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

[Axeman123]

1 hour ago, CannonFodder said:

i.m not sure the general population equate increased taxes to cost of services.

I can picture the coming calls for tax cuts as well as wage rises for all public setor staff, both to help with the cost of living.

1 hour ago, DurhamBorn said:

This is the stage on the roadmap where monetizing debt slows or stops,but governments cant accept it,or understand the new world they are in.

You can see this in so many places just now. The undefined flat cladding solution announced late last week for example; no new money from treasury, flat owners not paying a penny, and a vague commitment to extract the full whack from the big builders through various forms of tax extortion. The same thing again with gas prices; no money from the treasury to pay people's bills, no more blood to squeeze from the ordinary Joe, and an assumption that Utility companies can swallow it under duress. The government is out of money, ordinary Joe is out of money, and now the private sector is in the cross-hairs.

[JMD]

4 hours ago, Harley said:

Since we're playing with data.....

FYI, not investment advice, for discussion purposes only, DYOR; 154 potentially "value orientated" (my personal definition) common stock "opportunities" (my definition) for me to look at this weekend as follows (primary listings so no secondary listings, ADRs, etc):

Of course, those "at the bottom" could sink further!

The numbers as percentages of the available cohort stocks tell a somewhat different story but I'll stop there!

I like Stock Exchanges. They will continue earning their fees no matter what, and some pay good divis, plus they are decomplex. Is that your thinking here Harley? However how to value them and what entry price to buy at is difficult, ie if we get a DH style meltup and crash with most global market sectors not recovering for many years, wouldn't the exchanges themselves suffer similar fate? ... Historical charts wouldn't show a tight correlation but my thinking is that under extremes the exchange price would be coupled with its own underlying market and follow it down?

[Harley]

4 hours ago, DurhamBorn said:

@Harley do you have any thoughts on Pheonix Group? .I have added a lot in the sector during the December sell off but i was thinking of also adding Pheonix.I bought a lot of Wetherspoons then and have a 15% profit and was thinking of selling half the holding.I cant seem to find in their accounts what percentage of their annuities are inflation linked and more the point how many are flat.Im avoiding most areas of financials but insurers should gain a lot from rising rates,outside of a BK and derivative bomb of course.

Not advice, DYOR, no responsibility, etc.

I had a quick look and was worrying why it had not come up on my searches (and if so, what else!).  Looks like it would pass my initial financial criteria but then such financial companies are somewhat different (e.g. the quick and current ratios) and further analysis is challenging (e.g. the cash flow statement).  Maybe the technicals weren't quite there, although they are very interesting.  If the recent pullback is a bullish confirmation of a new uptrend, then I'm sure they'll pop up on my radar soon.  If so, I'll look harder and wonder about the increasing amount of common shares outstanding over the years (with an increased float but a static number of shareholders) and the negative ROI and other profitability ratios.  But that yield is tempting!

PS:  You can get a limited number of free company reports on Simplywall.st.  But then there are also the technicals to judge any buying opportunities.  

[DurhamBorn]

20 minutes ago, Harley said:

Not advice, DYOR, no responsibility, etc.

I had a quick look and was worrying why it had not come up on my searches (and if so, what else!).  Looks like it would pass my initial financial criteria but then such financial companies are somewhat different (e.g. the quick and current ratios) and further analysis is challenging (e.g. the cash flow statement).  Maybe the technicals weren't quite there, although they are very interesting.  If the recent pullback is a bullish confirmation of a new uptrend, then I'm sure they'll pop up on my radar soon.  If so, I'll look harder and wonder about the increasing amount of common shares outstanding over the years (with an increased float but a static number of shareholders) and the negative ROI and other profitability ratios.  But that yield is tempting!

PS:  You can get a limited number of free company reports on Simplywall.st.  But then there are also the technicals to judge any buying opportunities.  

The common share increases are because they used to issue equity when they bought out old back books from other insurance companies,but it looks like they have around a billion now available so likely next decent sized deals wouldnt need shares to be issued.Main thing for me is how much is fixed annuity,how much inflation linked.If a large amount are fixed,could be some big capital releases down the road for shareholders assuming rates tick higher.

[geordie_lurch]

I missed this on the FT the other day but Zerohedge have picked it up here and it chimes in with this thread nicely - there's a whole "antiwork" movement going on in the USA and elsewhere so the pool of tax payers is shrinking fast

Quote

Doreen Ford spent 10 years working in retail stores in the Boston area and hated it. So in 2017, when Ford’s grandmother suggested that she give up her traditional job altogether and leverage her love of dogs to make ends meet, she went for it. Ford walks dogs part-time, but otherwise has not held a traditional job since and says she has never been happier. "Usually, at best, [working was] pointless," said Ford, 30, "and at worst it was degrading, humiliating and exploitative."

As a moderator of r/antiwork, Ford has overseen the community during a massive explosion of membership, which has ballooned from 160K in October 2020 to 1.6M at the end of 2021.

These numbers have become large enough to force Goldman Sachs' analysts to take notice: In a November note, Goldman warned that the "antiwork" movement might present a "long-run risk" to labor force participation.

Their numbers are sufficient to prompt Goldman Sachs to warn in a November research note that the antiwork movement posed a “long-run risk” to labour force participation. “I think there’s a lot of positions that just don’t make any sense, that do not have to exist,” Ford said. “You’re just pushing around papers for no good reason. It doesn’t really help anybody.” “Idlers”, as members of the antiwork movement call themselves, largely believe that people should strive to work as little as possible and preferably for themselves. Many who have stopped working say they operate their own microbusinesses, like Ford, or work as few hours as possible in part-time jobs in order to survive. Some take on roommates or raid dumpsters for food to reduce their cost of living, according to Ford.

And let's not forget the other side of the coin: the pandemic has been a boon for the retire early movement, which also could create serious problems for the workforce participation rate, as we explained just the other day.

EDIT Whilst I'm here I have also just read a great article I found in the ZH comments about someone new to me called Peter Turchin. It's too long to quote lots but basically he seems to have predicted the current issues back in 2010 as per this interview https://www.theatlantic.com/magazine/archive/2020/12/can-history-predict-future/616993/ and the following seems to have some uncanny parallels with where we are currently at...

"The final trigger of impending collapse, Turchin says, tends to be state insolvency. At some point rising in­security becomes expensive. The elites have to pacify unhappy citizens with handouts and freebies—and when these run out, they have to police dissent and oppress people. Eventually the state exhausts all short-term solutions, and what was heretofore a coherent civilization disintegrates."

[Axeman123]

9 minutes ago, geordie_lurch said:

there's a whole "antiwork" movement going on in the USA and elsewhere so the pool of tax payers is shrinking fast

I think this is a marker of a top of some kind, an unsustainable extreme at the end of a long term trend of some sort, in the same way Argentina being able to sell century bonds a few years ago was. The vast majority of people will always need to exchange a significant part of themselves for financial sustenance one way or another; whether that is a significant % of their waking lives to toil, a few years of absolute max effort to get a scalable business of the ground and then personally throttle back, or their total focus on acquiring and maintaining a specialised and highly valued skill to enable part self-employment. The future isn't legions of self-sufficient dog-walkers etc, IMO.

[geordie_lurch]

1 minute ago, Axeman123 said:

I think this is a marker of a top of some kind, an unsustainable extreme at the end of a long term trend of some sort, in the same way Argentina being able to sell century bonds a few years ago was. The vast majority of people will always need to exchange a significant part of themselves for financial sustenance one way or another; whether that is a significant % of their waking lives to toil, a few years of absolute max effort to get a scalable business of the ground and then personally throttle back, or their total focus on acquiring and maintaining a specialised and highly valued skill to enable part self-employment. The future isn't legions of self-sufficient dog-walkers etc, IMO.

Yes see the EDIT I just added to my post above @Axeman123 Peter Turchin seems to have called this over a decade ago and his views on where we are headed aren't great

“In 2010, he [Turchin] predicted that the unrest would get serious around 2020, and that it wouldn’t let up until those social and political trends reversed. Havoc at the level of the late 1960s and early ’70s is the best-case scenario; all-out civil war is the worst.”

[Bobthebuilder]

1 minute ago, geordie_lurch said:

Yes see the EDIT I just added to my post above @Axeman123 Peter Turchin seems to have called this over a decade ago and his views on where we are headed aren't great

“In 2010, he [Turchin] predicted that the unrest would get serious around 2020, and that it wouldn’t let up until those social and political trends reversed. Havoc at the level of the late 1960s and early ’70s is the best-case scenario; all-out civil war is the worst.”

Funny you posted that, because I was just about to reply, saying that the antiwork movement reminds me of the 1960s-1970s drop out kids, hippys, punks etc. Anarchy in the UK and all that.

[Democorruptcy]

2 hours ago, Axeman123 said:

I can picture the coming calls for tax cuts as well as wage rises for all public setor staff, both to help with the cost of living.

You can see this in so many places just now. The undefined flat cladding solution announced late last week for example; no new money from treasury, flat owners not paying a penny, and a vague commitment to extract the full whack from the big builders through various forms of tax extortion. The same thing again with gas prices; no money from the treasury to pay people's bills, no more blood to squeeze from the ordinary Joe, and an assumption that Utility companies can swallow it under duress. The government is out of money, ordinary Joe is out of money, and now the private sector is in the cross-hairs.

Plus more talk of a wealth tax?

[Axeman123]

29 minutes ago, geordie_lurch said:

Peter Turchin seems to have called this over a decade ago and his views on where we are headed aren't great

That is a fascinating article, thanks for sharing.

His basic premise (as I understand it) is that an over-production of elites above the increase in elite positions for them to occupy innevitably leads to surplus elites rising up to seize positions they feel entitled to, co-opting the masses to their cause through populism. This seems quite an ideological position to take, and doesn't really stand up IMO.

I can't debate his mathematical models or detailed historical data etc, but I remain unconvinced by his premise. Certainly all revolutions need more than the proletariat to gain critical mass, but I suspect surplus elites jumping on an already rolling bandwagon are more of a symptom than a cause.

Turchin's theory is akin to the establishment myth that "Brexit wasn't even a thing that people were concerned about until Farage stirred it up", and thinking about it maybe a huge part of the establishment response was predicated on this chap's kind of thinking. Also the US establishment's reaction to Trump: "he is just doing populism, he doesn't really beleive any of it" or "he is just using division to get power" cetainly seem to share that same world view. Perhaps our elites are very influenced by him, and you can certainly see the appeal for them. No valid ideologies or ideas just the pursuit of power, lumpen masses that will take up cudgels over anything and rightly should therefore just be pacified or brow-beaten to be quiet, and the god-like elites that can so easily twist their simple peasant minds to any shape.

I will however take my hat off to Turchin for the ultimate brass neck: gaining tenured professorship as an ecologist(?), then mugging it off to do whatever he felt like while still drawing a salary.

[Axeman123]

33 minutes ago, Democorruptcy said:

Plus more talk of a wealth tax?

I see the bigger picture as the government having started to realise that their own formerly bottomless pocket is empty, but they are still thinking in terms of just needing a different pocket to reach into. It is very telling that they see the world as a place of bottomless pockets still, the fun starts when the realisation that isn't the case sets in.

Another way to look at it is the bargaining stage of bereavement. Anger/despair etc still to come.

Edit to add: Wealth tax was one of many kites flown recently, doubt it ever happens though.

[Joncrete Cungle]

5 minutes ago, Axeman123 said:

I see the bigger picture as the government having started to realise that their own formerly bottomless pocket is empty, but they are still thinking in terms of just needing a different pocket to reach into. It is very telling that they see the world as a place of bottomless pockets still, the fun starts when the realisation that isn't the case sets in.

Another way to look at it is the bargaining stage of bereavement. Anger/despair etc still to come.

Edit to add: Wealth tax was one of many kites flown recently, doubt it ever happens though.

The elites own most of the land & buildings so I can't see them being really taxed in a way that the elites can't avoid. The bennies class can't really be taxed either.

So that leaves..... Those in the middle with pensions, stocks & shares, ISA, Bitcoin etc....

[Democorruptcy]

11 minutes ago, Joncrete Cungle said:

The elites own most of the land & buildings so I can't see them being really taxed in a way that the elites can't avoid. The bennies class can't really be taxed either.

So that leaves..... Those in the middle with pensions, stocks & shares, ISA, Bitcoin etc....

Housing? Poor form I know but I've suggested a new tax. A Holiday Home Tax paid on the capital gain on any holiday home/let sold, that was previously used for residential purposes, i.e. those that have displaced a resident.

[CannonFodder]

Regarding antiwork, I view it as a side effect of unfairness, eg lack of ambition

There were folk who retired day they left school in my year, perhaps few hours pocket money for beer. That was many years ago, i can only see it being so muxh worse now.

Live with mum and dad , no ambition to move out.

Benefits on top and no ambition to climb ladder and comsume.

No ambition to have kids, cult of the individual 

All summed up to no ambition to be in the rat race and a realisation that houses etc are so out of reach, that seems pointless to even try.

I see a lot of this antiwork as loss of motivation and ambition due to generational inequality. Really people are subconsiously throwing the towel in. And reducing their expectations to single living at home with parents, few cans with mates and an alter ego online. Perhaps bounce up and down on partner on weekend too. Things in life are free and so on.

I think many are very happy this way, no wish to compete for a shrunken carrot and retired from 18.  Incentive is gone.

Problem is once they get to 30 plus and change their minds but no people or pressure management skills developed.

 

[ThoughtCriminal]

Now that's what i call schadenfreude.

[Axeman123]

26 minutes ago, ThoughtCriminal said:

Now that's what i call schadenfreude.

"them's the bastards that bombed me granny!"

Edit to add:

Luckily Berlin is currently a balmy 2c, dropping to a fresh -2c overnight.

[Harley]

4 hours ago, JMD said:

I like Stock Exchanges. They will continue earning their fees no matter what, and some pay good divis, plus they are decomplex. Is that your thinking here Harley? However how to value them and what entry price to buy at is difficult, ie if we get a DH style meltup and crash with most global market sectors not recovering for many years, wouldn't the exchanges themselves suffer similar fate? ... Historical charts wouldn't show a tight correlation but my thinking is that under extremes the exchange price would be coupled with its own underlying market and follow it down?

Apologies for not being clear. 

That first table shows the number of potential opportunities (number of stocks) by stock exchange.  It highlights the dearth of opportunities, according to how I personally rate things, in say the US versus say some Asian countries. 

I produced tables (not posted) showing the % of opportunities based on the number of "value" type stocks (i.e. excluding any technical filters) and the number of total stocks (i e. excluding any filters save market cap) for each exchange which further drew the point home.

I was also separately also looking at Asian orientated funds and they looked oversold.  Of course oversold things could sell off even more!  But this is the pool I like to fish in - primae facia value companies currently oversold, all according to my own preferred metrics (others available!).

The screens are wide nets so only take me so far, requiring a manual look at the charts to see if they're on the turn.  If so, I do a deeper dive on their financials.  But those wide nets (like a debt to equity ratio up to 150%) shows just how bad things are in some markets!

Takes a few hours and I'm easily bored and distracted, hence my trips here!

PS:  Given we seem to be in a more volatile tail end I'm very tempted to drop the value bit and sprint for some profitable trades before any pop.

[Harley]

59 minutes ago, CannonFodder said:

I see a lot of this antiwork as loss of motivation and ambition due to generational inequality.

Partly, but as I have mentioned before, the size of the pie just has not been growing in real terms for a while so those elites used to wealth growth have been doing it at the expense of the rest having a smaller share of said pie.  QED the relative enrichment of 1%.  Actually, they are now even taking from the 1%, hence the 0.1%!

PS:  Like the rat experiments they do in the lab, although I'll spare the gory details.

[The Bear of Doom]

1 hour ago, Democorruptcy said:

Housing? Poor form I know but I've suggested a new tax. A Holiday Home Tax paid on the capital gain on any holiday home/let sold, that was previously used for residential purposes, i.e. those that have displaced a resident.

Another possibility would be a general revaluation of residential property for Council Tax banding purposes.  IIRC, a property is only revalued/re-banded when it is sold, so a lot of the uplift in property value due to extensions etc is currently not captured by the government.

[Harley]

34 minutes ago, The Bear of Doom said:

Another possibility would be a general revaluation of residential property for Council Tax banding purposes.  IIRC, a property is only revalued/re-banded when it is sold, so a lot of the uplift in property value due to extensions etc is currently not captured by the government.

Feck it, CGT on all property, end of.  Why should a renter pay on investments while OO's, etc don't.  It's a gain, tax it or tax none! 

And now another logical but "such are folk" proposal on IHT.......! 

I'll get me coat!

[ThoughtCriminal]

Holy shit, a mainstream journalist who actually gets it. 

 

Full thread is worth a read.

[Axeman123]

36 minutes ago, The Bear of Doom said:

Another possibility would be a general revaluation of residential property for Council Tax banding purposes.  IIRC, a property is only revalued/re-banded when it is sold, so a lot of the uplift in property value due to extensions etc is currently not captured by the government.

I imagine that would come as part of a whole new replacement for council tax, with the revaluation snuck in. It certainly seems likely as a source of funds, of course at the moment the revenue would be going to councils rather than Westminster but that could easily change.

Perhaps it might hypothetically be a straight % of the valuation, more like US property taxes. Even 1% levied annually on the UKs ~7.5 trillion pound housing stock would yield 75 billion per anum. Locking in the peak valuation about now would be an obvious trick.

[The Bear of Doom]

7 minutes ago, Harley said:

Feck it, CGT on all property, end of.  Why should a renter pay on investments while OO's, etc don't.  It's a gain, tax it or tax none! 

And now another logical but "such are folk" proposal on IHT.......! 

I'll get me coat!

Yes, that would also be a good idea, but how it could be structured so it doesn't discourage landlords from selling up would need to be considered.  Having a CGT taper based on the length of owning would mean that long-term OOs wouldn't be penalised, whereas flippers would have to pay the most tax, however this may discourage LLs from selling up, and if an OO has to move due to work etc., they would either be penalised with higher tax, or just rent it out, thereby reducing the number of houses for sale.

Maybe the best option would be a proper Land Value Tax.

[MrXxxx]

On 07/01/2022 at 23:33, Cattle Prod said:

Speaking of Centrica, here you go. Remember when @DurhamBorn told us they weren't allowed to make a profit? They were being trashed and demonised by politicians for profiteering, do you remember? Gaslighting fuckers

Oh it's all coming out now, isn't it? 

On the plus side, it reminds me of DBs cigarette point, that you could add a penny a fag and no one would notice? Utilities could double their profit and no one would notice either.

This is why I avoid Utilities, although they were privatised being [and viewed as] essential the government still treats them as if they are nationalised. Note, this is less so with the Telecoms.

[MrXxxx]

On 07/01/2022 at 21:24, JimmyTheBruce said:

"Scott Wheway, Centrica’s chairman, said she would bring a “wealth of real-world experience in energy”"

Oh the irony.

No, he was misquoted by the media, he actually said " She will bring a wealth of energy but no real-world experience".

P. s despite what I have just written above about Utilities if @Yellow_Reduced_Stickeris selling on Monday I am buying! :-)))