Credit deflation and the reflation cycle to come (part 3)

[Majorpain]

4 minutes ago, Froggy2000 said:

That doesn't mean much to me being an ignoramus, but I do know I pay roughly 13p per Kwh for my home electricity.  In other words I normally pay £130 for a MWh.  Drax is charging 4k!!  Is that right?!!!

Yes, because they are desperate for power and are forced to pay at a ripoff price to get some more generating capacity.

[MrXxxx]

8 hours ago, DurhamBorn said:

Exactly,and the macro was clear before all this started that the QE needed to be fiscal and directed through governments.The financial crisis QE re-financed the  banks,nothing more,they re-financed money lost to debt default from dis-inflation.

This time they needed to lift everything around 30% so that they could reach a point where tax increases faster than spending.To do that it had to go direct into the economy.They printed direct government fiscal spending.

They had no choice and were right to do so.If they hadnt the economy would of collapsed,and i mean systemic,not rough recession.

Key take now is to understand this is a fully blown distribution cycle and all that entails.The things that were valued least will be valued most.To sustain the same standard of living will mean spending more savings,or being paid more for your labour.

 

So probably the worst time for all those currently retiring or early retiring?!

[sancho panza]

49 minutes ago, Loki said:

Thanks, I was reminded of David saying it had topped for the remainder of this cycle and would roll over. (I appreciate it's not like an on/off switch) Just wondered what an oil expert made of that idea.  To me it seemed even if it had topped it wouldn't fall far.

DH may have a deeper understanding of liquidity issues than the specifics of one industry in particular.He may well be lookign at it using roadmaps and calling the top from there.

Obviously the people who dig for oil may have a different view.

I'd say the issues that face the oil markets at the minute are mainly driven by supply/demand imbalances rather than CB liquidity issues which is why I'd differ from DH here.

Whereas say,gold,is still being driven mainly by liquidity issues imho

10 minutes ago, Cattle Prod said:

In a BK, oil will completely dump. But I'm not too fussed about that because I'm convinced reactions by the Fed and CBs will be fast and substantial and the dump will be quick. Oil equities may not suffer much at all. And the cycle I'm interested in is another 7 or 8 years to run.

I think there's a sweet spot looming before the BK arrives in earnest to sell high and try and buy back low.2008 deja vu all over again.Same in a lot of commodities .We know that histroically a 100% plus rise in oil price can trigger/herald recession,recessions lead markets down.

Problem is for us we're in that low that it becomes a question of selling a postion that helps me sleep at night to maybe trying to get a 50% bigger postion and maybe risking getting it worng and losing 50% which might start me not sleeping at night....

[DurhamBorn]

6 minutes ago, MrXxxx said:

So probably the worst time for all those currently retiring or early retiring?!

Well that depends,but for a lot yes.There arent many areas can leverage the inflation.BTL for instance will see costs going up much faster than rents.

Retiring understanding things can be great.Iv spent £120 on diesel since i retired in Feb for instance and done a few jobs on the house that would of cost a few grand if id got someone to do it.

 

[Loki]

2 minutes ago, sancho panza said:

DH may have a deeper understanding of liquidity issues than the specifics of one industry in particular.He may well be lookign at it using roadmaps and calling the top from there.

Obviously the people who dig for oil may have a different view.

I'd say the issues that face the oil markets at the minute are mainly driven by supply/demand imbalances rather than CB liquidity issues which is why I'd differ from DH here.

Whereas say,gold,is still being driven mainly by liquidity issues imho

Very good point, thanks

[Hancock]

21 minutes ago, sancho panza said:

I'd say the issues that face the oil markets at the minute are mainly driven by supply/demand imbalances rather than CB liquidity issues which is why I'd differ from DH here.

Your post about the Germans retail sales falling 2.5% less is surely a sign that demand is starting to fall.

Baltic Dry index is dropping like a brick.

Demand seems to be falling for life's non essentials.

[sancho panza]

13 minutes ago, Hancock said:

Your post about the Germans retail sales falling 2.5% less is surely a sign that demand is starting to fall.

Baltic Dry index is dropping like a brick.

Demand seems to be falling for life's non essentials.

yeah it is,but talking from experience here,I've sold too early before.The public are clearly beginning to fear the price rises that are coming.My Mum does her stuff for me listening to the old ladies and their families and the talk is doom mongering stuff by any standards.I'm not surprised retail sales are dropping if people are fearing job losses/income drops

I'll dig up a post I did on oil price rises and recession starts in 90/00/08 tmrw if I remember.Key thing is that you have to remember that recession start can often be retrospectively changed due to the GDP data getting adjsuted(as it does every quarter sometimes up to 6-12 months after the end)

A deflationary BK event looks highly likely,stock market drop will follow imho.Retail sales are an indicator but stock markets may get driven higher by commodity prices.Still lots of bulls out there and others believing the Fed has this under control

For me junk bond yields running negative in real terms and the US govt interest bill being 111% of tax receipts only ends one way.It's jsut the timing.For now I remain long the oils/telecoms/potash/goldies etc but reserve the right to be worng

[sleepwello'nights]

9 hours ago, Froggy2000 said:

That doesn't mean much to me being an ignoramus, but I do know I pay roughly 13p per Kwh for my home electricity.  

Not for much longer.

[belfastchild]

I know nothing about this and havent done any research but... ;-)

Had a thought catching up with the thread this morning about the amount of QE and various other things in the money supply and where it goes and how it goes etc.

Does anyone know how feasible it would be for a FAANG/crypto crash to facilitate the FED/ECB/BOE 'repatriating' a lot of the QE personal money supply?

Trying to chase up this green bonds thing and financial houses 'having to' invest in a certain amount of green stuff (think its all COP noise myself) but that would be another way of bringing the money supply sent to citizens back in house (and then some).

[DurhamBorn]

10 hours ago, Hancock said:

Your post about the Germans retail sales falling 2.5% less is surely a sign that demand is starting to fall.

Baltic Dry index is dropping like a brick.

Demand seems to be falling for life's non essentials.

Will be lumpy ,but that should be the story of the cycle.Massive tax increases and inflation are coming mainly from the middle who would tend to spend more on higher value items.The tax is being given to those lower down who tend to spend more on essentials and simple consumption.Distribution cycle.

Some areas seeing big cost pressures are also about to see big demand pressure.Its much harder for companies to navigate this king of cycle.

The drop off should see more onshoring though as a lot of the problems are supply based as inflation hits every part of the chain.JIT and long chains have inverted now and are a huge headwind instead of tailwind.People think it will calm down soon,and it will seem to improve slightly,but then carry on.If i was advising big corporates id of told then 3 years ago to start onshoring.We have been so hollowed out though you cant just go to a local forge etc anymore.

 

[DurhamBorn]

53 minutes ago, belfastchild said:

I know nothing about this and havent done any research but... ;-)

Had a thought catching up with the thread this morning about the amount of QE and various other things in the money supply and where it goes and how it goes etc.

Does anyone know how feasible it would be for a FAANG/crypto crash to facilitate the FED/ECB/BOE 'repatriating' a lot of the QE personal money supply?

Trying to chase up this green bonds thing and financial houses 'having to' invest in a certain amount of green stuff (think its all COP noise myself) but that would be another way of bringing the money supply sent to citizens back in house (and then some).

Inflation = + Tax + Rate Increases.

They dont want it in house though.Once in the pipes it has a bit of fun,but ends up where the economy needs it,where the price signals are.

 

[HousePriceMania]

[DurhamBorn]

Some of the Brasil stocks are getting into nice areas to open positions for anyone who wants exposure and who can live with the volatile nature.Not for widows etc etc DYOR.

AGRO,CIG,VIV,TIMB iv been adding to or set more ladders at 4% drops.

Iv sold out of Alcoa Corp pretty much 4x on that,though didnt buy a vey big holding, and iv moved 1/2 into TEF Germany this morning and im going to get a few Verizon later.

 

[DurhamBorn]

36 minutes ago, HousePriceMania said:

Nuts arent they.They forget its a market of stocks,individual companies.These people seem to think its an entity as one.

It was the same at the end of the tech boom.Ordinary boring companies were hated and at low PEs.Contrarian wet dream.

[HousePriceMania]

4 minutes ago, DurhamBorn said:

Nuts arent they.They forget its a market of stocks,individual companies.These people seem to think its an entity as one.

It was the same at the end of the tech boom.Ordinary boring companies were hated and at low PEs.Contrarian wet dream.

DB the trouble is, it's got so extreme, bubbles everywhere, CBs unable or unwilling to act, that when something does finally pop, it's going to be very very bad for people.

 

[Barnsey]

It'll be an economy rolling over, not rate hikes, which will hit homeowners.

https://duncanweldon.substack.com/p/the-bank-of-england-can-turn-a-mistake

According to the Financial Conduct Agency over 90% of mortgages taken out in the last five years have been on a fixed rather than a variable rate. By contrast, as recently as a decade ago over 60% of UK mortgages were on a variable rate.

An excellent analysis by the Bank a couple of years ago demonstrated that, as of late 2019, it would take around 3.5 years for any change in Bank Rate to feed through into the monthly mortgage costs of the median mortgage borrower.

[JMD]

16 hours ago, jamtomorrow said:

Yep, the 'Stay Puft' marshmallow man BK is incoming!!!    ...In fact I think that the name/image works particularly well on many levels - I wonder might that 'Stay Puft' image become a BK meme for this thread?!                                                                                     

[HousePriceMania]

Anyone else's oil shares being hammered this week ?

[sancho panza]

1 hour ago, DurhamBorn said:

Some of the Brasil stocks are getting into nice areas to open positions for anyone who wants exposure and who can live with the volatile nature.Not for widows etc etc DYOR.

AGRO,CIG,VIV,TIMB iv been adding to or set more ladders at 4% drops.

Iv sold out of Alcoa Corp pretty much 4x on that,though didnt buy a vey big holding, and iv moved 1/2 into TEF Germany this morning and im going to get a few Verizon later.

 

Thanks for teh heads up on Agro.

You got a view on AT&T?

[DoINeedOne]

what the fuck is this shit

Britain’s biggest firms will be forced to set out their green transition plans under an initiative to be outlined at the COP26 summit today by Chancellor Rishi Sunak.

The government wants to redirect investment away from carbon-intensive sectors such as coal and oil towards green initiatives, including electric car batteries and hydrogen fuel.

Companies on the stock market will have to set out their goals and will be assessed annually against their published plans.

Those who fail to make enough progress, or whose plans are deemed too weak, could face sanctions including fines or even removal from the stock exchange.

The Treasury said the plan would make the City “the world’s first net zero-aligned financial centre”.

However, Mr Sunak’s plans have already stirred some resistance from those who feel firms could still find ways to sidestep their obligations, such as moving their head offices overseas or leaving the stock exchange. 

If the plans are too draconian there are fears they could harm the City of London’s standing as an investment capital.

BP, Shell and mining giants Rio Tinto and Glencore are among those listed in London.

 

The CBI cautiously welcomed the plan, saying that business was already ‘upping its game’. But the employers’ group warned it was vital ministers work with colleagues abroad to produce ‘globally consistent’ rules to prevent British-based firms being penalised.

Mr Sunak will unveil his plans today at the Cop26 climate summit in Glasgow. A deal with 450 of the world’s biggest banks, pension funds and insurance firms will see almost £100 billion worth of assets begin to ‘transition’ to lower carbon sectors.

At present, firms are under no obligation to go green. A recent assessment found that barely half of all companies on the FTSE 100 have so far made any commitment to move to net zero.

[Hardhat]

32 minutes ago, HousePriceMania said:

Anyone else's oil shares being hammered this week ?

Yup. Portfolio has lost about 5% in past few days. 

Means I get more shares with my reinvested divis though. 

[HousePriceMania]

29 minutes ago, DoINeedOne said:

what the fuck is this shit

Britain’s biggest firms will be forced to set out their green transition plans under an initiative to be outlined at the COP26 summit today by Chancellor Rishi Sunak.

The government wants to redirect investment away from carbon-intensive sectors such as coal and oil towards green initiatives, including electric car batteries and hydrogen fuel.

Companies on the stock market will have to set out their goals and will be assessed annually against their published plans.

Those who fail to make enough progress, or whose plans are deemed too weak, could face sanctions including fines or even removal from the stock exchange.

The Treasury said the plan would make the City “the world’s first net zero-aligned financial centre”.

However, Mr Sunak’s plans have already stirred some resistance from those who feel firms could still find ways to sidestep their obligations, such as moving their head offices overseas or leaving the stock exchange. 

If the plans are too draconian there are fears they could harm the City of London’s standing as an investment capital.

BP, Shell and mining giants Rio Tinto and Glencore are among those listed in London.

 

The CBI cautiously welcomed the plan, saying that business was already ‘upping its game’. But the employers’ group warned it was vital ministers work with colleagues abroad to produce ‘globally consistent’ rules to prevent British-based firms being penalised.

Mr Sunak will unveil his plans today at the Cop26 climate summit in Glasgow. A deal with 450 of the world’s biggest banks, pension funds and insurance firms will see almost £100 billion worth of assets begin to ‘transition’ to lower carbon sectors.

At present, firms are under no obligation to go green. A recent assessment found that barely half of all companies on the FTSE 100 have so far made any commitment to move to net zero.

Tapering to be replaced by private debt

[Axeman123]

1 minute ago, HousePriceMania said:

Tapering to be replaced by private debt

Couldn't this just be standard waffle around one of these events that mysteriously is forgotten once the moment has passed? Start a committee to evaluate a possible scheme etc, a year later they come back and say it is too difficult.

[DurhamBorn]

42 minutes ago, sancho panza said:

Thanks for teh heads up on Agro.

You got a view on AT&T?

I prefer Verizon ,but T looks decent at these levels.Im trying to get diversity across the telcos,but leave room for more % upside and the US ones look decent value,but most around the world look superb value.

The sector is hated for many reasons.Now i suspect its due to debt load because the market thinks they will be stuffed once coupons go up,and i agree thats true if as a group they dont put up prices,but i think they will.I also think increasing rates is hugely bullish for these type of companies because it increases the value of present assets.They must de-leverage though as the cycle develops,thats crucial,not rolling over all the debt at higher coupons.

If price increases are working in id expect free cash to increase 5% to 7% this year at the big ones.If those numbers are across the board then they are all putting prices up.

 

 

[Noallegiance]

42 minutes ago, DoINeedOne said:

what the fuck is this shit

Britain’s biggest firms will be forced to set out their green transition plans under an initiative to be outlined at the COP26 summit today by Chancellor Rishi Sunak.

The government wants to redirect investment away from carbon-intensive sectors such as coal and oil towards green initiatives, including electric car batteries and hydrogen fuel.

Companies on the stock market will have to set out their goals and will be assessed annually against their published plans.

Those who fail to make enough progress, or whose plans are deemed too weak, could face sanctions including fines or even removal from the stock exchange.

The Treasury said the plan would make the City “the world’s first net zero-aligned financial centre”.

However, Mr Sunak’s plans have already stirred some resistance from those who feel firms could still find ways to sidestep their obligations, such as moving their head offices overseas or leaving the stock exchange. 

If the plans are too draconian there are fears they could harm the City of London’s standing as an investment capital.

BP, Shell and mining giants Rio Tinto and Glencore are among those listed in London.

 

The CBI cautiously welcomed the plan, saying that business was already ‘upping its game’. But the employers’ group warned it was vital ministers work with colleagues abroad to produce ‘globally consistent’ rules to prevent British-based firms being penalised.

Mr Sunak will unveil his plans today at the Cop26 climate summit in Glasgow. A deal with 450 of the world’s biggest banks, pension funds and insurance firms will see almost £100 billion worth of assets begin to ‘transition’ to lower carbon sectors.

At present, firms are under no obligation to go green. A recent assessment found that barely half of all companies on the FTSE 100 have so far made any commitment to move to net zero.

Can we judge politicians annually in the same way?