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

[feed]

1 minute ago, Harley said:

We could run quite far with this narrative.  For example, war bonds anyone?  Er, actually no choice, there's a war on dontyaknow!  The more I think about it, this may be the best narrative for me to navigate by for the foreseeable future.

erm..

https://www.telegraph.co.uk/money/consumer-affairs/savers-look-covid-bonds-help-fund-recovery/

A new war bond-style Covid recovery fund could spark interest among Britain's savers as the Government looks to use public savings to fill the huge black hole in its finances.

[Harley]

9 minutes ago, feed said:

erm..

https://www.telegraph.co.uk/money/consumer-affairs/savers-look-covid-bonds-help-fund-recovery/

A new war bond-style Covid recovery fund could spark interest among Britain's savers as the Government looks to use public savings to fill the huge black hole in its finances.

Great!  Voluntary today.......TBF I've been banging on about it too long.  And I want me 10%!

[ThoughtCriminal]

For CP (or anyone else). 

 

Its repeatedly been identified that LNG is going to the moon over the next ten years or more due to demand. 

 

So with that in mind, what is the purest play on gas as far as shares go? 

 

If you wanted to go balls in on Gas with none of this diversification malarkey I mean. 

 

Not investing advice natch............ 

 

 

[Loki]

8 minutes ago, ThoughtCriminal said:

For CP (or anyone else). 

 

Its repeatedly been identified that LNG is going to the moon over the next ten years or more due to demand. 

 

So with that in mind, what is the purest play on gas as far as shares go? 

 

If you wanted to go balls in on Gas with none of this diversification malarkey I mean. 

 

Not investing advice natch............ 

 

 

Centrica, go big or go home. 

 

[DurhamBorn]

19 minutes ago, ThoughtCriminal said:

For CP (or anyone else). 

 

Its repeatedly been identified that LNG is going to the moon over the next ten years or more due to demand. 

 

So with that in mind, what is the purest play on gas as far as shares go? 

 

If you wanted to go balls in on Gas with none of this diversification malarkey I mean. 

 

Not investing advice natch............ 

 

 

I own South Western Energy SWN i followed Ray Dalio in. Not advice etc

If anyone wants to see what Bridgewater have been buying you can check here.Iv found it useful for sectors i want.I chose SWN when i wanted gas companies and saw they had been buying,its trebled since.

https://hedgefollow.com/funds/Bridgewater+Associates

[ThoughtCriminal]

2 minutes ago, DurhamBorn said:

I own South Western Energy SWN i followed Ray Dalio in. Not advice etc

Cheers DB, I'll have a look at them. 👍

7 minutes ago, Loki said:

Centrica, go big or go home. 

 

Taxi for Loki! 🤦‍♂️😆

[Castlevania]

2 hours ago, Yadda yadda yadda said:

There is loads of money saved up waiting to be spent. All the cash usually spent on holidays, pubs, restaurants and (amongst office workers) on commuting, work clothes, lunch, etc. Some was spent on DIY and debt repayment. It will be a lumpy distribution with disproportionately more saved higher up the income curve. These 'excess savings' have surely contributed to asset bubbles. Especially in the USA where a lot of 'stimmy checks' have gone into shares and crypto.

Much of this money will be spent on luxuries. Some people have funny ideas of what luxuries are. L'Oréal will count for some. I've seen some of these companies described as Becky stocks. Businesses that aspirational women want to buy things from.

I haven't enough money to buy too many different shares so I'll stick to oil and mining and dirty stuff like that.

Edit to add that some have lost out through being unable to work. On average there is a lot of money about though.

Good luck in trying to buy a PlayStation 5.

[Loki]

10 year treasury note at 1.207%

[working woman]

2 hours ago, Heart's Ease said:

 when times are grim, it's still something people spend on - even though to me(!) it's the least rational thing ever!

I must look up the economist's term for it (to my shame my only degree is in economics and I can't remember owt).

It's called the lipstick effect, when times are tough women scale back and buy small luxuries such as a new lipstick. My small luxury through the pandemic has been a small bunch of flowers £3-5 a fortnight.

I work in a clothes shop and sent a message to my Manager a couple of days ago saying that when we re-open, I'm expecting a party atmosphere as people come out of hibernation and will want to treat themselves to new clothes.

I also know a lot of people will have lost loved ones, so going too mad will be a bit distasteful.

I think a line in the sand needs to be draw, with something like a Service of Rememberance at the end of March, for people who have died, wheeling out the Queen and Archbishop of Cantebury etc. Then people encouraged to go out and enjoy themselves, but still be careful and aware that others may be grieving.

 

 

 

 

 

 

[working woman]

4 hours ago, Harley said:

You've simply got to ask why our government (and others) is so willing to spend such historically high amounts under the narrative of covid and beyond (cladding?).  

Yes, after years of so called Austerity when we have been told there is no spare money for schools, the NHS, care for the elderly, helping the homeless etc, the amount of money that has been created is mind boggling.

However, wasn't that the basis of this thread,  that DB predicted that the deflation had to be printed back?   

The issue for Govts would be where to spend the newly created money. 

Covid came along at the right time and was one way to distribute it.  

Sustainable / Green Development has been on the backburner for years and not really been taken seriously. It may now prove a useful conduit for the money.

There is a time for everything. 

 

There is a simple solution, they could just give me the money,  I would happily find ways to spend it for them.

 

 

 

 

 

 

 

 

[DurhamBorn]

People might want to read this and also send in their thoughts to the consultation.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/960034/NMPA_consultation_2021.02.10.pdf

 

It seems to confirm that the increase will be a cliff edge one from 55 to 57 on the 6th April 28.That seems the only sensible way to do it,and its what happend last time it went from 50 to 55.

It will be interesting to see how it works in practice,for instance what if you take an uncrystalised withdrawel,does that count as pension accessed or do you actually have to be in full drawdown? Im 55 in 26 so if not i could be able to access then not access in 28 until 6 months into the year.

[Loki]

https://www.zerohedge.com/commodities/jpmorgan-predicts-biggest-short-squeeze-yet-begins-next-month

 

 

[sleepwello'nights]

21 minutes ago, working woman said:

Yes, after years of so called Austerity when we have been told there is no spare money for schools, the NHS, care for the elderly, helping the homeless etc, the amount of money that has been created is mind boggling.

However, wasn't that the basis of this thread,  that DB predicted that the deflation had to be printed back?   

 

In the mid 20th Century we had a World War. Prior to the war unemployment was high and civil unrest had been stirred by socialist politics. The Russian Revolution, The Spanish Civil War. The wars destroyed much infrastructure, deflation if you like. The end of WW2 gave the opportunity to rebuild and utilise the redundant military men to replace what had gone with the assistance of manpower from the underdeveloped colonies around the world. 

A better world was rebuilt from the devastation.

Perhaps Covid is a better enemy than other countries for the civilised world.

 

[Mapper]

5 hours ago, Knickerless Turgid said:

Is there a more pretentious brand in existence?

Cunts.

Bo Diddley telling Louis Winthorpe III what time it is.

 

[ThoughtCriminal]

I'm going to channel the spirit of David Hunter and be a contrarian. 

 

What if there is no great orgy of spending, whoring, drinking and holidaying etc after this "ends"? 

 

Anecdotally I've seen a lot of changes in people's behaviour: taking up long forgotten hobbies, losing weight and getting fit, unbridled joy at how much money they've saved not going to the pub. 

 

Everyone is baking in the fact that everything goes back to normal and we hit the roaring 20s.

 

Im not so sure that the propaganda and a year of a new routine won't have caused profound and permanent changes to how people live. 

 

I used to be a prison officer before I hid asbestos for a living and I know full well the power routine has to institutionalise people and entrench behaviours. 

 

The effect this would hadve economically can't be overstated. 

 

Just something worth considering. 

 

 

 

[sancho panza]

17 hours ago, dnb24 said:

I don’t know tbh, I think what you've stated  would be correct but there wasn’t any further determination/explanation. 
My thoughts are along the macro line- and echo @DurhamBorn in that we are at that inflection point where society isn’t interested in procreation (woke issues/lack of future/lack of faith - secular/financial/societal). It is also probably true that London has seen its day- TPTB need labour to move North.

 @spygirlhas been talking about it for a long time but this last year has really dented the financial job market in London- and either by design or chance- I can see the graduates/apprentices from 2022/23 moving up to Newcastle/Liverpool than down to London.

Would be interesting to see if the hospital planners up north expect to see higher birth rates?

 

I think there's been a lot written about the UK falling below replacement birth rate of 2.1 babies per woman,particualrly by Paul Hodges.

ALso worth noting that the current trends to aging are reinforced by hosuing prices.People like some security of tenure before having kids if they can-me and Mrs P rent and are having another little one in March so not judging anyone jsut saying I know what goes through her head-which means that places like Londinium are depopulating anyway given you've got 40 year olds living in shared accomodation becuase flats are so expensive or people paying £500k for a two bed flat.

Anotehr unintended consequence of our immigration and scoial hosuing policies.

Genuinely interested in whetehr you think housing costs play a part or not in the demogrpahic changes

 

 

16 hours ago, Harley said:

Bang on.  Just read this after my last post so very much on the same theme.  One contextual thing I forgot to say was historically we would have had a war by now, that historically being the most common reset (aka "clearing") mechanism.  Is what is labelled Covid, but which is (now?) something more broader than that, an attempt (by design or as much by nature) to replicate that?  No, I don't mean nature in the medical sense, but in the systems dynamic sense, where such things coalesce around it.  Like the start of the Big Bang in astro terms.  So should we therefore start viewing the emerging social and macro more from a war footing (command economy and all that) perspective?  So, for example, Green Energy and the like make the same "irrational" sense as making bullets do?  That is, the yardstick changes and the sooner we "get it' the better because getting under the covers of that would be far better than looking at any chart!

this is similar to that great quote from you a few moments back that 'if it wasn't BTC it would besomething else'.....

I agree,if we didn't have nuclear weapons on all sides,there'd have been a proxy war or two by now.interested in @AWW point on his friends saying this was manufactured...which would explain why our govts panicked so much if intelligenece agencies were warning them of that fact.

15 hours ago, DurhamBorn said:

The boss of L'Oreal, the world's biggest cosmetics group, has forecast a 1920s-style beauty boom when people will be allowed to go out and socialise again.

Chief executive Jean-Paul Agon said:

People will be happy to go out again, to socialise.

This will be like the Roaring 20s, there will be a fiesta in makeup and in fragrances.

Putting on lipstick again will be a symbol of returning to life.

 

 

Interesting that I've seen your roaring 20's meme cropping up across the media spectrum of late.

ALos,Luke Gromen interview I posted about teh other day was very much in line with a lot of your predictions,particualrly with regard to inflation.He predicts higher inflation than your good self but not by a lot.Number of bright minds heading in the same direction normally means 1 thing...(and I've still yet to study Napier's most recent round of interviews.

14 hours ago, Heart's Ease said:

Yup. Close family has done twenty odd years in various management levels of 'fragrance'. It's a sticky one. Most of trade done in the few weeks running up to, but not immediately before Xmas. Sticky because - even if there's little money around, it's an affordable treat, or affirmation, or aspiration. All marketing, of course. But when times are grim, it's still something people spend on - even though to me(!) it's the least rational thing ever!

I must look up the economist's term for it (to my shame my only degree is in economics and I can't remember owt).

Lipstick indicator?

[sancho panza]

13 hours ago, Cattle Prod said:

@sancho panza Just been looking at my XOP XLE balance, and am rebalancing a bit more toward XOP. Today for example it's following price more closely, while XLE is lagging as it has been.

I forgot one big element of this: refining. XOP gets their almost all their revenue from sellling the oil and gas, XLE have a big income % from refining. This is of course what softens the impact in an oil price bear, and lags it in a bull. And refining margins are currently low. So if you want more leverage to the price, perhaps XOP is better, but another play is that I think XLE could catch up once refining margins improve once demand picks up. XOP may not be pricing in a drop in the shale patch either.

Cheers for this CP.I'll have a look.At the minute,because of the amount we have in oilies,I'm only really buying options which would suit trading XOP which is inherently more risky as I remember coma scoring it and then buying some constituents which I sold up in Feb 2020 as Coivd approached(sadly kept OXY )

ref leverage,I've found some Futures Options on Saxobank where you can trade WTI or Brentand was looking at htem yesterday.WHat intrigued me was that the Sept calls were cheaper than the July as I remember and being one of those who's always confused by the differing interpretations of backwardation/contango,I was googling away trying to work out which one it was.

Not that it matters.These products look about right for us,but at the time,Brent was $62 which is a little bit more pricey than I'd enter at(we'll probably set up out of the money positons).Risky obviously so it's dyor.But we've effectively doubled our XOM positon in stocks with a range of April Calls which are looking good so we have something to play with.I've been redoing my historical charts and think $80 is entirely probable.

One thing that intrigued was that the futures are normally two months ahaead of option expiry ie options expire two months before futures expiry which I presume is to avoid the volatility as the futures approach settlement.

[sancho panza]

9 hours ago, sleepwello'nights said:

In the mid 20th Century we had a World War. Prior to the war unemployment was high and civil unrest had been stirred by socialist politics. The Russian Revolution, The Spanish Civil War. The wars destroyed much infrastructure, deflation if you like. The end of WW2 gave the opportunity to rebuild and utilise the redundant military men to replace what had gone with the assistance of manpower from the underdeveloped colonies around the world. 

A better world was rebuilt from the devastation.

Perhaps Covid is a better enemy than other countries for the civilised world.

 

I always love that Steve Keen quote that Great Depression 1 ended after ten years with world war two.

12 hours ago, Loki said:

Centrica, go big or go home. 

 

You mentioned the name,that's the recovery stopped at 53p....

[AWW]

Slightly tangential question - does anyone here generate additional income from their portfolio by selling call options for stocks they own?

[Noallegiance]

7 minutes ago, Cattle Prod said:

I have to relisten to his recent one on macrovoices. He had an alternative outcome to rising interest rates to cintrol inflation, by controlling bank credit growth  Keen to hear what you @DurhamBorn and the thread thought of it:

Would have considerable implications for the macro thesis discussed here.

@MvR

Is this not part of the thread thesis? Commercial banks being bypassed so the consumer credit growth is stunted, but governments feeding the economy with direct injection?

That quoted snippet also doesn't indicate the type of inflation, like where the inflation shows up/doesn't show up. Is there anything on that?

[Yadda yadda yadda]

3 hours ago, ThoughtCriminal said:

I'm going to channel the spirit of David Hunter and be a contrarian. 

 

What if there is no great orgy of spending, whoring, drinking and holidaying etc after this "ends"? 

 

Anecdotally I've seen a lot of changes in people's behaviour: taking up long forgotten hobbies, losing weight and getting fit, unbridled joy at how much money they've saved not going to the pub. 

 

Everyone is baking in the fact that everything goes back to normal and we hit the roaring 20s.

 

Im not so sure that the propaganda and a year of a new routine won't have caused profound and permanent changes to how people live. 

 

I used to be a prison officer before I hid asbestos for a living and I know full well the power routine has to institutionalise people and entrench behaviours. 

 

The effect this would hadve economically can't be overstated. 

 

Just something worth considering. 

 

 

 

Yes, all that is true. I've also seen people go back to smoking after just one cigarette. Some people will stop going to pubs or change their lifestyle permanently. Lots more won't and will be desperate to go out and spend. Whether that be in pubs and restaurants or on clothes and accessories. The people spending will more than make up for those that don't.

There could be substitutions. Friends round the house rather than go to the pub. Save on beer costs. It isn't the same experience though and you have to tidy up afterwards.

There have also been people who have taken less healthy life choices because of lockdown. I've seen it reported that smoking is up. Some people have become even more sedentary. Others are drinking more out of boredom.

The lockdown will affect behaviour, in at least a proportion of the population. There will be a spending boom as the money accumulating in bank accounts won't stay there. I expect holidays will be very expensive, although that might not really take effect until next year.

Lockdown led to demand and price surges in home exercise equipment. Dogs. A massive expansion of home food delivery. What will benefit from unlocking?

[Harley]

1 hour ago, Cattle Prod said:

I have to relisten to his recent one on macrovoices. He had an alternative outcome to rising interest rates to cintrol inflation, by controlling bank credit growth  Keen to hear what you @DurhamBorn and the thread thought of it:

Would have considerable implications for the macro thesis discussed here

This is what really attracts me to Napier, other than his historical perspectives and much else.  None/few mention like he does the elephant in the room (which has been taking a few covid dumps of late and making a right mess) - regulation.  It's so obvious that they will increasingly regulate in all walks of life.  They are Borg, the masters of the universe, the Ozymandias' of a brave new world yet to crumble, never wrong, to rightly tame nature to their self evident truthful pretensions.  Our politic has incubated a whole class of them in all walks of the public/third sector.  Like how many on SAGE are actual medics rather than a string of socio-academic so and sos.  Why should finance be spared?

[Hancock]

26 minutes ago, Yadda yadda yadda said:

Yes, all that is true. I've also seen people go back to smoking after just one cigarette. Some people will stop going to pubs or change their lifestyle permanently. Lots more won't and will be desperate to go out and spend. Whether that be in pubs and restaurants or on clothes and accessories. The people spending will more than make up for those that don't.

Once the shops, pubs and restaurants open, the only thing that will stop Brits spending is job losses or a tightening of credit.

This is a nation who on a Saturday night watches a dancing sausage to guess who is inside.

[Harley]

37 minutes ago, Hancock said:

This is a nation who on a Saturday night watches a dancing sausage to guess who is inside.

So pleased I have no idea what that's all about!  The nearest I get to broadcast TV is owning ITV shares!  And I'll dump them as soon as they peak (I have principles after all!).  I'm with DB - decomplex and enjoy those downstream stocks benefit during the party and (importantly) later (without having to guess the sectors to benefit from the state largess).  But also trade any melt up of the upstream (e.g. consumer facing) stocks, until the party's over.  I'm thinking one part of such a pullback may be that while the upstream stocks fall, and the tide runs out, there may remain a new plateau of higher commodity prices.  Surely any party won't last long enough for any additional supply via new producer investments, should they be that brave, to take effect.  And with currently busted supply chains....Trade v long term value.

[feed]

39 minutes ago, Yadda yadda yadda said:

Yes, all that is true. I've also seen people go back to smoking after just one cigarette. Some people will stop going to pubs or change their lifestyle permanently. Lots more won't and will be desperate to go out and spend. Whether that be in pubs and restaurants or on clothes and accessories. The people spending will more than make up for those that don't.

Risk taking.

Nothing quite like locking down an entire generation of youth for a year for a virus that has almost no averse effect on them to stimulate risk taking once let out again.  I imagine the roads will be carnage for a while.