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

[DurhamBorn]

3 minutes ago, reformed nice guy said:

US jobless claims at 6.6 million, higher than the 5.2m forecast.

Hopefully more bargains to be had soon!

The higher that goes the more they print and better for us longer term.I dont want everyone to lose their jobs,but a large enough percentage so the CBs print the required money to kick in the reflation.Cruel i know,but it is what it is

 

[TheCountOfNowhere]

27 minutes ago, DurhamBorn said:

The higher that goes the more they print and better for us longer term.I dont want everyone to lose their jobs,but a large enough percentage so the CBs print the required money to kick in the reflation.Cruel i know,but it is what it is

 

Cruel would be a meteorite hitting the earth and millions struggling, this is more akin to murder.

I'd prefer to lose a few quid and some sort of sanity to return.

 

 

 

[DurhamBorn]

https://www.wsj.com/articles/fed-announces-new-facilities-to-support-2-3-trillion-in-lending-11586435450?emailToken=541e2dedd6bede9b4d6ae9d44a2a062c7HuWo9MeoBNqhzmd09hf0IEjJVhb1HTeGJkTRwnEgr2wW1szbCZ9iSqB5eAUfJ5MrTaa7qUHJRxPktf+vdJ7dWh4tMok+E1cIneDsYK4DiTVjOvzKtS2+Vbq7iqpfucG&reflink=article_copyURL_share

Ok, Powell is right-sizing now,injecting direct into the economy.I make this around $6 trillion ,so another $2 trillion to come from somewhere.This one is stage two backstopping the credit markets,last injection will be the consumer,probably by buying up treasuries as the government borrow.

All happening as expected,this stops the bond market locking up to corporate's trying to roll over.

Debt deflation will still happen but Powell has now removed the systemic risk.ECB need to follow though,so far they have been way behind the curve.Powell caught up at last.

[Loki]

10 minutes ago, DurhamBorn said:

https://www.wsj.com/articles/fed-announces-new-facilities-to-support-2-3-trillion-in-lending-11586435450?emailToken=541e2dedd6bede9b4d6ae9d44a2a062c7HuWo9MeoBNqhzmd09hf0IEjJVhb1HTeGJkTRwnEgr2wW1szbCZ9iSqB5eAUfJ5MrTaa7qUHJRxPktf+vdJ7dWh4tMok+E1cIneDsYK4DiTVjOvzKtS2+Vbq7iqpfucG&reflink=article_copyURL_share

Ok, Powell is right-sizing now,injecting direct into the economy.I make this around $6 trillion ,so another $2 trillion to come from somewhere.This one is stage two backstopping the credit markets,last injection will be the consumer,probably by buying up treasuries as the government borrow.

All happening as expected,this stops the bond market locking up to corporate's trying to roll over.

Debt deflation will still happen but Powell has now removed the systemic risk.ECB need to follow though,so far they have been way behind the curve.Powell caught up at last.

I vaguely recall you saying you'd sold most of your IBTL, will you be buying back?

[reformed nice guy]

30 minutes ago, DurhamBorn said:

https://www.wsj.com/articles/fed-announces-new-facilities-to-support-2-3-trillion-in-lending-11586435450?emailToken=541e2dedd6bede9b4d6ae9d44a2a062c7HuWo9MeoBNqhzmd09hf0IEjJVhb1HTeGJkTRwnEgr2wW1szbCZ9iSqB5eAUfJ5MrTaa7qUHJRxPktf+vdJ7dWh4tMok+E1cIneDsYK4DiTVjOvzKtS2+Vbq7iqpfucG&reflink=article_copyURL_share

Ok, Powell is right-sizing now,injecting direct into the economy.I make this around $6 trillion ,so another $2 trillion to come from somewhere.This one is stage two backstopping the credit markets,last injection will be the consumer,probably by buying up treasuries as the government borrow.

All happening as expected,this stops the bond market locking up to corporate's trying to roll over.

Debt deflation will still happen but Powell has now removed the systemic risk.ECB need to follow though,so far they have been way behind the curve.Powell caught up at last.

Could it come from increased military spending? I reckon they will be putting a few more aircraft carriers in the Pacific soon enough

[Jesus Wept]

1 hour ago, DurhamBorn said:

https://www.wsj.com/articles/fed-announces-new-facilities-to-support-2-3-trillion-in-lending-11586435450?emailToken=541e2dedd6bede9b4d6ae9d44a2a062c7HuWo9MeoBNqhzmd09hf0IEjJVhb1HTeGJkTRwnEgr2wW1szbCZ9iSqB5eAUfJ5MrTaa7qUHJRxPktf+vdJ7dWh4tMok+E1cIneDsYK4DiTVjOvzKtS2+Vbq7iqpfucG&reflink=article_copyURL_share

Ok, Powell is right-sizing now,injecting direct into the economy.I make this around $6 trillion ,so another $2 trillion to come from somewhere.This one is stage two backstopping the credit markets,last injection will be the consumer,probably by buying up treasuries as the government borrow.

All happening as expected,this stops the bond market locking up to corporate's trying to roll over.

Debt deflation will still happen but Powell has now removed the systemic risk.ECB need to follow though,so far they have been way behind the curve.Powell caught up at last.

So essentially what you are saying is - worst case scenario.....

- Bond markets start to ‘collapse’ in US, Europe, etc (Happening already?)

- Massive printing (QE) of currencies in Europe and USA et al. (Happening already?)

- People around the world start to realise that currencies are being destroyed and make a ‘dash to assets’ (Over next 1-3 years after a little more deflation ?) and start buying up commodities, land, gold, stocks etc (assets)

- This causes inflation - slow at first but then it starts to ‘runaway’ and you get massive hyperinflation around the world....

- Eventually they have to ‘reset’ the Financial system with a new form of currency ? 
 

Worst case scenario I suppose?

 

[TheCountOfNowhere]

6 minutes ago, Vendetta said:

So essentially what you are saying is - worst case scenario.....

- Bond markets start to ‘collapse’ in US, Europe, etc (Happening already?)

- Massive printing (QE) of currencies in Europe and USA et al. (Happening already?)

- People around the world start to realise that currencies are being destroyed and make a ‘dash to assets’ (Over next 1-3 years after a little more deflation ?) and start buying up commodities, land, gold, stocks etc (assets)

- This causes inflation - slow at first but then it starts to ‘runaway’ and you get massive hyperinflation around the world....

- Eventually they have to ‘reset’ the Financial system with a new form of currency ? 
 

Worst case scenario I suppose?

 

Worst case scenario is WW3 and bankers being hung from lamposts...again.

6 minutes ago, Vendetta said:

So essentially what you are saying is - worst case scenario.....

- Bond markets start to ‘collapse’ in US, Europe, etc (Happening already?)

- Massive printing (QE) of currencies in Europe and USA et al. (Happening already?)

- People around the world start to realise that currencies are being destroyed and make a ‘dash to assets’ (Over next 1-3 years after a little more deflation ?) and start buying up commodities, land, gold, stocks etc (assets)

- This causes inflation - slow at first but then it starts to ‘runaway’ and you get massive hyperinflation around the world....

- Eventually they have to ‘reset’ the Financial system with a new form of currency ? 
 

Worst case scenario I suppose?

 

The chances are in this connected western world this 1-3 years might turn into 1-3 months 

[DurhamBorn]

1 hour ago, Loki said:

I vaguely recall you saying you'd sold most of your IBTL, will you be buying back?

No,not until the $ hits below 90.

[Loki]

6 minutes ago, DurhamBorn said:

No,not until the $ hits below 90.

Oh yeah of course, obvious now you've told me!

DXY just back below 100, as it happens

[logana]

The Bank of England has agreed to temporarily finance government borrowing in response to COVID-19 if funds cannot immediately be raised from debt markets.

"Among midcap stocks, homebuilder Redrow surged 6.7 percent after winning approval for the Bank of England's coronavirus emergency financing scheme and said talks with six banks to secure additional funds were progressing well.

Fellow housebuilders Barratt Development, Persimmon and Taylor Wimpey gained between 4 percent and 5.6 percent."

MPs are being offered an additional £10,000 to support them while they work from home during the coronavirus outbreak, it has emerged.

 

 

“We all too often have socialism for the rich and rugged free market capitalism for the poor.” ― Martin Luther King Jr.

[DurhamBorn]

13 minutes ago, Vendetta said:

So essentially what you are saying is - worst case scenario.....

- Bond markets start to ‘collapse’ in US, Europe, etc (Happening already?)

- Massive printing (QE) of currencies in Europe and USA et al. (Happening already?)

- People around the world start to realise that currencies are being destroyed and make a ‘dash to assets’ (Over next 1-3 years after a little more deflation ?) and start buying up commodities, land, gold, stocks etc (assets)

- This causes inflation - slow at first but then it starts to ‘runaway’ and you get massive hyperinflation around the world....

- Eventually they have to ‘reset’ the Financial system with a new form of currency ? 
 

Worst case scenario I suppose?

 

No hyper inflation next cycle,just high inflation.It will start very slowly,almost hard to notice.The inflation will be because the cycle will be industrial.All main countries will be re-tooling and re-investing into their economies.Political and economic cycles are all in line for the above.Its certain,only the size in question.

Governments will try to hold consumption spending on welfare/wages/pensions while inflating .

Im expecting arc furnace steel works on Teesside for instance over housing benefit in London.Lots of changes.People will be shocked by the way the cycle unfolds.

Over the cycle the most wealth destruction will be in bonds and housing wealth.The house is my pension is finished.

[Bricks & Mortar]

5 hours ago, Ellandback said:

I'm down 20% on my PM miner allocation, I bought last autumn planning to hold for a 100% gain then exit and await the deflationary bust - serves me right for being cocky! I get the impression that most of FinTwit expects another run up in PM stocks to start soon (@henrikzeberg is a notable PM bear for the short term but is widely ridiculed for his views) so maybe all is not lost. I'm aiming to increase my exposure soon but as a novice I'm a little hesitant as it's been brutal this year and I can't discount the possibly they just drift lower along with the general market.

Yeah, I see the derision that meets Henriks predictions, especially from the PM bull community.
But he was one of the few who called the recent collapse (in general, although he was also calling $800 gold, that didn't happen).
He's revised his timing, and is now predicting a bigger collapse, (including $800 gold), in the 2nd half of the year.  Which puts him in the same camp as anyone here who thinks we may not have seen the 'big Kahuna' yet, and also that guy, David Hunter that sometimes gets a mention on here.

Disclaimer - I'm in that camp.  Not sure who else might be, but at least my view wasn't laughed out of the room.

[StrugglingMillennial]

Well i had a meeting yesterday about being furloughed, some of my colleagues have been today but i am hoping my skill set will keep me in if only for a few more weeks.

Just out of interest @Durhamborn what sort of gains do you expect in oil over the next 5 years?

Interesting read 

 https://edition.cnn.com/2020/04/01/business/oil-prices-crash-storage-space/index.html?utm_term=link&utm_content=2020-04-01T12:00:11&utm_medium=social&utm_source=fbCNNi&fbclid=IwAR1MYOdAXng01qSgxoiOU9yikxLl1eHoN9KXwoDRkY_snYOeT3SsOWvQejs

[Noallegiance]

13 minutes ago, Bricks & Mortar said:

Yeah, I see the derision that meets Henriks predictions, especially from the PM bull community.
But he was one of the few who called the recent collapse (in general, although he was also calling $800 gold, that didn't happen).
He's revised his timing, and is now predicting a bigger collapse, (including $800 gold), in the 2nd half of the year.  Which puts him in the same camp as anyone here who thinks we may not have seen the 'big Kahuna' yet, and also that guy, David Hunter that sometimes gets a mention on here.

Disclaimer - I'm in that camp.  Not sure who else might be, but at least my view wasn't laughed out of the room.

With supply already gone and mines shut, what's the basis for a collapse in physical price?

[King Penda]

1 hour ago, DurhamBorn said:

No hyper inflation next cycle,just high inflation.It will start very slowly,almost hard to notice.The inflation will be because the cycle will be industrial.All main countries will be re-tooling and re-investing into their economies.Political and economic cycles are all in line for the above.Its certain,only the size in question.

Governments will try to hold consumption spending on welfare/wages/pensions while inflating .

Im expecting arc furnace steel works on Teesside for instance over housing benefit in London.Lots of changes.People will be shocked by the way the cycle unfolds.

Over the cycle the most wealth destruction will be in bonds and housing wealth.The house is my pension is finished.

The house is my pension thing is quite viable if your willing to rent a room out in the future .however not many could put up with what this entails .

[Harley]

Oh dear, maybe I should have bought in harder!  Seas of green. 

[DurhamBorn]

19 minutes ago, StrugglingMillennial said:

Well i had a meeting yesterday about being furloughed, some of my colleagues have been today but i am hoping my skill set will keep me in if only for a few more weeks.

Just out of interest @Durhamborn what sort of gains do you expect in oil over the next 5 years?

Interesting read 

 https://edition.cnn.com/2020/04/01/business/oil-prices-crash-storage-space/index.html?utm_term=link&utm_content=2020-04-01T12:00:11&utm_medium=social&utm_source=fbCNNi&fbclid=IwAR1MYOdAXng01qSgxoiOU9yikxLl1eHoN9KXwoDRkY_snYOeT3SsOWvQejs

8 years,it will hit $200 minimum,but more likely $330.The big gains will come late though as things go parabolic.

[Noallegiance]

I think for the sanity of market-watchers the point needs to be remade, confirmed, underlined, in italics, with caps lock on (metaphorically speaking) that day-to-day moves in this environment will drive one slowly mental.

This thread is for the long term.

Give yourselves a break. 

PS: There's always the opportunity to create a day-trader's thread, if so inclined.

[Shamone]

17 hours ago, DurhamBorn said:

I honestly try not to think about it as its a long way off and we have enough to contend with now and the next couple of years.A lot depends on the scale of the printing needed to right size things now.If we get around 3x the printing we have seen so far,thats a minimum i expect then we should see double digit inflation towards the end of the cycle.Sometime after that things will collapse,mainly governments as they wont be able to issue debt,and the CBs will be trapped because of the inflation.They simply wont be able to print,or buy government paper.Opposite to now,now they can print as much as needed as we are deflating.

The problem will be its likely we see currency collapse including the $ and no price discovery.Its a long way off though and things can change and it might just be a really terrible time that wipes away half of wealth,a bit like this turn now.

 

Thank-you for your thoughts on this. I wish I could 'live in the now' more than I do. It's strange that I worry so much for the future - I'm nearly 50 with no kids, so not really any skin in the game now. Will the printing have to stop because the currency would be so worthless? I can't get my head around it all as easily as you, you are a natural macro-economist. I'm hoping it will be as you say, 'just' a massive reduction in wealth. We in the West at least would still live like kings compared to 99.99% of humanity in history.

Thanks again for all your input! I'm hanging fire on the potash and oil for the moment (small amounts of dosh anyway) but have been looking at the dbx MSCI tracker for energy and industrials. For some reason you cant get the materials one which I like - am guessing a EU KIID thing. With such a small amount single shares worry me a little.

Thanks again.

[DurhamBorn]

18 minutes ago, stokiescum said:

The house is my pension thing is quite viable if your willing to rent a room out in the future .however not many could put up with what this entails .

Yes,i did it myself years ago,problem was we ended up drunk every night and both on dating sites so ended up all over the country meeting women and their mates and lots at mine as well.It was all out of control.Ended up i had to ask him to get his own place,and we were good mates.We drifted apart after that due to it and he died a couple of years ago.I regret that.Id advise never to do it with a mate.

[King Penda]

1 minute ago, DurhamBorn said:

Yes,i did it myself years ago,problem was we ended up drunk every night and both on dating sites so ended up all over the country meeting women and their mates and lots at mine as well.It was all out of control.Ended up i had to ask him to get his own place,and we were good mates.We drifted apart after that due to it and he died a couple of years ago.I regret that.Id advise never to do it with a mate.

Yes it got daft has I worked with the lodger and I even fucked his mum 

[Castlevania]

39 minutes ago, Bricks & Mortar said:

Yeah, I see the derision that meets Henriks predictions, especially from the PM bull community.
But he was one of the few who called the recent collapse (in general, although he was also calling $800 gold, that didn't happen).
He's revised his timing, and is now predicting a bigger collapse, (including $800 gold), in the 2nd half of the year.  Which puts him in the same camp as anyone here who thinks we may not have seen the 'big Kahuna' yet, and also that guy, David Hunter that sometimes gets a mention on here.

Disclaimer - I'm in that camp.  Not sure who else might be, but at least my view wasn't laughed out of the room.

I think it’s plausible. If we hit new highs on the main indexes over the next few months the more likely I see the scenario playing out. I don’t think the recovery from the bat flu will be as straight forward as people expect.

[Bricks & Mortar]

19 minutes ago, Noallegiance said:

With supply already gone and mines shut, what's the basis for a collapse in physical price?

He's predicting 2nd half of the year, so perhaps mines might be open again.  But, I don't think that's the reason.  Near as I can understand, he's predicting a larger deflationary collapse than we just saw,  with forced selling to cover margin calls elsewhere.

[Castlevania]

31 minutes ago, Noallegiance said:

With supply already gone and mines shut, what's the basis for a collapse in physical price?

Panic! We had a test run a few weeks ago when everything was being sold and the Dollar was being bid up. 

[Castlevania]

34 minutes ago, stokiescum said:

The house is my pension thing is quite viable if your willing to rent a room out in the future .however not many could put up with what this entails .

Do you plan on having a lodger when you’re an OAP?