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

[sancho panza]

45 minutes ago, sam1994 said:

Do they manage it directly though or is it outsourced?

Thanks for the info 

They msut manage it sthemselves given how they're going against the grain of investemtn advice.

https://www.bankofengland.co.uk/-/media/boe/files/about/human-resources/pensionreport.pdf

1 hour ago, Popuplights said:

I'm balls deep in RDSB. 20% down on my holding, as I had a tranche I bought at 20 quid, but its a hold for me.

I wouldn't even blink at that

[Majorpain]

3 hours ago, DurhamBorn said:

I expect councils are in for a massive shock.Once the cycle settles in people wont accept big council tax increases.How the government deals with that who knows.

What this lockdown has shown is well over half of the jobs being done nobody needs.Thats going to have an incredible affect.Inflation is coming hard.

Arguably those two are related!  Private sector purge of non viable jobs is currently underway, public sector however is full of the unproductive whose jobs are protected.

It would be interesting to see if there is any difference in areas with area mayors (Teeside/Manchester etc) and those with just local councils.  Tyneside area has 4 councils, all of which do their own thing with little co-ordination and don't want an area mayor as they would lose a lot of their power.  The entire structure of local government needs looking at to check its working effectively IMO.

[Chewing Grass]

4 minutes ago, DurhamBorn said:

Yes,but the big ticket items become much more expensive.That £250 a month lease car becomes £400 a month as rates increase.

I found an old bank statement from 20 years ago when tidying up and was surprised to see a debit for £350 for the finance on a people carrier for carting our three kids and stuff around in, this was a 20K vehicle at the time.

Dude next door foolishly has 4 daughters and has just got a 20 plate £35K VW for the same purpose on a lease 10% down and £350 per month so is stumping up over 20K for the use of it for 4 years.

This is only possible on low single digit interest rates, in reality, in a higher interest, inflationary environment it should be somewhere between £500 & 600 per month.

Many people who lease will be absolutely fucked when their current lease expires and will have to drive cars that won't make them briefly feel good.

[DurhamBorn]

4 minutes ago, Chewing Grass said:

I found an old bank statement from 20 years ago when tidying up and was surprised to see a debit for £350 for the finance on a people carrier for carting our three kids and stuff around in, this was a 20K vehicle at the time.

Dude next door foolishly has 4 daughters and has just got a 20 plate £35K VW for the same purpose on a lease 10% down and £350 per month so is stumping up over 20K for the use of it for 4 years.

This is only possible on low single digit interest rates, in reality, in a higher interest, inflationary environment it should be somewhere between £500 & 600 per month.

Many people who lease will be absolutely fucked when their current lease expires and will have to drive cars that won't make them briefly feel good.

My 15 year old PUG makes me feel good every day.Knowing it costs me £24 a month (parts/MOT/repairs over 12 months).I have been looking though,im going to buy something probably 5 years old around January.

[leonardratso]

12 minutes ago, DurhamBorn said:

My 15 year old PUG makes me feel good every day.Knowing it costs me £24 a month (parts/MOT/repairs over 12 months).I have been looking though,im going to buy something probably 5 years old around January.

spendthrift.

[sancho panza]

6 hours ago, Cattle Prod said:

The other element of having 63-100% inflation over the cycle is: will wages keep up this time? You could argue that stronger unions forced them to in the 70s, and I think that's less likely this time around. Unless you're in the public sector of course. There will be a major divide between the public sector "I'm all right Jack" inflation protected wages and pensions, and the private sector, who are going to get even more buggered. Where is the breaking point? I'm already at tax revolt stage myself, like many here, I wonder how many else feel the same way. The about turn in government signals in working from home may be to do with this.

I was talking to a friend in one of the top City investment firms today. Decent level, six figures etc. If he keeps his job after a redundancy round, wfh permanently is going to be the encouraged option. He's busy looking at making himself tax resident in Portugal. Wfh has opened up this option for hundreds of thousands of medium to high earners, previously only available to the private jet types. A fleet of them fly over me every Sunday to Farnborough to get back to the office for Monday. Now, no one of even moderate means has to do that. Getting a Ryanair out on Friday night back on Sunday was always too tight. Heading off on Wed night back to London on Monday evening for 2 days in the office: not a problem. This must be scaring the living shite out of the government: if the top 5% of earners (~ > £80,000) pay half of all income tax, all the ones who can wfh can afford to do what I described. So a huge proportion of the tax base is now a serious flight risk. Its happening right now in New York: the mayor is literally begging for the rich people fleeing the city to come back as his tax base is falling to pieces. 70s all over again. 

So Sunak better be careful about putting up taxes. An increasing number of people are becoming aware that the Covid money was not borrowed from any little old ladys pension via gilts, but just typed out on a keyboard at the BOE. Why the hell should my labour be used to "pay that back"? Being forced on pain of imprisonment to hand over a % of your labour to repay something made out of thin air is indeed a form of slavery. Ill be off to Portugal or Greece before that happens. There is a silent war for taxes going on I think, and is likely to become a noiser feature of this cycle. It's one race to the bottom I wholeheartedly support!

https://www.dailymail.co.uk/news/article-8630359/500bn-city-investment-firm-tells-staff-work-home-permanently.html

There are a good few issues here CP

1) I don't really envisage wages going up but I do see prices moving up.WE jsut don't have the sort of labour market squeeze that hsitorically pushes wages up

2) ref the public sector-which I work in-I'd say a few things.There are two levels in it,first are the oneswho've been in a few years,are top of their pay band,bought a hosue for cheap in teh 90's and doing nicely.The bulk are paid a reasonable bit for what they do but dont lead luxry lives.

I see this at my workplace,the poeple who've been there 10 years plus are on a good screw and generally know it.The younger end are on crap moeny £24k for teh first three years as a Paramedic(trust me,it's not worht the shit) ,but overwhelmingly,they are all well aware their pension is a lot better thna most non public sector people.They alos know that if they stick it out long enough,theyir pay will go up.

This is the inherent problem in the public sector,the bulk of the people doing the work are generally poorly paid(I say that because for example, the other day a mate was in our crew room and counted 15 people and his 8 years of service made him the msot senior which would have been unheard of 5 years ago when the room would have had people with 20-25 years service in).You see it with the police-anyone hitting 50 eyeing retirement,their replacements are 21,and on £22k.They jsut eye their pension,eye the relentless tream of shit they are epxeceted to deal with and it's a no brainer.Their replacements wont retire until theyre 65+++

and this is where we are .Leicesterhire on a Friday night-and this includes a population of 700,000 has 35-40 police on patrol at night.That's nothing.15 years ago would likely have been circa 120.

3) hence I totally get why the net taxpayers are angry,they're being asked to pony up for crap service and for benefits for people who've never worked and have no intention of doing so.And that's before we get to the train of dingies landing at dover.ALso being asked to pay for pensions for people the like of which they'll never enjoy.One of the reasons,like DB,I barely work above the tax threshold and won't unless Mrs P loses here job.

I can totally see why taxpayers would reassess their priorities,I hope they do and I hope it brings some real change.

[sancho panza]

4 hours ago, DurhamBorn said:

 

I expect councils are in for a massive shock.Once the cycle settles in people wont accept big council tax increases.How the government deals with that who knows.

What this lockdown has shown is well over half of the jobs being done nobody needs.Thats going to have an incredible affect.Inflation is coming hard.

I could bang on about public sector waste until the cows come home.The worst are the councils.Leicesterhsire has 9,all with CEO's and acolytes who want their beds feathering.

I honestly suspec they could cut 75% of council jobs and see no drop in service especially given the duplication of roles at a district level..NHS bit more difficult but loads of back office duplication and admin staff on Band 7 salareis for josb that in the priavte sector would likely pay 35%-40% less.

[sancho panza]

47 minutes ago, DurhamBorn said:

@sancho panza i think K+S offers massive upside,but with elevated risk.If they can offload the US salt business and de-lever then they might do a 5x over the cycle.OCI NV is another that could multi bag,though they use natural gas so could be more early cycle than late.

Cheers for the heads up on OCI.I'm still working off paperwork from 2019 in terms of coma csale scores.I'm going to do new SCS scores on Baccy,Telecoms and will redo potash as we're looking for more.SDF look like a great play and could pontenailly multibag,.

It genuinely amazes me how you know so the issues with so many indivudal companies off the top of your head.I spray n pray exactly because I can't cope with that level of work,fair play DB.

[Hardhat]

2 hours ago, Popuplights said:

I'm balls deep in RDSB. 20% down on my holding, as I had a tranche I bought at 20 quid, but its a hold for me.

I'm also around 20% down, keep adding. Holding for 2028. It's also one of my largest holdings, as imo it's been so cheap for so long.

[macca]

2 hours ago, Majorpain said:

public sector however is full of the unproductive whose jobs are protected.

I used to work for a council.. 

They had a road planning department.. It was setup many moons ago to deal with NEW roads and expansion.. 

Once expansion ended, they became the speed bump and road obstacle department.. 

So if you ever wonder why they can't afford to fix the roads, but they can afford to put in pointless width restrictions and funny junctions.. thats why.. 

Multi million £ budgets they have to spend on utter pointless shit.. 

[JMD]

3 hours ago, sancho panza said:

There are a good few issues here CP

1) I don't really envisage wages going up but I do see prices moving up.WE jsut don't have the sort of labour market squeeze that hsitorically pushes wages up

2) ref the public sector-which I work in-I'd say a few things.There are two levels in it,first are the oneswho've been in a few years,are top of their pay band,bought a hosue for cheap in teh 90's and doing nicely.The bulk are paid a reasonable bit for what they do but dont lead luxry lives.

I see this at my workplace,the poeple who've been there 10 years plus are on a good screw and generally know it.The younger end are on crap moeny £24k for teh first three years as a Paramedic(trust me,it's not worht the shit) ,but overwhelmingly,they are all well aware their pension is a lot better thna most non public sector people.They alos know that if they stick it out long enough,theyir pay will go up.

This is the inherent problem in the public sector,the bulk of the people doing the work are generally poorly paid(I say that because for example, the other day a mate was in our crew room and counted 15 people and his 8 years of service made him the msot senior which would have been unheard of 5 years ago when the room would have had people with 20-25 years service in).You see it with the police-anyone hitting 50 eyeing retirement,their replacements are 21,and on £22k.They jsut eye their pension,eye the relentless tream of shit they are epxeceted to deal with and it's a no brainer.Their replacements wont retire until theyre 65+++

and this is where we are .Leicesterhire on a Friday night-and this includes a population of 700,000 has 35-40 police on patrol at night.That's nothing.15 years ago would likely have been circa 120.

3) hence I totally get why the net taxpayers are angry,they're being asked to pony up for crap service and for benefits for people who've never worked and have no intention of doing so.And that's before we get to the train of dingies landing at dover.ALso being asked to pay for pensions for people the like of which they'll never enjoy.One of the reasons,like DB,I barely work above the tax threshold and won't unless Mrs P loses here job.

I can totally see why taxpayers would reassess their priorities,I hope they do and I hope it brings some real change.

SP, interesting comments you make on the NHS. I agree but when you mention the 'shite employees have to take...', it reminds me how this rather depressing state of affairs applies across all public services. It's also I think why those same public services can't attract talented senior staff of character and skill that could help transform our public services. Ie there is too much beurocracy, too much blame-game/and today we can add pc shame-game to the list. I'm not saying senior people don't earn big salaries, they do, it's just that those positions frustratingly don't attract people of talent because such people simply can't be bothered doing these media spotlight/scrutinised public sector jobs when they can earn, for example, as much money employed as a 'humble HR director' in any one of our many thousands of large UK corporates.                                                                                                                                                              But I guess I shouldn't be too down on the NHS, after all its failings are 'systemic', tragically meaning in today's world there is no one too blame, nothing to see here, please move along. But is there hope of change?... The NHS is a centrally run beurocracy, so although it is ultimately doomed to fail (rather like the failing apparatus of the old USSR), for the foreseeable it remains an appendage of the state, meaning it is not only immortal (note, see earlier USSR comment) but now also canonised for its compassionate covid efforts. Actually I am being unfair in picking on the NHS, after all I do consider that most Western institutions are failing, whether they be education, law, politics.                                                                                                                                                                                                           Ok I've had my rant - and to return to the predictions of this thread - perhaps it's because i have recently watched some Peter Thiel on YouTube, the US tech paypal billionaire, where he says similarly critical things about America, and is particularly scathing about US academia and r&d, where he thinks that a corrupt herd mentality has all but halted tech progress since the moon landings. He is also scathing over lack of medical breakthroughs, and the dirth of leadership in general. Btw his take on mobile phones is that they merely offer users a distraction from our crumbling infrastructure! He is certainly a different type of silicon valley entrepreneur (Google him, I shan't list his other 'qualities'). I mention him because although highly intelligent, although he actively invests in tech and co-founded PayPal, and was first investor in FB, etc, he sees America's future as being isolationist, and views most world bodies as being 'against' America (well American ideals at least)... this does seem to be growing trend, so can't disregard Thiel's comments, after all Don Trump is really just an accidental president, and what follows Trump in 4 (I think) years time will be the main event to watch for!

[wherebee]

5 hours ago, Majorpain said:

Excellent post, if i was to play devils advocate and go Malthusian, there are not enough resources to make enough productive work for the 6 Bn odd people on the planet.  Mix that with some automation for the lower skilled and what you should really see is the value of labour (wages) fall dramatically in a simple supply/demand equation, that will obviously go down like a lead balloon.  Its been covered up so far by drawing wealth from the future through debt, but that really isn't going to work forever, the market will eventually have its revenge (see silver).  

I completely agree that if any government doesn't keep an eye on this, they could wake up one morning and find a chunk of their projected tax base has buggered off to another domicile.  Its a risk at the minute so its not new, but if technology has started to quickly change the game then the government needs to act faster or it will end up in trouble.

Or, like me, they just stop working.  I was a top rate taxpayer for ten years ish, not counting low tax years in Hong Kong.  I'll do anything to avoid that again.  I'm currently working about 20 hours a week, and having enough income to save a bit, invest a bit, buy whatever we need, and cover all bills.  My personal income tax bill this year will be zero (not sure about the company).  That 20 hours spare I now get with the kids, and to fix stuff round the property, is untaxable.

I honestly can't think how I would be encouraged to work harder unless they radically raise the income tax threshold.

 

 

[wherebee]

So I think it's time go get some more Shell.  Having seen how low the price is compared to the past 20 years - every time I look at that, I go WTF.

The big risk is that someone invents/releases a free energy source (think fusion/alien tech).  That would real fuck the oilies over for ever.

So - do I feel lucky.....

[MrXxxx]

13 hours ago, Cattle Prod said:

Ill be off to Portugal or Greece before that happens. There is a silent war for taxes going on I think, and is likely to become a noiser feature of this cycle.

I think this might be a good thread especially with Brexit looming I.e relocation, where, cost of living, tax implications, visa requirements, retirement etc. I don't know enough of the subject otherwise I would start it, but I could contribute having lived/travelled widely....anyone?

[AWW]

I don't think many working age Brits will move to continental Europe for the tax regime. Not enough for it to become a problem for HMG. Just too much of a culture shock, Brits generally won't speak the lingo. However, I do think plenty will leave London/SE if working from home does indeed become the new normal. So badly-run London/SE councils will be even more fucked than they already are, and London shitholes that have been recently gentrified by the arrival of the quite- well-off will return to being badlands.

[Castlevania]

11 hours ago, sancho panza said:

Decnt bit of info here.It's RPI .

I always like to point out that the BoE pension fund is 90% invested in linkers even though they keep telling us inflaiton is behind us.

https://www.vanguard.co.uk/documents/adv/literature/understanding-inflation-linked-bonds.pdf

One thing to consider is that the government were planning to change the inflation measure from RPI to CPIH on existing linkers and not compensate bond holders. There was a consultation earlier this year which I think may have got delayed due to the bat flu.

[BurntBread]

11 hours ago, sancho panza said:

We need to build up our potash more.WE got into ptoash saskatchwan back in 2016/17 on a one off,got a first tranche Oct 2019 then second tranche March 2020.I agree NTR looks great here,MOS has run up a lot already.YARa,SQM,ICL<look good and SDF for the leveraged play of the bunch

Thank you: interesting list of companies!

Some people here seem to use the short-hand "potash" for the agricultural miners, but I wonder whether phosphate is the more important game? One of the big theses on this thread is that we should "decomplexify" and get up-stream of the (assumedly) coming reflation, and there is nothing more upstream than agriculture. That needs machinery, fuel for machinery, and nitrogen, phosphorus & potassium. Nitrate s produced with oil, and P & K are both mined (needing machinery, oil and mining rights). However, potassium is not a scarce element, and given enough energy, it might even be possible to extract it from seawater (albeit having access to deposits which can be obtained at a low energy cost would be hugely profitable in a high-cost-of-energy environment). Phosphorous though is on the ACS list of endangered elements. I would think that companies with access to scarce deposits could really have the world's nuts in a vice (so to speak) in the not too distant future.

Anyway, several of these companies have both P & K, so all's good, but just wondered whether it would be worth splitting them out to have diversity across phosphorus & potassium.

On the agricultural theme, the other part we haven't spoken about much is ag equipment makers, like Deere & Co (which has had quite a run-up in share price), or CNHI or AGCO. Has anyone looked at these types of companies in more detail?

[leonardratso]

baglar fund?

 

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/b/barings-global-agriculture-class-i-gbp-accumulation

 

[DurhamBorn]

1 hour ago, Cattle Prod said:

Do they use Dutch natural gas I wonder, and would having to import gas feedstock effect their margins...

Dutch gas is almost all gone. Theyve been sitting on an ocean of it for the last 50 years, and has given them a free ride, though you won't hear them say this when they smugly tell you about their agricultural productivity. We learned how great the Dutch were at ag in school and I never understood how they did it till I worked in the North Sea. Easy to heat your greenhouses and pour fertiliser into your tomatoes when you are sitting on the biggest gas deposit in Europe, by far (more than 2x the entire North Sea gas deposits in the UK, in one field. They are having to shut it down now as it's emptying, collapsing a little and causing earthquakes).

 

Yes exactly,thats why i think they would be early cycle as gas prices lag potash,but then move past.They have a big plant in the Southern US,a huge new one in Iowa.It would be interesting to see where their feedstock comes from for their Dutch Geleen plant.That will be where gas swings really hit hard.Great assets,but not as cut and dried as Mosaic and Nutrien.

[DurhamBorn]

2 hours ago, BurntBread said:

Thank you: interesting list of companies!

Some people here seem to use the short-hand "potash" for the agricultural miners, but I wonder whether phosphate is the more important game? One of the big theses on this thread is that we should "decomplexify" and get up-stream of the (assumedly) coming reflation, and there is nothing more upstream than agriculture. That needs machinery, fuel for machinery, and nitrogen, phosphorus & potassium. Nitrate s produced with oil, and P & K are both mined (needing machinery, oil and mining rights). However, potassium is not a scarce element, and given enough energy, it might even be possible to extract it from seawater (albeit having access to deposits which can be obtained at a low energy cost would be hugely profitable in a high-cost-of-energy environment). Phosphorous though is on the ACS list of endangered elements. I would think that companies with access to scarce deposits could really have the world's nuts in a vice (so to speak) in the not too distant future.

Anyway, several of these companies have both P & K, so all's good, but just wondered whether it would be worth splitting them out to have diversity across phosphorus & potassium.

On the agricultural theme, the other part we haven't spoken about much is ag equipment makers, like Deere & Co (which has had quite a run-up in share price), or CNHI or AGCO. Has anyone looked at these types of companies in more detail?

Agree and its something we need to look at more,i simply bought the sector because the whole lot was hugely undervalued and will look at them all more going forward as i tweak holdings.

Nutrien is self sufficient in phosphate and Mosaic is of course huge in it.Im fully loaded on Mosaic,but might keep adding Nutrien as my holding is 60% of Mosaic 

[DurhamBorn]

@Harley any chance you could take a look at The Chemours Company

https://www.chemours.com/en?_ga=2.81938326.1807178523.1597575268-328863908.1597575268&_gac=1.145023232.1597575317.EAIaIQobChMIz5-mxMef6wIVUuztCh2bqAz-EAAYASAAEgIDn_D_BwE

https://www.hl.co.uk/shares/shares-search-results/c/chemours-co-the-common-stock-usd0.01

I meant to buy some in March but i never got any (doubled since) but might start to buy on any pull back,or drip in now anyway.

[Democorruptcy]

21 hours ago, Cattle Prod said:

I was talking to a friend in one of the top City investment firms today. Decent level, six figures etc. If he keeps his job after a redundancy round, wfh permanently is going to be the encouraged option. He's busy looking at making himself tax resident in Portugal. Wfh has opened up this option for hundreds of thousands of medium to high earners, previously only available to the private jet types. A fleet of them fly over me every Sunday to Farnborough to get back to the office for Monday. Now, no one of even moderate means has to do that. Getting a Ryanair out on Friday night back on Sunday was always too tight. Heading off on Wed night back to London on Monday evening for 2 days in the office: not a problem. This must be scaring the living shite out of the government: if the top 5% of earners (~ > £80,000) pay half of all income tax, all the ones who can wfh can afford to do what I described. So a huge proportion of the tax base is now a serious flight risk.
 

I think this is why the governbankment didn't add Portugal to the original places OK to fly to without quarantine. A lot of this flight quarantine might be to discourage taxpayers from looking abroad before the Brexit transition period ends.

I've been reading up on the Portugese NHR

Quote

 

There are many advantages to being a non-habitual tax resident in Portugal:

• Benefit from a special personal income tax treatment over a 10-year period
• Possibility of enjoying a tax exemption on almost all foreign source income
• 20% flat rate for certain Portuguese source incomes (from specific professions as well as income from self-employment), as opposed to normal Portuguese income tax rates of up to 48%
• No minimum stay requirement
• Become part of a white-listed tax environment within the EU
• A tax exemption for gifts or inheritance to direct family members
• No wealth tax
• Free remittance of funds to Portugal

https://www.globalcitizensolutions.com/nhr-portugal-tax-regime/

 

There isn't a minimum stay requirement and you don't need to buy a property. You are accepted with a rental agreement so don't even need to live there.

[Ma2]

Latest newsletter from the lovely Lyn ☺️
https://www.lynalden.com/august-2020-newsletter/

Topics include: 
-A deep look into odd behavior in the Treasury market. 
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[Shamone]

17 hours ago, DurhamBorn said:

@sancho panza i think K+S offers massive upside,but with elevated risk.If they can offload the US salt business and de-lever then they might do a 5x over the cycle.OCI NV is another that could multi bag,though they use natural gas so could be more early cycle than late.

Got a little bit of that, too.

[Shamone]

16 hours ago, sancho panza said:

There are a good few issues here CP

1) I don't really envisage wages going up but I do see prices moving up.WE jsut don't have the sort of labour market squeeze that hsitorically pushes wages up

2) ref the public sector-which I work in-I'd say a few things.There are two levels in it,first are the oneswho've been in a few years,are top of their pay band,bought a hosue for cheap in teh 90's and doing nicely.The bulk are paid a reasonable bit for what they do but dont lead luxry lives.

I see this at my workplace,the poeple who've been there 10 years plus are on a good screw and generally know it.The younger end are on crap moeny £24k for teh first three years as a Paramedic(trust me,it's not worht the shit) ,but overwhelmingly,they are all well aware their pension is a lot better thna most non public sector people.They alos know that if they stick it out long enough,theyir pay will go up.

This is the inherent problem in the public sector,the bulk of the people doing the work are generally poorly paid(I say that because for example, the other day a mate was in our crew room and counted 15 people and his 8 years of service made him the msot senior which would have been unheard of 5 years ago when the room would have had people with 20-25 years service in).You see it with the police-anyone hitting 50 eyeing retirement,their replacements are 21,and on £22k.They jsut eye their pension,eye the relentless tream of shit they are epxeceted to deal with and it's a no brainer.Their replacements wont retire until theyre 65+++

and this is where we are .Leicesterhire on a Friday night-and this includes a population of 700,000 has 35-40 police on patrol at night.That's nothing.15 years ago would likely have been circa 120.

3) hence I totally get why the net taxpayers are angry,they're being asked to pony up for crap service and for benefits for people who've never worked and have no intention of doing so.And that's before we get to the train of dingies landing at dover.ALso being asked to pay for pensions for people the like of which they'll never enjoy.One of the reasons,like DB,I barely work above the tax threshold and won't unless Mrs P loses here job.

I can totally see why taxpayers would reassess their priorities,I hope they do and I hope it brings some real change.

Too right. Most people don’t realise the mugs they are being taken for.