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

[Castlevania]

1 hour ago, DurhamBorn said:

Economy has been smashed not because of inflation,but because most private sector workers wages stopped going up by RPI +.When i was 20 wages went up every year with RPI,the question was how much on top.In an average year 0.5% to 1% on top of RPI.Bad year only RPI,fantastic year RPI+1% +an extra holiday.

Once Labour were elected in the 90s as those pay increases went to government instead to he handed out in welfare and to sub council workers (mostly mid to high tier council workers).

 

That was the “success” of central bank inflation targeting. Companies stopped giving annual inflation linked pay rises. 

[dgul]

19 hours ago, Heart's Ease said:

https://www.nytimes.com/2014/12/21/upshot/of-kiwis-and-currencies-how-a-2-inflation-target-became-global-economic-gospel.html

Not sure if we've had this on the thread before but always a good read of how the 2% inflation target came about in the first place.

I think it is fairly simple -- we don't want it too high, we don't want it too low... Oh, let the Central Bank of Jamaica explain:

Now over to Andrew Bailey for our version.

[DurhamBorn]

2 hours ago, Cattle Prod said:

Great find! And welcome to the thread. 

One thing kept jumping around in my head watching that: "bond proxy bond proxy bond proxy". People are talking about tech stocks being bond proxies, which is a little insane...I prefer my bond to pay 8.6%! Exxon has always been the financially strongest major, and at this dividend, is probably the best bond proxy in the market.

He makes a very good point about oil inventory overhang masking inflation. Inflation is 'stuck in the pipes' as DB would say till the market tightens, then it will quickly run into everything. Currently we are about 120m bbl in excess in the USA, which would point to Q1 next year. Q4 this year if the market wakes up and starts front running it. How does that fit with your roadmap leads and lags, @DurhamBorn?

To be honest iv done very little on oil because im positioned now in the stocks and i wont be selling until oil goes over $200,maybe $250 later in the cycle.

I would expect the lag to be around 6 months though and would expect oil to move higher towards the end of the year,into next year.That could be even from a lower level than here.The key is once blocks move into reflation mode and start to compete.China,India,EU,US mostly.It might not even be direct oil demand for transport etc that sets things moving,it could be petro-chemicals ,investment demand,conflict.

I do think there is a good chance we get one more shake down though to remove the last weak hands from the sector.

As you say its incredible that the market thinks tech are bond proxies,but thats the way a bubble works,convincing themselves of why a 2% cash flow yield is great.

Most of this is because people still think inflation is dead forever,and they simply dont understand an inflation cycle.Very few,maybe none,are in the city or Wall Street etc who had to trade through the 70s.Inflation destroys wealth and most portfolios have almost zero protection from it.For ordinary people years ago they would of been buying the oilies at these prices,but the media have convinced everyone they are dead money.

Its like Amazon.How many investors piling in actually know they have huge input costs directly linked to inflation?,probably zero.Every widget they sell is at the end of a complex supply chain where inflation will ratchet up at every point.

[wherebee]

8 minutes ago, DurhamBorn said:

To be honest iv done very little on oil because im positioned now in the stocks and i wont be selling until oil goes over $200,maybe $250 later in the cycle.

I would expect the lag to be around 6 months though and would expect oil to move higher towards the end of the year,into next year.That could be even from a lower level than here.The key is once blocks move into reflation mode and start to compete.China,India,EU,US mostly.It might not even be direct oil demand for transport etc that sets things moving,it could be petro-chemicals ,investment demand,conflict.

I do think there is a good chance we get one more shake down though to remove the last weak hands from the sector.

As you say its incredible that the market thinks tech are bond proxies,but thats the way a bubble works,convincing themselves of why a 2% cash flow yield is great.

Most of this is because people still think inflation is dead forever,and they simply dont understand an inflation cycle.Very few,maybe none,are in the city or Wall Street etc who had to trade through the 70s.Inflation destroys wealth and most portfolios have almost zero protection from it.For ordinary people years ago they would of been buying the oilies at these prices,but the media have convinced everyone they are dead money.

Its like Amazon.How many investors piling in actually know they have huge input costs directly linked to inflation?,probably zero.Every widget they sell is at the end of a complex supply chain where inflation will ratchet up at every point.

This is a fantastic point.

I remember the 70's, just, and the rising prices.  Mainly in terms of sweets and crisps and magazines, because I was a spotty oik.  But I do wonder how a generation that has been used to everything getting cheaper can even conceive of a world in which your salary buys less food this month than last month.

[Chewing Grass]

1 minute ago, wherebee said:

This is a fantastic point.

I remember the 70's, just, and the rising prices.  Mainly in terms of sweets and crisps and magazines, because I was a spotty oik.  But I do wonder how a generation that has been used to everything getting cheaper can even conceive of a world in which your salary buys less food this month than last month.

Cheapest I remember crisps was 2p a bag probably about 1972 by 1978 they were at least 10p.

Correct me if I'm wrong, it was a long time ago.

[Hardhat]

1 hour ago, dgul said:

I think it is fairly simple -- we don't want it too high, we don't want it too low... Oh, let the Central Bank of Jamaica explain:

Now over to Andrew Bailey for our version.

That is hilarious

[nirvana]

EXXON sub 40!!! Pile in you capitalist mother fuckers!!!! 

[Noallegiance]

38 minutes ago, wherebee said:

But I do wonder how a generation that has been used to everything getting cheaper can even conceive of a world in which your salary buys less food this month than last month.

Tell us which useful stuff has gotten consistently cheaper over the last 20 years.

You are J Powell and ICMFP.

[nirvana]

3 hours ago, DurhamBorn said:

Economy has been smashed not because of inflation,but because most private sector workers wages stopped going up by RPI +.

RPI is a sideshow...my spidey senses are detecting too many Thatcher lovers around here....this is my take on the shagged economy and hyper inflation (private sector robbing the plebs) already in action 

 

[sleepwello'nights]

2 minutes ago, Noallegiance said:

Tell us which useful stuff has gotten consistently cheaper over the last 20 years.

You are J Powell and ICMFP.

Computers and most tech.

[Popuplights]

16 minutes ago, 5min OCD speculator said:

EXXON sub 40!!! Pile in you capitalist mother fuckers!!!! 

It's unbelievable isn't it. World's largest company in 2014.

[MrXxxx]

5 hours ago, 5min OCD speculator said:

@MrXxxx link your FT article, I've got a plugin for paywall workaround.....I'll post info in stealth cos I don't want any tom dick or harry 'banker cunt' using it 

re inflation, every time the cunts mention inflation replace that with 'cost of living increase' and see how it sits with you and your family???........this is why the economy has been getting fucked for the last 30+ years methinks 

https://ftalphaville.ft.com/2020/08/27/1598512639000/Markets-Now---Thursday-27th-August/

[MvR]

15 hours ago, M S E Refugee said:

I nearly opened an account with Saxo Bank until I found out that the Chinese are the majority shareholders

I didn't know that..  Definitely avoid like the plague then. If they own a majority, they will have CCP agents in key roles, able to take control of your account.  If hostilities break out,  there's a real chance they'll steal you money, or find some other way to fuck you over.  Not worth the risk.

[nirvana]

10 minutes ago, MrXxxx said:

https://ftalphaville.ft.com/2020/08/27/1598512639000/Markets-Now---Thursday-27th-August/

yup can read that.....

I'm getting my lucky coin out........

Exxon @ 40 us cents is about 30p......sooooo 100k shares is about £30k AND is this a good hedge against £ cos it's US $ denominated?

OR

Straight RDSB purchase?

COME ON! spin the wheel of fortune! We need to be able to vote on individual posts 

Hold on......option 3, long Tesla? 

[janch]

1 hour ago, wherebee said:

I remember the 70's, just, and the rising prices.  Mainly in terms of sweets and crisps and magazines, because I was a spotty oik.  But I do wonder how a generation that has been used to everything getting cheaper can even conceive of a world in which your salary buys less food this month than last month.

The worst bit wasn't food so much as the mortgage.  I don't think you could get a fixed rate then so you were always on the SVR (Standard Variable Rate) and it seemed to go up every month (end of 70s/early 80s).

[leonardratso]

22 minutes ago, 5min OCD speculator said:

yup can read that.....

I'm getting my lucky coin out........

Exxon @ 40 us cents is about 30p......sooooo 100k shares is about £30k AND is this a good hedge against £ cos it's US $ denominated?

OR

Straight RDSB purchase?

COME ON! spin the wheel of fortune! We need to be able to vote on individual posts 

Hold on......option 3, long Tesla? 

cents? pence?

[nirvana]

16 minutes ago, leonardratso said:

cents? pence?

Sorry having a blond moment  Meant US$ and £s sterling.........calculator got confused when I started thinking about 'hedging £ strength'......that's my excuse anyhow 

[Popuplights]

12 minutes ago, 5min OCD speculator said:

yup can read that.....

I'm getting my lucky coin out........

Exxon @ 40 us cents is about 30p......sooooo 100k shares is about £30k AND is this a good hedge against £ cos it's US $ denominated?

OR

Straight RDSB purchase?

COME ON! spin the wheel of fortune! We need to be able to vote on individual posts 

Hold on......option 3, long Tesla? 

Tesla. Definitely. All in.

[M S E Refugee]

We must be close to the bubble popping when Davey Day Trader can make money by picking Scrabble tiles out of a bag.

He's been trolling professional investors for the past few months.

[nirvana]

NASDAQ over 12k!!!

 

 

[nirvana]

31 minutes ago, M S E Refugee said:

Davey Day Trader

that's Dave Portnoy.....he's a cunt but he can be entertaining.... Looking like a 300k day....

 

[M S E Refugee]

6 minutes ago, 5min OCD speculator said:

that's Dave Portnoy.....he's a cunt but he can be entertaining.... Looking like a 300k day....

 

Portnoy's Rough n Rowdy is quite entertaining.

[Castlevania]

2 hours ago, MvR said:

I didn't know that..  Definitely avoid like the plague then. If they own a majority, they will have CCP agents in key roles, able to take control of your account.  If hostilities break out,  there's a real chance they'll steal you money, or find some other way to fuck you over.  Not worth the risk.

Owned by Geely who are predominantly a car manufacturer - they own the Volvo and Lotus brands now. I’m not sure how owning a bucket shop fits in.

[Popuplights]

1 hour ago, 5min OCD speculator said:

that's Dave Portnoy.....he's a cunt but he can be entertaining.... Looking like a 300k day....

 

I particularly like the way he has the horse racing on in the background.

[Noallegiance]

3 hours ago, sleepwello'nights said:

Computers and most tech.

I'll trump those trinkets with food and shelter. You know. Stuff to live.