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


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Iv been taking myself away from it all a bit and doing jobs that need doing and just enjoying seeing my family etc.Im very worried about where we are heading for my families future.Mostly what is happ

Great interview by David Hunter, posted earlier in the week by @The Idiocrat. Lots of information, including timings and targets. I have posted below my summary table, and I'll add a rough transcript

Just wanted to wish everyone a happy xmas and for all adding their thoughts and knowledge to the thread this year.I think we can safely say without any doubt the thread has proved itself and a lot of

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Don Coglione
5 minutes ago, leonardratso said:

aye, his african 'friend' suggested it to him;

image.jpeg.40d557d6a3655eeb754ba0e482090f9b.jpeg

What is that massive hand, with painted nails, all about then?

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Hancock
2 hours ago, Talking Monkey said:

I'm going to give IB another go, man was that thing I downloaded on mi computer confusing. SIPP and ISA with HL, they're good. Makes sense about the fx thing Harley if holding long term

What is the full name of IB, looking to set up an account to buy overseas.

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@sancho panza

So funny, one of my questions in my exam today was 

Quote

Explain the differences to investors between an older manufacturing company and a digital company with regards to the intangible and tangible assets on their financial statements

I said that investors like tangible assets where they are represented at fair value. If everything goes wrong most of this value is recoverable.

With digital companies their profit is very sales growth driven, nearly all extra revenue goes to profit and most of their overheads are fixed.

 

Using the stock selector parameters to avoid intangible heavy companies means all the options that pop up are in the first group.

The down side [in a normal market] would be this excludes all the high growth, high potential digital and knowledge led companies. One could end up excluding all companies with the best futures and buying all the dinosaurs (I am sure that the tech investors believe this).

But we are not in a normal market so most companies in the second group are in a bubble anyway resulting in the selection being fine.

 

In a corrected future, I would also like to select companies in the second group if they were good value. Everyone should revisit their criteria from time to time to make sure it is still the best option for them.

 

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6 hours ago, Barnsey said:

This is Nordea's current thinking, Autumnal policy error on the cards...

20210610_135540.jpg.ea0843c982f5cf423a2a4161c2daad63.jpg

This was my exact feeling a couple of months ago

(apart from not sure what "we better increase inflation expectations"  means as the CB's are trying to keep expectations low)

But now I think the schedule is a bit tight, the July Aug is likely in Aug Sep but with a gap the CB's won't act until they don't have a choice so the last bubble ends up in 2022 (does anything ever happen late Nov/Dec/early Jan??).

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Harley
3 hours ago, leonardratso said:

aye, his african 'friend' suggested it to him;

image.jpeg.40d557d6a3655eeb754ba0e482090f9b.jpeg

Is Macron a Nigerian prince scam victim?  Will the BIS block his account?

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Harley

Is inflation really set to take off or will we see one broad jump/collection of jumplets (with no fall back) exacerbated by the base effect to clear the current build-up?  A jump maybe partly caused by the financial speculation on commodities as much as excess purchasing power at a time of supply issues?  For the monetarists  doesn't continued inflation require continued printing and are we not near the end of the print cycle, potential MMT not withstanding?  For the Keynesians, doesn't pull inflation require a questionable booming economy?  Or is the current emerging uptick the required kindling to start a spiral which feeds upon itself?

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Noallegiance
5 minutes ago, Harley said:

Is inflation really set to take off or will we see one broad jump/collection of jumplets (with no fall back) exacerbated by the base effect to clear the current build-up?  A jump maybe partly caused by the financial speculation on commodities as much as excess purchasing power at a time of supply issues?  For the monetarists  doesn't continued inflation require continued printing and are we not near the end of the print cycle, potential MMT not withstanding?  For the Keynesians, doesn't pull inflation require a questionable booming economy?  Or is the current emerging uptick the required kindling to start a spiral which feeds upon itself?

Yes

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11 minutes ago, Harley said:

Is inflation really set to take off or will we see one broad jump/collection of jumplets (with no fall back) exacerbated by the base effect to clear the current build-up?  A jump maybe partly caused by the financial speculation on commodities as much as excess purchasing power at a time of supply issues?  For the monetarists  doesn't continued inflation require continued printing and are we not near the end of the print cycle, potential MMT not withstanding?  For the Keynesians, doesn't pull inflation require a questionable booming economy?  Or is the current emerging uptick the required kindling to start a spiral which feeds upon itself?

Money velocity will increase when we "open up" again, i wonder what that chart that shows the amounts sat in savings compared to current accounts looks like now (m1, 2 3?) 

On phone so hard to search.

DXY proving very resistant to dropping below 90, it's like everything is stuck in a loop

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Don Coglione
12 minutes ago, Harley said:

Is inflation really set to take off or will we see one broad jump/collection of jumplets (with no fall back) exacerbated by the base effect to clear the current build-up?  A jump maybe partly caused by the financial speculation on commodities as much as excess purchasing power at a time of supply issues?  For the monetarists  doesn't continued inflation require continued printing and are we not near the end of the print cycle, potential MMT not withstanding?  For the Keynesians, doesn't pull inflation require a questionable booming economy?  Or is the current emerging uptick the required kindling to start a spiral which feeds upon itself?

I am far too stupid to respond to your question in depth.

However, I have been to Sainsbury's today and have noted the price increases on a number of items, up 5-10% on a month ago.

I can't see these prices going back down again...

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Harley
11 minutes ago, Don Coglione said:

I am far too stupid to respond to your question in depth.

However, I have been to Sainsbury's today and have noted the price increases on a number of items, up 5-10% on a month ago.

I can't see these prices going back down again...

Agreed, but will they continue to rise and why?  That was the essence of my question.  Inflation measures the rate of change in prices.

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Harley
15 minutes ago, Loki said:

Money velocity will increase when we "open up" again, i wonder what that chart that shows the amounts sat in savings compared to current accounts looks like now (m1, 2 3?) 

People may be keen to keep that money close by if the economy and/or their jobs tank once things open up and the carnage appears.  Sure, an initial splurge, but a continuous one?

DXY might flip a bit to surprise everyone and take the heat out of commodities (overbought) before maybe continuing down?  Such is Mr Market.

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1 minute ago, Harley said:

People may be keen to keep that money close by if the economy and/or their jobs tank once things open up and the carnage appears.

I thought the same but then i encountered what people are like over the past 18 monthsxD

They will spend like a pissed up sailor on shore leave i reckon

They don't think like us!

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Harley
1 minute ago, Loki said:

They don't think like us!

Probably right, but I also wonder how many people's thinking has changed.  It will be fascinating to watch, assuming lockdowns, etc end.

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Just now, Harley said:

Probably right, but I also wonder how many people's thinking has changed.  It will be fascinating to watch, assuming lockdowns, etc end.

They will do whatever the current agenda being pushed tells them to do.

I'm not being deliberately cynical, i really believe that now.

"Spend spend spend, you deserve it" is my throwaway guess

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DurhamBorn
35 minutes ago, Harley said:

Is inflation really set to take off or will we see one broad jump/collection of jumplets (with no fall back) exacerbated by the base effect to clear the current build-up?  A jump maybe partly caused by the financial speculation on commodities as much as excess purchasing power at a time of supply issues?  For the monetarists  doesn't continued inflation require continued printing and are we not near the end of the print cycle, potential MMT not withstanding?  For the Keynesians, doesn't pull inflation require a questionable booming economy?  Or is the current emerging uptick the required kindling to start a spiral which feeds upon itself?

I think we get inflation until back end of this year ,early next,then maybe a downward move,maybe even deflation for a short period to fake out everyone.I think they are trying to lift liquidity by 30% so that governments tax take increases quicker than spending.I have around 61% increase in prices for the cycle, but that depends on a lot more printing yet.With printing now we should get around 43% inflation over the cycle.

I think a lull is very likely and that might be where we see balance sheet events,a clean out,then inflation running up again.I dont tend to do much work on short term calls though as im not a trader and try to price out to 5 to 8 years.

 

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50 minutes ago, Harley said:

Probably right, but I also wonder how many people's thinking has changed.  It will be fascinating to watch, assuming lockdowns, etc end.

Presumably lockdowns are the circuit breaker and the reason why they have hyped up the pandemic.

Say we have a few months of high inflation,  it starts to become a self-feeding frenzy so they lock the whole economy down again. Now we have near zero velocity again,  inflation subsides somewhat and they can print a little more. Rinse and repeat until we've had the required inflation for the cycle. 

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XswampyX
3 minutes ago, Siggy said:

Presumably lockdowns are the circuit breaker and the reason why they have hyped up the pandemic.

Say we have a few months of high inflation,  it starts to become a self-feeding frenzy so they lock the whole economy down again. Now we have near zero velocity again,  inflation subsides somewhat and they can print a little more. Rinse and repeat until we've had the required inflation for the cycle. 

I like it.

But it's not true.

Building game... People realise they live in a shit house (after being trapped in it for 18 months). Want a new patio/garden house/ swimming pool or extension.

Didn't buy a holiday last year, or car, or anything.

£5,000 in the bank, just sitting there.... Spend me!

How much?

Well we are really busy (and they are). So it's the price + £1,000

Great when can you start?

24 months.

Can't you do it any quicker?

Another grand might do it?

Here you go. £1,000

Well we have ordered the materials, but there's a shortage. We can't start work till we get the materials.

How long is that going to take?

24 months?

Now the builders work is drying up, not because it's not there, but because the materials to do the job aren't available.

They will soon start laying people off because they don't have enough cement to employ that person.

No doubt this scenario has a name, but I don't know what it is and the builders have a massive part in creating it, by starting jobs and ordering (some) materials that they can't use.

Retailers the same. We can't get product X so when we can, can you double order it.

They are ordering extra to service a demand from the past and they are creating a deficit of supply in the future.

So prices UP.... based on what?

 

 

 

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Lightscribe
7 hours ago, Harley said:

Probably right, but I also wonder how many people's thinking has changed.  It will be fascinating to watch, assuming lockdowns, etc end.

It will be fascinating to watch as the general populous are so financially uneducated (perhaps intentionally).

They just won’t understand why their salaries are not stretching to cover the costs of their £500k+ mortgages and soaring bills, there needs to be ‘something’ to blame. They will literally attribute it all to  Brexit and the Beeb will happily tow them along.

As I said before it’s from this point on that credit graph starts going the other way. Let’s face it the self employed and trades can up their rates accordingly. The PAYEs in the civil service, NHS and teaching are stuck on yearly 2% increases, it’s going to be pitch forks at dawn in strikes (if the civil service staff can bring themselves to leave ‘working from home’ that is).

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Barnsey

I think we're jumping to a few conclusions here.

Supply IS coming back online, that was more a late 2020 / early 2021 story, lumber for example back down to $1100 from almost $1700 in May. Cars are the sector which still seems under great pressure due to chip shortages from Taiwan, especially with their further shutdowns in play. Rental companies buying up used stock is massively distorting the U.S. market right now, and resulting car rental prices up over 100%. This will persist. Housing has obviously gone ballistic in the States, but buying intentions have nose dived and mortgage applications significantly down too.

Secondly, we're seeing a significant rise in union membership both here and abroad. I think it's far too easy to scream stagflation, but mission numero uno is wage growth (or wage inflation if you're the bill payer). I'm more optimistic on this front, due to a large cohort of the older population making a permanent exit from the job market, and the coordinated clarity of purpose from governments globally. Below inflation token payrises work ok in a disinflationary period, but not during what comes next.

Thirdly, do we REALLY think they're going to just sit back, let things crash, and say job done? I'm not sure how they dance along the tight rope in months to come, like I've mentioned, it'll possibly be lagging rental price increases across the pond that spook the Fed, but how they do this knowing the market will dive is hard to fathom at the moment. Rate increases combined with targeted tax breaks or stimulus?

I'm still convinced the only way to overcome this debt is inflation, marked as a positive for the employee of course, wages up, but also the cost of everything else. I'm also convinced some kind of market event in coming months seems inevitable, I'm no conspiracy theorist but perhaps it's exactly what's needed to turn on the taps again. The danger is thinking this time isn't different. Just look at the "success" of furlough and stimmy cheques. If things do wobble after being withdrawn, don't be surprised if they make a swift comeback.

The big question we all have to consider is at what point are supportive measures no longer possible? How far away is this potentially?  If western economies are largely coordinated in their supportive actions as at present, can these measures continue in perpetuity?

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