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


spunko

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ThoughtCriminal
7 minutes ago, Loki said:

I'm just going to see if I can jump on the forecast rise in silver, and then open a few 'sell' CFDs once we reach all time highs.  Nothing too complicated.

That said I have a feeling the highs will last longer than anyone expects

Yes, even with the batshit insanity that is teslas price, I can still hear ringing in my ears "The market can stay irrational for longer than you can stay solvent". 

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1 minute ago, ThoughtCriminal said:

Yes, even with the batshit insanity that is teslas price, I can still hear ringing in my ears "The market can stay irrational for longer than you can stay solvent". 

...until it can't! B|

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Democorruptcy
17 minutes ago, ThoughtCriminal said:

Not seeking trading advice, natch, but SURELY that share price isn't sustainable? 

 

Even if they became the Amazon of cars, and that just isn't going to happen. 

There's a list here of Amazon acquisitions over the years. Tesla is priced like it's going to acquire the other car manufacturers.

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22 minutes ago, ThoughtCriminal said:

Yes, even with the batshit insanity that is teslas price, I can still hear ringing in my ears "The market can stay irrational for longer than you can stay solvent". 

The balance of my spread-betting account would agree with this!

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Iv just updated my roadmap on inflation.Im not really bothered about shorter term numbers,too much noise,but out of interest for the thread i see inflation at 3.3% by June.Unless we get a BK and a short hard deflation.

I think then it will be expected to come down,but wont and will rise towards 5%.Then a long slow march to 8%,then a parabolic run up to 16% in a matter of months towards the end of the cycle.

I expect rates to run behind inflation by 2.5% at first,then 3.5% until around 2028 when rates will go into double figures.This will force trillions from bonds and cash into inflation sectors,mostly commods,but also companies that can inflate prices yearly.

The first part of the inflation looks set,the latter half relies on a lot more stimulus,so probably a BK,or a slower recovery and sticky unemployment that scares policy makers.

I think inflation adjusted from here the Vanguard 40/60 fund ,the sort mostly used by people close to,or in pension drawdown will lose 20% of its value before fees nominal.With a drawdown of 5% +2% IFA and platform fees i expect people in drawdown to see their pension go to zero over around 9 years at the same nominal cash withdrawing rate.So people forced out early this/next year will see their pensions run out before their state pension kicks in if taken at 55.The very best i could see is a stand still so pensions cut in half before inflation.

The above suggests we are entering an inflation cycle and a distribution cycle.

I still think the magic number to hold capitals value is an average of 6.5% a year growth.That should keep up with inflation compounded.

 

 

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9 minutes ago, DurhamBorn said:

The first part of the inflation looks set,the latter half relies on a lot more stimulus,so probably a BK,or a slower recovery and sticky unemployment that scares policy makers.

 

So do you mean potential BK soon or high unemployment and/or another (or the sooner one if put off again!) BK later?

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2 hours ago, 5min OCD speculator said:

they haven't been 1.75 since 1993 so I guess you're what they call a 'long term investor'? :P

My mistake, typo. 2.752.

Too many slugs of the old devils cheer me ups!

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20 hours ago, Loki said:

A mate of mine keeps insisting I should buy (Edit: well, lease.  Same thing innit as far as most are concerned) a flash car.

The affordability or desire is here nor there - with what we think is coming why the hell would I want a big arrow pointing at me?

My car is 11 years old...and (Gun metal) grey. I own every square cm of it.

I could have quoted many posts, but this one tipped me over the edge to comment.

My biggest financial asset, learned from a life of not much success, but walking some strange psychological paths, is knowing how to be happy with very little. The last time I looked at my total yearly expenditure was in 2018, and I spent less than £10k, including £7200 in rent. I wasn't trying to be frugal, or suffering in order to reach some target: that's just where I had got to, and I couldn't remember a year in which I was happier.

I have thought about this, and having missed out on most of the things people strive for, I have come to the conclusion that the one thing that I need, as much as food, is freedom. I run on it, like it's some kind of high-octane fuel. Freedom is one of those things which is hard to buy with money - at least you get a very poor exchange rate if you try to - but you can buy it with sacrifice, and in that currency it's always on offer. I hasten to add that's not all I need: I also want interesting ideas to think about, I like to feel I'm contributing useful work to the people around me, and I value a few close friends. However, none of those things are expensive.

As for this thread, it has been an enormous education to me, so thank you for everyone who has chipped, but most especially to @DurhamBorn, of course. He (and a few others) have made me feel a complete fool on several occasions, and I'm better for it. I'm thinking particularly of when I have mentioned some sector, and been appropriately slapped down. Years ago, I learned two maxims for life, and they have stood me in good stead: to always keep my office door open* (obviously metaphorical in the present world of open-plan), and to always try to be the stupidest person in the room. I try to live those maxims on this thread.

I'm therefore going to stick my neck out once more, and mention a contrarian sector I'll be looking at more closely next year, with an eye on buying: ... tech stocks. I'm thinking about MSFT, but also pegasystems, and maybe alteryx. They're clearly off-the-scale expensive now, but I have seen how difficult, perhaps even impossible, it is for companies to disentangle themselves from the MS ecosystem. They are also quite de-complex, I think: admittedly they are labour-intensive businesses, and a lot of server infrastructure, but microsoft has shown itself capable of neglecting product improvement, or even bug-fixing, and still finding itself able to charge top-whack. I'm thinking that if there is a tech crash, and once I've had a proper look at the balance sheets, a P/E of below 20 would be a place to start.

As a linux user since 1994, I'm going to hate myself, though.

 

* I think this was originally a quote from Frank Gray at Bell labs, who said that he had noticed two things that correlated with success. One was when people neglected their families, and the other was that those researchers who habitually left their doors open tended to win Nobel prizes; while those who didn't, didn't.

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ThoughtCriminal
22 minutes ago, Cattle Prod said:

Pity you can only make 100% on a short. As obvious a short Tesla is, there are easier ways to make money long. Many of our March tranches are up over 100% already, with unlimited upside. Imo only.

Only 100% with spread betting? 

 

 

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36 minutes ago, BurntBread said:

My biggest financial asset, learned from a life of not much success, but walking some strange psychological paths, is knowing how to be happy with very little.

What a great way of putting it :Beer:

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21 minutes ago, Loki said:

What a great way of putting it :Beer:

Amen!

All this time sitting around has certainly refocused the mind and given us all a renewed longing to embrace what we used to have the freedom to do. For me it's really just getting out and about, nothing fancy although I am partial to the odd foreign holiday, but I have so much of this country still to explore. Another lesson learned is that I seriously need to take things less seriously if I want to find any sort of sustainable happiness in years to come. The World cannot be controlled so don't put that weight onto your own shoulders.

Highly recommend signing up to Jesse Felder's free newsletter which comes out every so often. Brief but useful.

https://thefelderreport.com/newsletter/

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1 hour ago, Noallegiance said:

So do you mean potential BK soon or high unemployment and/or another (or the sooner one if put off again!) BK later?

BK would deliver the liquidity,if we dont get a BK high unemployment might keep them printing for fiscal spending longer.The 2nd would see inflation lower over the cycle,but still likely very high.

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Yadda yadda yadda
1 hour ago, DurhamBorn said:

Iv just updated my roadmap on inflation.Im not really bothered about shorter term numbers,too much noise,but out of interest for the thread i see inflation at 3.3% by June.Unless we get a BK and a short hard deflation.

I think then it will be expected to come down,but wont and will rise towards 5%.Then a long slow march to 8%,then a parabolic run up to 16% in a matter of months towards the end of the cycle.

I expect rates to run behind inflation by 2.5% at first,then 3.5% until around 2028 when rates will go into double figures.This will force trillions from bonds and cash into inflation sectors,mostly commods,but also companies that can inflate prices yearly.

The first part of the inflation looks set,the latter half relies on a lot more stimulus,so probably a BK,or a slower recovery and sticky unemployment that scares policy makers.

I think inflation adjusted from here the Vanguard 40/60 fund ,the sort mostly used by people close to,or in pension drawdown will lose 20% of its value before fees nominal.With a drawdown of 5% +2% IFA and platform fees i expect people in drawdown to see their pension go to zero over around 9 years at the same nominal cash withdrawing rate.So people forced out early this/next year will see their pensions run out before their state pension kicks in if taken at 55.The very best i could see is a stand still so pensions cut in half before inflation.

The above suggests we are entering an inflation cycle and a distribution cycle.

I still think the magic number to hold capitals value is an average of 6.5% a year growth.That should keep up with inflation compounded.

 

 

Very interesting. Inflation showing up sooner than I expected.

Do you have the cycle end at 2028 or 2030? I'm sure it is moveable to some extent. Clearly little or no debt will be vital towards the end of the decade. Whatever there is would need to be fixed rate in plenty of time.

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7 minutes ago, Barnsey said:

Amen!

All this time sitting around has certainly refocused the mind and given us all a renewed longing to embrace what we used to have freedom to do. For me it's really just getting out and about, nothing fancy although I am partial to the odd foreign holiday, but I have so much of this country still to explore. Another lesson learned is that I seriously need to take things less seriously if I want to find any sort of sustainable happiness in years to come. The World cannot be controlled so don't put that weight onto your own shoulders.

Highly recommend signing up to Jesse Felder's free newsletter which comes out every so often. Brief but useful.

https://thefelderreport.com/newsletter/

Thats why i invest,and why i learned.Freedom.The fact i dont have to go to a nightshift the night a comet arrives and my telescope comes out.The day i learned a place near me was where Eric Bloodaxe signed a charter,so i spent a couple of months researching everything about him.Counting the deer in my local wood in winter,seeing where the woodpeckers choose to nest each year.Walking across fields i crossed the exact spots with friends at 9 years old who are now dead and having the time to sit and remember them and smile.Making home made healthy meals for hardly any money.Fixing my house myself,the car,my kids houses and cars,going for a fast long walk whenever i choose to,etc etc.

I have almost total control over my life,as far as an ordinary working class person can.And a Ferrari pizza oven and Caputo pizza flour in bulk.Aldi are now doing a huge passata with basil and oregano for £1.15 superb for the base,freeze half of course,dont want to waste any xD

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2 hours ago, Democorruptcy said:

Tesla is priced like it's going to acquire the other car manufacturers.

either that or we're all living in a computer simulation.....I used to think Elon was a plonker but he makes an interesting argument......one on a billion chance, Rodders, one in a billion....xD

 

 

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2 minutes ago, Yadda yadda yadda said:

Very interesting. Inflation showing up sooner than I expected.

Do you have the cycle end at 2028 or 2030? I'm sure it is moveable to some extent. Clearly little or no debt will be vital towards the end of the decade. Whatever there is would need to be fixed rate in plenty of time.

2028,though 2030 is starting to look more likely.Debt isnt such a problem for companies with big cash flow,but crucial its fixed and can be paid off as it comes due,rolling over at nearly double digit rates wont be pretty.Vod and BAT have too much debt,but the structure of it is really well done.

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3 hours ago, ThoughtCriminal said:

Think it's time a spread betting account had my name on it. 

 

do it! start another thread as a diary, let's hear your thoughts as your bollocks rise up through your stomach :Jumping:

 

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2 minutes ago, 5min OCD speculator said:

do it! start another thread as a diary, let's hear your thoughts as your bollocks rise up through your stomach :Jumping:

 

I am wearing my bollocks as earrings!

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1 hour ago, Cattle Prod said:

Pity you can only make 100% on a short

not true, the profits are limitless with spreadbetting or  CFDs.....the mistake folks make is staying in the market for too long :P 

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1 hour ago, BurntBread said:

is freedom. I run on it, like it's some kind of high-octane fuel

amen brother, tits out for the lads! :P

eugne-delacroix-la-libert-guidant-le-people-1830--eugne-delacroix-wikicommons-e1486731769693.jpg

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Bobthebuilder
2 hours ago, BurntBread said:

I wasn't trying to be frugal, or suffering in order to reach some target: that's just where I had got to, and I couldn't remember a year in which I was happier.

Nice, well done that man.

I am completely debt free from January, last credit card payment, last loan payment and the mortgage has already gone. I have had my freedom for quite some time now from being frugal when all those around were spending like crazy and thought I was mad. Some of those that didn't like my frugality are now mid 50s with huge mortgages, I am 51 and quite happy with what I have now.

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ThoughtCriminal
1 hour ago, Bobthebuilder said:

Nice, well done that man.

I am completely debt free from January, last credit card payment, last loan payment and the mortgage has already gone. I have had my freedom for quite some time now from being frugal when all those around were spending like crazy and thought I was mad. Some of those that didn't like my frugality are now mid 50s with huge mortgages, I am 51 and quite happy with what I have now.

Congratulations. 

 

Nothing feels as good as financial freedom, and being debt free is a mighty step on the road. 

 

Here's to the other half of the journey.......... 

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