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


spunko

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56 minutes ago, HousePriceMania said:



Turkey: Town sees nine sinkholes in three months - BBC News

Bit like the housing bubble...demand brought forward, now we have the hole.

Who else can we short ?
 
Market Summary > Peloton Interactive Inc
26.58 USD-8.09 (-23.33%)past 5 days
20 Jan, 12:56 GMT-5 • Disclaimer
NASDAQ: PTON
 

Bit like the housing bubble in that they're absurdly overpriced ...... for what will for most be a clothes horse. 

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25 minutes ago, Don Coglione said:

Shame I am still getting fucked by shorting Tesla though...

Might be worth taking your losses at this stage if we're getting the 'melt up'

 

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heres something i know @DurhamBornwont want to miss, you can have my invite sir and go along for a free buffet, :D

Knowing how you love this fund (hahaha) im sure youll snap it up.

Dear Butfucker 3000

Mr Terry Smith cordially invites you to the 11th Annual Shareholders’ Meeting of the Fundsmith Equity Fund.

What: Fundsmith Equity Fund ASM

On: Tuesday 1st March 2022

Where: Central Hall Westminster, Storey’s Gate, London, SW1H 9NH

When: Doors open at 5.45pm and the presentation starts at 6.30pm

If you wish to attend, please register here:

Fundsmith Equity Fund ASM Registration
 
We will be holding an in-person meeting this year, subject to any changes in government COVID restrictions.

We kindly request that all attendees take a lateral flow test on the day of the meeting, prior to attending.

Terry will make a short presentation and will answer questions that have been submitted in advance. If you wish to submit a question please do so when registering, or post it to 33 Cavendish Square.
 
Please note that Fundsmith Emerging Equities Trust plc and Smithson Investment Trust plc have separate AGM’s and so questions and remarks at this meeting will only be about the Fundsmith Equity Fund.
 
Travel to the Meeting
The nearest tube stations are Westminster and St James’s Park (both on Circle and District lines) both are a 5 minute walk to Central Hall Westminster. The nearest car park is on Great College Street (SW1P 3RX) which is also a 5 minute walk to Central Hall Westminster.
 
A video of the ASM will be posted on our website following the meeting.

We hope to see you on 1st March.

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11 minutes ago, Loki said:

Might be worth taking your losses at this stage if we're getting the 'melt up'

 

I never realised how insanely priced they are. I remember in 2019 there was talk of how over valued they are.

image.png.e6e2b8382dd705f171685aa1506a8d4b.png

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10 minutes ago, Loki said:

Might be worth taking your losses at this stage if we're getting the 'melt up'

 

Spread-betting, so no tax advantage. I am all-in and hurting, so don't want to try to trade my way out of the hole. Also, I don't believe Tesla has far to run in the melt-up, so will hold.

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5 minutes ago, Hancock said:

I never realised how insanely priced they are. I remember in 2019 there was talk of how over valued they are.

image.png.e6e2b8382dd705f171685aa1506a8d4b.png

That's why I am holding my short. This is bigger than my memory of the 2000 tech bubble (in which I did not participate, but knew many who lost, including one suspected suicide).

Even if things go the way they should, I will be down several thousands, so have learned that lesson espoused by Warren Buffett.

At the least, the market has taught me the lesson of patience.

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47 minutes ago, HousePriceMania said:

What's the 3K for ?

Insurance, storage, MOT ?

I dont know anyone with a motorhome but a few with caravans.  These seem a more sensible approach if you really have the desire to live like a pikey for 2 weeks out the year.

Is the motorhome thing a snobberty/boomer thing ?  For 3K a year I can drive and stay in a lot of premier inns.

We tried a caravan once.  Got as far as Belgium.  Dad pranged it under a bridge and the awning ripped.  We all agreed it was a silly idea and it left our lives forever.

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1 minute ago, Harley said:

We tried a caravan once.  Got as far as Belgium.  Dad pranged it under a bridge and the awning ripped.  We all agreed it was a silly idea and it left our lives forever.

Did you leave it under the bridge?

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7 hours ago, MrXxxx said:

I hear this 'Boomers' argument all of the time...often these 'Boomers' haven't been gifted their wealth, but gained it through wise decisions.

This comment reminds me of my mother.

My parents are mid-60's.  Both have only ever worked in government jobs.  My father retired in his early 50's on a pot worth 2 million if valued properly.  Literally 70k a year equivalent of contributions starting from day one as an inexperienced hire.

Cheap housing with mortgages inflated away.  Free university education (in fact they had grants).  3 kids starting from their mid 20's. My mother worked part time for a bit but not for long.  They consider themselves frugal but fritter money away on pointless junk.  

My grandmother passed away a few years ago and left a large inheritance (London property from x3 to x30 salary).  My mother has spent half of it "doing up the house" including several thousand pounds on taps for the second bathroom.  My father keeps the rest in bank accounts where it just sits there getting inflated away.  He considers stocks etc. "too risky" and thinks he's being sensible and in any event claims "it's not a lot of money in the scheme of things".

I avoid talking about finance or jobs or anything like that with them but they insist on bringing it up.  They start boasting about how hard they had it and then start offering unsolicited "advice".  When you try explaining a few things to defend yourself from their condescending remarks they start rolling their eyes and claim they are "only trying to be helpful".  They then start making disparaging remarks about the younger people they now sponge off.

My brother once made the mistake of asking my father for a loan for 6 months to help with stamp duty, moving costs etc. when buying a house.  My father went ballistic and started giving lectures about "sacrifice", "entitlement" etc.  They don't talk at all now.

Of course not all boomers are like the above but as a group they had some fantastic opportunities and squandered a lot.  Overall I would say their reputation is deserved.

 

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2 minutes ago, Froggy2000 said:

This comment reminds me of my mother.

My parents are mid-60's.  Both have only ever worked in government jobs.  My father retired in his early 50's on a pot worth 2 million if valued properly.  Literally 70k a year equivalent of contributions starting from day one as an inexperienced hire.

Cheap housing with mortgages inflated away.  Free university education (in fact they had grants).  3 kids starting from their mid 20's. My mother worked part time for a bit but not for long.  They consider themselves frugal but fritter money away on pointless junk.  

My grandmother passed away a few years ago and left a large inheritance (London property from x3 to x30 salary).  My mother has spent half of it "doing up the house" including several thousand pounds on taps for the second bathroom.  My father keeps the rest in bank accounts where it just sits there getting inflated away.  He considers stocks etc. "too risky" and thinks he's being sensible and in any event claims "it's not a lot of money in the scheme of things".

I avoid talking about finance or jobs or anything like that with them but they insist on bringing it up.  They start boasting about how hard they had it and then start offering unsolicited "advice".  When you try explaining a few things to defend yourself from their condescending remarks they start rolling their eyes and claim they are "only trying to be helpful".  They then start making disparaging remarks about the younger people they now sponge off.

My brother once made the mistake of asking my father for a loan for 6 months to help with stamp duty, moving costs etc when buying a house.  My father went ballistic and started giving lectures about "sacrifice", "entitlement" etc.  They don't talk at all now.

Of course not all boomers are like the above but as a group they had some fantastic opportunities and squandered a lot.  Overall I would say their reputation is deserved.

 

Cunts.

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13 minutes ago, Froggy2000 said:

This comment reminds me of my mother.

My parents are mid-60's.  Both have only ever worked in government jobs.  My father retired in his early 50's on a pot worth 2 million if valued properly.  Literally 70k a year equivalent of contributions starting from day one as an inexperienced hire.

Cheap housing with mortgages inflated away.  Free university education (in fact they had grants).  3 kids starting from their mid 20's. My mother worked part time for a bit but not for long.  They consider themselves frugal but fritter money away on pointless junk.  

My grandmother passed away a few years ago and left a large inheritance (London property from x3 to x30 salary).  My mother has spent half of it "doing up the house" including several thousand pounds on taps for the second bathroom.  My father keeps the rest in bank accounts where it just sits there getting inflated away.  He considers stocks etc. "too risky" and thinks he's being sensible and in any event claims "it's not a lot of money in the scheme of things".

I avoid talking about finance or jobs or anything like that with them but they insist on bringing it up.  They start boasting about how hard they had it and then start offering unsolicited "advice".  When you try explaining a few things to defend yourself from their condescending remarks they start rolling their eyes and claim they are "only trying to be helpful".  They then start making disparaging remarks about the younger people they now sponge off.

My brother once made the mistake of asking my father for a loan for 6 months to help with stamp duty, moving costs etc. when buying a house.  My father went ballistic and started giving lectures about "sacrifice", "entitlement" etc.  They don't talk at all now.

Of course not all boomers are like the above but as a group they had some fantastic opportunities and squandered a lot.  Overall I would say their reputation is deserved.

 

I don't get it.  Family's as much a business.  Give the legacy to the kids where the marginal benefit is the highest.  Family should be your strength.  The old monied rich (and Asians) know that.

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HousePriceMania
1 hour ago, Don Coglione said:

Apparently I have been blocked by The C*untOf Nowhere and his "alias", but I have been shorting Peloton at $70.

Shame I am still getting fucked by shorting Tesla though...

I thought the stalking had ended.  @Spunko confirmed on more than one occasion that TCON was in france.  Not sure how weird someone can be on the internet, it's full of loons, but you are certainly up their.

Good luck with your shorts and your BTLs, now **** off.

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2 hours ago, belfastchild said:

https://www.bbc.co.uk/news/business-60057282

Ouch! BT 9.3% increase from March.
Doesnt affect the 15 quid universal credit rate.

Another stick to beat the net neutrality lobby with.

Ouch. Council tax bills will be rolling onto doormats soon. Although central helped there stopping similar increases but they’ll be jacking up parking, tip fees etc. Unfortunately inflation huge risk to public sector budgets. For example the NHS will need a lot more cash. Probably defence  and Schools too.


U.K. productivity is probably in the gutter too.

I still expect an emergency delay to National insurance increases. I mean wtf were they thinking!

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With a crooked smile
50 minutes ago, Froggy2000 said:

but they insist on bringing it up.  They start boasting about how hard they had it and then start offering unsolicited "advice".  When you try explaining a few things to defend yourself from their condescending remarks they start rolling their eyes and claim they are "only trying to be helpful".  They then start making disparaging remarks about the younger people they now sponge off.

A few people have written posts like this on here and TOS. I find it quite strange my family never discuss money or assets. I was brought up believing it was rude to discuss money. 

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54 minutes ago, Froggy2000 said:

My brother once made the mistake of asking my father for a loan for 6 months to help with stamp duty, moving costs etc. when buying a house.  My father went ballistic and started giving lectures about "sacrifice", "entitlement" etc.  They don't talk at all now.

As a parent myself, I just do not understand this desire in some parents to see their kids "make sacrifices" or have life as hard as they perceive they themselves did.  I'm putting money away for my kids now.  I want them to have an easier life than me.  I want them to learn financial lessons in their teens that I didn't learn until my thirties.

Seriously, what is it? A personality defect?

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Democorruptcy
5 hours ago, Starsend said:

I just had a bollocks email from Bulb saying that I was £17 in debit so they were increasing my monthly direct debit from £60 to £90 a month. Yeah, that makes sense.

It does make sense. Get some cash early on before folk go skint. Bulb don't want to last in the queue for their money.

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1 hour ago, Froggy2000 said:

y grandmother passed away a few years ago and left a large inheritance (London property from x3 to x30 salary)

Bar this bit; that came later in life anyway I assume [?], didn't they have to work for the rest?

1 hour ago, Froggy2000 said:

I avoid talking about finance or jobs or anything like that with them but they insist on bringing it up.  They start boasting about how hard they had it and then start offering unsolicited "advice".  When you try explaining a few things to defend yourself from their condescending remarks they start rolling their eyes and claim they are "only trying to be helpful".  They then start making disparaging remarks about the younger people they now sponge off.

And this is where you explain how the financial landscape has changed, and whilst you agree there are younger people 'sponging off' the system; the figures/evidence is there so it cannot be denied, somebody has to pay for it and as they are retired it won't be them.

1 hour ago, Froggy2000 said:

My brother once made the mistake of asking my father for a loan for 6 months to help with stamp duty, moving costs etc. when buying a house.  My father went ballistic and started giving lectures about "sacrifice", "entitlement" etc.  They don't talk at all now.

:-))) a big 'No, no'...unless of course you enjoy a morality lecture and/or value your sanity more than six months interest payments....I would always go for the latter, otherwise I can afford it both financially and mentally!

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Lacy Hunt, long term deflationist,gives another side of the story(one of the few deflationists aside Rosie).Warns negative real yields are the recession indicators.

Not much to disagree with but for me it's another example when we could do with separating credit deflation/inflation and price inflation/deflation.The two arent mutually exclusive and it's entirely possible(I would say probable that we get credit deflation alongside price inflation).

I post an interview with DiMartino Booth and Lacy Hunt,but it's 90 mins long.Interesting ,lot of talk re velocity and Fed hsitory.

https://mishtalk.com/economics/lacy-hunt-negative-real-rates-are-a-strong-recession-warning

Lacy Hunt: Negative Real Rates Are a Strong Recession Warning

In his 4th Quarter Review and Outlook, Lacy provides some interesting charts on negative real rates and recessions.
image.png.06a3276c51027a8cf4eed61b8a85ae2f.png

Please consider the Hoisington Management Quarterly Review and Outlook Fourth Quarter 2021. Emphasis Mine

Real Treasury Bond Yields

Real Treasury bond yields fell into deeply negative territory in 2021. In elementary economic models, this event, taken in isolation, would qualify as a plus for economic growth in 2022 and would be consistent with the strength indicated by fourth quarter 2021 tracking models.

Lacy a different view however. His analysis shows that negative real yields are associated with recessions. 

Debt overhang and demographics make the matter worse.

image.png.3fc66bb5f221c8625d79379af5d20fa4.png

History

Since 1870, the starting point of reliable data, only 24 full yearly averages were negative, or just 16% of the 152 readings over this time span.

Detailed parsing of the series reveals that 12 of those occurrences fell in the spans from 1914 to 1920 and 1939 to 1953, both of which were dominated by major military engagements and their subsequent demobilization – World Wars I and II and the Korean War.

Excluding the 1914-20 and the 1939-53 periods from the post 1870 sample still leaves a robust sample of 130 readings. During this lengthy span, cyclical and secular economic conditions resulted in a negative yearly average for real Treasury bond yields twelve times, or just 8% of the time. In the eleven cases prior to 2021, nine of the negative real yield periods coincided with recessions – 1902-03, 1907, 1910, 1912, 1937, 1974-75, and 1980.

Real long maturity yields were negative in 1934, which while not a recession year, happened during the horrific conditions of the Great Depression (1929-1939). In only one case, 1979, does the negative real yield happen during an economic expansion when the economy is not in a highly depressed state.

Debt Overhangs and Real Interest Rates

The level of indebtedness of the economy is another of the critical moving parts in assessing future economic growth. Based on empirical evidence, theory and peer reviewed scholarly research, the massive secular increase in debt levels relative to economic activity has undermined economic growth, which has in turn, served to force real long-term Treasury yields lower. This pattern has been evident in both the United States and the more heavily indebted Japanese and European economies.

image.png.b6d7d211c980b11b5e58812a1be7d9a4.png

 

Economic research provides additional insight and evidence as to why interest rates fall to low levels and then remain in an extended state of depression in times of extreme over-indebtedness of the government sector. While differing in purpose and scope, research has documented that extremely high levels of governmental indebtedness suppress real per capita GDP. In the distant past, debt financed government spending may have been preceded by stronger sustained economic performance, but that is no longer the case.

When governments accelerate debt over a certain level to improve faltering economic conditions, it actually slows economic activity. While governmental action may be required for political reasons, governments would be better off to admit that traditional tools would only serve to compound existing problems. For a restless constituency calling for quick answers to economic distress and where inaction would be likened to an uncaring and insensitive attitude, this is a virtually impossible task.

Carmen Reinhart, Vincent Reinhart and Kenneth Rogoff (which will be referred to as RR&R), in the Summer 2012 issue of the Journal of Economic Perspectives linked extreme sustained over indebtedness with the level of interest rates. In this publication of the American Economic Association, they identify 26 historical major public debt overhang episodes in 22 advanced economies, characterized by gross public debt/GDP ratios exceeding 90% for at least five years, a requirement that eliminates purely cyclical increases in debt as well as debt caused by wars. They found that the economic growth rate is reduced by slightly more than a third, compared when the debt metric is not met.

Persistent Global Weakness

Advanced Economies (AD)

In 2021, the Japanese, Euro Area and Chinese economies, in comparative terms, underperformed the U.S. economy. This pattern should continue this year. Due to more massive debt overhangs and poorer demographics, real GDP in Japan and the Euro Area in the third quarter of 2021 was still below the pre-pandemic level of 2019. The U.S. in this time period managed to eke out a small gain. The dispersion between the U.S., on the one hand, and China and Japan, on the other hand, may be even greater. Scholarly forensic evaluations have found substantial over-reporting of GDP growth in China and now, similar problems have been revealed in Japan.

Prime Minister Fumio Kishida said on December 15, 2021, that overstated construction orders had the effect of inflating the country’s economic growth figures for years. Consequently, the marginal revenue product of debt is even lower than reported therefore so is the velocity of money for both Japan and China. Interestingly, Bloomberg syndicated columnist and veteran Wall Street research director Richard Cookson makes a strong case that “China looks a lot like Japan did in the 1980s.”

Emerging Market Economies (EM)

The sharp surge in inflation in 2021 has resulted in far greater damage to the EM economies than the U.S. for three reasons. First, a much higher proportion of household budgets are allocated to necessities than in the United States since real per capita income levels are much lower than in the U.S. Second, numerous EM central banks increased interest rates in 2021.

Another problem emerges as most of the EM debt is denominated in dollars. When EM currencies slump as in 2021, the external costs of servicing and amortizing debt add an additional burden on their borrowers.

Growth Obstacles

In 2022, several headwinds will weigh on the U.S. economy. These include negative real interest rates combined with a massive debt overhang, poor domestic and global demographics, and a foreign sector that will drain growth from the domestic economy. The EM and AD economies will both serve to be a restraint on U.S. growth this year and perhaps significantly longer. The negative real interest rates signal that capital is being destroyed and with it the incentive to plough funds into physical investment.

Demographics continue to stagnate in the United States and throughout the world. U.S. population growth increased a mere 0.1% in the 12 months ended July 1, 2021. This was the slimmest rise since our nation was founded in the 18th century, along with two other firsts: (1) the natural increase in population was less than the net immigration, and (2) the increase in population was less than one million, the first time since 1937. The birth rate also dropped again.

Inflation

Inflation has been one of the most widely reported and discussed economic factors in the past year. Surging energy, rents, building materials, automotive, food and supply disruptions have boosted the year-over-year rise in the inflation rate to the fastest pace in decades. While some see this increase as a good economic sign, its increase actually had the effect of reducing real earnings by 2%. Even though unemployment fell in 2021, consumers became more alarmed by the drop in real wages according to surveys.

With money growth likely to slow even more sharply in response to tapering by the FOMC, the velocity of money in a major downward trend, coupled with increased global over-indebtedness, poor demographics and other headwinds at work, the faster observed inflation of last year should unwind noticeably in 2022.

Due to poor economic conditions in major overseas economies, 10- and 30-year government bond yields in Japan, Germany, France, and many other European countries are much lower than in the United States. Foreign investors will continue to be attracted to long-term U.S. Treasury bond yields. Investment in Treasury bonds should also have further appeal to domestic investors, as economic growth disappoints and inflation recedes in 2022.

 

 

 

 

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1 hour ago, AWW said:

As a parent myself, I just do not understand this desire in some parents to see their kids "make sacrifices" or have life as hard as they perceive they themselves did.

I would give the benefit of the doubt, in retrospect, to my late father who was very like that; he genuinely thought it equipped people for adversity and would lead to sucess later on. There was an element of glee to it as well though.

1 hour ago, Spiney Norman said:

It can be hatred.

Believe me, I know.

Are you the parent or child in that scenario?

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Yellow_Reduced_Sticker
10 hours ago, Starsend said:

I'm in general agreement with him except I see no reason to waste your time filling out forms to declare that you're not doing something. I don't have to fill out a form to declare I'm not using a shotgun. The onus is on them.

I've not had a TV licence for 19 years now. I've kept all the threatening letters, couple of hundred of them. They go in cycles, some of them very intimidating and threatening.

I've seen a licence inspector once. I told him politely I don't watch TV and shut the door.

The best way to deal with them is with a strict no contact rule. Ignore them.

 
TBF, I haven't watched the video - I posted as the reviews were good, and thought there maybe some extra good info, anyhoo...this is the YRS method...
 
ALL i do is when the letter arrives as it did at my new property 2 years ago, is write on the letter that this property does NOT have a TV, I NEVER fill out anything online or do anything via phone. AND most IMPORTANTI never give my name
 
BIG TIP ( @MrXxxx are you paying attention?!... DON'T EVEN PAY for the stamp, get TV licensing to pay the postage!:o :Jumping:
 
so you write: " this property does NOT have a TV " by where it says: the present occupier, then place the letter back in the same envelope, and write the TV licensing address on the front and place a bit of cellotape to seal the envelope, JOB DONE all for free in about 5 minutes of work! xD
 
And this saving pays for my yearly internet - NICE!;)
 
And I simply repeat this every 2 years easy!
BTW, i've NEVER had a licence inspector visit me.
 
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