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

[DurhamBorn]

@spygirl yes those things will be what happens over the cycle.The strange thing about the end of cycles,is that the things that suffer most at the end of them (think oil etc at the moment) do the best through the next one.BTL will be feeling ok at the moment.As stocks fall they will think they did the right thing.That will change when rates go above 7% and i see a 60% chance they go over 10%.

The next cycle will see massive changes.A dash to secure energy,the west and the east pulling apart and the West trying to stop Chinese expansion in Africa etc.

Pretty obvious supply chains will be shortened going forward.Where sterling is now,its probably a level that would pull back manufacturing,even without other reasons.

[Noallegiance]

4 hours ago, BadAlchemy said:

That link comes back with "article under investigation" (which makes me even more interested to read it!)

Here is a link to a cached version on Wayback Machine....

https://web.archive.org/web/20200321164503/https://medium.com/six-four-six-nine/evidence-over-hysteria-covid-19-1b767def5894

So it's a global shut down over fuck all.

[TheCountOfNowhere]

Are the stock markets opening on Monday ?

 

Im guessing they are in the list of people we just cant live without 

[MrXxxx]

2 hours ago, Loki said:

410

This post is under investigation or was found in violation of the Medium Rules.

Looks like it's been memory-holed for true bad-speak

Interesting `1984` terminology, glad I am not the only one noticing the parallels recently...though I was going mad/becoming a bit of a conspiracy nutter!

Read thread further and you will notice that someone has put a Time Machine link so that you can still read it.

[M S E Refugee]

2 hours ago, Loki said:

410

This post is under investigation or was found in violation of the Medium Rules.

Looks like it's been memory-holed for true bad-speak

https://twitter.com/CT_Bergstrom?ref_src=twsrc^google|twcamp^serp|twgr^author

Some scientist called CT Bergstrom has been debunking Ginn's views.

 

[Eventually Right]

On 18/03/2020 at 11:28, DurhamBorn said:

Because interest rates will be 10%,and the cost of living very high.This cycle turn is about where resources will be allocated by the economy.Instead of BTL being financed it will be massive social house building.Pendulums swing too far in cycles,then return too far the other way.I would expect southern house lose 70% inflation adjusted,northern maybe 20%.If i was buying in the north id buy now or within 12 months and fix those rates for 10 years.South id hold off for a couple of years.

 

Fed is behind the curve by massive amounts,dollar will fall once Fed gets close to right sized printing.World needs $s,and fast.

Hi DurhamBorn,

Do you have any thoughts on the nominal hit house prices in the south might take in the next 18-24 months? 
I have a vague recollection that you thought it might be as much as 30-40%, but that would have been a couple of years ago.

Thanks

[DurhamBorn]

8 minutes ago, Eventually Right said:

Hi DurhamBorn,

Do you have any thoughts on the nominal hit house prices in the south might take in the next 18-24 months? 
I have a vague recollection that you thought it might be as much as 30-40%, but that would have been a couple of years ago.

Thanks

Very difficult given the reason the debt deflation was kicked off.However its obvious that companies will re-trench once we get over the virus.Many/most will of drawn down extra debt etc and so will be tightening cash expenses.I wouldnt buy a southern house unless it was down 70%,and even then id avoid anyway.The south is fucked.Most reflation areas will be from a line north across the Humber.If i was wanting a house,id really consider buying one in the north and fixing for 10 years now.Rates are going to 10% probably by 2028.

I did a rough road map on if we see a 23% fall in GDP and the printing needed to get us back to a -5% over 12 months.It shows 22% inflation and 16% interest rates in 2028.The one iv done for the world says oil at $300+ around 2028.Thats an extreme and i expect 10% rates are more likely,but it shows where we are going.

 

[Eventually Right]

29 minutes ago, DurhamBorn said:

Very difficult given the reason the debt deflation was kicked off.However its obvious that companies will re-trench once we get over the virus.Many/most will of drawn down extra debt etc and so will be tightening cash expenses.I wouldnt buy a southern house unless it was down 70%,and even then id avoid anyway.The south is fucked.Most reflation areas will be from a line north across the Humber.If i was wanting a house,id really consider buying one in the north and fixing for 10 years now.Rates are going to 10% probably by 2028.

I did a rough road map on if we see a 23% fall in GDP and the printing needed to get us back to a -5% over 12 months.It shows 22% inflation and 16% interest rates in 2028.The one iv done for the world says oil at $300+ around 2028.Thats an extreme and i expect 10% rates are more likely,but it shows where we are going.

 

Thanks for the quick response DB.

I’m in the Bristol area, and don’t really want to leave for family reasons. 
If we get a half decent nominal fall in the next couple of years, I might have to bite the bullet anyway and just fix for 10 years-rents have become insane here the last couple of years, and don’t feel like being at the mercy of a landlords whim much beyond 40!

Ho hum!

 

[Gin]

5 hours ago, Loki said:

410

This post is under investigation or was found in violation of the Medium Rules.

Looks like it's been memory-holed for true bad-speak

Its back up but none of the graphs are showing

[NogintheNog]

I think we have had these discussions before but;

7 hours ago, spygirl said:

8 hours ago, MrXxxx said:

Hence the importance of a gold standard to act as an unbiased FIAT reference/datum?

What if an asteroid made of gold crashes into Earth?

 

Isn't that asteroid about to hit? Not gold though but $/£/Euro/AUD/ etc etc? Surely that's the same thing?

 

7 hours ago, spygirl said:

No, I dont thnk having a gold currency is wholey essential or useful. Theres just not enough

Yes, there clearly isn't enough at $1,500 per ounce. But repriced at $10,000 per ounce there might be. Every banker on the planet is gonna come up with that one. We only need one reserve currency to be gold backed.

 

7 hours ago, spygirl said:

The oly way a gold currency would work would be if people paid for stuff gold - and thats not going to happen

We were on a gold standard up to the 'Nixon Shock' in '71. No one was paid or paid for in gold then. They were paid in US$ which was 'backed' by the Gold held in vaults.

 

7 hours ago, spygirl said:

Whatever replaces the dollar is probably going to be synthetic

So that'll be Bretton Woods 2, backed by a load of depreciating FIAT currencies. As if central banks are gonna agree to the conditions to make that work, can't see it. Think I prefer the Gold idea!

 

I agree with many of your points on inflation though Spy.

 

[MrXxxx]

1 hour ago, NogintheNog said:

8 hours ago, spygirl said:

The oly way a gold currency would work would be if people paid for stuff gold - and thats not going to happen

We were on a gold standard up to the 'Nixon Shock' in '71. No one was paid or paid for in gold then. They were paid in US$ which was 'backed' by the Gold held in vaults.

A thought just came to mind...is this what the Russians/Chinese are planning buying lots of gold?...when they have enough they will supplant the Dollar as the World currency by fixing theirs to a gold standard?

[CVG]

2 hours ago, Gin said:

Its back up but none of the graphs are showing

It's available on the Doom Porn site

https://www.zerohedge.com/health/covid-19-evidence-over-hysteria

[spygirl]

Just now, MrXxxx said:

A thought just came to mind...is this what the Russians/Chinese are planning buying lots of gold?...when they have enough they will supplant the Dollar as the World currency by fixing theirs to a gold standard?

Let's get this straight - gold is totally useless as a means as exchange.

The stuff will rub off on your pockets.

For trade, you need a liquid, flexible currency that's broadly accepted.

Since I started following this sort if stuff in the 80s, it's always been the dollar.

At one point, I thought the Yen would ramp up. Then Japan blew up, and the whole trading thing that was Japan disappeared up its arse.

Then Euro started, and Europe is big. However, printing the slush fund needed for a trading currency is verboten by Germany. 

Dollar as a the reserve andor reserve currency is not the free ride people Inc. Americans think. It keeps the dollar strong, which destroyed jobs for the bottom 30% , which got Trump elected and a turn away from global trade.

[JMD]

19 hours ago, Bricks & Mortar said:

I'm starting to think the Fed reticence is because they want to time it for once the bad virus news is already priced in.  Be ideal if hey could get some good news too, and seen UK saying antibodies test might be days away, and a 'gamechanger', and US saying hydrowotsit drug treatment might be a 'gamechanger' and they're moving to secure supplies.
I think, if they can get good news on the virus out there, simultaneous with the Fed QE, that we might be back on with a meltup and later big kahuna.  (Big Kahuna comes after the meltup, when it wears off, with the population, in absence of what they perceive as an existencial crisis, screaming "piss off", to further QE and bailouts, possibly in the final weeks of a presidential election.)

BUT.  The above is only my view of what might happen.  I agree with DB.  If we don't get the printing, it's Goodnight, Vienna. 

And for the Fed themselves, if I was them... I'd go for the deflationary crash now, rather than later.  At least there's something to put the blame on.

But I'm still thinking there's a good chance the Fed can't see past the end of their nose.

EDIT TO ADD - Sancho Panza's previous post.  Bond Collapse.  (will warn here, that I don't believe I fully understand bond market),  But I'm thinking money flowing out of bonds  Where does it go?  Bit of good virus news and some QE, and it's melty-time.

B&M, that's an interesting idea and I notice some others including SP have similar view point, i.e. that there is a possibility that the big kahuna/debt-deflation crash is yet to happen, that it may happen as a separate distinct event later this year/early next year.

I like this theory very much...but perhaps for obvious reasons! I have learned so much from this thread that if I could just have a second bite at the investment cherry i'm sure I would become very rich! I guess so would everyone else here, but of course life is never that simple.

 

As an addendum, can I try a thought experiment?... Personally if we were to get that fabled melt-up, say later this year, I would sell approx. half (on a total value basis) of my portfolio. Reasoning would be that the expected subsequent crash would allow me opportunity to buy back the best stocks at low prices. 

My question is not the obvious: would you take the risk of selling, given that a '2nd crash' event might never happen. But instead - what are the 'pre-conditions' that might lead you to think that a 2nd crash was a real possibility? Could it be scenario like the corona virus diminishes sooner than expected in say 4 weeks and the market then partially recovers due to misplaced relief/optimism; or if only relatively small doses of gov. spending begun to lift the markets/economy, say US injected only $2trn and not $20trn, but then after a short period came the awful realisation that all those expensive gov. 'support for business' schemes had no exit point; or perhaps a mixture of these, or perhaps other scenarios?

 

Premature perhaps to be thinking in this way?... but discussion like this might be useful for some here that have written of holding back funds for such an event happening, especially if we are looking at a 2nd/3rd wave/18 months of corona infections. 

 

[JMD]

Did anyone notice the Pereto principle at work in the '80%' salary funding by the chancellor?

[Bobthebuilder]

13 minutes ago, JMD said:

Did anyone notice the Pereto principle at work in the '80%' salary funding by the chancellor?

As per normal, as DB says not enough earnings to tax going forward to pay for it.

[TheCountOfNowhere]

Boris looked happier tonight.  he's got away with the biggest heist in history.

[Talking Monkey]

11 hours ago, Calcutta said:

Japanese friend of mine thinks all of this is designed so that the US can print trillions and make the government debt China holds worthless, and he's hoping they put sanctions on the Communists. 'shit chin reds' as he calls them.

That is some brand new cussing I just learnt 

 

9 hours ago, Noallegiance said:

So it's a global shut down over fuck all.

What did the article say as its gone 410 now so cant read it

Whoops just saw the Time Machine thing, sorry

[One percent]

2 minutes ago, Cattle Prod said:

Post has been censored. What does that tell you guys...

Not on here they wont be. Last bastion of free speech.   all hail spunko. 

[DurhamBorn]

https://ourworldindata.org/coronavirus#growth-country-by-country-view

Thats a great one for data.Once it gets away once the number stop doubling every 3 days in each country its slowing down.You can see Italy now is doubling every 5 days,hopefully that will expand out now.Other countries are getting out to 9 days,and then its under control.People look at headline numbers,but the key is the growth curve.

[Talking Monkey]

6 hours ago, DurhamBorn said:

Very difficult given the reason the debt deflation was kicked off.However its obvious that companies will re-trench once we get over the virus.Many/most will of drawn down extra debt etc and so will be tightening cash expenses.I wouldnt buy a southern house unless it was down 70%,and even then id avoid anyway.The south is fucked.Most reflation areas will be from a line north across the Humber.If i was wanting a house,id really consider buying one in the north and fixing for 10 years now.Rates are going to 10% probably by 2028.

I did a rough road map on if we see a 23% fall in GDP and the printing needed to get us back to a -5% over 12 months.It shows 22% inflation and 16% interest rates in 2028.The one iv done for the world says oil at $300+ around 2028.Thats an extreme and i expect 10% rates are more likely,but it shows where we are going.

 

On the level of interest rates DB, wouldn't things start falling over even after a couple of percent increase, in 2018 things got hairy when Powell was doing it

[Loki]

3 hours ago, spygirl said:

Let's get this straight - gold is totally useless as a means as exchange.

The stuff will rub off on your pockets.

For trade, you need a liquid, flexible currency that's broadly accepted.

Agreed but as we are seeing now the paper price is completely unrelated to the physical price (if you can even get physical)

And as paper is an abstraction and we are seeing abstractions collapse, i just prefer phys. Even if just nice to look at

[UnconventionalWisdom]

On 17/03/2020 at 17:17, TheCountOfNowhere said:

Anyone looked at Boeing ?

 

 

That's pretty insane.

Just today...

BOEING CO (BA) COM STK USD5 (CDI)

Sell:$115.51 Buy:$116.54  $14.30 (11.03%)

 

 

You can clearly see the QE inflated bubble.

 

A company that sells planes that drop out of the sky should have a share price that is on the floor. this is long overdue, QE can't hide this flaw forever.

[leonardratso]

keep your shit together while all around go fucking nuts.

i feel wierd about all of this, not going to work, nobody there if i go in, im going in with a big bag next time and steal as much shit as i can.

[leonardratso]

carry