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

[Castlevania]

12 minutes ago, Shamone said:

I think that’s a great idea, actually. And means test the state pension, since that is also a benefit.

I doubt they’d do that. More likely to “simplify” income tax and merge it with NICs. So wealthy pensioners pay more in tax, and those with unearned income (dividends mainly) will also pay more.

[Talking Monkey]

15 hours ago, DurhamBorn said:

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.

 

DB would the need for CBs to inject even more mean that the inflation towards the latter part of the decade will be very likely at the upper end of the range discussed here or would the upper end have to be revised upwards.

I just get the feel with the impact of CV, lockdown etc on top of the originally anticipated credit deflation means the associated policy responses now potentially lead to an even more brutal collapse around 2028 than has been discussed on here the past couple of years

A few day ago the discussion on here and elsewhere was Powell finally right sizing the Fed response and was coming  up to speed, is that still the case or is he now slipping back in light of the revised amounts of QE and its associated sequencing through time that may be needed

[JMD]

1 hour ago, Harley said:

What's the difference between an accountant and a bookkeeper?  The bookkeeper gives you the number while an accountant first asks what number you want.  They're all accountants now! 

Yes, and in Douglas Adams Hitch Hikers Guide to the Galaxy, all the useless non-productive types were blasted into space to find and populate their own distant world. Such non-jobs included accountants and telephone sanitisers!

[TheCountOfNowhere]

3 minutes ago, JMD said:

Yes, and in Douglas Adams Hitch Hikers Guide to the Galaxy, all the useless non-productive types were blasted into space to find and populate their own distant world. Such non-jobs included accountants and telephone sanitisers!

I think they landed here

[DurhamBorn]

2 hours ago, C-gull said:

So can I ask a dumb question. If you had 5k to try and buy a bit of the bargains floating around today, how would you allocate it? Oil, telco, PMs seem to be popular but is there anything more specific anyone would be willing to suggest I take a specific look at? I struggle to keep up on this thread but have a horrible sense of fomo

This is not advice,do your own research etc,

Shell B £1500

Telefonica £1000

Mosaic Company £500

GDXJ £500

DRAX £500

Repsol £500

Vodafone £500

 

 

[Shamone]

5 hours 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.

Spot on, I think. If humanity had had half a brain cell we would have used the one-off fossil fuel dividend with the concomitant revolution in crop yield to our advantage - and built a smaller, more sustainable, more inclusive society. Holistic, even. Instead we bred like demented, rampant rabbits in a world without foxes. And fostered an out-of-control, psychopathic, ultimately self-destructive, consumer (we consume, like locusts) “society.” I really don’t think it can be unwound prettily. That is what concerns me about the end of the next cycle which we all talk about here. 

[Majorpain]

2 hours ago, JMD said:

Majorpain I do agree with what you've said. For some time I've been meaning to research more about how Singapore works - ok, its much smaller - but its also a very tech-driven, with a planned economy capitalist system, and its an ex-British colony.

Perhaps after we trim N. Ireland, Wales and Scotland from the 'United' Kingdom the Singapore model might just scale! Boris has even joked in the past about Britain becoming a Singapore-on-Thames post Brexit. Was that merely jest I wonder?   

Singapore is an interesting example, however its got the advantage over the UK in that its small and agile whilst the UK is more of a lumbering behemoth.  Its also heavily investing for the future in the right places.

UK is at 71 for comparison.

[TheCountOfNowhere]

25 minutes ago, DurhamBorn said:

This is not advice,do your own research etc,

Shell B £1500

Telefonica £1000

Mosaic Company £500

GDXJ £500

DRAX £500

Repsol £500

Vodafone £500

 

 

DONT BUY CENTRICA.

 

THIS IS ADVICE,

[JMD]

1 hour ago, Harley said:

8 years?  Alas no way, even without CV.  The start (just the start) is now months away.  It will be CV2.  The dumb and envious will cheer until they then come for them.  The connected spivs will make out like bandits on speed and the last remaining quaint notions of "England" will go the same way as have its bobbies and other institutions.  The middle class will go the same way as their Latin American cousins.  Get an Argentinian pen pal if you are an optimist wanting to prepare, else get a Venezuelan one!

PS:  Before CV, given the decades of under-performance topped off with Brexit, our non performing "democratic" institutions were under threat.  They're now going to fight back.  Our collective dissonance will be like CV.  This is the socio-political backdrop against which this thread may play out.  A Russian doll where this thread sits inside another.

Harley, I suppose I have been writing similar thoughts here recently, so not sure why I challenged you over the 8 year timing thing. After all as you comment bigger things are afoot. Things have become quiet dark and claustrophobic, and that's not due to self-isolation/quaranteening either. What did it for me was the near total all-encompassing Coronavirus/economic shutdown compliance amongst our political classes, our political commentators - both left and right, our media, and of course our fellow citizenry totally lapped it up. Where were the dissenting voices? ...Why was it left just to Eamon Holmes and his 5G mast theory!

A Latin American 'brave new world' dystopia for us you suggest? Maybe, but for what its worth i personally had for many years feared it would for us be a EU/China trade link-up, followed by more and more joint totalitarian control. But now things have chnaged and China has become the wolf in sheep's clothing, and I believe this will encourage the West and Russia to come together, strategically and culturally. I think the 'soft' themes/threats will be about trust and culture and China and the Middle East countries will become more and more mistrusted and reviled against. 

[Errol]

20 hours ago, Cattle Prod said:

Top quality content and posters, this thread just gets better.

Without question this thread is one of the very finest threads I've ever read in my history of internet use. A veritable gold mine of information and learning opportunities.

[DurhamBorn]

2 hours ago, Sasquatch said:

Christ! I just need to get my house sold and then I can move north and live in DB's shed....

My shed is not in good shape Sasquatch its small and falling apart and full of mice.I would say moving north would be a good idea.Im not saying it because i live here,there are several places around the country,but i do think ours is one.From my house north there is nothing until the central belt of Scotland apart from a few very small villages.West nothing after Barnard Castle until the Lake District.South you have Darlington,but after that about 50 miles until Leeds with not much inbetween.East you have the main areas,Boro,Sunderland,Newcastle etc.Close enough if you want anything,but very little reason for people there to come here.East Durham is rough with places like Easington and Peterlee,Shotton etc,but again they never venture over to the west of the county.

Another area i quite like is Bridlington/Scabby area.Cheap living there and not far from York if needed.Also trains to York and the East coast mainline are easy.

 

 

[JMD]

1 hour ago, TheCountOfNowhere said:

I think they landed here

Your correct, have you read the book? That was the conceit of the story, but I didn't want to spoil it for anyone... oops too late!

[DurhamBorn]

 

1 hour ago, Talking Monkey said:

DB would the need for CBs to inject even more mean that the inflation towards the latter part of the decade will be very likely at the upper end of the range discussed here or would the upper end have to be revised upwards.

I just get the feel with the impact of CV, lockdown etc on top of the originally anticipated credit deflation means the associated policy responses now potentially lead to an even more brutal collapse around 2028 than has been discussed on here the past couple of years

A few day ago the discussion on here and elsewhere was Powell finally right sizing the Fed response and was coming  up to speed, is that still the case or is he now slipping back in light of the revised amounts of QE and its associated sequencing through time that may be needed

Im trying to look at that over time TM,but yes i think that is likely.Powell and the Fed are up to speed in that they are up with the curve,but they will need to do a lot more still.The ECB is nowhere near,so Europe is likely a basket case.The BOE is behind as well.Thats more the governments fault though and their cack handed fiscal injection,or the lack of it.Reflation is certain now (not yet of course) and the scale should be towards the top of the road map.I dont think it will over shoot much,if at all,but 20% inflation isnt out of the question in a spike.I think 10% is almost certain ,and rates in double figures.

The structure still looks like a slow build in inflation though,it only goes parabolic towards the end,say 27/28.

Whats changing due to the nature of the way the cycle ended is that instead of companies rolling over,or paying down debt,they are instead all drawing down credit facilities they had in place.This means those that survive will have to use cash flow to pay this down.Less to invest and less for dividends.To be blunt most chief execs have taken companies into the end of cycle in a very poor shape.Distribution cycle is certain.Principal will need to be sold to provide income.I expect equity release is finished as well.Leveraged BTL will be the biggest loser once things get going.Everything will be against it,rates,social house building,tax,lack of finance etc.

Due to that i think government will be taking an even bigger part in the cycle than expected,at least at first.

[Sasquatch]

12 minutes ago, DurhamBorn said:

My shed is not in good shape Sasquatch its small and falling apart and full of mice.I would say moving north would be a good idea.Im not saying it because i live here,there are several places around the country,but i do think ours is one.From my house north there is nothing until the central belt of Scotland apart from a few very small villages.West nothing after Barnard Castle until the Lake District.South you have Darlington,but after that about 50 miles until Leeds with not much inbetween.East you have the main areas,Boro,Sunderland,Newcastle etc.Close enough if you want anything,but very little reason for people there to come here.East Durham is rough with places like Easington and Peterlee,Shotton etc,but again they never venture over to the west of the county.

Another area i quite like is Bridlington/Scabby area.Cheap living there and not far from York if needed.Also trains to York and the East coast mainline are easy.

 

 

Thanks DB. You've outlined your locality very well previously . We are intending to have a few road trips in the near future to check out bits of the country we are not so well acquainted with. We are perhaps 75% sure it will be Yorkshire as we know it well and we can probably carry on with our business part time for a few years (our two daughters and partners also live in Yorkshire). The Yorkshire coast is appealing as is North York Moors. Quite like the look and feel of Hornsea (as long as the house is far enough back from the crumbling coastline!). Lake District is too expensive as are any areas near Harrogate etc.

Our house is on the market and we nearly had someone on the hook before the virus landed. Perfect buyer as well. Minted and didn't need to sell. 

 

[DurhamBorn]

2 hours ago, janch said:

I'm confused..........I was expecting the dollar might weaken after all the FED pumping but DXY is nearly 100 with the pound at $1.24 ish.  Is it because of all the doom and gloom and the dollar is a safe haven?  Or have the FED not printed enough to "right-size" yet?  Or anything else?

What does the road map say for the longer term? I feel all at sea right now

Fed is near the curve now,problem is the ECB isnt.The EU is proving a disaster.Once they start to rightsize the $ should fall.Over 100 and i think there are still systemic risks somewhere and the Fed will need to keep pumping.Once things settle and the world wakes up to the fact the super powers are going to face off for a cycle there will be a dash for real assets.

[Loki]

30 minutes ago, JMD said:

I believe this will encourage the West and Russia to come together, strategically and culturally. I think the 'soft' themes/threats will be about trust and culture and China and the Middle East countries will become more and more mistrusted and reviled against. 

I really hope you're onto something there

[DurhamBorn]

1 minute ago, Sasquatch said:

Thanks DB. You've outlined your locality very well previously . We are intending to have a few road trips in the near future to check out bits of the country we are not so well acquainted with. We are perhaps 75% sure it will be Yorkshire as we know it well and we can probably carry on with our business part time for a few years (our two daughters and partners also live in Yorkshire). The Yorkshire coast is appealing as is North York Moors. Quite like the look and feel of Hornsea (as long as the house is far enough back from the crumbling coastline!). Lake District is too expensive as are any areas near Harrogate etc.

Our house is on the market and we nearly had someone on the hook before the virus landed. Perfect buyer as well. Minted and didn't need to sell. 

 

Hornsea would be an area id be interested in,as you say well back though.I love the Lake District,but wouldnt live there.Its only 1 hr 20 mins for me anyway.North York Moors are lovely,but expensive.Thirsk is in a nice spot though if spending a bit more.

Id never go south of the Humber.As for as im concerned Eric Bloodaxe was my last King,and im Northumbrian not English.

[Sasquatch]

7 minutes ago, DurhamBorn said:

Hornsea would be an area id be interested in,as you say well back though.I love the Lake District,but wouldnt live there.Its only 1 hr 20 mins for me anyway.North York Moors are lovely,but expensive.Thirsk is in a nice spot though if spending a bit more.

Id never go south of the Humber.As for as im concerned Eric Bloodaxe was my last King,and im Northumbrian not English.

Eric Bloodaxe. Now that's a hammered silver penny I'd like to find in a field one day!

[JMD]

23 minutes ago, Errol said:

Without question this thread is one of the very finest threads I've ever read in my history of internet use. A veritable gold mine of information and learning opportunities.

Indeed, and perhaps the last sane ('sane' I said - not 'safe'!) space on the net. I have learned so very much from the posters here. Thank you all. Plus it has personally helped crystalise my own ideas, thoughts and actions. But what strikes me also is the quality of interaction here, not only is discussion so markedly civil, but I find people's replies so generous in time and content. 

[Loki]

One of the most intangible benefits has given me is not caring about not owning a spit and Kleenex Barratt box yet.

Money can't buy the feeling of 'knowing' what's coming and that feeling of having dodged a bullet, rather than missing out.

I'm incredibly grateful I won't spend the rest of my working life paying such a place off.

I've said before that I never really had a plan beyond that, never had any interest in shares, just hard work.  So it's been a big learning curve.  Again, that feeling of having a plan is priceless.

[Shamone]

1 hour ago, DurhamBorn said:

My shed is not in good shape Sasquatch its small and falling apart and full of mice.I would say moving north would be a good idea.Im not saying it because i live here,there are several places around the country,but i do think ours is one.From my house north there is nothing until the central belt of Scotland apart from a few very small villages.West nothing after Barnard Castle until the Lake District.South you have Darlington,but after that about 50 miles until Leeds with not much inbetween.East you have the main areas,Boro,Sunderland,Newcastle etc.Close enough if you want anything,but very little reason for people there to come here.East Durham is rough with places like Easington and Peterlee,Shotton etc,but again they never venture over to the west of the county.

Another area i quite like is Bridlington/Scabby area.Cheap living there and not far from York if needed.Also trains to York and the East coast mainline are easy.

 

 

I think you’d like Herefordshire.

[Jesus Wept]

2 hours ago, DurhamBorn said:

This is not advice,do your own research etc,

Shell B £1500

Telefonica £1000

Mosaic Company £500

GDXJ £500

DRAX £500

Repsol £500

Vodafone £500

 

 

A good place to start here. 

Similarly to DB (but only recently - 4 weeks ago) I started my holdings with Shell, Telefonica and more recently some Vodaphone and I also hold some BP and some ETFs of the indices - DOW, Nikkei, Emerging markets...and Gold. 

Will slowly be drip feeding in every month over next 15-25 years for long term hold and dividends in a variety of shares - increasing portfolio. 

Anyway reason for posting is I’ve recently been looking at exposure to commodities and started with an ETF -  but I am intrigued and interested in looking at getting some exposure to the potash market.

What’s the back story on the Mosaic Co? Biggest US producer of potash and fertiliser.

What was the reason / story behind the ‘ bubble’ in 2008 and consequent ‘pop’...? It’s fallen out of favour since. Has it been discussed elsewhere? 
 

MOSAIC CO. Stock Price 1995 onwards

[Errol]

Take a look at Freeport for a copper play as well.

[Bricormortis]

I think  the US jobless stats come out on Thursday. Hardly going to be happy reading. Mr Market might throw a wobbly.

 

[Loki]

16 minutes ago, Bricormortis said:

I think  the US jobless stats come out on Thursday. Hardly going to be happy reading. Mr Market might throw a wobbly.

 

Americans in Michigan are throwing a wobbly already