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

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Wouldn’t be so sure we'll get long term rental falls.  Those 700k and more could come right back if the economic situation is better here than their home countries post lockdown.  It’s an incredibly mobile workforce and wage arbitrage could be even more of a thing, if we do get they care more about unemployment than inflation.

[Bobthebuilder]

3 minutes ago, Hardhat said:

But the next 5 years will be very interesting in London property. Already anecdotally know that there are way more rental properties on the market and people are getting rent reductions.

I live in London. In the surrounding streets I am starting to notice a few empty rentals (2 bed terraces). Never seen it before.

[DoINeedOne]

New Grant Williams End Game Podcast - Paul Singer

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[DurhamBorn]

@sancho panza i think the worst thing about it is every penny of printing is simply theft of saved labour.Its how our system works of course and the CBs simply have to deal with whats in front of them.In the UK the big worry now is that over half the population rely on handouts,benefits and state wages.That means cutting the free stuff is really difficult.Once other countries stop printing the UKs structural deficit will be exposed.They will need to fund £150 billion a year with the CBs disengaged.That should see rates following inflation higher.

I see a lot of economists saying CBs will simply control the curve,but i dont think they can once inflation moves.Forcing down the short end will simply encourage even more velocity.

[DurhamBorn]

@Cattle Prod propane use probably for increased fork lift truck use in distribution centres.

[Popuplights]

59 minutes ago, Hardhat said:

If real rents and property prices in London / SE fall it would suit me down to the ground. I've lived here all my life, and I have a fairly decent deposit saved now. A 30% fall and I would be looking to buy immediately. I reckon it's coming as BTL and AirBnB spivs start to realise they're going to have to sell up. Won't be quick though, I don't think, there will be people better off than me waiting to buy at higher prices. But the next 5 years will be very interesting in London property. Already anecdotally know that there are way more rental properties on the market and people are getting rent reductions.

Can't come soon enough imo, London property is ridiculously overvalued and it's fucking up an entire SE generation's chances as all the jobs are here.

The other problem is that so many nice houses have been converted badly into HMOs by cowboy landlords... there's a lot of work to be done to make them into decent family homes again if the exodus is really happening and sustained. Might be a good ten years for builders / fitout. Could be a good business model to start buying old wrecked HMOs at knock down prices and converting them back to family homes for when they come into middle-class couples' price ranges.

Who knows. Would love to see some of the Foreign speculators, BTLers and AirBnB spivs who are ruining London lose their shirts though.

My daughter had accepted her first midwife job at a London hospital, starting in May, so this is fantastic news. Cheers. 

[JMD]

4 hours ago, geordie_lurch said:

I am just an amateur at all this but was thinking more a Slow Kahuna as I'd seen other's mention the possibility of a slow grinding pull back in these strange times but I am totally on board that inflation is coming and my stocks and shares ISA is positioned for this via oilies and other decent dividend payers. How much and how we pull back again from here I'm not sure about but I'm happy setting stop losses alongside limit orders in case we have a wild down day that no one sees coming followed by a quick reversal even if I lose a few % upside but reduce the downsides to single digits

There could still be a melt up like some have suggested or with Biden in this could be the start of another sector rotation back out of metals and oilies as the risk is seen as 'off' again? There's also the possibility the can is going to be able to be kicked for many more month or years by all the Western Government's Japan style. None of us know for sure otherwise we wouldn't be on here so much

For example, I bought physical silver over 10 years ago as I was 'clever' and could see the system was on it's knees etc but also hedged my bets with the cheapest house for my family in the best area I could get into around 2013 when everyone on the other site said the real crash was just around the corner etc etc. Sitting here in 2021 the silver price hasn't changed in £ terms and is looking like it's probably going to drop back down a decent bit here IMHO to £16 or less so I will be 'down' on that again yet that house has added over £100,000 in the same time frame not even taking into account the 7 years of mortgage payments on a tracker rate I was also told was mad to get at the time.

The point I think I'm trying to make is that at the end of the day you have to do what's right for your and those closest to you using the best information you have and your gut instincts. Sometimes this might mean being even more contrarian than other contrarians even though you agree on the most likely end game

 

If we don't get a BK... how about a Simmering (or even sector rotation) Kahuna? Damn, its so frustrating!! But then again, as DurhamBorn sort-off said - the market likes to 'tease' the most people!?

[Democorruptcy]

52 minutes ago, DurhamBorn said:

@sancho panza i think the worst thing about it is every penny of printing is simply theft of saved labour.Its how our system works of course and the CBs simply have to deal with whats in front of them.In the UK the big worry now is that over half the population rely on handouts,benefits and state wages.That means cutting the free stuff is really difficult.Once other countries stop printing the UKs structural deficit will be exposed.They will need to fund £150 billion a year with the CBs disengaged.That should see rates following inflation higher.

I see a lot of economists saying CBs will simply control the curve,but i dont think they can once inflation moves.Forcing down the short end will simply encourage even more velocity.

Their own previous policies couldn't possibly be blamed for what's in front of them now?

e.g. buying their debt has enabled governbankments to fund the handouts, benefits etc? The more CB's enable, the more shit they have to deal with? I call it a "governbankment" because I don't see the line between Central Banks and Governments that you see is still there.

[TNS]

Waiting for miras, be a few quid saved. That will almost certainly happen before any major falls but who knows.

[dnb24]

Anecdotal and not sure how it fits in with the thread as such- but I have a mate who works in medical team for prem football club who was telling me how there will probably be no player transfers of note this winter as clubs have no money, and that essentially transfers that only 6-9 months ago were touted at being £100+million would be 50% of that now.

[Democorruptcy]

2 hours ago, Cattle Prod said:

Latest EIA report is out. They are not picking up further production drops yet, still flat at 11m. Stocks increased because exports were down, so likely to be temporary, and a good chunk was pulled out of Cushing, which was needed. The interesting bit is in the products supplied table:

Products supplied are a proxy for demand, and if you look at the four week average columns, they are now within 5.3% of last years demand (with production down 15% over the same period). Not far to go, and this is without the restrictions being lifted and the economy hammered. Even more interesting is a chunk of the the lost gasoline and jet fuel is being substituted/burnt as propane, which is up by 28%! I don't know how that works refining wise. What do you think they're using all that propane on? Must be home heating.

I had a look to see where that came from, here if anybody wants to look at the full version.

I also stumbled across a summary, crude oil inventories are still up?

Quote

 

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 4.4 million barrels from the previous week. At 486.6 million barrels, U.S. crude oil inventories are about 9% above the five year average for this time of year

https://ir.eia.gov/wpsr/wpsrsummary.pdf

 

 

[Hunty]

On 08/01/2021 at 10:19, Loki said:

Nice one thanks Hunty, my parents finally got S&S ISAs and this would be a great first entry point 

Gap Link

She needs to get down to 2.72 in the next few days/week or so to maintain this current upward trend channel (otherwise she will drop out of this current trading channel).

Theres a Gap left today at 2.92.

If this gap stays open she should rise back up quickly to fill it at 2.92 and then have a go at breaking through the 3.10 resistance and go upwards over the coming weeks/months. Then hopefully next stop 3.60 to 3.80.

GLA.

[Democorruptcy]

16 minutes ago, Hunty said:

Gap Link

She needs to get down to 2.72 in the next few days/week or so to maintain this current upward trend channel (otherwise she will drop out of this current trading channel).

Theres a Gap left today at 2.92.

If this gap stays open she should rise back up quickly to fill it at 2.92 and then have a go at breaking through the 3.10 resistance and go upwards over the coming weeks/months. Then hopefully next stop 3.60 to 3.80.

GLA.

Do you mean she's got to drop no lower than 2.72 to keep going up, not necessarily to go down there because if 2.92 is filled it's still upwards? If it dropped to 2.71 it could drop a lot lower?

[reformed nice guy]

4 hours ago, Cattle Prod said:

What do you think they're using all that propane on?

People that vote Green, love Saint Greta, say diesel cars should be banned but still want a trendy salad from an overpriced restaurant where the front of staff wear masks and the kitchen staff dont wash their hands after a hefty shite

[AWW]

5 hours ago, Cattle Prod said:

I do catch the sniff of lawsuits about this, could it be that the blasted lawyers save us?!

Happened in Portugal.

[Loki]

4 hours ago, DurhamBorn said:

@Cattle Prod propane use probably for increased fork lift truck use in distribution centres.

The big distribution centre use electric ones to my knowledge, they are H&S obsessed.

I was working at a fitout of one in Derby.  Huge lead acid batteries chargers.  The VNA ones had the biggest batteries (So did most of the work) and they are a fairly standardised design as far as I could tell, I don't know if propane ones exist.  

With the extreme cold all over the continent in the not too distant it was most likely heating

[DurhamBorn]

3 hours ago, Democorruptcy said:

Their own previous policies couldn't possibly be blamed for what's in front of them now?

e.g. buying their debt has enabled governbankments to fund the handouts, benefits etc? The more CB's enable, the more shit they have to deal with? I call it a "governbankment" because I don't see the line between Central Banks and Governments that you see is still there.

True,but they have no choice in our present system.If they dont print during dis-inflation you end up in direct deflation and that would wipe out almost every company,every asset etc.Government is the real problem.One of the main things im looking forward to in the cycle is when CBs have to stop printing.They will,and governments then will have to balance the books.CBs arent printing to give governments for the sake of it,they are doing it to stop deflation as their remit orders them to do.

One of the main reasons for this cycle seeing higher inflation is because for 20+ years governments have used the liquidity for handouts rather than investment.Brown even called benefits investing in families.

[Hunty]

1 hour ago, Democorruptcy said:

Do you mean she's got to drop no lower than 2.72 to keep going up, not necessarily to go down there because if 2.92 is filled it's still upwards? If it dropped to 2.71 it could drop a lot lower?

 

1 hour ago, Democorruptcy said:

 

She broke out in mid Jan to 310 which had been a strong resistance zone previously (April to August 2020), she was unable to break above 310 and was sent back into the channel.

She has dropped to the  previous strong support zone 285. (look at the support this zone provided April to August 2020)

Yes 310 was resistance and 285 was support.

Now you understand those two levels it becomes interesting.

It's decision time.

1. Move up to fill the gap created this morning at 292  and attempt another breakout.

2. Try again to break down through the 285 support and go for the 272.5 gap fill.

I suspect to stay in the channel then eventually move higher she'll make another attempt and try to break down through the 285 support. With a fair probability of a 272.5 gap fill or close. BUT remember it's only a probability.

[Errol]

[Democorruptcy]

1 hour ago, DurhamBorn said:

True,but they have no choice in our present system.If they dont print during dis-inflation you end up in direct deflation and that would wipe out almost every company,every asset etc.Government is the real problem.One of the main things im looking forward to in the cycle is when CBs have to stop printing.They will,and governments then will have to balance the books.CBs arent printing to give governments for the sake of it,they are doing it to stop deflation as their remit orders them to do.

One of the main reasons for this cycle seeing higher inflation is because for 20+ years governments have used the liquidity for handouts rather than investment.Brown even called benefits investing in families.

I don't think they will balance the books. I think countries will do something like a long dated covid bond and sweep a lot of the debt under the carpet. 

What caused the disinflationt? Do we go back to Thatcher's big bang, Clinton repealing Glass Steagal, Japan CB starting QE, BoE cut our interest rate to a 48 year low in 2003 when our annual HPI was at 25%, the BoE say they handled our housing bust well but not that they helped cause it.

Re governbankments I think this is a good piece written in 2009 by Simon Johnson who used to be Chief Economist at the IMF. It shows a nice merging of Wall St banks, The Fed and US government. They've been joined at the hip ever since.

https://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/307364/

[Democorruptcy]

1 hour ago, Hunty said:

 

She broke out in mid Jan to 310 which had been a strong resistance zone previously (April to August 2020), she was unable to break above 310 and was sent back into the channel.

She has dropped to the  previous strong support zone 285. (look at the support this zone provided April to August 2020)

Yes 310 was resistance and 285 was support.

Now you understand those two levels it becomes interesting.

It's decision time.

1. Move up to fill the gap created this morning at 292  and attempt another breakout.

2. Try again to break down through the 285 support and go for the 272.5 gap fill.

I suspect to stay in the channel then eventually move higher she'll make another attempt and try to break down through the 285 support. With a fair probability of a 272.5 gap fill or close. BUT remember it's only a probability.

I'm not a chartist and didn't know 285 was supposed to be support but last week I sold 9000 at 3.02+ and bought back 10000 today at 2.84 so added a 1000 units for about 1.40 each. I'd still be happy if it broke down through 2.72 so I could buy some more.

Do you use Point & Figure charts at all?

[sancho panza]

8 hours ago, Barnsey said:

I'm saying nothing...

What I don't get is that his tweets are so definitive, so confident, especially on timing and targets (refering to melt up by end of this quarter etc), and then he says he's a macro strategist and isn't providing any specific time frame or trading advice  But it was the number of people religiously hanging onto this targets a year ago who were burned big time by his constant push back that the market was definitely going to turn around here, whilst it kept on going down, that made me think twice. Now he's got an exponentially higher number of followers clinging to his every tweet. Interestingly, as last year progressed, I noticed a clear divergence of expectations between Mr Hunter and @DurhamBorn

In other news, the great London emigration continues:

 

ref Hunter,like with any of these people,I use their logic far more than I use a prediction.AS someone else said,you have to make up your own mind based on the info available and your risk profile.I don't follow DH's timing sunless they concur with mien,but I think you should take great care ditching his logic t the same time as you ditch  his timing calls.

Same for Kaplan,Alden,Gromen etc etc.

There's a HUnter video a few months back that was immaculate and arguing for a BK this year around April,that timing may have changed and the possibility has arisen that we get an SK in the bond markets instead,but the reasoning was pretty damned good.WOuldn't short on it tho.

Ref London depopulating Barnsey,that's an interesting dynamic.AS I psoted previously,depopulation of the UK is something which isn't on anyone's radar except amongst weird corners of the web where basement dwellers live

7 hours ago, Cattle Prod said:

Good news for sure. My parting shot to Jeremy Hunt was "if you brought down the PCR cycles the pandemic would stop overnight and well you know it". What worries me is he's still running around like a hamster pushing for further restrictions, and some other genius is wanting to pay people £500 to test positve. Back in the real world, it's already happend (I can see why they're trying to pay people to get on this curve, it's in danger of dissapearing:

So I'm not sure I can see a return to normality, because a bunch of these PPE Oxford twats clearly want to keep it going, and 80% of the braindead public support their own imprisonment. Also, the government has made no sign of acknowledging the revised (restated) WHO PCR guidlines let alone implementing them. But I do catch the sniff of lawsuits about this, could it be that the blasted lawyers save us?!

Nice chart.

I agree UK govt is enjoying their power play over the ordinary folk.But here's my thinking

WHO (who hated Trump and were hated back by Trump because he saw them as China puppets),announce change in PCR cycle count guidance one-ONE -day after Beijing Joe gets his white house slippers on.AS you've said,those cycle counts could have a dramatic effect on the case count.Beijing and sleepy Joe aren't in the least bit interested in what Bozza and his clueless crew are up to>I could put forward a pretty strong argument that the current problem in the NHS is down their mismanagement.

I think the decison appears to have been taken that the world needs to get back out of it's foxhole and get trading again.As you say,there coud aslo be the smell of litigation but my read here is that this is Joe,WHO and China calling the tunes.

If the case count in the US drops and the MSM change the tone of the reports to Joe has saved the USA,then I think we'll be out of lockdown before we know it.

As you've said,our govt are chumps really.Been played from the start imho by SAGE,commercial interests,China etc...History wont be kind to them.Starting tosee a lot of lefty friends beginning to make observations to the effect of lcokdowns don't work etc.First time in ten months.

https://coronavirus.data.gov.uk/details/cases

Cases

Deaths

Tests

7 hours ago, Loki said:

I think this is the official WHO page

https://www.who.int/news/item/20-01-2021-who-information-notice-for-ivd-users-2020-05

Intrgiuing .will eb interesting to see how many cycles are deemed the new acceptable limit

[Democorruptcy]

Talking about Hunter reminded me of another oldie in Jeremy Grantham and that I haven't looked at q and CAPE for a while. It's not pretty:

Quote

 

With the publication of the Z1 data up to 30thSeptember 2020(10thDecember2020)I have updated my calculations for qand CAPE. Both qand CAPE include data for the quarter to 30thSeptember2020.

The September average of S&P 500 was at 3365.52 and US non-financials were overvalued by 242% according to q and quoted shares, including financials, were overvalued by 91% according to CAPE. (It should be noted that I use geometric rather than arithmetic means in these calculations.) As at 17th December 2020, with the S&P 500 at 3722.48, the overvaluations by the relevant measures were 278% for non-financials and 111% for quoted shares.

Data for my calculations of qare taken for 1900 to 1952 from Measures of Stock Market Value and Returns for the Non-financial Corporate Sector 1900-2002 by Stephen Wright, published in the Review of Income and Wealth (2004) and for 1945 to 2020 from the Financial Accounts of the United States (“Z1”) published by the Federal Reserve. Data for our calculations of CAPE are taken from the data published on Robert Shiller’s website, updated if necessary from data published by Standard & Poor’s. Data on net worth are only available annuallybefore 1952 and I have calculated the quarterly data by interpolation assuming that changes are evenly spread over each year. Market value data are calculated by adjusting the year-end figures for the quarterly value of the S&P 500 or its equivalent as shown by Robert Shiller.

http://smithers.co.uk/page.php?id=57

 

 

[sancho panza]

6 hours ago, DurhamBorn said:

@sancho panza i think the worst thing about it is every penny of printing is simply theft of saved labour.Its how our system works of course and the CBs simply have to deal with whats in front of them.In the UK the big worry now is that over half the population rely on handouts,benefits and state wages.That means cutting the free stuff is really difficult.Once other countries stop printing the UKs structural deficit will be exposed.They will need to fund £150 billion a year with the CBs disengaged.That should see rates following inflation higher.

I see a lot of economists saying CBs will simply control the curve,but i dont think they can once inflation moves.Forcing down the short end will simply encourage even more velocity.

Yeah it was interesting to see Gromen talking about welfare,DoD and interest payments being 130% tax revenues.

If I get time next week I'll look at the UK's .But the reality is that we'll struggle to switch off from welfare based GDP growth we've seen in the UK over the last twnety years.Let's be honest,there's a greater proportion of the UK reliant on govt spending than ever at the minute(incl furlough).The problem is that as a society,once people expereince life without working,it's really hard to row that back when the income from working is so poor.

Take care home work,relentless,emotional,distressing,dirty and really low pay to sh1t ratio(literally).I honestly don't know how they recruit people for it,given teh conditions.If you can get by on benefits,why do it?ANd that's where we are.

UK is in a hole here.Once they can't print what are they going to do and what are all the people expecting an inflation proof income from them going to do......?

Depressing really when I look at the UK debt figures and think people expect my kids to pay them....I hope that generation defauts,I really do.

6 hours ago, Popuplights said:

My daughter had accepted her first midwife job at a London hospital, starting in May, so this is fantastic news. Cheers. 

Fari play to her,I dislike maternity jobs immensely,when it goes wrong,it goes really wrong.

4 hours ago, dnb24 said:

Anecdotal and not sure how it fits in with the thread as such- but I have a mate who works in medical team for prem football club who was telling me how there will probably be no player transfers of note this winter as clubs have no money, and that essentially transfers that only 6-9 months ago were touted at being £100+million would be 50% of that now.

Interesting insight.They'd hear all the gossip as well.

This is likely down to lower league clubs all over  that have suffered catastrophic revenues drops as they get most of their cash from ticket sales.Not so bad for Prem clubs but if the terraced hosues are down 50%,it follwos the detached will come down to.

Suspect wages will follow.

48 minutes ago, Errol said:

UK is£900 over £2trn.Could be in the lead.

[Hunty]

2 hours ago, Democorruptcy said:

I'm not a chartist and didn't know 285 was supposed to be support but last week I sold 9000 at 3.02+ and bought back 10000 today at 2.84 so added a 1000 units for about 1.40 each. I'd still be happy if it broke down through 2.72 so I could buy some more.

Do you use Point & Figure charts at all?

Hat Tip.

Took a 10k position on Petrofac @ 1.055.

Got powder to ladder all the way to ground zero.

Worth a look.

DYOR.

GL.