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

[kibuc]

I know many have given up hope long time ago, and for very good reasons, too. But this old dog is still alive, it seems:

UK: InfraStrata signs LoI for fabrication of Windfarm Development Vessels

https://www.energy-pedia.com/news/united-kingdom/infrastrata-signs-letter-of-intent-for-fabrication-of-windfarm-development-vessels-181382

It never occured to me before that a push towards renewables and offshore energy production will actually require vessels

[Majorpain]

23 minutes ago, kibuc said:

UK: InfraStrata signs LoI for fabrication of Windfarm Development Vessels

They have done a really good job turning around H&W, first ships to be built there for at least a decade.  Still a long way to go, a skilled local workforce does not appear overnight.

[janch]

4 hours ago, sancho panza said:

queueing outside card factory to get in.Sad.Ridiculous in equal measure.

I agree and it's the same here but good to see business booming in their case especially as I have some shares (which are still underwater)  I think the retail which will survive the desecration will be the at cheap end.  Poundstretcher is also very busy and have recently started out on cheap clothing.  Since the closure of Dorothy Perkins/Bonmarche/Edinburgh Woolen and Peacocks they're the only clothing we have left here apart from New Look.  This is in a medium-size market town in the SW.

I can see the future of retail being:

undercut all the competition initially then when you have a captive audience gradually increase prices.  I can see Card Factory doing this as well as BT/VOD etc.  They've already priced out Clinton cards here.

[Democorruptcy]

3 hours ago, reformed nice guy said:

Yup, this is correct

I always fund my ISA with cash, even if I am not using it at the time for shares immediately

At one time you could only move money one way between ISAs, from cash ISA to shares ISA. I made a case to TPTB that transfers should be allowed both ways, to encourage savers to invest in shares while rates were low, without fear of being unable to return some money to just cash savings. They then started allowing transfers both ways in 2014. Obviously there's no incentive to transfer that way while rates are low but if rates were to rise, retaining the tax advantage might be useful, if there's a time you don't fancy shares.

[CVG]

11 minutes ago, Democorruptcy said:

At one time you could only move money one way between ISAs, from cash ISA to shares ISA. I made a case to TPTB that transfers should be allowed both ways, to encourage savers to invest in shares while rates were low, without fear of being unable to return some money to just cash savings. They then started allowing transfers both ways in 2014. Obviously there's no incentive to transfer that way while rates are low but if rates were to rise, retaining the tax advantage might be useful, if there's a time you don't fancy shares.

Or alternatively just buy some short term gilt funds or ETF's to hold in your shares ISA.

[JMD]

1 hour ago, kibuc said:

I know many have given up hope long time ago, and for very good reasons, too. But this old dog is still alive, it seems:

UK: InfraStrata signs LoI for fabrication of Windfarm Development Vessels

https://www.energy-pedia.com/news/united-kingdom/infrastrata-signs-letter-of-intent-for-fabrication-of-windfarm-development-vessels-181382

It never occured to me before that a push towards renewables and offshore energy production will actually require vessels

That's great news. If ship building can return to the UK then surely any industry can do the same?                                                                                          And yes I also think the oil/gas service/maintenance offshore vessel sector is a good one especially with offshore wind projects increasing. For any interested, I bought some Subsea 7 a Norwegian basd global company that does offshore oil/gas and also specialises in windfarm commissioning/maint. Please dyor before jumping aboard!

[Noallegiance]

Infrastrata are surely a great bet for this cycle. They're bread and butter is exactly what's about to be carried out.

[Noallegiance]

50 minutes ago, Cattle Prod said:

Eurodollar futures are breaking up, pricing in negative rates in the US  or a sign that something in the system is breaking?

What does this mean please?

[DurhamBorn]

4 hours ago, sancho panza said:

Sorry Gerodie spent too much time on St Louis this mroning.Ever since CP explained how to work the charts it's abeena distraction in life I think there's a lot in that cahrt.I coudl write an essay on ity.

In short, that indexed chart says to me that oil/fuel is likely going up longer term,hosue prices have had their day as an asset class,interest rates are due to rise,velocity is due a rise and that when M1/M2 cross over pension assets we coulkd get some sharp changes in direction of travel of velocity,IR's and infaltion more generally(the dogpoo sandwich measures)

 

I better check my CCTV because i think my jotter has gone missing 

[leonardratso]

2 minutes ago, DurhamBorn said:

I better check my CCTV because i think my jotter has gone missing 

have you had the grandkids round? If theres some crayons missing as well then id look for some colourful embellishments like mine did a few years back with my car documents folder, so all my receipts and mot/insurance certificates had rainbows and smiley heart faces on them when i got them back together.

[DurhamBorn]

1 hour ago, Cattle Prod said:

Eurodollar futures are breaking up, pricing in negative rates in the US  or a sign that something in the system is breaking?

Companies protecting against the yield curve changing.People are packing the front end of the curve because they are expecting the longer term part of the curve to see increasing yields.They plonk at the short end  so they can re-allocate easily later.The irony is the lower the rate at the short end shows people are expecting inflation longer term.

In simple terms they are expecting a lot more stimulus in short order.

[Noallegiance]

Thanks gents

[Barnsey]

 

[Chewing Grass]

That assumes a) people want to take debt back on-board and b) they are worthy of the new debt.

He has a very traditional middle-class perspective.

[DurhamBorn]

6 minutes ago, Barnsey said:

 

Great that this thread delivered for us all so far ,we are in front of things and doing very very nicely,just need to navigate a bit longer.

CBs are trying to open Pandoras Box and let the evils of the world out.Roaring 20s are coming.Flapper girls,excess,inflation,living for today and hopefully a modern day Lousie Brooks, the sexisest woman to ever walk gods earth for me 

 

[Loki]

1 hour ago, DurhamBorn said:

girls,excess,inflation,living for today

Sounds just like the roaring noughties and twenteens 

[Froggy2000]

@Cattle Prod There isn't much liquidity in Short Sterling, the UK equivalent of Eurodollars, for long expiry dates.  I think it pretty much dries up after 2/3 years.  Also the margin for the futures or option contracts would entail a carrying cost.  

Eurodollars are better, but even they don't go that far.

https://www.cmegroup.com/trading/interest-rates/stir/eurodollar.html

Look at the volume traded column.  Not a single contract traded today past Dec 2027.  I like your thinking though!

@Chewing Grass I couldn't agree more.  

[DurhamBorn]

https://moneyweek.com/investments/investment-strategy/602472/time-value-of-money-about-to-reverse?utm_campaign=money-morning-newsletter&utm_medium=email&utm_source=newsletter

More people sniffing we are coming to the end of a long dis-inflation period.Still a very real risk of a huge credit event first though.

[TNS]

Crazy, just noticed the IPO for Airbnb:

Jan 2009 (seed): $2 million
Nov 2010 (Series A): $70m
Jul 2011 (Series B): $1.3b
Oct 2013 (Series C): $2.9b
Apr 2014 (Series D): $10.5b
Jun 2015 (Series E): $25.5b
Sep 2016 (Series F): $31b
Apr 2020: $18b
Yesterday (IPO Price): $47b
Today: $98b

 

[Loki]

Just now, TheNickos said:

Crazy, just noticed the IPO for Airbnb:

Jan 2009 (seed): $2 million
Nov 2010 (Series A): $70m
Jul 2011 (Series B): $1.3b
Oct 2013 (Series C): $2.9b
Apr 2014 (Series D): $10.5b
Jun 2015 (Series E): $25.5b
Sep 2016 (Series F): $31b
Apr 2020: $18b
Yesterday (IPO Price): $47b
Today: $98b

 

This has to be based on nothing more than Fed gibs...what is this business case for AirBNB in COVID clownworld?

[Barnsey]

Interesting chart from visualcapitalist.com

[DurhamBorn]

@Cattle Prod just looked at the deeper numbers for Europe after you mentioned they could be the trigger.The ECB balance sheet is TWICE the size of the Feds when you take in GDP.

Excess liquidity is now at 3.4trillion Euros.

I cant wait until they start to import inflation,as they will soon enough.

[sancho panza]

4 hours ago, DurhamBorn said:

I better check my CCTV because i think my jotter has gone missing 

he did ask...It's all stuff we've been discussing here since you started the thread.

Have to say,those charts reminded me some of my own journey from debt deflationista to stagflationista since this thread started.

3 hours ago, Chewing Grass said:

That assumes a) people want to take debt back on-board and b) they are worthy of the new debt.

He has a very traditional middle-class perspective.

The very essence of a debt deflation raising the propsect of Fisher's paradox coming into play

Shamelessly nicked form WIki

'Crucially, as debtors try to liquidate or pay off their nominal debt, the fall of prices caused by this defeats the very attempt to reduce the real burden of debt. Thus, while repayment reduces the amount of money owed, this does not happen fast enough since the real value of the dollar now rises ('swelling of the dollar')'

2 hours ago, Froggy2000 said:

@Cattle Prod There isn't much liquidity in Short Sterling, the UK equivalent of Eurodollars, for long expiry dates.  I think it pretty much dries up after 2/3 years.  Also the margin for the futures or option contracts would entail a carrying cost.  

Eurodollars are better, but even they don't go that far.

https://www.cmegroup.com/trading/interest-rates/stir/eurodollar.html

Look at the volume traded column.  Not a single contract traded today past Dec 2027.  I like your thinking though!

@Chewing Grass I couldn't agree more.  

Thanks for the info.

[sancho panza]

 

#debtdeflationcometh @Chewing Grass

https://wolfstreet.com/2020/12/07/consumers-finally-getting-smart-credit-card-balances-continue-steepest-drop-ever/

American consumers – let’s face it, consuming is the number one top job during these trying times – have paid down their credit cards again.

In October, credit card balances and other revolving credit ticked down again from the prior month, and plunged by 10.3% from October last year, the steepest year-over-year drop ever, eking past the peak year-over-year drop during the Financial Crisis (-9.9% in January and February 2010):

 

[sancho panza]

45 minutes ago, DurhamBorn said:

@Cattle Prod just looked at the deeper numbers for Europe after you mentioned they could be the trigger.The ECB balance sheet is TWICE the size of the Feds when you take in GDP.

Excess liquidity is now at 3.4trillion Euros.

I cant wait until they start to import inflation,as they will soon enough.

We haven't talked about the Eurozone much on here as we tend to focus on fed and BoE....until @Cattle Prod mentioned Eurodollars and I had to look them up ,i Thought it was a reference to the currency pair

 

Have you any idea of what that would be if they took German GDP/debt out of the equation? How screwed is the eurozone ref Brexit/banking system/periphery? Have you got a view?

If anyone has some decent analysis,feel free to psot the links.