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

[DurhamBorn]

As @sancho panza has put up in that superb post above,the governments handling of this crisis (and im a Tory voter) has been a disaster.Their schemes are the last throws of a dice first rolled in 1982,but they havent ended up with a double six.A deflation on this scale needs a two pronged assault on the enemy lines.First is needs direct central bank action pumping direct into the capital markets.2nd it needs a massive government fiscal liquidity drop and then a longer term (12-18months of continued fiscal action on a slowly descending line.

The crazy schemes they have come up with are laughable.Me myself will probably get the self employed grant as i had my own business until late last year but have the tax all done.June il get something.June.Sending these loans through the banks is again crazy.Why would banks get involved in such rubbish?.The governments should of cancelled VAT payments and refunded last years tax in a direct transfer.If it carries on repeat.

The anger about to be unleashed will shock the elite.We have an elite and political system that has created an economy where young people cant afford a house and old people die alone in shit care homes.Mostly because they are too busy funding scroungers both welfare and corporate.

People wont tolerate that anymore.

The start of this thread mentioned something that would happen during the coming deflation.Massive financial dislocation.The road map was clear on that,but even im shocked by the size of it and the scale.I expected it would sweep away a lot of the leveraged,but not go like an earthquake across most small companies.

Whats certain is the only answer that will be accepted by the people is a full blooded reflation.Its going to be even more broad based than i expected 3 years ago.

The knock to the consumer looks like it will undershoot my most extreme targets.Thats huge.It means government will have to inject even more than expected.Fed is going way over $9 trillion,maybe up to $18 trillion,BOE another trillion to come at least.

Crucial to stick to the de-complex areas i think.Perhaps time to start thinking about other areas that might do ok as well.

 

[Barnsey]

“Reflation-birds are GO”

 

[Majorpain]

7 hours ago, DurhamBorn said:

The crazy schemes they have come up with are laughable.Me myself will probably get the self employed grant as i had my own business until late last year but have the tax all done.June il get something.June.Sending these loans through the banks is again crazy.Why would banks get involved in such rubbish?.The governments should of cancelled VAT payments and refunded last years tax in a direct transfer.If it carries on repeat.

Im guessing the point of getting the banks involved was because they lend on a daily basis they have the experience to screen the applicants for credit worthiness, the drama is that the majority of the 300,000 companies screaming for the loan were probably not credit worthy in the first place, hence the banks needing the personal guarantee.  It was maybe a mistake to think that this could be done in a way that zero taxpayers cash was going to be wasted, lucky its unlimited at the moment!

The VAT idea has merit, keep it simple stupid and a cash injection directly back into the majority of business which pay the tax without dodging it.

[MrXxxx]

8 hours ago, DurhamBorn said:

he anger about to be unleashed will shock the elite.We have an elite and political system that has created an economy where young people cant afford a house and old people die alone in shit care homes.Mostly because they are too busy funding scroungers both welfare and corporate.

This. When those who have something to lose and can't fight back, and those who have nothing to lose and so are prepared to fight back, you have the recipe for civil disorder...

...our `snowflake` generation are about to learn some important lessons, and so are the political class!

[BadAlchemy]

8 hours ago, Loki said:

A 'Dave H' podcast that supports the idea of a crash later this year (I haven't listened yet)

https://contrarianpod.com/content/podcasts/season2/market-melt-up-will-continue-until-late-summer-before-onset-of-global-deflationary-bust/

I listened to a couple of audio interviews of his yesterday. That link might be one of them. One thing that struck a chord for me was when he was describing going into a place early in his career just before this disinflation cycle started and shifting their portfolio away from energy stocks and into things like Coca Cola (the reverse of what we are doing here). All the older guys laughed at him for a year or two as he underperformed, then... Boom! Everything changed.

[Noallegiance]

9 hours ago, Loki said:

A 'Dave H' podcast that supports the idea of a crash later this year (I haven't listened yet)

https://contrarianpod.com/content/podcasts/season2/market-melt-up-will-continue-until-late-summer-before-onset-of-global-deflationary-bust/

For the gamblers the temptation must be huge to try and time the coming melt-up.

It ain't me!

[BadAlchemy]

https://www.thesun.co.uk/news/11391287/cut-pensions-triple-lock-pay-coronavirus/

(Apologies for link from the gaudy Sun). Softening up the masses for removal of pension triple lock? "It has to go" say 'experts'.

[Shamone]

34 minutes ago, BadAlchemy said:

https://www.thesun.co.uk/news/11391287/cut-pensions-triple-lock-pay-coronavirus/

(Apologies for link from the gaudy Sun). Softening up the masses for removal of pension triple lock? "It has to go" say 'experts'.

Fascinating. I think we will see more and more of this, hinting at what’s coming. That age group is the most entitled in history. I’m sure they will be made to take some pain.

[Loki]

59 minutes ago, Noallegiance said:

For the gamblers the temptation must be huge to try and time the coming melt-up.

It ain't me!

Me neither, anyone know why everything took a whack today after all the announcements of liquidity injection?

(This is why I don't time  I'm just trying to get an understanding)

• (Edit 2: Wonder if it's anything to do with the stupid DXY poking its stupid head back above the stupid 99 line )

[NogintheNog]

12 minutes ago, Shamone said:

49 minutes ago, BadAlchemy said:

https://www.thesun.co.uk/news/11391287/cut-pensions-triple-lock-pay-coronavirus/

(Apologies for link from the gaudy Sun). Softening up the masses for removal of pension triple lock? "It has to go" say 'experts'.

Fascinating. I think we will see more and more of this, hinting at what’s coming. That age group is the most entitled in history. I’m sure they will be made to take some pain.

That 'age group' also worked through an era where benefits and tax credits were a fraction of those on offer today, many of them worked through a career on low wages bringing up families and struggled to save much money before retiring. The 'entitled' are the ones sitting on tax credits and benefits now who have never paid a penny into the tax system.

By all means get rid of the triple lock, but get rid of the benefit payments too.

[sancho panza]

Below is a cross post from the Sceptics thread.44 minutes but you'll get the gist in the first 5.Well worht a look.I try not to cross psot but Ernst Wolff has a good knowledge of the financial system and it's history.

Talks about how ultimately this crisis will play into the hands of big globalist companies-long story short.

As per me and @Loki discussion the other day,it ain't right,but I think a lot of small companies are going to get crushed under the weight of the govt's incompetence and their inability to fund their fight with a strong balance sheet.

I was thinking this morning about all the jobs in car chworooms selling PCP's/lease cars to people at £300pcm-gone.Small coffee shops without a rich owner-gone.Small retial/manufacturing without strong balance sheet and the size to get on the end of a govt purchase order-gone.

Given the predominance of service sector jobs in the UK,the lock down will have a disporportionate effect.

I desperately hope I'm wrong.

@DurhamBorn I would say this becuase we're heavily decomplex in terms of our equity set up(basically oil/gold/silver/potash/utilities),but picking the winners in complex trades is looking tougher and tougher.

 

13 minutes ago, sancho panza said:

Another great vid here with Ernst Wolff,who discusses the Corona crisis with reference to

1) the finanical system

2) connections of WHO to Big Pharma who fund 80% WHO budget

3) misleading data regarding death certificates that noone's questioning

4) pandemics of the past eg bird flu where panic was spread and relatively few died

5) big winners of previous pandemics were Big Pharma

6) discusses the bigger economic/financial picture incl 2008,back to Bretton Woods,that it's now a ponzi scheme ripe for collapse due to issues like /explosion of credit in 90's/LTCM/2008-QE-ZIRP/buy backs/derivatives.

7) Are we in lock down because govts are pre empting a wider economic shut down in the near future?

8) Financial system is unsustainable.Fed unable to unwind QE/ZIRP 2015-2018.Repo market broke in Sept 18 2019 . Hedge funds in trouble due to a) recession occuring b) corona virus and China lock down c) oil price crash

9) Globalist companies will be biggest beneficiaries.

10) Donald Trump not as mighty as Head of Blackrock or Vanguard

11) emergence of cashless society-disempowers ordinary people.

12) We could well be seeing the end of the dollar.

13) China has huge shadow banking problem that has been in trouble for a few years.

 

 

 

[Barnsey]

22 minutes ago, Loki said:

Me neither, anyone know why everything took a whack today after all the announcements of liquidity injection?

(This is why I don't time  I'm just trying to get an understanding)

• (Edit 2: Wonder if it's anything to do with the stupid DXY poking its stupid head back above the stupid 99 line )

Oil

[Loki]

6 minutes ago, Barnsey said:

Oil

Thanks Barnsey - back below (Just) $20 for WTI Crude.  Blimey

[StrugglingMillennial]

Well as of today i am furloughed, i knew it was coming and i expect the company will continue to furlough people as this really starts to bite like alot of companies will. I have had a few friends who have been furloughed or their company has let them go because they haven't been there for very long aswell as a number of friends with small companies who are struggling because of the mess that the goverments help scheme is in.

I think that with the warnings being put out there about further falls in the market what has already happened is likely to be a precursor of what is to come, the market pulled back because of the interventions of governments around the world which is to be expected but i feel it was not enough and it will be a painful switch to the new economic model that we will have to adapt to.

Governments can print all they want but its going to take time for the new companies to appear and for the infrastructure projects to get off the drawing board.

 

[Majorpain]

7 minutes ago, sancho panza said:

Below is a cross post from the Sceptics thread.44 minutes but you'll get the gist in the first 5.Well worht a look.I try not to cross psot but Ernst Wolff has a good knowledge of the financial system and it's history.

Talks about how ultimately this crisis will play into the hands of big globalist companies-long story short.

As per me and @Loki discussion the other day,it ain't right,but I think a lot of small companies are going to get crushed under the weight of the govt's incompetence and their inability to fund their fight with a strong balance sheet.

I was thinking this morning about all the jobs in car chworooms selling PCP's/lease cars to people at £300pcm-gone.Small coffee shops without a rich owner-gone.Small retial/manufacturing without strong balance sheet and the size to get on the end of a govt purchase order-gone.

Given the predominance of service sector jobs in the UK,the lock down will have a disporportionate effect.

I desperately hope I'm wrong.

@DurhamBorn I would say this becuase we're heavily decomplex in terms of our equity set up(basically oil/gold/silver/potash/utilities),but picking the winners in complex trades is looking tougher and tougher.

With regards manufacturing, we are in the middle of the 4th industrial revolution with AI and automation, a lot of the small manufacturing companies don't have the scale to invest in things like industrial robots which will be the big driver of productivity in the years ahead.  As an example, i could do programs for every single frame and panel set in the UK over one year (50,000?) with the setup we have now, that's one person doing the job of 200 odd people in something like 15 different companies. Even 5 Years ago that would have been a crazy idea.  Its going to be brutal, but it may the best way forward to allow the strong to survive and thrive rather than bumping along the bottom like the last 10 years with cheap labour and debt ridden zombie companies.

I think your (unfortunately) spot on the money, if you dont have cash in the bank or the ability to get more, your going to be in a world of hurt.  But that's at the start of business for idiots and has been since we were trading rocks 10,000 years ago.

[Harley]

10 hours ago, DurhamBorn said:

Sending these loans through the banks is again crazy.

Precisely.  So many easier and more efficient methods such as a tax rebate (why pay if a business is not producing/declaring tax), and many others. 

[Harley]

3 hours ago, Barnsey said:

“Reflation-birds are GO”

 

Maybe more greasing the palms of party donors?  Certainly, I can't see any other logic.

[sancho panza]

27 minutes ago, Majorpain said:

With regards manufacturing, we are in the middle of the 4th industrial revolution with AI and automation, a lot of the small manufacturing companies don't have the scale to invest in things like industrial robots which will be the big driver of productivity in the years ahead.  As an example, i could do programs for every single frame and panel set in the UK over one year (50,000?) with the setup we have now, that's one person doing the job of 200 odd people in something like 15 different companies. Even 5 Years ago that would have been a crazy idea.  Its going to be brutal, but it may the best way forward to allow the strong to survive and thrive rather than bumping along the bottom like the last 10 years with cheap labour and debt ridden zombie companies.

I think your (unfortunately) spot on the money, if you dont have cash in the bank or the ability to get more, your going to be in a world of hurt.  But that's at the start of business for idiots and has been since we were trading rocks 10,000 years ago.

An excellent set of points MP.

You're right about AI.Whenever there is a structural change in the economy,such as the UK went through in the 80's,it creates a huge set of challenges for companies small,medium and large.I was saying to Mrs P last night that when I started investing it was all phone based.A friend of mine went into the city straight after Uni and I went to see him in New York once.He took me to the trading floor of his company and 1/2 of their office space was unused-and this was premium NYC real estate.He told me that when he had arrived it was pretty much full but then started thinning out early noughties.

 

@spygirl has written extensively on here about how a lot of well paid Finsec back office jobs have become automated.

 

ref the bit in bold.absolutely.

[Harley]

1 hour ago, NogintheNog said:

By all means get rid of the triple lock, but get rid of the benefit payments too.

Excellent priorities there!  Start with those taking more out than ever put in.  Need a true Beveridge based system not the current abomination.

[Harley]

15 hours ago, DurhamBorn said:

Everyone is moving their factories there as they tell China to do one.

Ricardo, or least the narrative ascribed to him, was mostly wrong.  Only those studying O level Economics on their Oxbridge PPE course think he was right. 

[reformed nice guy]

43 minutes ago, Majorpain said:

With regards manufacturing, we are in the middle of the 4th industrial revolution with AI and automation, a lot of the small manufacturing companies don't have the scale to invest in things like industrial robots which will be the big driver of productivity in the years ahead.  As an example, i could do programs for every single frame and panel set in the UK over one year (50,000?) with the setup we have now, that's one person doing the job of 200 odd people in something like 15 different companies. Even 5 Years ago that would have been a crazy idea.  Its going to be brutal, but it may the best way forward to allow the strong to survive and thrive rather than bumping along the bottom like the last 10 years with cheap labour and debt ridden zombie companies.

I think your (unfortunately) spot on the money, if you dont have cash in the bank or the ability to get more, your going to be in a world of hurt.  But that's at the start of business for idiots and has been since we were trading rocks 10,000 years ago.

I agree with you Majorpain.

If you were benevolent dictator for the UK, what would you do to encourage UK industry to embrace AI + automation faster?

[sancho panza]

Some historical perspective

 

 

[Harley]

On 14/04/2020 at 09:39, PaulParanoia said:

Would you mind sharing what your indicators are ... or linking to an old post if you've done so before?

Apologies but not in detail.  I use things such as the MACD and Stochastic.  A common approach.  Other indicators are available which people also use.  Best to invest the time finding something that works for you that you can "own" and live with its failings!  Mine fails often.  This is a numbers game.

[Harley]

IMO, there will be capital controls (at least in EU land), a wealth tax, the forced buying of government bonds (even direct confiscation), financial repression via regulation as well as the current indirect forms, higher and more window like taxes, graft on the back of govt interventions, bans on holding certain assets, etc.  Nothing, pensions included, will be safe.  CV has released the genie from the bottle. Prepare right now.

[Long-game]

39 minutes ago, sancho panza said:

Some historical perspective

 

 

Funny how they only went back 5 years, the way they have misused statistics and ineffective modelling which fucked up overestimating with aids, swine flu and new variant cjd has been irresponsible imho. Until unfortunately we have higher herd immunity we are fucked, the elderly and vulnerable should have been sheltered and the rest particularly young kids should have developed immunity.