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

[Yadda yadda yadda]

12 minutes ago, Cattle Prod said:

Where do you hire it? The closest one to me seems to be in London.

I'm in London. Technically inner London. I expect they or their competitors will be in all mid-size and larger towns within a few years. There is a minimum population size that will support them. Clearly there is a minimum usage rate for the costs to stack up. There also has to be slack in the system so that one is always available.

Only a few places here, the usual suspects  A lot more if you switch to the USA. Might give some indication of the size of town that it is currently viable in. Enterprise is more widespread despite being later to the game.

https://www.zipcar.com/en-gb/cities

https://www.enterprisecarclub.co.uk/gb/en/home.html

 

[AWW]

10 minutes ago, JMD said:

But is it just about 'Western' cronyism or protectionism? Isn't the real source problem the West is starting to face up to all about having to reinvent its Western economic model? We currently rely on ever growing gdp to sustain our (unpayable) debt. Apparently there is no alternative to monetary collapse to reset things. And Isn't this why that can keeps getting kicked? What economic model we get next will be interesting to learn about, i don't look forward to the next few decades of experimentation... but eventually/ultimately i guess it will simply be a return to a more human scale (Adam Smith) free market system.

This is my gut feel. There has been too much debt in the system since the early 2000s. But in order to keep a fiat system on the road, you need to keep increasing debt. I don't see how ever negative interest rates would help, as they would reduce the amount of debt.

"I think I read somewhere" that no previous fiat system has ever lasted longer than 40 years. Ours is approaching fifty.

[JMD]

16 hours ago, feed said:

In the West the major autos are terrified of 1 thing and concerned about another.

The change in demographics, millennials and gen Y, don't care about ownership and combine that with the rise of the ride sharing companies.  It's a huge disruptive influence that if they don't get ahead of they're done.    

I think the shift in generational thought, motivations, morality, etc, is so interesting - and as you point out, its key to predicting how companies capture future markets and orient their business models for success. Neil Howe in his Fourth Turning book talks a lot about these inter-generational changes. The Neil Howe podcast interview i posted last week had him discussing this topic in regards political frameworks. 

[Loki]

32 minutes ago, AWW said:

 

"I think I read somewhere" that no previous fiat system has ever lasted longer than 40 years. Ours is approaching fifty.

That's just because we have electrified plate spinning machines that previous generations didn't 

Without those enabling real-time fuckery it would have been the same story I think

[sancho panza]

43 minutes ago, Cattle Prod said:

So that's a sample size of two. Where can you get a handle on the state of the second hand car market, does Autotrader to stats I wonder?

Wolf had an intersitng piece a wek or two back.Sugar rush retial buy bigger car pushing prices/voluem up,then the likely collapse at some point in the not too distant.

I suspect we're in a similar place.I don't know of any good Britsh stats for used cars

https://wolfstreet.com/2020/11/13/used-vehicle-sales-slow-retail-wholesale-prices-drop-with-plenty-of-supply-after-crazy-price-spikes-over-the-summer/

The prices of used cars and trucks that are sold at wholesale auctions around the US dropped again in the week ended November 8, compared to the prior week, the 12th week in a row of week-to-week declines that followed a historic 36% spike from April through mid-August, according to data reported by J.D. Power on Thursday. Wholesale prices are now down over 8% from that peak but are still 6% higher than they’d been at the beginning of March. What a historic trip:

What these dealers are facing is a retail market that had gone haywire. Weirdest economy ever. During the three-month period of July, August, and September, retail prices of used cars and trucks spiked by 15.1%, according to the Consumer Price Index data. The 6.7% spike in September alone was the biggest month-to-month jump since February 1969.

But in October, used-vehicle retail prices, based on the Consumer Price Index for Used Vehicles, released by the Bureau of Labor Statistics on Thursday, ticked down 0.1% — “seasonally adjusted,” meaning it already accounts for any typical price declines in October:

 

 

[feed]

53 minutes ago, JMD said:

But isnt that a bit of a false narrative, directly comparing the East to the West? For example, the West no longer has an increasing or young population. Is it really just about 'Western' cronyism or protectionism? Isn't the real source problem the West is starting to face up to all about having to reinvent its Western economic model? We currently rely on ever growing gdp to sustain our (unpayable) debt. Apparently there is no alternative to monetary collapse to reset things. And Isn't this why that can keeps getting kicked? What economic model we get next will be interesting to learn about, i don't look forward to the next few decades of experimentation... but eventually/ultimately i guess it will simply be a return to a more human scale (Adam Smith) free market system.

Not so much a comparisons between east and west, but that the effect of a reinflation will be different.  Growth in India/China is easy to see.  But it’s more opaque in the EU, because the EU is a protectionist trading block and the corporations that run our stakeholder capitalism, if that’s what it’s now called, are protectionist in nature.   And that protectionism in the West may overwhelm the macro play.  
  
The funds that DB often talks about, for example, well if you cannot get access to them due to EU legislation, knowing that they will have value in a reinflation is useless.  What’s driving that  - capital controls.  
And with Cars, longer term use of ICE in the EU maybe better nationally or for certain demographics, but the protectionist nature from the new EV market, as it benefits the state and corporations over ride that.

So whilst we may see a more raw reinflation in the emerging markets, the effect here could be counter intuitive to both a reinflation or the current economic model.  
 

[feed]

14 minutes ago, JMD said:

I think the shift in generational thought, motivations, morality, etc, is so interesting - and as you point out, its key to predicting how companies capture future markets and orient their business models for success. Neil Howe in his Fourth Turning book talks a lot about these inter-generational changes. The Neil Howe podcast interview i posted last week had him discussing this topic in regards political frameworks. 

I did listen to that and it has put a few pieces into place for me. Particularly around the rejection of individualism.  

[sancho panza]

While Im on Wolf,this was a great piece of his summing up the current insanity.They are piling up the gunpowder in the hull of the ship.

Wolf does graphs with complex themes for laymen.

https://wolfstreet.com/2020/11/18/no-payment-no-problem-in-rosy-world-of-forbearance-official-delinquencies-plunge-credit-scores-of-delinquent-borrowers-jump/

So what happens to debt when borrowers stop making payments on their mortgage..?

Well, the algo of credit bureaus, such as Equifax, sees that the borrower who was delinquent has “cured” the delinquency and has become “current,” and it then raises the borrower’s credit score. A brave new world, but here we are.

Delinquent loan balances have plunged across all loan types, as these delinquent loans have been moved into forbearance or deferral programs, according to data from the New York Fed’s household credit report for the third quarter.

Auto loans are not backed by the government, and the deferral and forbearance programs have been implemented by private-sector lenders and loan servicers. Newly delinquent auto loan balances dropped to 5.8% of total auto loan balances, the lowest in the data going back to 2003. Note the delinquencies of auto loans during the prior crisis, when they exploded into the double digits. But this crisis now is the Best of Times:

Credit card delinquencies also plunge.

In this era of deferral programs and government cash sent to households, newly delinquent credit card balances also dropped during the crisis, instead of surging, as they did during the last crisis. Credit card delinquencies had been on the rise since 2016, during the Good Times. Then the Pandemic and the unemployment crisis hit, and surprise, instead of spiking, newly delinquent credit card balances fell to 5.7% of total credit card balances, the lowest since 2016:

Forbearance pushes mortgage delinquencies to record low.

The government guarantees or insures the vast majority of residential mortgages issued in the US.. These borrowers can live in their homes without making a payment for one year. When borrowers who have fallen behind on their mortgage enter forbearance, the lender can choose to mark the loan as “current.”  This “cures” the delinquency though no catch-up mortgage payments have been made. Newly delinquent mortgages therefore dropped to a record low of 2.5%, despite the crisis:

The New York Fed found that, “On average, delinquent borrowers whose loans were converted to ‘current’ upon entry into forbearance saw an average 48-point increase in their credit scores (here, Equifax Risk Score 3.0).”

But for borrowers who were not delinquent when they entered forbearance, their credit score was unchanged.

 

 

[JMD]

16 hours ago, jamtomorrow said:

I remember finding motorway journeys utterly utterly baffling around 2005 time - to see all those nearly-new mercs and audis, but with no obvious way for the general population to afford them (if you believed household income surveys).

It's not just low rates either, it's falling rates and people growing accustomed to each car being better than the last based on no particular change in discretionary income.

Middle classes in for quite the shock as this turn unfolds.

Agreed. We are at an economic cycle turn, and it is fascinating to ponder whether products/concepts like car ownership, aircraft/international travel, cinemas, etc, will diminish greatly or even maybe become very niche by 2030.

The discussions about changing business models and of leasing is not just 'a car thing' either. I remember in the late 1990's there was talk of hiring quality tools, instead of buying/owning them, examples included lawnmowers, etc. So its not a new concept (what is?). However, i believe it was the German manufactures, Bosch, etc, who were particularly keen on those ideas. I wonder if German industry - from Mercedes to fridges - will be sustained in future years by widespread adoption of a lease/rent model, and rolled out across all Europe (perhaps under the guise of sustainable manufacture and 'environmentalism')?

[Yadda yadda yadda]

16 minutes ago, sancho panza said:

When borrowers who have fallen behind on their mortgage enter forbearance, the lender can choose to mark the loan as “current.”

Enron would approve.

[Yellow_Reduced_Sticker]

With ALL this chatter about motors ...YOU folks are keeping ya eyes of the ball ...AND missing today's BRILLIANT Royal Mail News!

 

YES...Another LOSS!

 

HOWEVER, they MUST be turning a corner! UP over 5% today to £3.12 ...Good job i bought more around £1.37 ! NEARLY ALWAYS pays to average down/ladder in!

 

They have come down today from their HIGHS ...is that YOU @DurhamBorn OR @5min OCD speculator...talking profits?!

 

Here's a 1 year chart, looks good MAYBE UP and away to £ 7.00 quid ...well by 2026!

 

"Royal Mail posts operating LOSS amid pandemic but pins hope on parcel delivery"

 

https://uk.finance.yahoo.com/news/royal-mail-posts-operating-loss-amid-pandemic-but-sees-parcel-delivery-as-way-forward-092806892.html

[JMD]

24 minutes ago, feed said:

I did listen to that and it has put a few pieces into place for me. Particularly around the rejection of individualism.  

Apparently, the intelligentsia class don't rate Howe's Fourth Turning. But i must admit that his theory had a profound affect on me. Its just that i grew up believing that 'human progress' was a given, and such progress flowed in one direction only. I couldn't get my head round the alternative Chinese idea of everything having a cycle. Howe's book put everything into context for me. It was also very stark to me that Howe's time frames coincided with the big economic event expected this decade by this forum's thesis. Anyway, the positives were that i gained a greater insight into history, trends, etc. Unfortunately, the negative was the realisation that Western ideas, thought and civilisations are ultimately mere totems and are fragile, transient things. I guess all societies, given enough time, begin to unpick their ideas(ideals?) at their peril. But i assume that these things must happen in order for life to transmogrify? (i do like that word!). But to bring things back on topic - perhaps its a bit like DB says - 'nothing goes up in a straight line'!!

[JMD]

Anyone else own the gold miner - Auryn Resources - it has now split itself up, separating its mines into three different companies - Sombrero, Tier One, Fury.

I haven't seen this type of thing happen before. I had a small amount invested.

Kibuc, i wonder do you have any views on this change?

 

I also found this podcast discussing it.

 

 

[Erewhon888]

On 18/11/2020 at 15:32, AWW said:

They're only too heavy for people to change. I could foresee driving over a cradle that drops the battery out of the floor then driving forwards onto a machine that lifts a new battery into place.

 

Swappable electric car batteries

Quote

a network of automated pitstops that, in a mere three minutes, or about the same time required to fill up a car with gasoline, would replace an exhausted battery with a charged one. 

Quote

carmakers regard their battery packs as core intellectual property, and hence will refuse to standardize “any time soon.” 

 

 

[Bobthebuilder]

1 hour ago, Yellow_Reduced_Sticker said:

They have come down today from their HIGHS

I sold a load yesterday, not calling a trade on it, just wanted the money in something else. I am taking profits at the moment to get stuff into a tax wrapper and can't transfer any shares. More dosh for the platform again.

[arrow]

Looks like friction in opec+. Not surprising as they struggle to cope with less income.

"After a day of public silence following press reports the nation was considering its position in OPEC, Energy Minister Suhail Al-Mazrouei said Thursday the UAE “has always been a committed member.”"

Last time I looked UAE needs the oil price to be about $75 this year and $65 the next to balance its budget. Not happening this year, unless there's an almighty DH melt up. Unlikely UAE would want to contribute to the oil price falling, or collapsing, by leaving opec.

"OPEC+ is meant to decide at its next meeting on Nov. 30-Dec. 1 whether to go ahead with a January production increase as set out in the April agreement, or delay it. So far, Riyadh and Moscow have signaled they are prepared to delay the hike as the virus continues to sap demand for energy."

Definitely prepared to delay the production hike, particularly Saudi. If the oil price falls too much, the poor princes will be driving skodas.

 

https://www.bloomberg.com/news/articles/2020-11-19/uae-tries-to-lower-temperature-in-dispute-with-opec-allies

[Option5]

19 hours ago, DurhamBorn said:

I dont know mant young working people over 23 who dont own a car.Hundreds of them.All own a car who can drive.I dont believe younger people dont want to own outside of a few big cities.The younger ones at my factory (i make engines) own the most expensive cars,its the older workers who own older models.

Own or drive? I suspect the younger drivers PCP or lease, hence the newer cars.

[DurhamBorn]

18 minutes ago, arrow said:

Looks like friction in opec+. Not surprising as they struggle to cope with less income.

"After a day of public silence following press reports the nation was considering its position in OPEC, Energy Minister Suhail Al-Mazrouei said Thursday the UAE “has always been a committed member.”"

Last time I looked UAE needs the oil price to be about $75 this year and $65 the next to balance its budget. Not happening this year, unless there's an almighty DH melt up. Unlikely UAE would want to contribute to the oil price falling, or collapsing, by leaving opec.

"OPEC+ is meant to decide at its next meeting on Nov. 30-Dec. 1 whether to go ahead with a January production increase as set out in the April agreement, or delay it. So far, Riyadh and Moscow have signaled they are prepared to delay the hike as the virus continues to sap demand for energy."

Definitely prepared to delay the production hike, particularly Saudi. If the oil price falls too much, the poor princes will be driving skodas.

 

https://www.bloomberg.com/news/articles/2020-11-19/uae-tries-to-lower-temperature-in-dispute-with-opec-allies

Russia and Saudi are deciding if they need to take pain a bit longer to finish off US shale.The increase in gas prices in the cycle will amaze people.They should start to see a squeeze in 2023 as supply falls below demand.The sector will shake people out all the way up as people think it cant be right.500% to 700% increase in gas prices by 2029.

[arrow]

 

SSE, ScottishPower and National Grid to deliver Eastern Link. North Sea offshore wind farms generating electricity

They're going to construct and lay undersea cables from Scotland to Selby and Hawthorn Point. They say to power homes, but it could also generate hydrogen in Norh East England.

Infrastructure investment, but will only start to begin construction in 2024

 

"Three of the UK’s largest energy firms have today confirmed they are developing ambitious plans to deliver an underwater super-highway that will see the North Sea become the hidden power house of Europe.

The electric super-highway will play a vital role in achieving net zero as all three power firms were confirmed today as major partners of the UN’s COP26 climate change event to be held in Glasgow in 2021.

The Eastern Link will be made up of some of the world’s longest subsea HVDC cables with a combined capacity of up to 4GW. The multi-billion pound investment is expected to support hundreds of green jobs throughout construction and operation. The project will be led by SSE, ScottishPower and National Grid, setting off from two separate points in Scotland; Peterhead and Torness.

The cables will significantly increase the UK’s capacity for clean, green renewable power, enabling enough electricity for around four million homes to travel up to 440km from the east of Scotland, a hub for offshore renewables, down to two points in the north-east of England, Selby and Hawthorn Point.

The east coast of Scotland is already home to almost 1GW of operational offshore wind farms with a further 4.4GW in the pipeline and up to 10GW predicted following the outcome of the next Scottish offshore wind leasing round, Scotwind.

Survey works along the route have recently commenced with construction works currently expected to take place from 2024.

Alistair Phillips-Davies, Chief Executive of SSE, said: “The development of the East Coast link is one of the most exciting energy developments over recent decades and is essential to delivering the UK’s 40GW offshore wind target by 2030 and critical to our own commitment to build a network for net zero emissions.

“With the eyes on the UK ahead of COP26 next year, this project clearly demonstrates how the UK is leading the world in tackling the climate emergency and supporting thousands of jobs and supply chain opportunities.”

Keith Anderson, CEO of ScottishPower said: “COP26 will provide the perfect opportunity for the UK to showcase its innovation, progress and leadership in tackling climate change and we are proud to be major partners in the event.

“We firmly believe the UK can achieve its ambitious Net Zero targets but it must be done through investment and innovation in essential projects like the Eastern Link, providing benefits for customers and society in the long term.

“COP’s success is, in part, thanks to the collaboration of sectors, industries and countries and we are looking forward to exploring this mammoth opportunity with SSE and National Grid.”

Nicola Shaw, UK Executive Director at National Grid, says: “This project will help transport enough renewable electricity for around 4.5 million homes across the UK and will become part of the backbone of the UK’s energy system. It’s a great example of companies working together on impressive engineering feats that will help the country hit its net zero carbon target by 2050.”

SSE, ScottishPower and National Grid have been at the forefront of the UK’s journey to net zero, investing, building and maintaining the critical national infrastructure required to facilitate the transition from traditional thermal generation to renewable energy."

https://www.sse.com/news-and-views/2020/11/power-firms-unite-to-deliver-underwater-energy-super-highway/

[Don Coglione]

4 hours ago, AWW said:

Also used to use Zipcar. As soon as kids come along, it ceases to be an option, unless in the interim they've added integrated child seats and rear passenger tablets.

Rear passenger tablets?!

Give the little cunts a humbug to share and a bloody good slap.

[Don Coglione]

3 hours ago, JMD said:

Agreed. We are at an economic cycle turn, and it is fascinating to ponder whether products/concepts like car ownership, aircraft/international travel, cinemas, etc, will diminish greatly or even maybe become very niche by 2030.

The discussions about changing business models and of leasing is not just 'a car thing' either. I remember in the late 1990's there was talk of hiring quality tools, instead of buying/owning them, examples included lawnmowers, etc. So its not a new concept (what is?). However, i believe it was the German manufactures, Bosch, etc, who were particularly keen on those ideas. I wonder if German industry - from Mercedes to fridges - will be sustained in future years by widespread adoption of a lease/rent model, and rolled out across all Europe (perhaps under the guise of sustainable manufacture and 'environmentalism')?

Was it not only a generation ago that we rented our TVs/VCRs/washing machines?

[Popuplights]

6 minutes ago, Knickerless Turgid said:

Was it not only a generation ago that we rented our TVs/VCRs/washing machines?

Yes indeed. At university in 1987 we rented a toploading JVC video recorder from radio rentals. Tenner a month. 

[Don Coglione]

6 minutes ago, Popuplights said:

Yes indeed. At university in 1987 we rented a toploading JVC video recorder from radio rentals. Tenner a month. 

I think it was twenty for a fuck-off (at the time) TV plus VCR in our student house in 1987.

[Dogtania]

But definitely see the rental option being a viable route that will be taken under guise of environmentalism.

Far higher quality, built to last and be repaired etc as when needed.  Less landfill etc.

[Loki]

1 minute ago, Cattle Prod said:

If we are in a 'Roaring 20s' by 2023 or so, maybe the economy will take it on the chin.

That sounds feasible to me, and durhamborn says  inflation will still be outrunning interest rates so it might just be a case of running to stand still