work.  Especially in regard to timings.  Mr Market (and Mrs Macro!) always likes to wrong foot us!  My biggest take away of my close work with the intellectual powerhouse that was the leading strategy company was to quickly move forward by defining a best possible hypothesis but to slave away at always keeping it under review and see where it leads.  If a hypothesis is a lightening rod, then it is the lightening that is interesting, not so much the rod!  "It was only a hypothesis"!  Intellectual pragmatism and flexibility (as it was allowed back then!).  I hope this this thread is a broad "church" with a common set of broad beliefs but also a wide array of changing nuances among its attendees. 

What particularly resonated with me was Mr Hunt's integrated view, bringing in macro+.  Lots of others do too but there was something about him that worked well for me.  An analogy would be fixating on the world of currencies in isolation without noticing all currencies are going down against say real assets.  Sure, no deep dive but such is the program format and sometimes this macro stuff is just like press reports post rationalising market moves.  Things can happen just because enough of the right people wish, expect, or make it so.  And the rich and powerful have not been floundering around all this time.

Our biggest risk is being blindsided by the very things we ignore (in practice if not in thought).  I'm steep in economics and finance but now old enough not to go down those rabbit holes.  I've bashed on about the bigger picture (i.e. political and social) to keep a sense of balance.  The biggest mistake we can make is not to think beyond the finance and economics, like say Napier stresses.  Our guesses could easily be blown out of the water by just a fraction of the covid stuff being applied to the financial world.  And IMO it will, but a lot more.  We can allready see the direct impact (RDSB, Exxon, etc) of all this stuff.  But IMO these are very early days with much more to come.  We can be right about the macro and easily still get slaughtered and IMO we probably will.  I'm engaging in the covid forums because of what it means, the bigger and broader picture, to us here.  This stuff has to become viseral to be able to deal with it because it is so foreign. 

FWIW, I believe there will be a bi (or more) polar world, and that a crash will be more than just the narrow stuff we talk about in economic and financial terms.  This other stuff will almost make that traditional crash talk irrelevant.  I see a crash as much being regulation and privatisation to non-existence (at least for us), etc.  Driven under the guise of the social and political narratives currently being seeded.  Of course Russia and China are currently being singled out by the gang!  A gang that is probably well invested (under the cloak of secrecy) in all the things they promote against!

You've created a great hypothesis to underpin this thread.  Those old strategy folk would be proud to take it forward.  It's a hypothesis though, and folk need to understand conceptually what that is and how to use it correctly to tease out all the other stuff.  It's the start of the journey, not its end.

God I love this stuff!  Makes you humble, 360 degrees wide!

Agree 100%.

To relay a quote I heard once, ‘When you take things for granted, granted things get taken’

We live in unparalleled times, we can only prepare as best as we can given past history and data. But don’t discount what may seem outlandish and crazy as we are in clown world after all.