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

[JMD]

OK, this is kinda about Covid, and i know there is a covid thread - however i don't think this is off-topic because it relates directly to the macro - in terms of the potential political 'battle/control fronts' looming on the horizon. I'm not a prepper, but i do accept the long slow 'Total War' of economic/financial attrition thesis yet to be waged upon us, as mentioned regularly here by Harley and others.

I commented recently about trying to get my head round what form our next 'plan'tomime - the pandemic, might take on next. The below podcast goes someway toward answering those questions for me... So if the concerns presented happen, perhaps the timing of the BK will be when the next ultra-virulent-variant hits? (though not that helpful in terms of timing i guess).    

Long video, but the interesting bit starts: 1:53-2:05, so quiet short (followed by his research to 2:33 if interested).

So is this mere conspiracy? Or perhaps others might like to comment more on the topics mentioned. After all MSM won't inform us of any of this stuff. i.e Ivermectin, a legacy drug i'd not heard of, and is apparently a possible treatment, as well as being a form of immunisation. Or how Covid testing has been so suspiciously(?) awful. Or how the rapid development/specialist focus of the created immunisations will actually result in more virus mutations happening. Perhaps @dnb24 and @sancho panzaand others have informed medical views?    

Bret Weinstein is a biologist, and found himself at the centre of the Evergreen College/'BLM first engagement' 3-years ago - worth looking up if your not familiar with that shocking examplar of our increasingly retarded society!

(Btw, I like the Lex Fridman podcasts, he's become the latest long-form interview you tube star. He is a MIT A.I. researcher and so does come across bit eccentric, maybe think of him as the thinking man's Joe Rogan!)           

 

[HousePriceMania]

3 hours ago, Nomad said:

Seems like the banks want the taxpayer to pick the bill up for people who are struggling to repay their mortgages, what a great scheme for the banks, we'll keep the profits but if there is any debt we want to pass that on.

https://www.bbc.co.uk/news/business-57240532

 

https://www.theguardian.com/us-news/2021/jun/22/california-rent-forgiveness-plan-coronavirus-pandemic

 

California has a $5.2bn plan to pay off unpaid rent accrued during the pandemic

The rent forgiveness SUBSIDY FOR THE RICH program would pay landlords all of what they are owed while simultaneously giving tenants a clean slate LAND LORDS TAX PAYERS MONEY SO THEY DON'T LOSE OUT.

[DoINeedOne]

18 hours ago, Transistor Man said:

Lyn Alden on Energy. 

Very good, well worth a read.

https://seekingalpha.com/amp/article/4436929-the-case-for-a-longer-term-oil-and-gas-bull-market?__twitter_impression=true

 

Great article, just annoys me alot companies are not available via my ISA

--------------------------------------------------------------------------------

Interesting i think some of you discussed this before about companies profiting and using alot of a telecoms networks

https://telecoms.com/510357/netflix-ordered-to-pay-for-network-usage-in-korea/

A South Korean court has ruled against Netflix in a case over its payment – or lack thereof – of network usage fees.

The decision essentially means that the video streaming specialist will now have to pay the network operators to carry its traffic, pending the result of what is being seen as an inevitable appeal.

[sancho panza]

On 27/06/2021 at 18:59, Animal Spirits said:

The repricing and liquidations havent really got going yet either. Monetary policy has forced market participants to chase yield and own instruments where the underlying credit risk of the asset is not accurately reflected in it's price or yield.

Below investment grade bond index effective yield is a bit above 4% at the moment.

You can see how quickly things blow out when the overnight markets seize up. Very quickly only the most liquid instruments will be accepted in repo (T Bills etc). Then market participants are presumably forced to raise funds by liquidating other positions and then all heck breaks loose as Wolf Richter likes to put it.

They have the option to transact with the Fed in one of its loan facilities which might send the wrong signal to other participants and theres your banking system seized up. Would like to know who is still using these facilities assuming they've been turned away in repo...!

 

 

That's an absolutely fascinating chart in so many ways AS.As you say,this is before the birds hit the turbines.What's strange is that post covid ,insto's have piled back into these intrsuments when the effect of a deflationary shock on them has been throughly demonstrated....???

This has Fishers theory of debt deflation written all over it.The end will be epic.Solvency risk will reappear.

On 28/06/2021 at 12:05, Cattle Prod said:

What strikes are you thinking, if you don't mind me asking? 

Just be aware that my options trading is not that sophisticated unlike @MvR,is a spray n pray operation to a degree,uses ladders and uses my own unique method of measuring leverage/placing bets/hedging sector exposure.I mainly play with profits generally but with these goldie positions,I am hedging exposure to the wider PM sector and storing $ that we otherwise would have used to buy stcok in the PM miners.

Currently, we've Barrick set up thus,2 ladders in.

Sept 22,23,24,25,26(looks like we'll lose a chunk on this one)

Oct 22,23

Nov 20,21

Anglogold-2 ladders

Oct 20,21,22

Jan 19/20

Kinros

Nov 7,8

Fresnillo

Nov 850,900,950.

 

3 hours ago, JMD said:

So is this mere conspiracy? Or perhaps others might like to comment more on the topics mentioned. After all MSM won't inform us of any of this stuff. i.e Ivermectin, a legacy drug i'd not heard of, and is apparently a possible treatment, as well as being a form of immunisation. Or how Covid testing has been so suspiciously(?) awful. Or how the rapid development/specialist focus of the created immunisations will actually result in more virus mutations happening. Perhaps @dnb24 and @sancho panzaand others have informed medical views?    

 

Weinstein is really worht a watch and was recently interviewed by Joe Rogan I believe.

He has a great interview with Dr Robert Malone who ivented mRNA vaccine technology here

He has a great explanation about why PCR test results published without cycle counts are questionable at best,a blatant misrepresentation at worst here.

It's a rabbit warren going into this stuff.Prof John Ioannidis wrote a great piece here in 17/3/2020 regarding his prediction for the IFR which was 0.125% based on the Diamond Princess Cruise ship here

 

I think there are issues with vaccine safety and there are some very educated opinions on that not least from Dr Robert Malone himself,made in conjunction with Bret Weinstein and also a guy called Steve Hirsch in the video I put up first.

My own experience at work has very much reinforced my vaccine hesitancy.The other night I diagnosed two patients with new onset Atrial Fibrillation(and they were symptomatic with it).I normally see one case every three months maybe...key thing is that it's mainly treated with .........blood thinners because there's a clotting risk that the blood thinners reduce.

On taking the second one to hospital,I had a chat with the A&E sister and she said that they were getting a lot of new onset AF of late in older patients of late.

 

 

[Transistor Man]

35 minutes ago, Cattle Prod said:

- Why did the $ weaken from Feb 06 to Jul 08?

That’s the US housing bust, isn’t it? Jan 2006. 

[Transistor Man]

17 minutes ago, Cattle Prod said:

Nice. Did the Fed do something in response to the housing bust? I think QE started after all that...

 

“The greenback dropped against all major European currencies during 2006, pushed lower by the prospect of the Federal Reserve remaining sidelined or even cutting interest rates to spur growth while interest rates in Europe continued to move higher.”

[sancho panza]

1 hour ago, Cattle Prod said:

Thanks, I prefer longer dates as these things always take longer than I think it will, so I'm in Nov and Jan GDXJ, and SLV. I was going to roll them out a bit, but this PM dump has a smell of a sharp down and up (coincident with Basel III and opex tomorrow). Lets see. I need to get better organised with ladders.

So many interesting psots today that I'll return to later tonight.

On this point,it's why I'm using options on PM miners.If PM's dump we've still got the dollars.If they go up,then we win.Stay flat we lose but I think we're going up or down here.Flat jsut isn't how these things work.if they get cheaper,we'll buy the stocks.

I can hear the kids screaming down the drive.Gotta go.....

[Democorruptcy]

On 27/06/2021 at 16:38, AWW said:

Went to a party last night and got chatting to a guy who'd just qualified as a financial advisor. I asked him what his views were on some of our favourite subjects. The cycle turn. Housing. Equities. ESG. He didn't really have a view on any of it: "I'm just trained to choose a risk profile based on the person's age and risk appetite, then put them into the appropriate funds."

And people PAY for this advice!

There must be some good IFA's about but a lot are chancers. A good few years ago I had a gambling mate who sold camping gear in a local shop. He scraped through a couple of exams and became an IFA. He wanted me to invest some money but as I knew he was such a mug punter I decided against it. Unfortunately he talked my parents into it and lost them a good few quid in funds run for a firm he worked for but then left. Last time I spoke to him he had become a mortgage broker selling mortgages to single women on tax credits.

[planit]

I also think Bret Weinstein is good, his approach is very careful and methodical. Even so he has just been demonetised by YouTube for a month (I think the last one was a week)

Once people become political targets for the woke it is only a matter of time. There are other people showing evidence on Ivermectin etc that are untouched - like Dr John Campbell.

Absolutely shocking the control of information at the moment.

[ThoughtCriminal]

When they start saying shit like that its time to worry. 

 

I wonder how Lagarde's savings are doing. 

[Option5]

7 hours ago, Noallegiance said:

If ever an article summed up where we are on multiple fronts without unwrapping the underlying causes and inevitable outcomes:

Why small investors are piling into share-trading apps - BBC News

Lambs, slaughter are the words that spring to mind.

Now those at the top have got all the big money they start sifting through the dregs until they have everything. 

[Loki]

7 minutes ago, ThoughtCriminal said:

When they start saying shit like that its time to worry. 

 

I wonder how Lagarde's savings are doing. 

I wonder why she thinks people go to work in the first place

Only joking, I don't wonder at all, I know they only say dumb shit to keep up appearances 

[Froggy2000]

52 minutes ago, planit said:

Even so he has just been demonetised by YouTube for a month

Never heard of him but being demonetised by YouTube is a pretty good endorsement in my opinion.

I'll take a look.  Thanks!

[leonardratso]

 

[sancho panza]

9 hours ago, HousePriceMania said:

 

Inflation ?

you need some longer term context there imho

[sancho panza]

23 hours ago, Transistor Man said:

Lyn Alden on Energy. 

Very good, well worth a read.

https://seekingalpha.com/amp/article/4436929-the-case-for-a-longer-term-oil-and-gas-bull-market?__twitter_impression=true

 

Super read.It very much comes across as the summation of what @Cattle Prod @DurhamBorn and Dr Tim Morgan have been discussing for the last year or two.

It's got virtually every theme discussed on here by those above over the last few years.Some grat graphs that deserve singling out

9 hours ago, planit said:

I wanted to illustrate the current situation and where we are heading with regards to oil balances.

Section A in the chart of US oil stocks below is the last 3 months. The grey shadow is the average inventory for the last 5 years.

From the chart it is not very obvious how fast stockpiles are declining compared to the 'normal' for this time of year so I have extrapolated forwards.

For both the last 3 months (A) and the next 3 months (B) I have drawn in the 5 year average range boundaries. From this I can work out the 3 months drop from this 'expected' value. Then I apply the same drop on top of the average range  movement for the next 3 months. At current rate of shortfall of supply we end up at point X.

 

 

Now this clearly is a crude (pun intended) analysis mainly because I am using the range movement rather than the average movement.

The biggest reason I can see for the drop is oil transport has not shifted enough to make up for the drop in shale production. With the US self sufficient under Trump, there was no need to transport much oil to US. Now world oil flows will have to rebalance to address where the oil is needed and supply everywhere is tight (article).

The change in policy with Biden compared to Trump has also not helped and they seem to have their heads buried in the sand and be helping Russia and OPEC+. The balance of power has shifted towards OPEC and Russia for both oil and gas, Germany is as bad as the US. 

OPEC will keep oil supplies tight, they are quietly leading the world in the current situation and the squeeze is going to show up in the best location for them as the chart above predicts. This situation can't turn around quickly (like an oil tanker LOL) because we are already in the draw down season, shale is not ramping up and Biden is shutting oil down. There is no line of oil tankers on it's way to the US.

If everyone keeps ignoring the issue (hard to address 'dirty' oil and gas), I doubt the battered industry are going to come to the rescue (as they have a 'you deserve this' attitude) so in 4-6 weeks we should see the result.

  

 

Nice work on that chart planit.As @Cattle Prod has oft said,it's the perception of supply rather than the supply that drives the excesses and your point shows that the point of maximum panic/price disclocation is probably some months away

[Innkeeper]

3 hours ago, Option5 said:

Lambs, slaughter are the words that spring to mind.

Now those at the top have got all the big money they start sifting through the dregs until they have everything. 

It has always struck me that this has now become the plan with crypto. 

However this is not a conversation that goes down well in crypto-land...

[Barnsey]

11 hours ago, Hancock said:

Sunak is a 

"So, about those Swedish/Danish/Russian/American/Korean/Canadian/German/Dutch stamp duty holidays..."

[sancho panza]

5 hours ago, Cattle Prod said:

Really good chart here from @crudeoildigest on what is happening in the WTI world:

 

- Why did the $ weaken from Feb 06 to Jul 08?

- Did it stay weak to 2014 because of post GFC Fed policies like QE?

(DXY is candles, WTI in green)

- And I'm guessing DXY strengthened again in mid 2014 because the Fed stopped buying treasuries?!

It's a very striking correlation in mid 2014 between Fed stops growing its balance sheet, DXY immediately strengthens, WTI craters. The shale oil supply thing happened around then too, but it looks to me like if it was cheap enough in dollar terms, the rest of the world would have bought it. There was never that much of an oversupply, a % or two, and I've always said the shale vs. Saudi thing was a media construct. Looks like dollar has been too high for the ROW for the last 7 years. 

- Why would the yanks want this? What advantage does a higher dollar give them?

- How does this fit with your pre recession oil price spike analysis, @sancho panza?

- What happens next? Looking at current progress on the Fed balance sheet, I'm surprised the dollar isn't well down in the 80s already, and I (finally) totally get where @DurhamBorn and David Hunter are coming from with that call. 

Edit: Zoom to the key 2014 inflection point for clarity. DXY in green is flattened due to scal bar, but it went from 93 to 109 in 8 months from early July 2014, while WTI went from 106 to 44 (the second leg down to 27 in 2016 was shale supply ontop).

Interesting psot there CP.

My first instinct is that correlation doesn't equal causation.If we take a couple of those periods up close(and at the moment I'm using a lot of charts from peak and troughs to reduce noise and highlight trends) it seems to me that oil doesn't appear to have a fixed ratio of response to changes in DXY.Hence also worht considering gold moved into a Baer in April 2011

Sure DXY is a factor but it's not the only one.Speculative momentum likely played a far greater run up in 2008 than anything else.

In terms of why DXY weakend into the peak in )08 then I remember Bob Janjuah always taklking about risk on risk off phases.That rise into the bubbble was a risk off phase wehn the dollar got sold because people were specualting in other currnecies.The poop hits the fan and people risk off back into the dollar.

This is one of the reasons I'm wit @DurhamBorn seeing more 'risk on' at the minute than risk off.But then we're in a very differnt space in terms of the fed balance sheet as you say.

All in all,I suspect the scale of the moves in oil reflected the fact that there was specualtive participation until there wasn't if you get my drift.There werent any major imbalances in supply demand that would hvae jsutified the ,moves that we're tlaking about.Worth noting oil moved either side of the DXY line more than gold did.

 

[Hancock]

1 hour ago, Barnsey said:

"So, about those Swedish/Danish/Russian/American/Korean/Canadian/German/Dutch stamp duty holidays..."

Apart from Canada in the nations with double digit inflation, i don't believe the property bubbles of the other nations started from such absurd levels as the UK

Worrying non the less.

[AWW]

4 hours ago, Democorruptcy said:

There must be some good IFA's about but a lot are chancers.

I can believe it - this guy was an estate agent.

[JMD]

10 hours ago, sancho panza said:

Weinstein is really worht a watch and was recently interviewed by Joe Rogan I believe.

He has a great interview with Dr Robert Malone who ivented mRNA vaccine technology here

He has a great explanation about why PCR test results published without cycle counts are questionable at best,a blatant misrepresentation at worst here.

It's a rabbit warren going into this stuff.Prof John Ioannidis wrote a great piece here in 17/3/2020 regarding his prediction for the IFR which was 0.125% based on the Diamond Princess Cruise ship here

 

I think there are issues with vaccine safety and there are some very educated opinions on that not least from Dr Robert Malone himself,made in conjunction with Bret Weinstein and also a guy called Steve Hirsch in the video I put up first.

My own experience at work has very much reinforced my vaccine hesitancy.The other night I diagnosed two patients with new onset Atrial Fibrillation(and they were symptomatic with it).I normally see one case every three months maybe...key thing is that it's mainly treated with .........blood thinners because there's a clotting risk that the blood thinners reduce.

On taking the second one to hospital,I had a chat with the A&E sister and she said that they were getting a lot of new onset AF of late in older patients of late.

 

 

Thanks SP, I shall certainly look into those links you provide. As you say the topic is 'down the rabbit hole' stuff. I agree, but I said last April time that I thought Covid would be more impactful than climate change for Joe Public, and (obviously so far) it's turned out to be that way. I admit I had no evidence for saying that at the time - and perhaps it is just confirmation bias for me to stick with my Covid skepticism. However I shall mention just one alarming aspect, which is that the Covid (clerics!) scientists are fully embedded into government, whereas their climate scientist countrrparts were always more secular and distant. There was even much public pushback against global warming (particularly the XR zealots), and personal dissent was also even allowed, however in contrast everything Covid related has become almost sacrosanct, and where you either believe or else you are labelled a heritic!?                                                                                                                        Ok I might be overdoing the religious symbolism bit...  but my main point is that the required government control measures have been successfully put into place. Now we repeatedly hear of how we must 'learn to live with covid'. Is that just more sinister yet simplistic sloganeering? Or what other risks might we now expect to happen to us  - and to our wealth?... initially, personal id's, (virus) tracking, travel restrictions are baked in I guess, but then what?... One thing's for sure, with all the political parties plus the police/legal/media institutions all singing from their same 'keep safe' hymn sheets, it should prove extra easy for our new class of political puritans to implement their plan-demic part-deaux distopea... What me paranoid?, never used to be, but you bet I am now!!

[RickyBacker]

5 hours ago, Hancock said:

Apart from Canada in the nations with double digit inflation, i don't believe the property bubbles of the other nations started from such absurd levels as the UK

Worrying non the less.

I wouldn't be so sure. I can't back up with actual data at the moment, but I've lived in Taiwan for almost ten years and house prices over here have been, and still are, even more absurd than the UK. There isn't even the 'lack of supply' argument as they are building apartment blocks hand over fist to meet the needs of a declining population.
That picture is a view from my apartment, and this is taking place across the entire country. Insanity.

[Hancock]

5 hours ago, RickyBacker said:

I wouldn't be so sure. I can't back up with actual data at the moment, but I've lived in Taiwan for almost ten years and house prices over here have been, and still are, even more absurd than the UK. There isn't even the 'lack of supply' argument as they are building apartment blocks hand over fist to meet the needs of a declining population.
That picture is a view from my apartment, and this is taking place across the entire country. Insanity.

Presumably they're used as safety deposit boxes for the Chinese to hide their money?

Wont be too long until those houses below are flattened.

[RickyBacker]

1 hour ago, Hancock said:

Presumably they're used as safety deposit boxes for the Chinese to hide their money?

Wont be too long until those houses below are flattened.

The houses in the foreground are fine, the Government can't/wont take your property as they do in China. A year ago it was just fields and wasteland. Then, a Costco got planning permission. The council started to build roads and infrastructure, and then the apartment blocks started springing up. Rich people with lots of cash and no where else to get a return on it. They just buy the land and build. A basic three bedroom apartment in one of those will cost at least 200K pounds equivalent (minimum). Every time I stop at the traffic lights they thrust flyers into my hand ... way more supply than demand and an average wage that is much lower than the UK.