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

[DurhamBorn]

 

2 hours ago, BurntBread said:

@DurhamBorn, I have a question about the long cycles and turning points. I was intrigued by you drawing a distinction between the lead-up to the "great depression" and our recent history; for I was very much under the impression that both were driven by debt, which then got defaulted on. However, you clarified somewhat in another thread, by saying that the "roaring 20's" (1920's) were more industrial (debt spent mostly on tractors in the US); while the recent debt build-up was due mainly to consumers, and real estate (although from reading contemporary literature, I have the feeling that real estate was also high in the 1920's, but maybe I'm wrong).

The other aspect of my puzzlement is the relation of your cycles to the Kondratiev long cycles, which would (I think) put us in a similar position to the late 1920's. I suppose I had pigeon-holed you a little in that framework, but I realise you have a lot more detail in your model, with a notion of where debt is accumulating.

So, my question is: would you be willing to say some more about past cycles? I am hoping you might put some dates on the past turning points, and to say what were the main characteristics of each cycle? I mean particularly, whether prices were rising/falling, what asset classes were getting the investment, or driving the cycle, and (one of your phrases) what was happening to the "cost of money"?

Actually, I'm a little unclear on your concept of "cost of money": is that measured by the long bond rate, minus CPI, or something else (since CPI is an average, it doesn't really capture the disorganised nature of inflation)?

I have another question for later, but if you could help me to grasp a bit better the historical aspects of your macro work, I would be extremely grateful!

That would take a whole thread BurntBread and wouldnt really gain us much at the moment,even though its very interesting of course.I havent studied any cycles in great detail before the 70s inflation.Only in very basic terms.

The cost of money is from the long bond yes,but not discounted to inflation,we discount it to liquidity.We arent interested in what the economy is saying the inflation is,its backward looking.

 

 

[Sugarlips]

4 minutes ago, Funn3r said:

Always love re-reading this. I believe it was from username "fofp" which I thought was a random string until I actually looked just now and saw it is supposed to mean "Fuck Off Fake Person" urban slang.

As for " yes folks, this is a once in three generations event. This is the only time this will happen in your lifetimes" I think that just shows that the problems we're facing now are the same ones from 2007 which were merely delayed and can-kicked rather than resolved.

Brilliant, exceptional insights given when it was written.

So to take the predictions at face value, that means we are now at year 13 of 18 and the ‘Bernanke put’ only bought us all time, it was never a ‘recovery’ except for in some real estate markets, merely can kicking and the virus is just a convenient excuse to finally face the music. 

I assume DB the next 5 years is the real depression and aligns nicely with your  road map?

 So this is it, the game is up, this is the moment it all collapses around our ears?

And to again take the above literally, the property markets that have defied the odds this last decade just ran out of road ie the 90% (?!) down starts now?

May we live in interesting times as the Kung Flu’ers might say.

Stay safe everyone, it’s the psychological effect on our friends and loved ones that still can’t see this coming (and yes, those that signed up for the SUV on tick 6 months ago) that will hurt the most and could be the most difficult aspect.

 

[Funn3r]

1 minute ago, Sugarlips said:

I assume DB the next 5 years is the real depression and aligns nicely with your  road map?

DB when you started this thread I recall you said something like the crash will be short and sharp and "will feel like a depression but won't be." That still your view?

[sancho panza]

15 hours ago, Hardhat said:

 

What we're seeing here is classic debt deflation as we've been discussing on the thread for years. Why are people queuing up at food banks in their brand new cars? It's simple, it's because they could never really afford those cars, but with rates being so low, the car companies sold them on HPC to the poorest in society. What does that mean? It means that they will never get the cost of the car back now, so the debt they have lent out to the poor people who took the car loans will never be paid back. That's debt deflation in action - there is no longer enough money in the consumer class to have a car and food. You can see that clearly in the photo above. They're not "Mexicans", they're Hispanic Americans, almost 20% of the population. They ARE the American consumer. It doesn't matter if one or two of them have saved some money, most of them haven't and could never afford to anyway, they've been living paycheck to paycheck for years whilst companies give them products on hire purchase that will never get fully repaid. The new cars are not the problem, they are just a symptom. When you see people queuing for foodbanks in brand new SUVs, it's easy to think "stupid people", but if you've been following this thread at all, you will zoom out and see the forces at play that have put these people in the position of having a brand new SUV but needing to use a food bank. Life in the US really is that precarious at this point in the cycle. No wonder they are printing.

Another in the long line of thought provoking posts that follow me around in my daily life.

I'm jsut about to get the kids handed to me but a few things I'd like to say here

Firstly to establish my position that there are two types of recession,1)Inventory recession ie we build too many bikes,we sell em off cheap and then we beging again.2) credit recession-much rarer beast ,alst was was GD1 feature a drawdown in credit demand wh ich begets -via Fishers paradox-increasing defaults which beget drawdown in credit demand.

The solution to inventroy recessions is easy,jsut turn on the spigots and print some cash.Assuming you don't destroy your currency,misallocations will settle themselves out

the solution to credit recession is much harder to deal with.I'll psot some more on fisher's theories later when I have time,but the key take home is the one @Harley raised 500 pages back about behavioural economics and the fact that our CB's have proven themselves to have little real world understanding of the psychology that motivates consumers.

To bring this onto point,what Hardhat refers to is bang on ,reams of people with a flash car who can't afford to eat(I realise they'll eb a few who believe it's all a scam and theyre jsut getting free food-thats your right).In terms of the last few inventory recessions,they jsut loaded up with more credit.Sub prime mortgages mutated post 2008 to become sub prime car laons.Nothing really changed except where the credit bubble was pumped.

Now I beleive,we're finally entering Fisher's territory.Are these people finally beginning to realsie how exposed they are?will their psychology change more fundamentally,they're attitude to credit.

The key thing to take on board witha debt deflation is that it's starts as a psychological phenomenon and becomes an economic vicious circle as drops in aggregate demand lead to drops in credit demand which lead to drops in employment which leads to drops in aggregate demand.

 

Where we are now is at the start imho,the Big Kahuna is yet to come.Govts-who are on mnaouvres here-will spin the wheel and get it going again but the psychological damage has been done in a way I'm not sure they get.There are the shrot term issues with getting people back to work,but there's a possibility that Joe Public will become increasingly debt averase and that's something govts haven't dealt with in 80 years.

[sancho panza]

21 minutes ago, Sugarlips said:

Brilliant, exceptional insights given when it was written.

So to take the predictions at face value, that means we are now at year 13 of 18 and the ‘Bernanke put’ only bought us all time, it was never a ‘recovery’ except for in some real estate markets, merely can kicking and the virus is just a convenient excuse to finally face the music. 

I assume DB the next 5 years is the real depression and aligns nicely with your  road map?

 So this is it, the game is up, this is the moment it all collapses around our ears?

And to again take the above literally, the property markets that have defied the odds this last decade just ran out of road ie the 90% (?!) down starts now?

May we live in interesting times as the Kung Flu’ers might say.

Stay safe everyone, it’s the psychological effect on our friends and loved ones that still can’t see this coming (and yes, those that signed up for the SUV on tick 6 months ago) that will hurt the most and could be the most difficult aspect.

 

The problem is with Kondratiev theory that you need to move the timeline along side increasing/decreasing life expectancy.The last generation that lived through a debt delfation left the workplace and politics in the 1990's,which times nciely with the repeal of glass steagall and the dropping of cash reserve lending/basel 1 etc.

 

[sancho panza]

4 hours ago, MrXxxx said:

This last line is th crux of the matter...either directly or indirectly we all pay for these people who can't manage their funds properly...and thats what offends me, especially when it happens `time and time` again, and nothing is done to change it as big business is `on the make`

 

I spent the years between 2009 and 2017 being offended by what CB's were doing and lsoing ground to inflation creep?I was only bailed out by my specualtive activities in otehr areas.I've reflected learned my lessons and am sat here now with a pragmatic acceptance that curently,I have no pwoer to change govt policy.

There are two issues here.

1) if any of us have a moral issue with it then we need to get into politics

2) in terms of protecting yourself and your family from poverty,then you need to hold your nose and play the game.

[Loki]

4 minutes ago, sancho panza said:

in terms of protecting yourself and your family from poverty,then you need to hold your nose and play the game.

That's why I'm here

[Talking Monkey]

2 hours ago, Panda said:

Anyone remembers this post, not from myself; another day another place but an interesting read and worthy of its place in history....

 

 Credit Bubble Bursts: First Snows Of K-winter

Posted August 16, 2007

 

 

Well, it's several years since I said "It ain't a housing bubble it's a credit bubble!" in these hallowed pages and finally, and by Eris it's been a long wait, that credit bubble has burst.

 

There was the Tulip Bubble, the Wall Street Bubble, the Canal Stocks Bubble, the Railways Bubble, and the granddaddy of all credit bubbles: the South Seas Bubble. You should all feel very privileged that you've lived through the one credit bubble that's been bigger than all of them and this planet's very first global credit bubble.

 

Better yet: you've reserved a ringside seat for the denoument and already it promises to be spectacular. yes folks, this is a once in three generations event. This is the only time this will happen in your lifetimes. For the Longwaves and Kondratiev fans around you, the first snow of K-Winte ris starting to fall thick and fast.

 

How's the show so far? Well, entirely as expected, if a little faster than I'd have thought it would be. Naturally the first hole appeared in mortgage credit since mortgage debt is far and away the largest part of the credit pyramid that's been so carelessly put together over the past couple of decades. Sir Printsalot, Alan Greenspan, must be regretting the day he said that derivatives don't need regulation, because part of the fun in this giant game of pass the parcel is that nobody even knows where those trillion-Dollar parcels of bad debt are. Worse, since it's known that there are more credit default swaps insuring corporate debt than there is corporate debt to insure, we can't even put an upper limit on the actual amount of poison there is still floating in the global financial system. Not unnaturally, pretty much everyone is suspected either of holding some bad paper or of having loans out to someone who is.

 

Meanwhile, remember that little fuss about how the backroom boys of derivatives trading hired to keep records couldn't keep up with the action and were sometimes weeks behind? Well, we'll get to see how they do when the markets get a little excited. My bet is that they'll fall behind and folks will get even more jumpy when they realise that not only don't they know where the bad stuff is, but they don't know either who's trading in it.

 

Now of course a normal credit bust would take 16-18 years to play out, though histories largest may take a little longer. We can't expect this sort of mayhem every day for 18 years. There will be days, weeks, months, even years when things seem to be getting back to "normal", only to fall off a cliff again and catch out the unwary. What I'd expect sooner rather than later is for a gigantic fraud or two to be uncovered. Frauds are easy to hide when everything is booming, but not so easy when folks start nervously counting their money. The great Warren Buffet pointed out that it's only when the tide goes out that we find out who's been swimming naked. Needless to say, when these frauds are discovered, there will be a whole lot more nervousness to go around.

 

Now of course I've been absent from the prediction game (other than that it was a credit bubble and it would bust) because if we could predict when a bubble would bust we would be overnight billionaires. Worse, it gets quite disheartening to keep knowing that it's going to happen and yet see the monster go on and draw yet more people into its maw. I still believe that we would have had a bust and debt deflation in 2003 if it wasn't for Sir Printsalot and Chopper Ben cutting rates to 1% to prevent the coming debt-deflation. Naturally this simply took a mortgage bubble already on a moonshot and gave it a stardrive. Those guys will yet go down in history as the folks who saved a recession at the cost of a depression.

 

Still, since we have the above bubbles, plus the 1990's Japanese credit bubble to crib from, let's make some predictions about the general structure of what's comng.

 

The golden rule of credit bubbles seems to be that whatever assets, or Magic Money Tokens, people use credit to bid up in the bubble, are the main areas of price implosion during the bust. I don't think it's any sort of well-kept secret that the main MMT in this one has been housing. The usual margin on a MMT is 90%, that is people put 10% down and borrow 90%. That was certainly true for Wall Street stocks in 1929 and nothing I've read of the other bubbles indicates them as having been grossly different. Housing in his bubble has been unprecedented in garnering 100% loans and even 110% or 120% for pretty much anyone who could fog a mirror. Even the South Seas Bubble, the previous largest, brought in only one third of the UK population. The Millenium Bubble (Hell, someone has to name it eh? Any better suggestions?) has typically involved 70% of the population of those countries affected (and in the advanced westernised countries, I see only Japan and Germany not taking part). The price of the main MMT's will generall fall between 67% and 90% in the aftermath. This fits well with what happened in Japan and it's what I expect to see happening here.

 

Another firm rule is that the more debt involved, the more people involved and the longer the bubble goes on, the worse the denoument will be. Remember the old saw:

 

If you owe the bank a million Dollars, you're in trouble, but

 

I you owe the bank a billion Dollars then your bank is in trouble?

 

Well, we've just invented a third line:

 

If you owe the bank a trillion Dollars, we're ALL in trouble.

 

So there's no escaping that the general economies are going to hit the skids. Pretty clearly the first hits will be in the financial sector. There are going to be swathes of redundancies in banking, stockbroking, estate agencies, builders and petty much anyone else who's been an intermediary in the game. Worse, since everyone is going to need a svapegoat (nobody blames themselves for their financial stupidity and politicians are adept at finding someone else to blame) some of those folks are going to jail. If you're an estate agent, or a buy to let landlord, then keep your nose clean and your head down. I'm serious: some of you are going to the pokey simply because someone has to. All folks need is some sort of chicanery which will suffice as a charge. An unsympathetic jury is already guaranteed.

 

Next up, people who've been spending borrowed money for a couple of decades are going to have to relearn how to spend only earned money. That's going to guarantee a decline in retail sales. Worse, once the severity of what's happening becomes apparent folks are going to try to pay down debt and save. This will cut retail even further. In western economies, the amount of retail space now is ten times what it was a decade ago. That all got build for the boom and it's all about to be redeployed back to oher uses. A lot of people who got jobs in retail are going to become redndant, and they're going to have trouble paying their debts. Inevitably this will lead to reposessions and more property on the markets.

 

Since two-thirds of US and UK economies depend on retail and related (and it's close enough for government work elsewhere too) these economies are going to go into recession. In the UK this is going to produce an immediate and interesting result. A whole bunch of people from outside the Uk are here to earn money to send to their families back home to buy or build a house there. When the recession comes and they can't earn money, they're going to take the plane out to wherever they can. This is going to hit retail again. It's going to hit the tax take and it's going to hit the property rental markets. A great many properties are very suddenly going to find themseves missing tenants. This will drive rents down adn it will produce a large number of landlords racing each other to sell first while there are still any buyers. This will be the point that Charles Mackay called"Devil take the hindmost".

 

Needless to say, by this point housing prices will be falling. This will ratchet them down further.

 

In the US, 40% of loans in the past 2 years were subprime, 12% were Alt-A, and 8% were Jumbos. None of those markets are making loans now because the bond investors won't buy 'em. Even if someone can find a creditor ready to take a risk, they're asking 3% per annum on top to compensate them for it. There's a great deal of difference in the affordability of a mortgage at 8% and one at 11%. I figure that based on that, more than half the US mortgage market has been shut down. It's time to ask what price properties will sell at if nobody gets credit and everyonme pays in their own cash. The Japanese found this ou the hard way, and we're now headed implacably to the same question.

 

In the ratcheting up of property price to income ratios as the mortgage interest rates have been falling, properties have been behaving like a bond where the price acts inversely to the yeild. No doubt at some point the central banks would like to cut the mortgage rate to try to head off the carnage. However what the last fortnight showed is that it's not the central banks who decide mortgage rates, and it's not the "lenders" either. Nope, tha pass was sold as long ago as 1998, it's just taken folks this long to notice. Last week US Treasury rates fell as folks sought security. Those are the rates the central banks can affect. However mortgage rates actually rose while Treasury rateswere falling. The bondholders discovered that they control the mortgage rate by setting the price at which they'll buy mortgage-backed bonds and the CDOs based on them, if hey'll buy any at all, which is becoming a less academic question by the day. If property acts like a bond, then as the bondholders raise the interest rate on mortgages, properties must fall in price in response. I estimate that for every percentage point on the rate, prices will fall around ten percent. If the risk premium is to be three percent, we're loking at a 30% fall from the getgo, though due to erosion of availability of credit, I expect things to eventually go much furthe than that. This is the only time in history that credit has been available to everyone, and by the time we're through, I don't think anyone on the planet will be looking to repeat the experiment. Not lender, and certainly not buyer.

 

Another lesson from credit bubbles past is that they end in "revulsion" (Kindleberger's term I think). Those whose financial lives have been destroyed by debt will refuse ever to countenance taking it again in their lives, which is fine because there essentially won't be any offered anyway - revulsion happens to those creditors who lost their all too. Also, they'll teach their kids not to take on debt. Those kids will grow up and teach their kids the same thing but with the bust becoming history, they'll probably take it out for serious purposes. Their kids will see it as ridiculously old and fogey to be scared of debt and sooner or later they'll find their Magic Money Token. It could be a flower bulb (I know of six flower bulb bubbles in history) or maybe flying cars or AI chips, but there will be one, and the credit cycle will be complete. The only real certainty is that it won't be housing. The token always changes.

 

So what will the central banks do? Well, they'll try to stop a deflation. That's the reverse of inflation. Cash under the bed becomes more valuable over time. The effective value of debt rises because the money it takes to pay it back becomes more valuable. If enough deflation happens, then wages start to fall. f they don't, as in the 1930's in the uS, then mass redundancies happen and that has even worse implications for turnng the financial screw tighter. As folks wages fall, it gets harder for them to pay their oustanding debts and more defaults happen. That affects debt paper. Lather, rinse, repeat.

 

The central banks will try more of what they're doing now: printing money and showering it liberally upon the economy. Chopper Ben got his name for a 2003 paper on how to stop a deflation by throwing cash out of helicopters.

 

There are a couple of problems with the idea though. First, you have to shower ever more money out of the helicopters to keep things going and keeping them going will make any eventual burst worse. Eventually the amount of cash needing rained down is going to be enough that you don't have enough helicopters. Remember those pictures of wheelbarrows in post WWI Germany? That's the end of that story. Eventually people repudiate the currency, as they did in the Mississippi Bubble in France, and run to gold. Needless to say, that's even worse than a deflation. The Japanese tried this. It failed because folks took their cheques from the central bank and duly put them in the bank or paid down debt with them. Paying down debt doesn't cause as much extra deflation as defaulting on debt, but it does cause some.

 

The second problem is that the more usual way for central banks to shower people with money is to let them borrow it at ultra cheap rates. The Japanese cut heir base rates to zero for a decade (they've only just raised them to half a percent in the last month and some folks think that's too much). Japanese house prices still fell 50% to 90% and the deflation still went gaily on. You can offer people cheap loans, but if the last thing they ever want to see again in their lives is a loan, then it just ain't gonna help.

 

What might happen with all this money printing is that inflation will rise. Then the bondholders will simply raise their interest rates to compensate them for the inflation risk and property prices will take another large step down.

 

I expect the central bankers to try it though, so we'll get an inflation, then a deflation, which will almost certainly destroy mre people's wealth than if we cut out the middleman and go straight for the deflation. The great thing about deflation is that it's self-curing. Once the price of money and assets returns to a sustainable level then it stops. Sure, that's likely to see property. art, vintage cars, collectibles etc drop 90% or so in value, but in fact it will be a good thin g that people don't have to go into hock their whole lives to get a roof over their heads. Sure, some people with current mortgages will be in debt for the rest of their natural, but more and more they'll find that their neighbours won't. It will be a far healthier society.

 

Remember the end of the 1989 housing bubble (interesting that housing bubbes are 18 years in length in the UK, we now have a housing bubble and credit bubble peaking, and busting, at the same time - exciting or what?) where prices fell 50% in real terms but only 25% in nominal terms? That was because we got 25% inflation over the 4-5 years of the bust and that sheltered nominal prices from a larger fall. In a deflation though, nominal prices fall further than real prices because the effect is reversed. Thus a 50% fall in real prices again, plus a 40% deflation (say over 18 years that's not a huge amount per year) and you get a 90% all in nominal values for houses only going down 3% per annum in a 2% deflation.

 

So enough of the economics. What else will change? There's the famous Hemline Indicator where hemlines go up in good times and down in bad. We can safely assume that they'll be going down and sadly we'll see the demise of the bare midriff and other forms of fleshly exposure. Modesty will make a comeback. People will be more worried about keeping their jobs and social conservatism and conformity will return. People will have less money and so will move from expensive to cheaper pursuits. They'll move away from reality TV to escapism and fantasy (the Potter mania may be an early indication). Romance, Westerns, SF and Fantasy and so on will be back in vogue. People don't like reality when it's grim and want to get away from it in their leisure time. People will mend and make do rather than junk stuff when it's broken. They'll also speak to their neighbours again. People need to know there are other people to help when they're in trouble and so individualism will wane.

 

In short, times will change, but not all the changes will be bad ones.

 

Certainly the future just got a lot more interesting and as I said, you have a ringside seat for the most spectacular financial event in this planet's history.

The fabled post that is from all those years ago

[Errol]

[MrXxxx]

50 minutes ago, sancho panza said:

I spent the years between 2009 and 2017 being offended by what CB's were doing and lsoing ground to inflation creep?I was only bailed out by my specualtive activities in otehr areas.I've reflected learned my lessons and am sat here now with a pragmatic acceptance that curently,I have no pwoer to change govt policy.

There are two issues here.

1) if any of us have a moral issue with it then we need to get into politics

2) in terms of protecting yourself and your family from poverty,then you need to hold your nose and play the game.

Agree SP, when I was younger I was completely indifferent to politics, but as I have grown older I am much more critical. I would now take 1 I.e stand as an  MP, but can see that the whole system is rigged I.e if you don't `follow the party line` you are out/finished in politics.

As a result I now do option 2. If you can't change the system because the majority of the electorate are naive (and lack basic critical thinking) then you have to look after your own interests and let them pay for their ignorance. Hence as someone else pointed out, I frequent this site.

[Hardhat]

Sometimes it's hard not to take things personally, especially as for many of us, what the govt. decides affects our real, day to day standard of living etc.

However, we also need to realise that we are living inside a huge financial system, involving billions of people, that is at best fairly chaotic. The CBs do what they can to stop the entire thing collapsing, but for every rich and powerful organisation invested in maintaining the status quo, there is generally an equally powerful and rich organisation or individual invested in collapsing the whole thing for their personal gain ("disaster capitalism").

Realistically most of us on this forum are fairly average income wise, but what we do have is curiosity about the system we live in instead of blind acceptance. This, really, is the thing that sets this thread apart from a standard "how to invest your money" stock tip kind of forum - we are looking at the whole system and how the cycles inside it will play out.

As @DurhamBorn often says - "take the emotion out of it". To me that applies equally to laddering into stocks as it does to watching the govt. decisions on monetary and fiscal policy. It's not about you, it's not about me, it's about the structure of the system. Once you start looking at it like that, your thinking is ahead of 99% of people on this topic, and you will start to see what is actually going on.

[Loki]

17 minutes ago, Hardhat said:

As @DurhamBorn often says - "take the emotion out of it". To me that applies equally to laddering into stocks as it does to watching the govt. decisions on monetary and fiscal policy. It's not about you, it's not about me, it's about the structure of the system. Once you start looking at it like that, your thinking is ahead of 99% of people on this topic, and you will start to see what is actually going on.

Thanks for this.  I have a lot of respect for @sancho panza even though we disagreed on some things above.  I will never understand the psychology of people who take on a new car lease when they are living paycheck to paycheck (That's not a judgement of them, it's a fact about me), so taking the emotion out of is it essential.

[DoINeedOne]

Current Price	$1,710.86

[Loki]

46 minutes ago, DoINeedOne said:

Current Price	$1,710.86

Weird.  I was just browsing silver to go as I saw this notification.  

I wonder when JPM will start to capitalise on their gigantic silver holdings

[UnconventionalWisdom]

.

[UnconventionalWisdom]

On 07/04/2020 at 23:39, ThoughtCriminal said:

Hello All

Long time lurker, followed the thread from the beginning and finally decided DB’s warnings of inflation destroying my wealth can no longer be ignored.

 

Never bought a share in my life so just after some very basic advice.

 

Am I correct in thinking I need to open the s+s ISA with the platform I intend to use for buying the shares? HL, for instance? If so can anyone recommend one?

 

Im looking to buy and hold for the duration of the shitstorm to come, so I won’t be making many trades.

 

Thanks in advance.

I've just started using Freetrade. Good app and no buy or sell fees. 3 quid a month.

[Bricks & Mortar]

22 minutes ago, UnconventionalWisdom said:

On 07/04/2020 at 23:39, ThoughtCriminal said:

Hello All

Long time lurker, followed the thread from the beginning and finally decided DB’s warnings of inflation destroying my wealth can no longer be ignored.

 

Never bought a share in my life so just after some very basic advice.

 

Am I correct in thinking I need to open the s+s ISA with the platform I intend to use for buying the shares? HL, for instance? If so can anyone recommend one?

 

Im looking to buy and hold for the duration of the shitstorm to come, so I won’t be making many trades.

 

Thanks in advance.

I've just started using Freetrade. Good app and no buy or sell fees. 3 quid a month.

If you're going to buy & hold, I'd go with HL, (which I'm with), or AJ Bell, (which others on here have led me to believe is similar, some prefer the interface, and may have a wider range of investments to choose from).  Why not have a look at both, and see what you like.  In a matter of months, you'd be better off with a £12 fee for each trade and dodge the £3/month. 

[MrXxxx]

38 minutes ago, Bricks & Mortar said:

If you're going to buy & hold, I'd go with HL, (which I'm with), or AJ Bell, (which others on here have led me to believe is similar, some prefer the interface, and may have a wider range of investments to choose from).  Why not have a look at both, and see what you like.  In a matter of months, you'd be better off with a £12 fee for each trade and dodge the £3/month. 

If your going to buy and hold surely a fixed one off fee such as iweb would be better wouldn't it?

[Bricks & Mortar]

18 minutes ago, MrXxxx said:

If your going to buy and hold surely a fixed one off fee such as iweb would be better wouldn't it?

I must admit I'm not aware of what iweb can offer.  Sounds like they should check that out though.
 

 

[NogintheNog]

56 minutes ago, Bricks & Mortar said:

If you're going to buy & hold, I'd go with HL, (which I'm with), or AJ Bell, (which others on here have led me to believe is similar, some prefer the interface, and may have a wider range of investments to choose from).  Why not have a look at both, and see what you like.  In a matter of months, you'd be better off with a £12 fee for each trade and dodge the £3/month. 

HL and AJ Bell also charge a fee based on your holdings of shares/funds. HL charge 0.45% a year of your shares capped at £45. So £3.75 per month over £10,000 worth of holdings.

[MvR]

On 11/04/2020 at 01:05, MvR said:

 I'm tempted to do something with US steel myself now you point it out. I'll see what the market's doing on Tuesday ( or is it Monday they open? I'd better check!) and put on an X trade of some sort, and post it here, along with its performance and any adjustments I make as time progresses, reasoning etc.

I've started a thread on the Shares Trading sub-forum, tracking this X ( United States Steel ) trade.

 

 

[sancho panza]

Posted this before.We aren't even at stage one yet but the signs of the credit bubble are there,it's jsut looking for that pinprick.I genuinely do wonder if we're finally gettinghere.

The psychology of using income to clear debt rather than borrow more is what initates Fisher's paradox which dictates that as people pay down debt then their ability to earn income(ie as GDP reduces) will decrease,effectively meaning that the very act of reducing debt may well mean that they reduce their chances of clearing any more.

https://en.wikipedia.org/wiki/Debt_deflation

Fisher's formulation (1933)

In Fisher's formulation of debt deflation, when the debt bubble bursts the following sequence of events occurs:

Assuming, accordingly, that, at some point in time, a state of over-indebtedness exists, this will tend to lead to liquidation, through the alarm either of debtors or creditors or both. Then we may deduce the following chain of consequences in nine links:

1. Debt liquidation leads to distress selling and to
2. Contraction of deposit currency, as bank loans are paid off, and to a slowing down of velocity of circulation. This contraction of deposits and of their velocity, precipitated by distress selling, causes
3. A fall in the level of prices, in other words, a swelling of the dollar. Assuming, as above stated, that this fall of prices is not interfered with by reflation or otherwise, there must be
4. A still greater fall in the net worths of business, precipitating bankruptcies and
5. A like fall in profits, which in a "capitalistic," that is, a private-profit society, leads the concerns which are running at a loss to make
6. A reduction in output, in trade and in employment of labor. These losses, bankruptcies and unemployment, lead to
7. pessimism and loss of confidence, which in turn lead to
8. Hoarding and slowing down still more the velocity of circulation.

   The above eight changes cause

9. Complicated disturbances in the rates of interest, in particular, a fall in the nominal, or money, rates and a rise in the real, or commodity, rates of interest.

— (Fisher 1933)

[Majorpain]

10 hours ago, sancho panza said:

Where we are now is at the start imho,the Big Kahuna is yet to come.Govts-who are on mnaouvres here-will spin the wheel and get it going again but the psychological damage has been done in a way I'm not sure they get.There are the shrot term issues with getting people back to work,but there's a possibility that Joe Public will become increasingly debt averase and that's something govts haven't dealt with in 80 years.

The interesting thing with the panic buying is that its actually made the population much more resistant to shocks than previously, there cant be many people not trying to get two weeks of food in the house.  Goes to show how quickly things can change if the population wills it, all it takes is a big enough shock.  The unemployment rates from the US indicate that people are in line for a good dose of financial reality, where loading up on debt and you lose your job is not a good situation to be in.

[JMD]

On 12/04/2020 at 23:45, sancho panza said:

 

 

Terrifying how quickly the British public have turned into the eyes and ears of the police when it comes to people sunbathing inparks.Terrifying how quickly the police have taken to clearing sunbathers off parks.

Police are too political these days (although to be fair this 'political virus' has infected all areas of modern life, where people are shuned for voicing opposite opinions or even lose jobs for holding incorrect beleifs) and police have distanced themselves from average public norms of fairness, letalone law... I'll feel safer when they change back to wearing blue uniforms, for me 'our boys in black' just doesnt fit with them being a civilian force - which is what their meant to be.                                                                                                                                                                                  Anyway for me we have witnessed the hive mind at work with the recent mass acceptance of the shutdown of our economies, and I have hinted at my fears over this recently. Then again I admit to being somewhat conflicted here, mainly because I have longstanding doughts over the value of Western liberal democracy (ie continually voting for ever higher spending programs) - for me rule of law and property rights provide better safeguards for securing our individual rights... Anyway so much happening at the moment and I suppose mostly not strictly discussion for this thread.

[JMD]

12 hours ago, Hardhat said:

Sometimes it's hard not to take things personally, especially as for many of us, what the govt. decides affects our real, day to day standard of living etc.

However, we also need to realise that we are living inside a huge financial system, involving billions of people, that is at best fairly chaotic. The CBs do what they can to stop the entire thing collapsing, but for every rich and powerful organisation invested in maintaining the status quo, there is generally an equally powerful and rich organisation or individual invested in collapsing the whole thing for their personal gain ("disaster capitalism").

Realistically most of us on this forum are fairly average income wise, but what we do have is curiosity about the system we live in instead of blind acceptance. This, really, is the thing that sets this thread apart from a standard "how to invest your money" stock tip kind of forum - we are looking at the whole system and how the cycles inside it will play out.

As @DurhamBorn often says - "take the emotion out of it". To me that applies equally to laddering into stocks as it does to watching the govt. decisions on monetary and fiscal policy. It's not about you, it's not about me, it's about the structure of the system. Once you start looking at it like that, your thinking is ahead of 99% of people on this topic, and you will start to see what is actually going on.

I agree Hardhat, I viset here to attempt to learn how to position financially for the next cycle. The macro insights are fascinating to read and although sometimes posts appear to verge on the political, I don't think this is intended and in fact it's mostly more to do with explaining behavioural economics and human psychology, and therefore important in understanding how/why cycles play out. As you say this makes this blog pretty much unique. Of course, the economy doesnt occur in a vacuum, and capitalism and communism are both 'isms', so views of how these systems will morph in future is also of great pertinance.                                                                                                                                          Many thanks again to DB for starting this blog endeavour.