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

[kibuc]

41 minutes ago, MrXxxx said:

Easy way around that, you offer them a voluntary severance deal.

After which they take the vax and get re-hired with higher pay due to staff shortages. 5-headed plan.

[Hancock]

3 hours ago, kibuc said:

Wow, that speach from Powell was a retreat and a half - and the markets are loving it.

Inflation - transitory. Also, transitory.

Durables - will stop going up soon, pinky promise

Wage inflation - not translating to price inflation

Job market - participation rate not at all where we want it

IF, and that's a big IF, we were to do something about tapering QE, it should under no circumstances be understood as prelude to rising rates

Due to lags, effects of changes to monetary policy can kick in when they're not needed anymore, sometimes better to just wait things out

And since we're talkin about tapering, in previous FOMC meeting we agreed we would start doing that by year end if conditions improve and we can see them improving but there's delta variant and stuff so for now we'll continue looking at data

 

Inevitable, sadly im still sitting on a load of cash waiting for the BK/dip that probably wont come!

[MrXxxx]

37 minutes ago, Hancock said:

Inevitable, sadly im still sitting on a load of cash waiting for the BK/dip that probably wont come!

Just remember that inflation loss on your cash at the moment would `pale into insignificance` to the loss on shares in a BK.

[Loki]

1 hour ago, MrXxxx said:

Just remember that inflation loss on your cash at the moment would `pale into insignificance` to the loss on shares in a BK.

I think it depends on what you were holding and whether it's a sector rotation or not.  Reflationary shares should bounce back(?)

 

Rest assured I will let you all know what I do so you can do the opposite. 

[Phil]

1 hour ago, MrXxxx said:

Just remember that inflation loss on your cash at the moment would `pale into insignificance` to the loss on shares in a BK.

We are all gonn lose. Its just the level of pain, and acceptance you can take before you pop

[Hancock]

1 hour ago, MrXxxx said:

Just remember that inflation loss on your cash at the moment would `pale into insignificance` to the loss on shares in a BK.

Yes but its whether a BK actually happens, just a decent dip would do me!

Best i can hope for is a new variant of corona to get the markets down and give them another reason to print!

[sancho panza]

14 hours ago, belfastchild said:

It never even occured to me to ask! Would be interesting if the majority of the 5 were minorities, would be even more interesting if they were the only minorities they employed!
 

I know at my place of work,we have few ethnic minorities and from the conversations I've had ,uptake is very low.

Possibly one of the reasons we've been left alone by our chain of command.

13 hours ago, Noallegiance said:

That's quite profound.

Something about that article has fostered a change in me. Obviously I understand many things from this thread and other sources, but reading that has made me perform an instant reassessment of my working life.

Within reason, I feel the need to attempt to earn as much as I can as quickly as I can in order to expand my cash pot for investment and ensure my standard of living at least remains stationary.

Anything above that would be a bonus.

I agre NA,I found it a summation of a lot this trhead has talked about over the years,jsut without the humourous interludes and pizza recipes.

Dark stuff indeed.That dark it may have even depressed our very own prince of darkness @Talking Monkey...I think it's the unfailing honesty and logic with which he predicts declining disposable income into the distant future(nothing your average basement dweller wouldn't disagree with) that really hits home.

 

[DurhamBorn]

7 hours ago, Majorpain said:

When timber went parabolic, people had the choice not to purchase it at that price which brought supply/demand back into balance.  Because so much manufacturing capacity has been exported to China, this wont happen because cheap Chinese goods have put a hefty chunk of the rest of the worlds production capacity out of business (Steel is good example!).

There is the best part of 30 years of offshoring to fix (Early 90's to 2017ish), all that productive capacity will take time to move back to the ROW, in the meantime the JIT economic system means that companies have a choice in either paying extortionate amounts to ship components from China or closing down.  

Really interesting to watch, there is in theory no limit to how high container prices could go as for some companies its literally life and death if they cant get the parts/goods they need.

Imagine if these companies had hired some macro strategists a few years ago.

.

[sancho panza]

Another decent size goldie trading on 7 times historic earnings

Decl:long

[MrXxxx]

1 hour ago, Hancock said:

Yes but its whether a BK actually happens, just a decent dip would do me!

Best i can hope for is a new variant of corona to get the markets down and give them another reason to print!

Yes I know what you mean...I can remember saying the same thing about house price crashes for the last 15 years! :-)))

[sancho panza]

13 hours ago, DurhamBorn said:

Like we always said the end of the long dis-inflation cycle would see policy move to fiscal.It was certain,a macro certain anyway.Covid was just the trigger at the end of the cycle.It could of been anything,and this is what most miss.It doesnt matter the trigger,it matters how close to a trigger.Dis-inflation had ran out of steam.The financial crash could and should of been fiscal,but they only bailed the banks balance sheets.They printed back a lot of the dis-inflation then,but handed it to the rich by making good the bonds instead of wiping them out.

Inflation always comes when their are less goods and services and the same or more demand.Liquidity means people can buy and bid for these without doing any work,and thats when you get the feedback loops kicking in.

People are about to get poorer because its a distribution cycle.That 15% increase in food price hits people hard,but not us on here because potash could leverage it 10x over and the companies did.

This inflation is not going away,its just starting,and will shake out people who see some short term falls and think thats it.Crucial to hold assets that catch and leverage the inflation.

 

Lot of good points in there DB.

And this is one of the key things I've learned from this thread.I used to be a deflationist and still am.But I read these pages over the years and the logic with which you,particularly,laid out the route to price inflation,such that I couldn't argue with it.Made me realsie that credit systems co exist with pricing systems,sometimes they move in unison,sometimes they don't.They aren't mutually exclusive to the extent that they are.

Long story short,it really does look like price inflation is here to stay.If a credit deflation occurs at any point,it will jsut make the situation a whole lot worse.

 

11 hours ago, JMD said:

... But another facet, is that these social (employment) disruptions - which government has caused - yet has neither the skill nor the will to fix, will i think be massive triggers for the creation and uptake of new right(or left?)-leaning political parties. 

 

I think it's also worth considering the role of demogrpahics here as well,exacerbating any lurch politically to the left or right.Paul Hodges has written extensively on the issue of the peak spending years being 25-54 as people nest and have kids.The current crop of 25-40 year olds have never known anythign but a hugely expensive hosuing market and studetn loans.The more recent crops are facing student debts of £50k and funded by jobs at B&Q on minimu wage while they fund the RPI link ed pensions of the demographic deciles that have had it msotly for free.

In my social circles-particualrly the ex military types-I sense a huge sense of isolation from Westminster politics.Brexit was a taste of the dislocation to come,not it's end product.

[sancho panza]

10 hours ago, JMD said:

I have been wondering recently, given the ideological split between the financial commentators over inflation/deflation - is the dividing line between the inflationisters and the deflationists, may be that the former are far more skeptical toward the huge financialised 'fairy-tale world' that's been created during previous decades, i.e. derivatives, cdo's, mbs, etc. And that the deflationists still believe in (maybe still actively involved in!!) the derivative markets? I dought whether this manifests as a strict dividing line or rule between the two camps, but i wonder if anyone has done a head-count of the opposing two sides?     

 

 

As Ive said,too many people focues on delfation/inflation as if you can't have both.

I think finacialization will go bsut and we will face a huge credit deflation.

However,I alos think if our currency crashes then we'll be paying more oil either way.

AS ever,the commentariat are talking as if the only safe currencies are western currencies.jsut like on the oil supply/demand imbalance discussions as per  @Cattle Prod they're looking the worng way at a crucial moment

10 hours ago, harp said:

My Mrs is a facilities manager. Around 10 months back she had the broker on the phone to sort out her energy companies as the deal was coming to an end. After having me in her ear she got a 5 year fixed deal on gas and electric. The broker laughed at her when she said energy costs are going to go through the roof!! Thanks basement dwelling people

I have to watch what I say here but someone I know took advice off the senior economist for a High St bank which stated quite simply,that inflationary pressures would pass(so they didn't bother with a fixed rate mortgage).I said nothing but immediately thought of @Barnsey 15 year fix and know which bus I'd get on.

These people at the top of the system don't see the crash coming even if theyve created it.....

10 hours ago, Heart's Ease said:

Picked up from Twitter.

 

 

That's a pciture and half right there HE......holy smoly...

[Hancock]

58 minutes ago, MrXxxx said:

Yes I know what you mean...I can remember saying the same thing about house price crashes for the last 15 years! :-)))

I've a feeling where we are now in relation to the stock market is the equivalent of where we were in 2009 with the housing market ... where most were shouting for the impending house price crash ... that just isn't going to happen.

[MrXxxx]

6 hours ago, Hancock said:

I've a feeling where we are now in relation to the stock market is the equivalent of where we were in 2009 with the housing market ... where most were shouting for the impending house price crash ... that just isn't going to happen.

Mmmm, not so sure....they (government) are now going to have to belt tighten due to years of excess, and will have to make a few choices...when the majority of the demographics become renters through no choice, continued support of the property bubble would be political suicide....but I've thought logically like this for years and have continually been `wrong footed`.

[Harley]

18 hours ago, Starsend said:

Looks like I'm still not doing too badly then. New daily standing charge on mine is 24.102 so mine's overall still a bit cheaper.

Except your post suggests your rate is not fixed, although maybe we are over the worst for now?

[Harley]

1 hour ago, MrXxxx said:

.......continued support of the property bubble would be political suicide.

Not if the banks, etc own it all so we "can be happy"!  inheritance, etc are also other possible scenarios.

A nice segue to a public service announcement (although the above example is, tbh, a bit rubbish as a justification for this!). 

Not having a go so please do not take offence.  Indeed a compliment as it's being taken forward for further thought which is what it all should be about here.

One small example of a potential mind trap sometimes displayed on this thread.  That is incremental thought, or a form of anchoring to the "as-is" world.  Yep, I've said it before.

Incremental thought is dangerous as it can be easily manipulated.  A bit like setting up your gun crews to cover the bug out route you set up as part of your ambush.  Incremental thought would send you right into those guns.

We would all be advised to set our mental reasoning to "11" atm.  To stress test all hypotheses to a far wider (and wild) set of scenarios and see what pops out.  Lateral thinking to the fore with a healthy dose of rational thinking and sense of proportion.

The last 18 months have been an example of incremental thought and to where it can lead (still in progress).  It's how they stay one step ahead of us.

Thankfully, finance folk often have a head start as has been witnessed by them typically being the best sources of analysis of covid s-show to date.

I just want everyone to build in resilience.  That's my contribution.

[Hancock]

2 hours ago, MrXxxx said:

Mmmm, not so sure....they (government) are now going to have to belt tighten due to years of excess, and will have to make a few choices...when the majority of the demographics become renters through no choice, continued support of the property bubble would be political suicide....but I've thought logically like this for years and have continually been `wrong footed`.

More an analogy about the stock market, seems to be a minority claiming its onwards and upwards from here and there isn't going to be a bust such as@goldbug9999 maybe the few are correct.

Inevitable that we'll get a BK but like a HPC may not be for a long time!

[Talking Monkey]

9 hours ago, sancho panza said:

I know at my place of work,we have few ethnic minorities and from the conversations I've had ,uptake is very low.

Possibly one of the reasons we've been left alone by our chain of command.

I agre NA,I found it a summation of a lot this trhead has talked about over the years,jsut without the humourous interludes and pizza recipes.

Dark stuff indeed.That dark it may have even depressed our very own prince of darkness @Talking Monkey...I think it's the unfailing honesty and logic with which he predicts declining disposable income into the distant future(nothing your average basement dweller wouldn't disagree with) that really hits home.

 

 

Prince of darkness that made me proper laugh SP, I  definitely dwell on the negative a bit too long on occasion. 

I really like Dr Tim's stuff for exactly the reason you mention, his unfailing honesty and logic. His stuff is a big contributer to my decision to be overweight in oil. 

I've got to say it is a bit bleak when you take the Seeds economic model and overlay it with what we discuss here, along with forecasters like David Hunter's predictions for end decade. 

Really thinking about how bleak things could potentially get has its benefits, as it kicks one into gear to get on with planning on how to navigate through, think about various scenarios, have contingencies and back ups in place, think about key decision points in advance etc. As that evolves and most importantly in parallel reminding oneself that perspective is everything, you end up in a pretty good state of preparedness and the despondency dissipates. 

 

 

 

 

[MrXxxx]

1 hour ago, Harley said:

Not if the banks, etc own it all so we "can be happy"!  inheritance, etc are also other possible scenarios.

A nice segue to a public service announcement (although the above example is, tbh, a bit rubbish as a justification for this!). 

Not having a go so please do not take offence.  Indeed a compliment as it's being taken forward for further thought which is what it all should be about here.

One small example of a potential mind trap sometimes displayed on this thread.  That is incremental thought, or a form of anchoring to the "as-is" world.  Yep, I've said it before.

Incremental thought is dangerous as it can be easily manipulated.  A bit like setting up your gun crews to cover the bug out route you set up as part of your ambush.  Incremental thought would send you right into those guns.

We would all be advised to set our mental reasoning to "11" atm.  To stress test all hypotheses to a far wider (and wild) set of scenarios and see what pops out.  Lateral thinking to the fore with a healthy dose of rational thinking and sense of proportion.

The last 18 months have been an example of incremental thought and to where it can lead (still in progress).  It's how they stay one step ahead of us.

Thankfully, finance folk often have a head start as has been witnessed by them typically being the best sources of analysis of covid s-show to date.

I just want everyone to build in resilience.  That's my contribution.

I think you make a good point, and agree....people can blind sided`/manipulated to think along a certain path, even when their thought is the apparent opposite of the official government line I.e the recent change in some negative main stream reporting alongside the 16 months of fearmongering `state propaganda`, just to give the illusion of balance.

[Errol]

"You know what the problem is? I will tell you as a former citizen of the former Soviet Union. What is the problem of empires? They think they are so powerful that they can afford small errors and mistakes. But the amount of problems grows and a moment comes when they can no longer be managed. And the United States, with a confident gait and a firm step, are going straight down the path of the Soviet Union."

Vladimir Putin, June 2021

[No One]

1 hour ago, Errol said:

"You know what the problem is? I will tell you as a former citizen of the former Soviet Union. What is the problem of empires? They think they are so powerful that they can afford small errors and mistakes. But the amount of problems grows and a moment comes when they can no longer be managed. And the United States, with a confident gait and a firm step, are going straight down the path of the Soviet Union."

Vladimir Putin, June 2021

He's not wrong. He saw first hand how the USSR collapsed.

[Barnsey]

Late 90s episode of Bruce's Price is Right on TV at the moment, we really do seem to have forgotten just how lucky we've been during the 20 years of disinflation since.

2 wooden outdoor chairs and a parasol = £500, 7 inch portable DVD player = £900 

Absolutely convinced we're turning back now.

[JMD]

26 minutes ago, Barnsey said:

Late 90s episode of Bruce's Price is Right on TV at the moment, we really do seem to have forgotten just how lucky we've been during the 20 years of disinflation since.

2 wooden outdoor chairs and a parasol = £500, 7 inch portable DVD player = £900 

Absolutely convinced we're turning back now.

Agreed, 'good-game good-game', however am not wholly convinced any of the resultant pain, responsibility or blame can be levelled purely at Bruce Forcyth!?!

[Shamone]

15 hours ago, sancho panza said:

As Ive said,too many people focues on delfation/inflation as if you can't have both.

I think finacialization will go bsut and we will face a huge credit deflation.

However,I alos think if our currency crashes then we'll be paying more oil either way.

AS ever,the commentariat are talking as if the only safe currencies are western currencies.jsut like on the oil supply/demand imbalance discussions as per  @Cattle Prod they're looking the worng way at a crucial moment

I have to watch what I say here but someone I know took advice off the senior economist for a High St bank which stated quite simply,that inflationary pressures would pass(so they didn't bother with a fixed rate mortgage).I said nothing but immediately thought of @Barnsey 15 year fix and know which bus I'd get on.

These people at the top of the system don't see the crash coming even if theyve created it.....

That's a pciture and half right there HE......holy smoly...

Never underestimate the peace of mind that comes with a 10 year fix. 

[leonardratso]

wish i could fix my gas+elec for 10 yrs, thats a jumpy fucker every contract end.