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

[DurhamBorn]

2 hours ago, Eventually Right said:

Hi DB, forgive the ignorance, but I’m seeing a lot of calls for the dollar to break a lot higher, whereas I think you’ve suggested your road map sees it lower.
 

If lots of the printed currencies will be used to buy dollars, does this not create upward pressure on DXY?

Cheers

Yes,it would if the printing by other central banks was much higher than printing by the Fed,but it isnt,so a small increase in the dollar then down.I expect all currencies to shift into assets,and the $ is simply the last currency before the assets are bought.The dollar calls over the last few years that worked out fantastic were based mostly on liquidity flows from the main central banks compared to the Fed and some cross market stuff.So dollar might hold up,but once it starts to slide it will indicate the shift into real assets has started (or more speeding up)

[AWW]

4 hours ago, PatronizingGit said:

Same as the bank bail outs a decade ago...take the money, no strings attached...in fact, only string is be as irresponsible as you were before.

One of my limited companies (employees: 1 - me) has applied for the full bounce back loan. Free money for at least a year, and a small chance it'll just get written off. I'd usually rail against this sort of thing, but my attitude has hardened since I've had kids: if everyone else is going to take the piss, so am I.

[BearyBear]

"Buy the dip" mantra in practice...

 

[spygirl]

21 hours ago, DurhamBorn said:

Hope so Spy ,they should have a decent decade ahead if they can.My mam was disabled and could hardly walk at all and they were always great with her and my dad.My dad never tips anyone,but he nearly always tipped their drivers.I remember the days of going to Spain on the coach with Siesta etc and the axles being weighed down on the way back as everyone stuffed the bus with fags and booze,including the owners 

There will always be a demand for short 3-5, out of season coach trips. They are cheap, fill oaps days who are v time rich.

I remember my uncle n family pissing off to Spain in the mid 70s. Previously it had been Scabby or Filey. Might as well have been Mars.

By then, well since mid 60s  hed been coining it in as miner, same as others in Leeds Wakey.

People forget how much miners earned in the last few years, which ended late 7ps, as the real mass of mining was finished. 80s miner strike was bollovks. 70% had gone under Labour in 70s.

Uncle was earning well in top 10% of UK incomes. And lived in a house that was gifted to him by NBC in the 60s.

Literally 90% of his income was disposable.

Didn't drive. No big sink on his money bar the club every night.

Leeds Bradford wiki- 

By the mid 1970s, the package holiday had become popular in the British Isles. During 1976, the first holiday charter flight to the Iberian Peninsula by Britannia Airways departed Leeds Bradford.[16][9]

The Spanush coaches were always the very poor relation to charter flights. 4h versus 30h on a bus. No way on earth, even with promise of topless beach.

 

 

 

[sancho panza]

3 hours ago, DurhamBorn said:

It can sound hyperbole and probably is a bit,but yes i think we could see a dash for real assets.I noticed David Hunter was saying the PMs might do a .com and go hyperbole and i think there is a real chance they do.Once the cycle gets going i think the CAD will do well,but i think the main story is currencies being swapped for $s then swapped for assets.

Iv have some lag work on it,but need to really update things,but the numbers are so off the scale its almost a waste of time.However the road map is saying the liquidity flows into each currency through printing,then a lot is exchanged for dollars (what we have been seeing) and then those $s are exchanged for real assets.Potash is a prime example,i think people will be using their dollars to increase order size as the year unfolds.Again it probably leans to hyperbole,but there is a very good chance even the big players like Mosaic 5x or even 10x in price from here as they leverage the price increases.

Im not really doing much work on currency now,even though the calls have been fantastic over the tail end of the cycle because we are nearly ex-currency forward commods.

This is what I'm thinking myself.Someone posted on the  the DXY basket the other day and questioned whether the euro would benefit like it did back in 07/08.What you suggest acutally makes a lot of sense.I am beginging to think that a lot of people have no other option to the dollar than commodities.

 

Great DDM video.Well worht a watch-deflation,saving,growth,inflation

'Fed relies on models,Powell adamant inflation never going to be a problem-Danielle disagrees particualrly as Fed has been only buyer at auction-> if fed backs away and former buyers dont step forward then we'll get infkation.DDM explains higher IRs can coexist with sclerotic growth as in the &)'s, which is where a lot of us are.

Just because they print it doesn't mean people will borrow.To see inflation you'd need to see some demand.Banks will into lend recklessly into credit risk.

@Harley Good discussion on velocity hitting  a wall-all you get is more debt to service which creates deflation.Housholds without as much liquidty as possible.Highest tier of income earners see shrinking incomes.People with the means to spend are saving-not spending.

Neo classicals will create inflation.Debt jubillee only possible on sovereieng debt.

Once inflation comes currencies will morph from currency wars into real wars.All coutnires have to agree on debt jubillee.Lot of countires looking to unseat the dollar hence won't agree.

We've been playing this game for 12 years.Helicopter money means US gvot needs to print the tresuries for the Fed to buy.Bottom thrid of consumers will spend everythign the govt gives them.Powell looking for velocity to grow.Powell already bailed out stock/bonds.

Middle classes getting screwed.Fiscal in nature.Powell doesnt get that helicopter money and bailing wall st out will only do so much,as the middle classes won't get any of the liquidity.

State penion funds will need to incrrease taxes which will hammer middle classes again.Lot of under funded pensions and fiscal dire stratis will have to raise taxes.Fed will need to get federal taxes raised so places like texas can subsidze illinois.'

 

 

[spygirl]

3 hours ago, Wheeler said:

Not much extra in the full article:

An investment tycoon has warned that Lloyds bank is facing an “existential crisis” and suggested it should wind itself up so it can return capital to shareholders.

Jeremy Hosking, worth £385m according to The Sunday Times Rich List, asked whether Lloyds was “a for-profit private company or simply a publicly owned utility” after it joined other banks in cancelling dividend payments following pressure from the City regulator.

Hosking, 61, wrote to Lloyds before last week’s annual meeting, when more than a third of shareholders voted against a pay packet of up to £7m for boss Antonio Horta-Osorio. Hosking said there was “no point” in designing a new pay scheme until the bank had resolved “the dissonance between an (apparently) coherent strategy, and its complete failure from the point of view of shareholder returns”, even before Covid-19 hit.

He wrote: “Demonstrably we cannot make money in banking so the logical question . . . is: what is the point of Lloyds? Logically the most appropriate strategy . . . is that the bank should be . . . winding itself up.”

Hosking, who co-founded Marathon Asset Management and now runs a firm under his own name, has a £37.5m stake.

Lloyds’ first-quarter profits fell by 95% last month as it booked £1.4bn of charges to cover expected credit losses.

On Friday, Lloyds chairman Lord Blackwell wrote in The Times that banks should “be part of the solution” by paying, in effect, a “social dividend”.

Theres a very very very very important point there which has huge ramification of how a lit of the UK is structured and what people value/invest.

Banks are not profit maximising orgs. A modern economy needs a stable functioning banking system that operates like a utility.

And by bank, I mean deposit taking, drawing money down from central bank  n paying it back over time. Not an investment or trading bank, which are very different orgs.

Banks blow up when they try to maximise profit.

Until big bankg, UK banks were slow n low profit, with the odd one lurching into stupidity.

Big bang saw the lines between retail and trading banks blur, which is a bad thing. But the UK was untroubled as the biggest source of consumer bank credit was mainly building societies, which were regional mutuals - small, inefficient, tied to regional savings n housing.

Then came building society demute, with BSes turning into banks, accessing wholesale money.

Boom. All gone in about 10 years. UK economy still holed 10 years later.

Back to Hoskins- retail banks will return fuck all return on  equity. He ought yo be smart enough to see that, just his position is too big to be honest.Equity funding should be limited in retail banks and be just there for loss absorbing. Retail banks will offer utility returns - think a few points over gilts, to allow for extra risk.

Huge ramifications, as theres still a whole lot of finsec jobs to go as banking becomes more a technology based utility.

UK housing is going nowhere. London/SE esp fucked as prices are nowhere near the new reality.

No ones going to make much money from housing.

Houses are going to sell at the same HPE ratio. If you make money itll be down to local employment levels and earnings increasing, not the housing increasing by itself I.e mortgages going from 4x income to 8x income.

 

 

 

 

 

[DurhamBorn]

@sancho panza i think most of that is right,or at least where we are probably heading.My dollar road map was based on liquidity etc and it still is.However before the crisis the lags out 6 months didnt account for the fact we might see massive printing across all main countries nearing the scale of the US.That hasnt changed the near term affects much,but the $ is holding up longer than i expected.Cross market says that is linked to this massive printing everywhere due to the nature of the bust.So in very simple terms,the $ has held up longer than expected,but hasnt gone up.That says for all the massive Fed printing other currencies are being swapped for dollars.Given the Fed is buying up the treasury issues it cant be for treasury buying,so that indicates these $s are going to be buying real assets.

Classic distribution cycle building.I think my initial targets on inflation and commod prices over the cycle are probably too conservative,or we might hit the targets early.

The middle class probably have hardly any inflation loving assets.Their pensions will be in bonds and most of their savings in housing equity.The irony is i think 15% might be enough in silver to keep them up with inflation over the cycle,or 8% or less in PM miners.

The key is to own assets that are inflation loving,but also assets that can multiply the inflation.

[Bobthebuilder]

1 hour ago, DurhamBorn said:

The middle class probably have hardly any inflation loving assets.

Thats pretty much all middle class people i know, all property leveraged up with more and more debt over the last 20 years, some interest only and still believe in the magic money tree.

[DurhamBorn]

@sancho panza 13.20 in the vid "injected into the veins of the economy"  has she been reading this thread 

[Barnsey]

That daily briefing will have huge ramifications for pretty much everything lockdown related, the anger is universal and widespread.

[Loki]

4 minutes ago, Barnsey said:

That daily briefing will have huge ramifications for pretty much everything lockdown related, the anger is universal and widespread.

I think this is in the wrong thread but I still agreed with it on principle 

[Barnsey]

15 minutes ago, Loki said:

I think this is in the wrong thread but I still agreed with it on principle 

Sorry yes, just chucked it into here as could have serious implications for our reflation path

[Loki]

1 minute ago, Barnsey said:

Sorry yes, just chucked it into here as could have serious implications for our reflation path

Oh I wasn't having a go, I thought it was a mistake. You must mean the latest corona briefing? 

 

[Barnsey]

13 minutes ago, Loki said:

Oh I wasn't having a go, I thought it was a mistake. You must mean the latest corona briefing? 

 

Indeed Loki, don’t want to focus on politics but I believe it’s just sent a massive shockwave through the country, so either everyone gives up and we get a huge second wave, or we obey the rules and Keir advances on the palpable anger.

Could delay the reflationary recovery if tensions rise dramatically, especially given what unemployment % is about to rise to now that large companies are commencing redundancy talks In anticipation of having to pay 25% of the furlough wage costs, as of 1st August (45 days for firms >100 staff)

[Loki]

3 minutes ago, Barnsey said:

Indeed Loki, don’t want to focus on politics but I believe it’s just sent a massive shockwave through the country, so either everyone gives up and we get a huge second wave, or we obey the rules and Keir advances on the palpable anger.

Could delay the reflationary recovery if tensions rise dramatically, especially given what unemployment % is about to rise to now that large companies are commencing redundancy talks In anticipation of having to pay 25% of the furlough wage costs, as of 1st August (45 days for firms >100 staff)

I wonder if ashestoashes called it right here

 

[Bobthebuilder]

43 minutes ago, Barnsey said:

That daily briefing will have huge ramifications for pretty much everything lockdown related, the anger is universal and widespread.

Care to elaborate Barnsey, cant see the news you are talking about here.

[Don Coglione]

Painful day incoming tomorrow?

https://www.bbc.co.uk/news/world-africa-52791780

[DurhamBorn]

4 minutes ago, Barnsey said:

Indeed Loki, don’t want to focus on politics but I believe it’s just sent a massive shockwave through the country, so either everyone gives up and we get a huge second wave, or we obey the rules and Keir advances on the palpable anger.

Could delay the reflationary recovery if tensions rise dramatically, especially given what unemployment % is about to rise to now that large companies are commencing redundancy talks In anticipation of having to pay 25% of the furlough wage costs, as of 1st August (45 days for firms >100 staff)

People up here arent happy.He was seen by several people in Barnard Castle and also wandering around in Houghall Woods with his wife (thats in Durham itself).Boris is wasting all his political capital.I dont want Cummings to go because he will help fuel money for the north and also help deal with the civil service,but his choices and lies and Boris backing him will do the Tories a lot of damage.It might even cost them seats they won up here.

[MvR]

51 minutes ago, Barnsey said:

That daily briefing will have huge ramifications for pretty much everything lockdown related, the anger is universal and widespread.

All I saw was stuff about the schools re-opening.  Is that what you're referring to?

[Barnsey]

3 minutes ago, DurhamBorn said:

People up here arent happy.He was seen by several people in Barnard Castle and also wandering around in Houghall Woods with his wife (thats in Durham itself).Boris is wasting all his political capital.I dont want Cummings to go because he will help fuel money for the north and also help deal with the civil service,but his choices and lies and Boris backing him will do the Tories a lot of damage.It might even cost them seats they won up here.

Like I say I don’t want to detract from the thread but this was a huge moment, and just when we were all feeling pretty unified to pull through this awful recession (captain Tom etc), sentiment has turned on a dime. And I’m grateful for all the honesty coming from all the great folks up where you are DB when interviewed on TV.

[AWW]

13 minutes ago, Knickerless Turgid said:

Painful day incoming tomorrow?

https://www.bbc.co.uk/news/world-africa-52791780

My biggest take from that article is "Most of those who tested positive were not showing any symptoms."

My gut feeling is that the response to CV has been massively out of proportion. There will be unrest in countries with millions of newly jobless people. Imagine how bad that unrest will be if it turns out that some of the world's governments trashed their economies for naught.

[Loki]

22 minutes ago, Knickerless Turgid said:

Painful day incoming tomorrow?

https://www.bbc.co.uk/news/world-africa-52791780

 

Quote

Most of those who tested positive were not showing any symptoms

https://www.independent.co.uk/news/world/africa/coronavirus-tanzania-test-kits-suspicion-goat-pawpaw-positive-a9501291.html

[ThoughtCriminal]

16 minutes ago, AWW said:

My biggest take from that article is "Most of those who tested positive were not showing any symptoms."

My gut feeling is that the response to CV has been massively out of proportion. There will be unrest in countries with millions of newly jobless people. Imagine how bad that unrest will be if it turns out that some of the world's governments trashed their economies for naught.

The finger pointing for the lockdown debacle has already begun. 

 

Danish PM has been caught lying that the countries public health agency backed lockdown when they actually OPPOSED it. 
 

Swedish all cause mortality is 2nd lowest in last five years. 
 

Fatality rate is going to be same as flu and we’ve smashed the world economy over a model from a Bill Gates employee with a track record of bullshit and wild inaccuracy. 
 

Off topic, so apologies, but the whole debacle has me beyond pissed off.

 

[Castlevania]

41 minutes ago, Knickerless Turgid said:

Painful day incoming tomorrow?

https://www.bbc.co.uk/news/world-africa-52791780

How does working in a mine lead to HIV?This is terrible reporting.

South Africa's mines, where people often work in close proximity deep underground, have often been the epicentres for other communicable diseases like tuberculosis and HIV.

[Chewing Grass]

20 minutes ago, Loki said:

 

https://www.independent.co.uk/news/world/africa/coronavirus-tanzania-test-kits-suspicion-goat-pawpaw-positive-a9501291.html

Fascinating how the Virus has now jumped to Goats and Pawpaws, perhaps they bought the testing kits off the same chap who sells bomb detectors to Arabs.