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

[sancho panza]

10 minutes ago, Ponty Mython said:

Currently on the coast north of Durban, heading back to town in a few days, it will be interesting to see whether the country's third city is suffering equally.

No shortage of water here though...

Enjoy it Ponty.What's Durban like in terms of security/corruption/economy?

it's mainly Zulu,had some people from the Cape saying that a lot of local politicans get capped there if they fall out of line.Be interested if you know much about the politics there.

Mrs P's sister intends to go back to Durban when she's had enough of Dubai

[Talking Monkey]

17 minutes ago, sancho panza said:

Most LL's are small time

https://www.mydeposits.co.uk/blogcat/how-many-buy-to-let-landlords-are-there-in-the-uk/

The minister produced an extensive table detailing the number of landlords living in each local authority area in England, Scotland, Wales and Northern Ireland.

The number of landlords totals 2,594,720 – with the most (2,266,770) living in England. Scotland has 158,505 landlords, Wales 104,450 and Northern Ireland 64,995.

Counting the number of private rented homes is still fragmented. The latest data from each government shows around 5.45 million homes are let as buy to lets or shared houses.

 

My god 5 million homes as BTL, what a load of bollocks the past 30 years have been

[Noallegiance]

2 minutes ago, Talking Monkey said:

My god 5 million homes as BTL, what a load of bollocks the past 30 years have been

It's quite something that it's been easier to own 2+ than 1.

[janch]

Never mind MMT......we are nearly there if the following is to be believed:

https://www.zerohedge.com/markets/repocalypse-20-deck-turn-repo-rates-are-blowing-out

[Harley]

5 hours ago, Harley said:

Mr Carter was my teacher at school.  Did Economics (including more personal finance) and metalwork.  Taught us fallacies like get rich quick.  Think he was old enough to be ex-WWII.  Worldly wise.  Always wore a suit, white shirt and thin tie.  Very 1950's.  Absolutely great man (a few other teachers were the same).  I aced Economics the rest of my life.  Received top marks for metalwork too which is proving equally valuable later in life!  I owe him a lot.

.....And my physics teacher, a bit of an identikit, and very polite about having to cane people!  I mention him because he taught one great idea I successfully used the rest of my life - "If in doubt, draw a great big dirty diagram"!  I don't know about things today and the ability and focus to teach pupils about finance, but these folk were full on characters with very experienced lives and a desire to pass their wisdom on.   

[janch]

and another which is quite lenghty and a bit beyond me but the gist is what DB has been predicting ie the Fed are behind the curve and there isn't enough liquidity.  Massive QE4 is needed to stop the system grinding to a halt.  The market will crash before they act.

https://www.zerohedge.com/markets/its-about-get-very-bad-repo-market-legend-predicts-market-crash-days

[Harley]

4 hours ago, Noallegiance said:

Me thinks the next few years are going to see some old fashioned character-building stuff on many fronts.

Stories for the grandkids. Hopefully.

TBH, I getting a bit old for "character building", having done rather a lot in the past, but you're right.  The cliche that challenges are in a large part mental is correct, much as some would wish not 'cause no amount of money, excuses, etc can make up for that.  I've been through the mill a few times and it's always been interesting who comes out the other end intact.  

[Harley]

4 hours ago, Loki said:

I think anyone posting on this thread has enough 'character' already and it's time for the others to have their share!

The journey always starts with an open and enquiring mind.  The rest just happens!

[Harley]

3 hours ago, sancho panza said:

Underneath the surface,seismic changes have been occuring over the last twenty years and quite simply can't carry on on the same trajectory.

We would do well to see things in a historical context, starting this latest phase with the deregulation and more importantly financialisation of the economies in the 1980s.  Things have been increasing at an increasing rate and she'll blow at some point.  We must be at the foothills by now so makes sense to prepare for whatever is coming next, but change (at a faster and more dramatic pace) it surely will.  The tremors, both realised and sat on, are getting more frequent and severe.  Bottom line, ex real real growth, things are a zero sum game and the current bill is huge.  For me, it is time not just to try to optimise things within the current financial regime, but also beyond it.

PS: Apologies, probably repeating myself, time to fill my pint glass and move on!

[Harley]

2 hours ago, headrow said:

I've been keeping my dividends as cash for the past 3 months waiting for a better entry point . Got 6k looking for a home but i can't seem to find any value anywhere.

Me too, no value in my usual suspects.  Indeed they virtually all look to be on a downward path or are peaking ahead of one.  Partially my problem for not devoting time to exploring new areas but most of the main index ETFs, PMs, bonds, etc which I would still be buying into are, IMO, uninspiring.  But invest I must as this cash is a huge risk if we hit another banking crisis.  That said, there has been a bit of a stealth bull run in the US oil companies I looked at.  There's always something out there.  I thought maybe commodities but they seem to just churn through the classes with limited net gain overall.  I must look harder soon, especially having missed last year's January bull run due to too nice a Christmas and New Year!  But this lime stone wall won't get built on it's own!  

[Harley]

2 hours ago, sancho panza said:

The academic class from which our CB overlords come from can't accept they got it badly wrong and that money velocity isn't a constant.

Bingo!

2 hours ago, sancho panza said:

Watch out below.

They'll be wanting compo, just you wait!

2 hours ago, Talking Monkey said:

My god 5 million homes as BTL, what a load of bollocks the past 30 years have been

I could feel at tad better if they were owned by pension funds, etc who behave professionally, long term, are well regulated, etc (as often the case on the Continent) but this is not the British way.  Absolutely scummy and predatory as usual.

[Don Coglione]

2 hours ago, sancho panza said:

Enjoy it Ponty.What's Durban like in terms of security/corruption/economy?

it's mainly Zulu,had some people from the Cape saying that a lot of local politicans get capped there if they fall out of line.Be interested if you know much about the politics there.

Mrs P's sister intends to go back to Durban when she's had enough of Dubai

I am sure that I replied to this earlier, but anyway:

I have no connection to the place and have not visited Durban in almost 20 years, at which time it had the highest per capita murder rate in SA, which was going some. I can report back in a few weeks, assuming that I make it back!

[Loki]

2 hours ago, janch said:

Never mind MMT......we are nearly there if the following is to be believed:

https://www.zerohedge.com/markets/repocalypse-20-deck-turn-repo-rates-are-blowing-out

https://www.zerohedge.com/markets/its-about-get-very-bad-repo-market-legend-predicts-market-crash-days

Within a couple of days though? 
"Gradually, then all at once?"

@DurhamBorn any thoughts?

[Democorruptcy]

4 hours ago, sancho panza said:

Ignoring the methodological differences, since 2010, the proportion of landlords with just one property has declined from 78% to 45% or from 40% to 21% of the sector. Meanwhile, the proportion of landlords with five or more properties increased from 5% to 17% or from 39% to 48% of the sector. Landlords are, on average, older and less ethnically diverse than the general population10 . Most have been landlords for some time.  Over half (59%) of landlords are aged 55 years or older. Not surprisingly, given the older age profile, a third (33%) of landlords are retired. The majority (89%) of landlords are White.

Thanks for that stat.

At the time s21 was going to be introduced I suggested on ToS that it was governbankment policy to shake properties from the hands of small scale BTL. It's no good for governbankment tax revenues to have more and more people living off property income and paying little tax, when they used to be working full time and caught in the PAYE net. Especially when a lot of them might be decent earners, who then drop taxable working hours and retire earlier.

[Agent ZigZag]

32 minutes ago, Democorruptcy said:

Thanks for that stat.

At the time s21 was going to be introduced I suggested on ToS that it was governbankment policy to shake properties from the hands of small scale BTL. It's no good for governbankment tax revenues to have more and more people living off property income and paying little tax, when they used to be working full time and caught in the PAYE net. Especially when a lot of them might be decent earners, who then drop taxable working hours and retire earlier.

Never really thought of that, but I can see government think tanks making such an observation. With a cynical mind like that you should work for the government

[DurhamBorn]

7 hours ago, Loki said:

Isn't this a crucial part of durhamborns premise though? Government's being lent/printing straight into infrastructure

Yes,and its nothing to worry about because we already have the road maps worked out on different scales.The cyclical/reflation areas will outperform the inflation created by between 1.4x and 8 times (silver).

Im actually much happier now that the market isnt spotting the macro turn at all,and are still selling off the very stocks that will gain.A massive amount of liquidity and wealth locked in bonds will be starting to flow into inflation loving assets 12 months from now.We cant know the exact timing,so ladders into the areas and the stomach to accept perhaps 20% downs before dividends might happen.

Its actually incredible how close the macro picture was to pointing to the way politics and direction would go.Once the markets wake up to inflation,as they will bonds and most equities will show underperformance on scales that will damage most peoples pensions etc by a large margin.Everyone and his dog is structured with the belief if bonds go up shares go down,shares go down bonds go up.They have forgot the 3rd way.Bonds go down a lot,shares go down as well,commods and inflation loving assets go up.The irony is,most funds etc are selling the very areas that will protect them.

[Noallegiance]

3 hours ago, Harley said:

The journey always starts with an open and enquiring mind.  The rest just happens!

I love quotes. You can quote me on that.

Here's one:

All wisdom starts with "I don't know".

[Harley]

5 hours ago, Noallegiance said:

I love quotes. You can quote me on that.

Here's one:

All wisdom starts with "I don't know".

Indeed.  I'm of an age where I can now make up my own quotes!  Like in this case, "Humility opens eyes".

[Noallegiance]

9 hours ago, Harley said:

  I'm of an age where I can now make up my own quotes!  

Harley

2019

[Yellow_Reduced_Sticker]

On 26/11/2019 at 19:41, MrXxxx said:

YRS will be on in a moment explaing that he saw Janch`s post and decided to buy :-) :-):-)

Na...that stock wasn't on me radar, besides any small company that's HIGH RISK I only ever put in a small amount, so if it goes BUST I don't give a HOOT!

 

1 Stock that has caught my attention is potash company Sirius Minerals- had a high of 40p now...DOWN to 3.5 p !

 

 

I like to look at the stock chart and directors share-deals, and why are the  directors NOT filling their boots at this price?

 

 

I may bung in a monkey when they hit 1p HA-ha! They either go bust OR multi-bag, didn't @spygirl or @DurhamBorn write about these way back in the thread?

 

@DurhamBorn, ya mention learning more DIY skills, well i do near-on everything myself if i can...anyway i want to re-do my driveway, and came across these video tutorials to build a DIY Gravel Driveway, and ffs its a girl doing this work, so if she can do it anyone can!

 

 

My drive is about the same size as hers, however i won't do the big front area as i have grass there...i rang around for quotes - the average is £4.5K!

 

So I'll be doing it myself, BUT with one HUGE money saving TIP, through my neighbour I've found a place where i can get FREE Cotswold stones, and its only down the road, near an allotment, so should be able to do it all with a borrowed wheelbarrow from the allotment ... SAVE using the car fuel!

 

 

 

[sleepwello'nights]

On 11/12/2019 at 08:02, Noallegiance said:

It's going to happen isn't it:

https://www.bbc.co.uk/news/business-50579897

I'm not sure I've ever felt how I feel now. Isolated. Concerned. Lost. Depressed. 

 

This comes back to the question I can't resolve: what is money?

As an accountant I conceptualised it as a way of rationing resources. If that is so then what is wrong with a government utilising the manpower of its population to build, upgrade, improve the infrastructure of the country. Sure some will leak into vanity projects but they may only represent a small proportion of the total. 

An example is Roosevelts new deal to pull the US out of the depression.

In times of war the workforce is mobilised to achieve a common purpose. Full employment ensues. There are unfortunate consequences but the point that resources are fully utilised stands.

And then I cast my mind over the reported experiences in other countries where the resources have been misallocated. An example that springs to mind is Romania where Ceausescu built an imposing imperial palace. Command economies have been shown to be unworkable.

It also goes against my ideological principles that it can only be achieved by compelling others to do the bidding of a few, even if it is for the common good, some form of taxation or force that supresses individual freedom. 

What is money?

[JMD]

On 09/12/2019 at 18:17, Bricks & Mortar said:

Beware.  one of my guys cracked a van windscreen.  Apparently, it was covered on insurance, so nothing to worry about.  I'd previously got a price of £200 from an independent - but the insurance insisted on Autoglass if they were paying.  So, £440, of which I had to pay £100 excess, and the VAT of £88. (at least we claim that claim the VAT back).
The stinger was about a year later - when I found it would be an extra £500 to stick a new worker on the policy, because there had been 3 claims in the last 5 years - the windscreen - and someone hit my personal car when it was parked - and the new worker himself had a bump with his personal car - The van insurance was only £280 to start with.

Interesting, so you were painfully stung both ways. That's mostly the reason why I try to 'game' the insurance by using tpft, but nowadays the premiums are getting too close to fully-comp.

As you say the public are forced to use AutoGlass despite them being more expensive. Surely just another example of how the markets are not working efficiently... Big companies lazily only wanting to deal with other big companies.

For further evidence of this being the case, the independent that replaced my windscreen for £200 - half the cost of AutoGlass prices - said they get all their windscreens supplied from AutoGlass!! Presumably Autoglass sell their stock at a profit, so the extra £200 AutoGlass charge when they do the replacement is pure extra profit for them; whereas the independent can make a profit by charging only £200.

 

[JMD]

On 09/12/2019 at 20:32, Harley said:

Well spotted!  It's a metaphor.  Gin then, debt and the rest today.  But yes, a (real) gin after work is a nice treat!  Aldi of course!  I will research "Beer Street" and await its time!

I concur with you regarding the actual gin spirit.   

Some have called the artist Hogarth hypocritical with his Beer Street. However, if we fast-forward to today, we perhaps see similar social dilemmas playing out - where the 'working-classes' are being subsumed into a destructive drugs culture, including the associated effects of crime, etc. Whereas the upper classes although having always done things to excess, drugs, drink, etc, they still somehow manage to come out unscathed? This isn't a 'them and us' rant btw, rather I think total freedom (eg drug liberalisations) come with consequences that dare not be discussed, lest those discussions be viewed as being judgmental/elitist/or (perish the thought) just having a contrarian opinion. ...Does the gin/drugs metaphor of excess apply I wonder?        

 

[sancho panza]

Hussman from Dec 3 with some interesting obs.

https://www.hussmanfunds.com/comment/mc191203/

' With respect to the U.S. economy, it’s worth remembering two facts. First, the trajectory of every U.S. economic recovery has followed a very simple mean-reverting path. Specifically, the “output gap” at the recession low (the difference between actual GDP and potential GDP as estimated by the CBO) has narrowed at a rate of about 8% per quarter, utterly regardless of how aggressive or extreme monetary policy has been. That output gap tends to narrow until it is closed. 

There’s utterly no reason to imagine that the economy will permanently avoid future recessions just because the “can” of the recent expansion has been kicked down the road a bit further, following a very long mean-reverting recovery from a very deep recession trough that has finally closed the output gap. Indeed, with structural real GDP growth (trend productivity + labor force growth) down to just 1.6%, even a sustained real GDP growth rate above 2% would require a further decline in an already depressed unemployment rate, a strong reversal in trend productivity, or a baby boom in which the newborns are immediately of working age.

While we can’t rule out a “Japan-like” situation of low GDP growth and even low interest rates in the years ahead, one shouldn’t imagine that this would imply decades of “market stagnation without a meaningful pull-back in prices.” Yes, Japan cut interest rates persistently and aggressively throughout the 1990s and has kept them low ever since. Yes, the median short-term interest rate in Japan since 1990 has been less than one-quarter of a percent. But stock market investors should also remember that Japan’s Nikkei stock index lost over 60% from 1990-92, with a 40% loss from 1996-98, a 60% loss from 2000-03, and a separate 60% loss from 2007-09.

The idea that low interest rates somehow put a “floor” under stock prices is a historically-uninformed delusion. A market loss on the order of 60% would be wholly consistent with low interest rates and easy monetary policy, especially at the valuation extremes we observe at present. Recall that the Fed eased aggressively through the entire 2000-2002 and 2007-2009 market collapses.

“Buckle up” isn’t a forecast, it’s a precaution

From a shorter-term perspective, we’ve observed a type of market dispersion in recent sessions that has typically been associated with steep and rather abrupt market plunges, often representing the first leg of a more extended collapse.

.. ..... in this case reflecting dispersion in leadership (new highs vs new lows), participation (the % of individual stocks joining a given market advance), and breadth (advancing vs declining issues) emerging immediately near a record market high.

We observed this condition on November 20, with a full leadership reversal (new highs strictly above new lows) the next day, and another instance on Tuesday December 3. While we’ve already seen a quick 2% market retreat from the market’s highs in the past two trading sessions, you’ll notice several short yellow bars next to all of those previous red bars. Those yellow bars indicate single-day S&P 500 declines of 2.9% or more within 12 trading sessions following a given signal. That’s not a forecast, and there’s no assurance that we’ll observe that outcome in this particular instance. It is, however, consistent with our broader view.

Still, it’s worth remembering that I’ve adopted a constructive, unhedged, or leveraged market outlook after every bear market decline in over three decades. I have every expectation that such opportunities will emerge over the completion of this market cycle. The mistake would be to believe in a permanently high plateau.'

[sancho panza]

https://www.straitstimes.com/business/economy/china-suffers-biggest-dollar-bond-default-by-state-owned-company-in-two-decades

China suffers biggest dollar bond default by state-owned company in two decades

SINGAPORE (BLOOMBERG) - A major Chinese commodities trader became the biggest dollar bond defaulter among the nation's state-owned companies in two decades, in a moment of reckoning for Beijing as it struggles to contain credit risk in a weakening economy.

Tewoo Group Corp announced results of its unprecedented debt restructuring, which saw a majority of its investors accepting heavy losses. This is expected to reshape investors' perceptions about government-owned borrowers whose identity has for years offered a relatively strong sense of security.

It's also seen as offering a road map for resolving similar debt crises in the future.