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

[JMD]

6 hours ago, DurhamBorn said:

Exactly it is.Pulls tax onshore,and in Orange SA and others even direct divs to governments as well.

Telcos will get some of the cut one way or another.They have massive power,just they cant use it yet.

DB, Interested where you say some telcos now beginning to pay 'direct divs to their government', I wonder if that is similar - and maybe one day might evan become same as in Russia - where I believe all sectors pay dividends into the state, and probably reason why many russian companies pay high divis (corporatism?).

[Hancock]

30 minutes ago, wherebee said:

No.  They haven't got enough needles in arms and compliance for surveillance yet, in my view.  There will be some scarey varient in Q1-2 2022 which drives enforcement further.  Mandating boosters (as per Israel and is being pushed in Australia).

Got to disagree, the £1bln for the entertainment industry showed theyre out of bullets, and Boris knows he's out of a job if he lockdown again.

[wherebee]

7 minutes ago, Hancock said:

Got to disagree, the £1bln for the entertainment industry showed theyre out of bullets, and Boris knows he's out of a job if he lockdown again.

I hope you are right.  A lot of my investment decisions go better if people start travelling and spending again.

[Hancock]

Just now, wherebee said:

I hope you are right.  A lot of my investment decisions go better if people start travelling and spending again.

I hope im wrong so i can get pile into the oil companies.

[Loki]

46 minutes ago, wherebee said:

No.  They haven't got enough needles in arms and compliance for surveillance yet, in my view.  There will be some scarey varient in Q1-2 2022 which drives enforcement further.  Mandating boosters (as per Israel and is being pushed in Australia).

Starting gun for the bust? I think you could both be right. Although i also think a cyber event could conveniently happen but that's not for this thread

[Hardhat]

22 minutes ago, Hancock said:

Got to disagree, the £1bln for the entertainment industry showed theyre out of bullets, and Boris knows he's out of a job if he lockdown again.

Cancelling Christmas was what did for Oliver Cromwell...

[DurhamBorn]

2 hours ago, Froggy2000 said:

Thanks for the update DB.  Turkcell looks particularly interesting considering what's happening to the Turkish Lira!  I'm not sure whether its ultimately good news in terms of wiping out Lira denominated debt, or whether its bad because the Turkish economy will unfortunately go down the toilet (again).

Political crisis and currency are usually great times to buy.Kaplan put me onto that fact years ago.Currency hit means they become cheap on the world market for goods etc and then the economy rebounds the other way.Turkcell is risky,but for people happy to accept the risk could provide very nice returns.

[DurhamBorn]

50 minutes ago, JMD said:

DB, Interested where you say some telcos now beginning to pay 'direct divs to their government', I wonder if that is similar - and maybe one day might evan become same as in Russia - where I believe all sectors pay dividends into the state, and probably reason why many russian companies pay high divis (corporatism?).

Governments own shares in many of them Orange and Telenor for instance.

[Long time lurking]

Read the article at the link if you have not already done so then watch the video , the video goes in to more depth regarding whats outlined in the link

https://thephilosophicalsalon.com/a-self-fulfilling-prophecy-systemic-collapse-and-pandemic-simulation/

 

 

[sancho panza]

6 hours ago, Cattle Prod said:

Welcome. What no one is yet talking about in supply is the lag time to new production. You saw recently that exploration finds are at 75 year lows. There will be BK type of financial fluctuations in price to shake people off, but the peak will not be 2024, unless demand gets severely destroyed, like worse than the great depression. It takes 5-10 years for new oil/gas supply to come on line. $200 in 2024 might be enough to stimulate investment, which won't show up in supply till the end of the decade at the earliest. So two roads:

1. Oil does a natural gas spike and destroys the world economy in the next 1-3 years

2. Oil cycles and grinds up against a supply wall for the next 1-8 years, after which we might get more supply. But probably won't.

 

Put simply like that I'm for option 1.It's done it for the last three recessions before the coof.

High oil prices is not something we can cope with for long as it would likely initiate a credit deflation in the banking sector which we'd have to roll through.

After that,we're going higher in commodities,much higher imho.

[sancho panza]

Shaun Richards on board

https://notayesmanseconomics.wordpress.com/2021/12/22/uk-gdp-is-revised-higher-but-stagflation-is-on-its-way/

UK GDP is revised higher but stagflation is on its way

Posted on December 22, 2021

This morning gives us an opportunity to review the UK economic experience over the pandemic and also to look ahead, as it is the season or at least day for economic growth ( GDP) revisions. In terms of the level the news was good.

The level of GDP is now 1.5% below where it was pre-coronavirus (COVID-19) at Quarter 4 (Oct to Dec) 2019, revised from the previous estimate of 2.1% below, because of upward revisions to growth in 2020;

So we are in terms of the level of GDP some 0.6% better off than we previously thought. The main player here is that 2020 was not as bad as we had thought it was with every quarter revised higher and the last one by 0.4%. That tends to be the nature of sharp economic contractions which is that they get over recorded at the time and then reduced by revisions. The detail shows we know much less about smaller businesses than many try to claim.

We have also incorporated Value Added Tax (VAT) turnover data up to Quarter 2 (Apr to June) 2021 to estimate the output of small businesses for some industries in the output approach to GDP.

It is not only wages for smaller businesses that are missing from the official data. Also my case that we need to have more complete data about services trade gets another boost.

This release includes the processing and GDP balancing of a number of annual benchmark data for 2020, including the annual International Trade in Services Survey.

Anyway this is the good part.

Annual UK GDP in 2020 is now estimated to have fallen by 9.4%, revised from a first quarterly estimate of negative 9.7%.

But whilst the level is good news the speed is not as we slowed as 2021 progressed.

UK gross domestic product (GDP) is estimated to have increased by 1.1% in Quarter 3 (July to Sept) 2021, revised from the first estimate of a 1.3% increase.

 

At this stage the numbers back up our theme which was that as pre pandemic economic growth was weak then once we got back to previous levels there was a fear that we would return to slow or no growth.

What happened in the third quarter?

In monthly terms we stalled in mid summer.

For the latest quarter, those figures indicate that monthly GDP fell by 0.1% in July, and increased by 0.1% in August and 0.6% in September 2021.

Looking at it in sectoral terms then our largest sector grew by less than we had thought.

There was a rise in services output of 1.4% in Quarter 3 2021, revised down from a first quarterly estimate of 1.6%.

Although growth was weaker than we had thought the problems of measuring this are shown by the revision to an area we now think grew.

Notably, the arts, entertainment and recreation sector has now recovered to above its pre-coronavirus levels by 2.4%, revised from a first estimate of being 5.4% below pre-coronavirus levels.

It is also a sector which of course if being hammered right now.

More curiously we do not seem to have counted what we produced.

Production output fell by 0.1% in Quarter 3 2021, revised down from a rise of 0.8% from the first estimate.

Inflation Problems

This is not what you might think as there is a big problem here.

The implied deflator rose by 0.5% in Quarter 3 2021, revised from a first quarterly estimate rise of 0.2%. Compared with the same quarter a year ago, the implied GDP deflator rose by 0.6%.

 

So the picture of inflation picking up which is the experience of everyone is contradicted by what is supposed to be this.

The implied GDP deflator represents the broadest measure of inflation in the domestic economy, reflecting changes in the price of all goods and services that comprise GDP.

We are back to a point which I have made many times which is that the inclusion of the government sector has blown the numbers up.

This was driven by a rise in the annual household implied deflator of 2.8%, partially offset by a fall of 7.1% in the government implied deflator.

As you can see the household deflator was working but the overall one was torpedoed by the deflator by the government sector. This is quite a fail as our “broadest measure of inflation” has failed to pick up the rise in inflation. Indeed having gone 1.9%, then -1.9% before the 0.5% in the third quarter it has lost the plot.

Health Sector

This has played with the numbers in another way as you can see below.

The consumption of health services fell by 1.6% in Quarter 3 2021, revised down from a first estimate of a rise of 3.4%.

Caused mostly by this.

Revisions were driven by updated data in General Practitioner (GP) services and outpatient follow-up appointments across 2020 and 2021.

In the modern era it is disappointing that we do not know what GP appointments are. Also we see another way that the pandemic has affected our official statistics.

Trade

This was worse then we had thought.

The UK’s trade balance fell to a deficit of negative 1.9% of GDP in Quarter 3 2021, revised from a first estimate of negative 1.2%.

In volume terms, total exports fell by a revised 3.5% in Quarter 3 2021, driven by downward revisions to goods and services.

 

This may well have been driven by the supply chain shortages issue.

There was a fall in goods exports of 8.8% in Quarter 3 2021, particularly because of falls in machinery and transport equipment, unspecified goods, and material manufactures.

Within it there was an improvement in the important services sector.

he rise in service exports of 2.7% was driven by financial services, as well as other business services where GDP balancing adjustments have been applied……. Services imports fell by 2.4% in Quarter 3, because of falls in intellectual property.

Comment

We can now bring this up to date. We may well have got right back to where we started from to quote Maxine Nightingale in November. But December is going to show another decline. It is quite clear that the hospitality industry has received what in football would be called a scissor tackle. Not only have people cancelled many bookings but those places with business have been affected by staff having to isolate due to Covid. I expect the next series of these numbers to be worse and maybe much worse.

The percentage of businesses currently fully trading in early December 2021 was 80%, while the percentage partially trading was 12%; this compares with 81% and 11%, respectively, in late November 2021 with the transportation and storage industry reporting the lowest percentage currently trading.

The exact pattern is different for each of the countries as we look forwards to January as restrictions are higher in Scotland and Wales compared to England. But with the energy price crisis getting even more severe the opening of 2022 looks like a time of stagflation with inflation especially to the fore.

 

 

[Harley]

8 hours ago, Hancock said:

Got to disagree, the £1bln for the entertainment industry showed theyre out of bullets, and Boris knows he's out of a job if he lockdown again.

Boris is apparently scheduled to leave in Feb22 so maybe thinking about his exit as the last chance to have a smithering of a decent reputation to play with in the future?  Push back against the machine now, for show?  Or maybe free at last?  Not that it'll make much difference when the new paid for buggins takes over.  But Mr Market will look on and just do what Mr Market does.  I expect more explicit financial repression next year.  That is the road they are on.  There's return on your money, return of your money, and shortly, access to your money, maybe followed by what money? 

PS:  All IMO.  Not being alarmist, this could take time to fully play out, until say 2030, but maybe less linear and more stepped as the opportunities present themselves.  Just a case of keeping an eye on asset allocation (in its most broadest sense).

[Hancock]

7 minutes ago, Harley said:

Boris is apparently scheduled to leave in Feb22 so maybe thinking about his exit as the last chance to have a smithering of a decent reputation to play with in the future?  Push back against the machine now, for show?  Or maybe free at last?  Not that it'll make much difference when the new paid for buggins takes over.

He'll trade on Brexit and profit from being Englands Greta for the rest of his days!

It seems the mood has changed in all the print MSM, seems its now time to get back and wait for a bust.

Though i did just buy £500 worth of PMPL which is the GBP version of "Alerian Midstream Energy Dividend" just to keep an eye on where it goes!

[Harley]

19 hours ago, sancho panza said:

You were the one who first mentioned them to me and I use them inconjunction with normal candles ie the Heiken identify the trend and then I use ordinary candles to guide me in and out of the trade alongsdie fundamental analysis plus instinct

All our oilies options trades from BP 240 last year were framed using Heiken.So in short H,thank you for the introduction.

10%, crypto please!  Not for losses though, no refunds! 

PS:  Seriously, have you sussed out the candle formations signalling an upcoming change in trend?

[Harley]

6 minutes ago, Hancock said:

Though i did just buy £500 worth of PMPL which is the GBP version of "Alerian Midstream Energy Dividend" just to keep an eye on where it goes!

I recall there were tax issues with LPs so have they addressed that in the EU version?

[Harley]

19 hours ago, belfastchild said:

Depends how much data you use and what your local coverage is like.
Three, sim only, 1gb, unlimited calls and texts 6 quid a month. free hotspot, roaming included.
I have it for a little over a fiver.
Found coverage here in NI is good and the roam thing works in border areas when you pick up southern signal.

Ta guys.  Indoor coverage is an issue here, made worse if they don't provide wifi calling.  I'm looking at PAYG with Vodafone via Asda, etc.  

[Harley]

22 hours ago, Harley said:

I've just renewed by broadband for two years fixed (apart from the horrific RPI+ uplift).  The current supplier offered me an alleged stonking new deal so I had a quick look and came up with quite a few cheaper ones.   Went back to them and nicely haggled a 27% reduction, although I miss out on the (iffy?) cashback had I switched.  I'm now seeing a better deal on our mobiles........!

Oh dear, the silence suggests I just screwed myself!  

[Harley]

11 hours ago, DurhamBorn said:

Iv got BT,VOD,Orange SA,Telefonica SA,Telefonica Germany,Telefonica Brasil,Telenor,AT&T,Verizon,Turkcell ,most are flat on buy price apart from BT that i lumped big bucks into below £1.Some of the others are up mostly a few % including divs.

I'm patiently waiting for buy signals in some of the less leveraged.  I hold VOD and the Brasilian plays but the others have mostly been a bit meh so far.  I'll take a closer look.

[Harley]

11 hours ago, Castlevania said:

Telecom Argentina

Is there an ADR for this one then?

[Harley]

9 hours ago, Loki said:

Starting gun for the bust? I think you could both be right. Although i also think a cyber event could conveniently happen but that's not for this thread

I think it's right to think in terms of a rolling number of "events" of which covid is the first.  Of course, some may just be the result of their poor reactions to covid.

[Hancock]

33 minutes ago, Harley said:

I recall there were tax issues with LPs so have they addressed that in the EU version?

No idea. There is a UK version MMLP LN and LON: PMLP.

Then at the bottom of this article -

The fund comes with an expense ratio of 0.40%. This compares to 0.50% for the $220m Invesco Morningstar US Energy Infrastructure MLP UCITS ETF (MLPD LN), presently Europe’s largest North American energy infrastructure play, and 0.25% for the $10m L&G US Energy Infrastructure MLP UCITS ETF (MLPI LN).

https://www.etfstrategy.com/alerian-makes-european-debut-with-north-american-midstream-energy-dividend-etf-mmlp-london-stock-exchange-49594/

[MrXxxx]

43 minutes ago, Harley said:

Ta guys.  Indoor coverage is an issue here, made worse if they don't provide wifi calling.  I'm looking at PAYG with Vodafone via Asda, etc.  

This chat encouraged me to do some digging, thought this might be useful for others:

https://kenstechtips.com/index.php/data-plans/1gb-data

[MrXxxx]

29 minutes ago, Harley said:

I think it's right to think in terms of a rolling number of "events" of which covid is the first.  Of course, some may just be the result of their poor reactions to covid.

Agree, I think Covid is coming towards its 'shelf life' and expect it to be followed by 'Cold war' type posturing [can see a full on war] between The West and antagonists i.e. Russia/Ukraine and China/Taiwan...Middle East will be allowed to 'come in from the cold' or allowed off the 'naughty step'.

[Castlevania]

56 minutes ago, Harley said:

Is there an ADR for this one then?

Yeah. NYSE: TEO. They’re either ridiculously cheap or about to go bust. Make your own mind up  

[DurhamBorn]

1 hour ago, Harley said:

I'm patiently waiting for buy signals in some of the less leveraged.  I hold VOD and the Brasilian plays but the others have mostly been a bit meh so far.  I'll take a closer look.

Main results will be the ones back end of next year as thats when inflation should start feeding in to free cash.Id be looking for the first year 6% to 10% increases in free cash.Also the number that matters the most,Return on Capital employed.That will start to rise as long as they arent over investing in roll outs.Crucial it does as it will signal bond holders are passing their capital to equity.For the highly indebted its the critical number.