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

[M.C. UK]

1 hour ago, DurhamBorn said:

Inflation had no chance in this cycle due to structural forces at work,and people who expected high inflation missed the point,dis-inflation forces have been way higher since around 1983.That is now ending.Im pretty convinced most of the market is going to get caught out by this massive change.Long term bonds have some more time in the sun yet,but will destroy massive wealth in the next cycle.

@DurhamBorn thanks for the post (I believe you patiently being re-posting this few times - thanks for the refreshing)
Would you have at hand the link for the tracking indicators/graphs used for this?(i.e. dis-inflation forces)

Cheers,

M.C.

[King Penda]

1 hour ago, DurhamBorn said:

Beautiful house that stokie,those bricks are like steel as well.My dads house has similar ones,i think around 1920 and was a nightmare putting cables through the wall,blunted loads of drill bits.A lot been spent on that by the look,i could see you setting up home there and settling down though that would mean many a broken heart in Stoke and surrounding shires 

Your looking at 110k morgage that’s 900 a month over 12 years say next August I’d have 30k more that’s about 650 for a similar type morgage bit to risky on 1 income 

[King Penda]

3 minutes ago, Tdog said:

 

Price has already been dropped once, i'd hold off until then .. but then again ive been predicting a crash for 15 years!

I’m watching for interest only if I’m honest but it’s a nice house

[Moominpapa]

On 03/10/2019 at 14:17, JMD said:

Moomingpapa, ah... so I assume the key/legend (the high/low vol. coloured blocks?) should contain numbers? Sorry to be a pest but just like to understand the graph - particularly if it has guidance re. % allocations.

 

unfortunately it did not come with figures just relative volume.

On 04/10/2019 at 11:21, sleepwello'nights said:

Is this the start or a false dawn? I suspect a false dawn. 2020 is when the consensus seems to suggest the inevitable downturn starts. We seem to be wishing it on, maybe we are seeing straws in the wind though.

I was listening to an interview on Kitco this morning and the interviewee speculated on what would happen if Trump was not elected in the next presidential election. In his opinion if a Democratic candidate like Elizabeth Warren won then apart from the social unrest the economy would be subjected to increases in government expenditures.

Maybe some of the expenditure would be directed to infrastructure projects. Isn't this something that Trump has proposed anyway. Perhaps civil engineering companies would make sensible companies to invest in?

How would Trump losing affect our investments in the UK? I have no real wish to invest outside the UK, I don't even know where or want to start looking. 

Again I am in the dilemma of whether to commit some more cash into stock picking or whether to keep on the side lines until there is a sharper fall. Just like I've done for so long now, kicking myself for missing the surge in 2016!

DB you've suggested UK cyclical stocks at present, these are all dependent on consumer expenditure, if a recession occurs then consumer expenditure will fall. I don't understand your perspective? https://uk.tradingview.com/markets/stocks-united-kingdom/sectorandindustry-sector/consumer-cyclicals/ 

 

I dont think you can see them as bond proxies, even the gold miners that i've bought i see very much as an equity allocation even though they have  gold in the ground. I dont see how you substitue one asset for another in a complete different class - they don't act in the same way for example a company's bond coupon will never pay more that the agree amount (save for linkys) but a company can increase decrease its dividend and the face value of the share is subject to change whereas the nominal face value of the bond will remain the same. 

On 04/10/2019 at 14:49, JMD said:

re. dividend paying utility stocks as bond proxies...

Democorruptcy, I genuinely appreciate the feedback if I've said something stupid there. But in the context of this forum I had genuinely considered this to be one of my take-aways from visiting here. Am I wrong?

I admit my use of the term 'proxy' is pretty loose (maybe should have used the 'alternative' safe word!). But the next cycle, along with big gov. spending projects, will greatly favour telecoms/energy providers/etc, with these types of companies being the sector bedrock. As always selecting which ones, and getting them cheap/unleveraged is the challenge.

Discretionary consumer spending will fall, but staple consumer spending will have to be spend - energy/food/healthcare etc

On 04/10/2019 at 14:52, spygirl said:

US job figures are still coming in very strong.

US has run out of employable people.

Companies are doing job fairs in prisons.

i've been thinking about the jobs figures - what happens when everyone has a job. How do you increase consumption abov trend without increasing productivity if everyone has a job - unless there is some amazing technology advancement you can't so at best all you can do is keep job growth in line with production, which isn't possible because the use of debt has employed people today to produce goods, which would be affordable in the future but are unaffordable now because we're not sufficiently productive now. Too much production and not enough demand.

They can't increase demand without increasing debt fund production now, but whose going to lend at 0% rates - only the state, because there is no commercially sound reason to do so. Does it matter whether we have a Tory or Labour government at this point, maybe - you can print and give individuals handouts and increase the pay of public servants or subsidise corporations (incentives or tax breaks or lower estate/licence costs) to build stuff or a combination of the two. I think the former sees higher inflation in the currency and overall growth - the latter sees higher currency inflation (but not as much as the former) and sector specific growth or a combination. Either way there will be inflation no matter what - but when.

[spygirl]

2 hours ago, Moominpapa said:

unfortunately it did not come with figures just relative volume.

I dont think you can see them as bond proxies, even the gold miners that i've bought i see very much as an equity allocation even though they have  gold in the ground. I dont see how you substitue one asset for another in a complete different class - they don't act in the same way for example a company's bond coupon will never pay more that the agree amount (save for linkys) but a company can increase decrease its dividend and the face value of the share is subject to change whereas the nominal face value of the bond will remain the same. 

Discretionary consumer spending will fall, but staple consumer spending will have to be spend - energy/food/healthcare etc

i've been thinking about the jobs figures - what happens when everyone has a job. How do you increase consumption abov trend without increasing productivity if everyone has a job - unless there is some amazing technology advancement you can't so at best all you can do is keep job growth in line with production, which isn't possible because the use of debt has employed people today to produce goods, which would be affordable in the future but are unaffordable now because we're not sufficiently productive now. Too much production and not enough demand.

They can't increase demand without increasing debt fund production now, but whose going to lend at 0% rates - only the state, because there is no commercially sound reason to do so. Does it matter whether we have a Tory or Labour government at this point, maybe - you can print and give individuals handouts and increase the pay of public servants or subsidise corporations (incentives or tax breaks or lower estate/licence costs) to build stuff or a combination of the two. I think the former sees higher inflation in the currency and overall growth - the latter sees higher currency inflation (but not as much as the former) and sector specific growth or a combination. Either way there will be inflation no matter what - but when.

You get people to do your house work.

Then get people to invent machines to do housework.

[dgul]

2 hours ago, Moominpapa said:

...

i've been thinking about the jobs figures - what happens when everyone has a job. How do you increase consumption abov trend without increasing productivity if everyone has a job - unless there is some amazing technology advancement you can't so at best all you can do is keep job growth in line with production, which isn't possible because the use of debt has employed people today to produce goods, which would be affordable in the future but are unaffordable now because we're not sufficiently productive now. Too much production and not enough demand.

...

I have this suspicion that everyone always will have a job.  It is just a question of what technology does to define what sort of job.

I actually find it interesting.

Eg, classically you had 'the cobbler buys bread off the baker, who buys flour from the miller who buys wheat from the farmer who buys boots from the cobbler'.  That's the basis of the economy -- the money is just the thing that makes the real stuff (goods in this case) move.

Nowadays I think we've got to a point where a substantial part of the economy is 'the personal trainer buys a ballooning experience from the ballooner, who buys cleaning services from the cleaner who buys a clown for his kid's birthday who buys training from the personal trainer'.

And the more automation takes over the production of necessary goods and food, the more people will spend all their time/money on services -- and the more automation takes over necessary services (eg, nursing, say), the more people will spend their time/money on frivolous services.

This is, IMO, the future of leisure that was predicted by Keynes -- where 'we'd only be working 15 hours a week'.  It is more or less true -- on average I think workers only 'work' 15 hours a week on the sort of thing that was 'work' in the 1930's (I mean across all workers -- about 50% of jobs are 'work' as defined by a 1930's person).  The rest of the working time in the country is spent on leisure -- only we now expect to pay people to assist in our leisure where in 1930's Britain leisure was cheap or free.

[Democorruptcy]

19 hours ago, sancho panza said:

I constantly reassess where I think we're at and where we're going in this process.I've been a deflationista for 15 years but over the last couple I've had to accept that print they will.I still find it hard to reason how we won't all go Japanese.Could it be that they went japanese on their own and you can't have 100 countries all devaluing at the same time.....we have aging populations in the West which may inhibit any attempts at reflation.......

 

I was thinking about Japan yesterday. They started THE housing bubble and QE? In the past I remember reading about how many USA assets the Japanese were buying. Once one country starts doing it then they create so much unearned money, that they all have to do it? Otherwise the other countries see too many of their assets bought up. A weaker currency should mean a country has more chance of having it's assets bought up by countries with stronger currencies but is it the scale? As long as the country can keep producing enough unearned money via QE, housing bubbles, shadow banking etc it can still buy it's own (protect) or assets of another country (invade). Each Dollar, Yen, Renminbi is a soldier marching to get some assets, in a bloodless war?

 

[spygirl]

6 hours ago, stokiescum said:

Your looking at 110k morgage that’s 900 a month over 12 years say next August I’d have 30k more that’s about 650 for a similar type morgage bit to risky on 1 income 

https://www.home.co.uk/guides/house_prices_report.htm?location=st6&all=1

Nothing to show, price wise, for 15 years.

Absolute massive drop in sales in 08. Worse ive seen to be honest.

Offer 140k.

Get a better paid lodger, charge 350 all in.

Get two and its no brainer.

I dont think youll lose money.

But i dont think youll make any.

I have a theory, which is looking spot on as time goes by.

In an area with bombed out wsges n MMR, prices platea out at 5x median wage.

It then becomes almost impossible to see above that, no matter how big or nice a house. No buyers, or rather, no finance for buyers.

Get someone who can chuck in 1x meduan wage in cash and its a buyers market.

[DurhamBorn]

1 hour ago, spygirl said:

https://www.home.co.uk/guides/house_prices_report.htm?location=st6&all=1

Nothing to show, price wise, for 15 years.

Absolute massive drop in sales in 08. Worse ive seen to be honest.

Offer 140k.

Get a better paid lodger, charge 350 all in.

Get two and its no brainer.

I dont think youll lose money.

But i dont think youll make any.

I have a theory, which is looking spot on as time goes by.

In an area with bombed out wsges n MMR, prices platea out at 5x median wage.

It then becomes almost impossible to see above that, no matter how big or nice a house. No buyers, or rather, no finance for buyers.

Get someone who can chuck in 1x meduan wage in cash and its a buyers market.

A lodger is a superb way of earning tax free cash due to the rent a room scheme.The knack is to use the money to whack the mortgage down.I did it many years ago.Mistake i made was it was a good friend.We ended up pissed all the time and all around the country seeing women we met online.After about 6 months i started coming home to women id never met before who he told i was the lodger,empty cider cans everywhere and my health was going downhill.I sent a text to a female friend saying how sick i was of his scruffy ways but sent it to him by accident.He ended up meeting a woman a couple of weeks later and moving out and we lost touch.He died a couple of years ago.He was a very good friend and it ruined out friendship,something i really really regret,especially now il never see him again.I think the best way is someone of the opposite sex and/or not a really close friend.

[Democorruptcy]

11 hours ago, stokiescum said:

This ones been reduced and I'm watching to see what it goes for it's a nice house (no laughing at the back ) High Lane, Tunstall, Stoke-on-Trent, ST6
https://www.rightmove.co.uk/property-for-sale/property-83548910.html

I'm not keen on Tunstall but did go a few times for a Buffet Fever.

[spygirl]

4 minutes ago, DurhamBorn said:

A lodger is a superb way of earning tax free cash due to the rent a room scheme.The knack is to use the money to whack the mortgage down.I did it many years ago.Mistake i made was it was a good friend.We ended up pissed all the time and all around the country seeing women we met online.After about 6 months i started coming home to women id never met before who he told i was the lodger,empty cider cans everywhere and my health was going downhill.I sent a text to a female friend saying how sick i was of his scruffy ways but sent it to him by accident.He ended up meeting a woman a couple of weeks later and moving out and we lost touch.He died a couple of years ago.He was a very good friend and it ruined out friendship,something i really really regret,especially now il never see him again.I think the best way is someone of the opposite sex and/or not a really close friend.

What you want is a mon to fri lodger.

Someone who travels down sunday - or monday. Then fucks off home on friday, leaving the fun time - friday weekend to yourself.

Lodger saves of accomodation n travrl/commute, which can be phenominal.

You get 300 extra to chuck at mortgage.

Avoid doleys at all cost. And 80% of under 25s, at least ones from the same locality. An under 25 from miles away wont be inviting his mates who still live with mam n dad around.

 

[Moominpapa]

3 hours ago, spygirl said:

You get people to do your house work.

Then get people to invent machines to do housework.

Yeah but people have been saying that for the past 8000 years and still no ones invented one that doesn't need constant human intervention and isn't crap.

[Sugarlips]

On 05/10/2019 at 00:14, BearyBear said:

Meanwhile HSBC is slashing rates on saving accounts... including the reg saver from 5% to 2.75%...

Something is definitely up with them..another 10000 jobs going, on top of the 4700 that have gone in recent weeks..

https://www.ft.com/content/b43e7b3e-e6c7-11e9-b112-9624ec9edc59

[Harley]

5 hours ago, Sugarlips said:

Something is definitely up with them..another 10000 jobs going, on top of the 4700 that have gone in recent weeks..

https://www.ft.com/content/b43e7b3e-e6c7-11e9-b112-9624ec9edc59

Paywall, worthless link if you do not have a subscription.  Or is there another way?

[Castlevania]

34 minutes ago, Harley said:

Paywall, worthless link if you do not have a subscription.  Or is there another way?

https://www.google.co.uk/amp/s/www.cityam.com/hsbc-reportedly-mulling-up-to-10000-job-cuts/amp/

City AM version

[spygirl]

8 hours ago, Sugarlips said:

Something is definitely up with them..another 10000 jobs going, on top of the 4700 that have gone in recent weeks..

https://www.ft.com/content/b43e7b3e-e6c7-11e9-b112-9624ec9edc59

Software meet banking, banking meet software.

Finsec worker meet the dole queue.

If anything was going to be reamed by digitisation its jobs that are bascially digit based - finance.

Its only the bad selling and leverage that have kept the finsec one of the UKs major job creators.

No more.

 

[DurhamBorn]

2 hours ago, Harley said:

Paywall, worthless link if you do not have a subscription.  Or is there another way?

https://www.facebook.com/l.php?u=   that followed by the full link after the = ,enter then click "follow link",it should get you everything on the FT site behind the paywall.

[Talking Monkey]

2 hours ago, spygirl said:

Software meet banking, banking meet software.

Finsec worker meet the dole queue.

If anything was going to be reamed by digitisation its jobs that are bascially digit based - finance.

Its only the bad selling and leverage that have kept the finsec one of the UKs major job creators.

No more.

 

I reckon this 10,000 is just the start when they are done HSBC will be a lot smaller

[BearyBear]

Anecdotally, I've used "How Much Can I Borrow" calculator on HSBC website many times in the past years and nobody has ever contacted me... until last week, when someone phoned me at 7pm on the same day I've run the calculator and was very eager to offer me a mortgage for a much higher sum than I anticipated. Weird when other banks are retreating from offering these..!

[Errol]

HSBC may well be in trouble due to what is happening in Hong Kong.

[Castlevania]

I’d expect Standard Chartered to fall before HSBC.

[Errol]

China adds over 100 tons of gold to its coffers this year amid ongoing trade war with US

The People’s Bank of China raised bullion reserves to 62.64 million ounces (1,957 tons) last month from 62.45 million (1,951 tons) in August, bringing this year’s gold haul to over 100 tons.

https://www.rt.com/business/470351-china-gold-buying-spree/

[Barnsey]

It's been great to see travel companies with vacancies reaching out to Thomas Cook staff but can't help think when other companies feel the strain as the deflationary bust gets underway, all this good will may dissipate very rapidly.

[JMD]

19 hours ago, dgul said:

I have this suspicion that everyone always will have a job.  It is just a question of what technology does to define what sort of job.

I actually find it interesting.

Eg, classically you had 'the cobbler buys bread off the baker, who buys flour from the miller who buys wheat from the farmer who buys boots from the cobbler'.  That's the basis of the economy -- the money is just the thing that makes the real stuff (goods in this case) move.

Nowadays I think we've got to a point where a substantial part of the economy is 'the personal trainer buys a ballooning experience from the ballooner, who buys cleaning services from the cleaner who buys a clown for his kid's birthday who buys training from the personal trainer'.

And the more automation takes over the production of necessary goods and food, the more people will spend all their time/money on services -- and the more automation takes over necessary services (eg, nursing, say), the more people will spend their time/money on frivolous services.

This is, IMO, the future of leisure that was predicted by Keynes -- where 'we'd only be working 15 hours a week'.  It is more or less true -- on average I think workers only 'work' 15 hours a week on the sort of thing that was 'work' in the 1930's (I mean across all workers -- about 50% of jobs are 'work' as defined by a 1930's person).  The rest of the working time in the country is spent on leisure -- only we now expect to pay people to assist in our leisure where in 1930's Britain leisure was cheap or free.

I agree, though some sectors will really suffer such as retail/transport etc, some will expand such as health sector.

However overall automation will adversely hit most jobs. So I see government setting a 3-day week to manage the employment down-trend along with universal basic income to incentivise/bribe and encourage take-up (within 25 years a 3-day week will become the norm, just like Saturday working used to be for the masses). This will not be a bad thing as free time will be a real benefit for most people, including being financially advantageous - i.e. child care will no longer be required for two parent families if they correctly stagger their own work week; diy clubs will spring up (already happening) to teach people to do tasks instead of hiring trades people.

That's the 'good side' - Unfortunately, I don't foresee a complete utopian future for all. I think the West can just about achieve this transition - there will be painful social dislocation and a 'new politics' will emerge, but I think the West can successfully create a new social contract. And hopefully Asia - in particular China - and Middle East will be able to adapt to the changes, because their societies are generally more cohesive and patient. But my concern would be Africa and South America where their economies and growing populations will want what the West has and will not be prepared to wait 50 years for their economies to play 'catch up' with the West. Unfortunately the differences between rich and poor nations will increasingly be seen through the poisonous and self-destructive lens of 'racial exploitation'... no good will come of this and immigration problems that the West has experienced so far will be nothing compared to the probable mass exodus of people in the future, exacerbated by climate change viewed as yet another harm inflicted by the West.

(BTW as an aside, I do actually hope that carbon is the main cause of climate change as this scenario will at least provide a possible solution, allowing us (the evil West!) to invent 'artificial trees to re-absorb the carbon', I believe that technology is the only way to solve the climate crises because China/India will continue to produce more and more carbon for decades to come, although if Piers Corbyn (Jeremy's brother) is correct it is down to sun spot activity, tragically meaning I guess there is no practical solution).  

        

 

[JMD]

18 hours ago, spygirl said:

https://www.home.co.uk/guides/house_prices_report.htm?location=st6&all=1

Nothing to show, price wise, for 15 years.

Absolute massive drop in sales in 08. Worse ive seen to be honest.

Offer 140k.

Get a better paid lodger, charge 350 all in.

Get two and its no brainer.

I dont think youll lose money.

But i dont think youll make any.

I have a theory, which is looking spot on as time goes by.

In an area with bombed out wsges n MMR, prices platea out at 5x median wage.

It then becomes almost impossible to see above that, no matter how big or nice a house. No buyers, or rather, no finance for buyers.

Get someone who can chuck in 1x meduan wage in cash and its a buyers market.

Spygirl, thanks for the great link to the house-price data site.

I tested it for my area and it looks accurate for what i remember for house prices here between year 2000 and now. I know its based on land registry sales data so should be accurate but its not always the case. I wonder, what do others think of it in terms of their own locality in regards to what they know happened to house prices for them (or just their own property perhaps)?