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

[Gin]

On 24/05/2022 at 07:19, Cattle Prod said:

About right

 

They cannot sleep at night looking at the writing on the wall .

[Democorruptcy]

13 minutes ago, Plan-b said:

Brilliant - With your intuitive correct guidance perhaps you should ask them for a job as head of finance - I'd expect it pays well

That extra £175m charge is a sobering thought. Whether firms have too much index linked or fixed rate debt could be the difference between making lots of profit or going bust. Presumably if UU have paid out a lot of extra money for debt, then their lender is doing well out of it. One of the reasons why banks like interest rates increasing, i.e. there's inflation so any index link debt makes them more and there's better margins between loans they make and saving rates they pay.

[M S E Refugee]

Food crisis not linked to sanctions – US https://www.rt.com/news/556113-russia-sanctions-grain-ukraine/

The Democrats are tying themselves up in knots.

[Pip321]

6 minutes ago, M S E Refugee said:

Food crisis not linked to sanctions – US https://www.rt.com/news/556113-russia-sanctions-grain-ukraine/

The Democrats are tying themselves up in knots.

I think the West are tying themselves up in knots. The outcome for East and West is looking increasingly negative....no winners only the protection of jobs for those in power. 

Such a shame I cant see rt new anymore. However, this one appears to be a song I know from My Fair Lady....

The Grain in Ukraine fails mainly on the Plain. 

(I will let myself out)

[HousePriceMania]

10 hours ago, sancho panza said:

US housing market could be roling over

Sales down,inventory up,median price spikes on lower vol......looks like the boat's taken on some water,can they bail fast enough?

 

 

News from ground zero in Oz is that the bubble has burst, the pin that pricked it was a tiny IR rise and the promise of 2% rates by the end of the year. The thinking is that prices are going back to 2019 levels pretty sharpish.

That's optimistic I think.

I've had a good couple of years spreading the house price mania word, so might get to quit by the end of the year.

It's exhausting.

[snaga]

6 minutes ago, Democorruptcy said:

That extra £175m charge is a sobering thought. Whether firms have too much index linked or fixed rate debt could be the difference between making lots of profit or going bust. Presumably if UU have paid out a lot of extra money for debt, then their lender is doing well out of it. One of the reasons why banks like interest rates increasing, i.e. there's inflation so any index link debt makes them more and there's better margins between loans they make and saving rates they pay.

on the flip side, if those companies go bust, the debts go bad, the banks take a hit? same for personal debt?

Higher rates will ultimately lead to higher margins, but lower volume? and the transition is going to hurt.

[stoobs]

Just opened an in-date Morrison's 6 pint milk carton and it's on the turn. Same thing happened with Asda a few weeks ago.

We've never had a problem with supermarket milk, and now twice in a couple of weeks.

This is probably just bad luck, but wondered if those on the thread with farming links might have insight into something going wrong with the dairy supply chain?

[Democorruptcy]

26 minutes ago, snaga said:

on the flip side, if those companies go bust, the debts go bad, the banks take a hit? same for personal debt?

Higher rates will ultimately lead to higher margins, but lower volume? and the transition is going to hurt.

Yes, what banks need is a governbankment like ours that shifts the liabilities of a lot of the worst debts onto taxpayers through such as guaranteed covid loans, help to buy and now the mortgage guarantee. Then today under the pretence of helping people, they hand out free money so they can ultimately pay their debts.

 

[snaga]

3 minutes ago, stoobs said:

Just opened an in-date Morrison's 6 pint milk carton and it's on the turn. Same thing happened with Asda a few weeks ago.

We've never had a problem with supermarket milk, and now twice in a couple of weeks.

This is probably just bad luck, but wondered if those on the thread with farming links might have insight into something going wrong with the dairy supply chain?

warmer weather, and somewhere in the supply chain (common to both supermarkets) someone is cutting back on power by not keeping the milk as chilled as they should?

[JMD]

10 hours ago, sancho panza said:

Another Rishi/Bozo/Mogg/Cameron/Gideon etc etc.Probably explains why he's a decent shot at 80/1.....

I'd honestly(and I say this as Ukip voter 2006-19) rather vote for Corbyn and jsut get the total societal collapse over with.Death by a 1000 Etonian cuts is a crap way to go.

Bold is mine

https://en.wikipedia.org/wiki/Kwasi_Kwarteng

Early life and education

Kwarteng was born in the London Borough of Waltham Forest in 1975,^[1] to parents Alfred K. Kwarteng and Charlotte Boaitey-Kwarteng, who had emigrated from Ghana as students in the 1960s.^[4][5] His mother is a barrister^[6] and his father an economist in the Commonwealth Secretariat.^[5][7]

After starting school at a state primary school, Kwarteng attended Colet Court, an independent preparatory school in London, where he won the Harrow History Prize in 1988.^[8] Kwarteng then went to Eton College,^[1] where he was a King's Scholar and was awarded the prestigious Newcastle Scholarship prize. He read classics and history at Trinity College, Cambridge, achieving a first in both subjects^[9] and twice winning the Browne Medal. He was a member of the team which won University Challenge in 1995 (in the first series after the programme was revived by the BBC in 1994).^[5][10] He attended Harvard University on a Kennedy Scholarship, and then earned a PhD in economic history from the University of Cambridge in 2000.^[11]

Early career

Before becoming a member of parliament, Kwarteng worked as a columnist for The Daily Telegraph and as a financial analyst at JPMorgan Chase and other investment banks.^[12] He wrote a book, Ghosts of Empire, about the legacy of the British Empire, published by Bloomsbury in 2011.^[5] He also co-authored Gridlock Nation with Jonathan Dupont in 2011, about the causes of and solutions to traffic congestion in Britain.^[13]

Yes agreed, (and perhaps this is far too political/granular for this thread but I think I need to declare) I've been voting ukip/brexit/reform parties since 2001 and would never vote for a main party again because mainstream politics is a manipulated game. At same time I am under no illusion that mine is just a protest vote, but better than not voting at all, so to that end I now vote SDP.                                                                                                                                              Didn't mean to imply KK would be much improvement, but i can see a concerted attempted internal conservative putch to remove Johnson (replace with Hunt, etc), and with the MSM not able to hide their glee at the prospect, so any step in the opposite direction is a good thing imo, but again this is mere comment as I don't vote for that tribe....     However, in terms of 'political games' i may place that paddy power bet if I can get those odds!

[Loki]

Just watching a latest David Hunter vid and he now has a $3000 target for gold this cycle

[Boon]

To me I think Boris is a good aspirational figure of many of the Tory voters, hence his popularity. 

I think even getting a black PM like Kwasi would be an even harder one than an Asian one like Sunak, irrespective of competence. That seems about a generation away.

Jeremy Hunt will cause voters to get amnesia because he kinda looks like what a Tory leader should look like. Or for someone untainted by the recent years, Tugendhat.

 

[JMD]

11 hours ago, sancho panza said:

US housing market could be roling over

Sales down,inventory up,median price spikes on lower vol......looks like the boat's taken on some water,can they bail fast enough?

 

https://wolfstreet.com/2022/05/24/housing-bubble-getting-ready-to-pop-unsold-inventory-of-new-houses-spikes-by-most-ever-to-highest-since-2008-sales-collapse-below-400k/

 

 

Unsold inventory of new houses spiked in a historic month-to-month leap of 34,000 houses, and by 127,000 houses from April last year, to 444,000 unsold houses, seasonally adjusted, the highest since May 2008.

In a recent Wealthion, I was surprised to hear - because I thought Wolf had been predicting a US housing crash - to see Wolf Richter instead saying that US house prices would trend down over time, some bumps maybe but no market crash. This is part 2 of that interview where he comments about housing... Has he recently changed his forecast?             https://m.youtube.com/watch?v=tmCJPMJd3y4

[belfastchild]

27 minutes ago, stoobs said:

Just opened an in-date Morrison's 6 pint milk carton and it's on the turn. Same thing happened with Asda a few weeks ago.

We've never had a problem with supermarket milk, and now twice in a couple of weeks.

This is probably just bad luck, but wondered if those on the thread with farming links might have insight into something going wrong with the dairy supply chain?

Saw this the other day in action in a supermarket.
Pallets of frozen food on the shop floor with only one person stacking the freezers. Watched them lift a couple of things at a time, walk to freezer, put in, walk back, repeat with the food getting warmer and warmer and the walk to the next freezer getting longer and longer. IIRC it used to be done by 3 people with motorised pallet trucks.

Probably not a major issue with frozen but I have warned people before about yellow sticker stuff that has been well in date, its the stuff thats been sitting out in the sun for a while perhaps.

All this is usually fine in winter...

[Democorruptcy]

5 minutes ago, belfastchild said:

Saw this the other day in action in a supermarket.
Pallets of frozen food on the shop floor with only one person stacking the freezers. Watched them lift a couple of things at a time, walk to freezer, put in, walk back, repeat with the food getting warmer and warmer and the walk to the next freezer getting longer and longer. IIRC it used to be done by 3 people with motorised pallet trucks.

Probably not a major issue with frozen but I have warned people before about yellow sticker stuff that has been well in date, its the stuff thats been sitting out in the sun for a while perhaps.

All this is usually fine in winter...

Well that's a sobering thought for @Yellow_Reduced_Stickerheading into the summer.

[working woman]

11 hours ago, HousePriceMania said:

Was it always like this or was life once predictable, decent and sane? 

I know what you mean, it can feel like being in a washing machine,  not looking forward to the spin cycle ahead. 

I have decided, I cannot control what goes on in the outside world, but I can control what goes on in my home. I am focusing on cultivating a calm and happy life at home. Yes I have to venture out into the outside world to go to work, but home is now where it's at for me. A complete turn around from my work/career focused self in my 20-40's.  

Peace and quiet, minimal TV, home cooked meals, books to read, creative hobbies, occasional trips out to natural places.

That is my self-prescribed antidote to the world's madness. 

“Ah! There is nothing like staying at home, for real comfort.” Jane Austen

[Bus Stop Boxer]

I see Sovs at Baird have dropped about 8-9 quid in last 2 days. Quite a big drop this am it seems.

Are we going to see a drop in gold price due to selling to cover stock losses/obligations as markets fall?

Isn't that what happened in 08?

Bearing in mind todays Sunakshitcast it would have been reasonable to have expected a rise? Esp in sterling?

It cant be just reacting to higher expected rates.

At some point gold must surely fly to the moon Rodney.

Just knowing when to back up the truck.

[Bus Stop Boxer]

5 minutes ago, working woman said:

I know what you mean, it can feel like being in a washing machine,  not looking forward to the spin cycle ahead. 

I have decided, I cannot control what goes on in the outside world, but I can control what goes on in my home. I am focusing on cultivating a calm and happy life at home. Yes I have to venture out into the outside world to go to work, but home is now where it's at for me. A complete turn around from my work/career focused self in my 20-40's.  

Peace and quiet, minimal TV, home cooked meals, books to read, creative hobbies, occasional trips out to natural places.

That is my self-prescribed antidote to the world's madness. 

“Ah! There is nothing like staying at home, for real comfort.” Jane Austen

Don't forget the gun turrets, vats of boiling oil, and a moat.

[belfastchild]

2 minutes ago, Bus Stop Boxer said:

Don't forget the gun turrets, vats of boiling oil, and a moat.

cheaper to get two horses heads on the gateposts and an old caravan in the drive.
Nobody comes near you then.

[sancho panza]

1 hour ago, HousePriceMania said:

That's optimistic I think.

I've had a good couple of years spreading the house price mania word, so might get to quit by the end of the year.

It's exhausting.

To be fair,you've been relentless , looks like the US price action  is about to turn.Interesting for the Dow theorists to see the classic low volume kicking off a median price spike(which is what the MSM will focus on)

Same in the UK,LE2 my barometer postcode has 2 months inventory for semi's,6 month's for detached,so prices liquid and HOT....flats have 20 months inventory............So eeseentially,mix adjsuted LE2 hosue prices going higher but there's clearly strutural issues that will out at some point

3 hours ago, jamtomorrow said:

The effect on *aggregate* velocity will then be the sum of these kinds of component effects.

 

What makes the macro situation explosive is that the monetary gauges, dials and policy levers all measure or operate on *aggregates* - it's "que sera sera" for the component effects.

(This is why I think Gromen is on the right track when he refers to monetary policy levers as now operating more like an on/off switch)

In summary: it's not just a question of up or down - it's going to get bumpy. *Very* bumpy.

Excellent post.I'm posting charts to US money supply as the BoE website is like mud to get rhough,but the point remains.

Like you say,aggregates cover all manner of structural changes in the market place eg currently retail sales holding up(or not dropping as much as expected) because fuel prices are going higher.Like you say,that saving grace is a double edged sword.

The interesting thing from a price inflation poitn of view is what happens when consumers begin to believe the pound in their pocket is going to explode.They'll spend quicker creating demand pull inflation running alongside cost push.

US M2 velocity looks subdued but remembering that velocity is GDP/money supply it seems safe to assume that for each round of printing we're getting less and less bang for our buck

[Bus Stop Boxer]

4 minutes ago, belfastchild said:

cheaper to get two horses heads on the gateposts and an old caravan in the drive.
Nobody comes near you then.

Escort on bricks and an old fridge.

[JMD]

5 hours ago, belfastchild said:

Let youtube run its course yesterday whilst I was doing stuff and it ran through some interesting videos.
Wealthion part 1 interview with Danielle DiMartino Booth about Powell and controlled explosion of the markets.

 

Royal Institution - have boomers prinched their childrens futures, some of the forum themes but interesting to see (hear in my case) it laid out and some explanations why

Oh and I only got a few minutes into this one before I had to go back to the computer and turn it off as I was shouting at it from the other room. Peter Zeihan on with the 'experts' from ARK invest. Now 35 mins in and all I can see is him owning the ARK people but thats my own personal bias. Science, Bro!

Right now 10 sovereigns are 350 quid more than Ive ever paid... tempted with all the doom mongering ;-)
Off to listen to David McWilliams latest two to see if theres any change there in how the wind blows...

David McWilliams you say?...    Not exactly who you were referring to I know, but the lyrics to this song  '...The days of Pearly Spencer, the race is almost run!!'  - sound very apt for this thread's systemic collapse thesis...                                                                                                                                                                        Anyway, back in the 60s there was no internet, perhaps the guy was leaving his coded phone message for this (future) blog!!...   Need to listen again, take notes and decipher?!                                                                                                             It's only 3mins, worth a listen... and full of allegory, eg being waist height in water is an obvious reference to Buffets 'swimming naked'!!          (Marc Almond did a 'camped-up' version in the 90s, was also quiet good)...                                      https://m.youtube.com/watch?v=4VDS8uArR0A

[Loki]

13 minutes ago, Bus Stop Boxer said:

Just knowing when

None of us would be on this thread if that was the easy part, we'd all be on our own islands 

Cost averaging/laddering is the way to go especially at these prices

[sancho panza]

3 hours ago, CVG said:

Keep your eye on here. 80's best from the big bookies when I checked.

https://www.oddschecker.com/politics/british-politics/next-prime-minister

Might spark up ye olde politcal betting thread.

I think Kwarteng looks a good value ebt at these prices with possibly a year or two to pay out,possibly less.

Looking at the runners,if I was able to access Betfair,I'd lay the likes of Hunt/Truss nearer the time.Tugehndat looks a potential winner as well,anotehr public school(although only St Paul's) and Cambridge type

https://en.wikipedia.org/wiki/Tom_Tugendhat

Early life and education

Tom Tugendhat is the son of Sir Michael Tugendhat, the High Court judge, and his French wife, Blandine de Loisne.^[3] He is the nephew of Lord Tugendhat, a businessman and fellow Conservative politician. After attending St Paul's School, London, Tugendhat studied Theology at the University of Bristol, before doing a Master's degree course in Islamic studies at Gonville and Caius College, Cambridge, and learning Arabic in Yemen.^[4]

Tugendhat holds dual British and French citizenship. His wife is a French judge and senior civil servant, and his father-in-law is a French diplomat, the lead Organization for Security and Co-operation in Europe mediator in Ukraine.^[5] Tugendhat is a Catholic, with Jewish ancestry.^[6][7]

3 hours ago, StrugglingMillennial said:

I'm sure that the papers will be awash with similar articles today but take a look at the comments on this one 

https://www.dailymail.co.uk/news/article-10855499/Rishi-Sunak-prepares-unveil-10bn-energy-bills-bailout-benefit-UK-household.html#comments-10855499

People are not happy about having to pay for other people's benefits.

Thanks for psoting,fascianting reading .Seems like the penny is beginnign to drop especailly as more and mroe punters are drwan itno the cost of living crisis.

 

[sancho panza]

2 hours ago, Democorruptcy said:

That extra £175m charge is a sobering thought. Whether firms have too much index linked or fixed rate debt could be the difference between making lots of profit or going bust. Presumably if UU have paid out a lot of extra money for debt, then their lender is doing well out of it. One of the reasons why banks like interest rates increasing, i.e. there's inflation so any index link debt makes them more and there's better margins between loans they make and saving rates they pay.

Especially when said charge amounts to 40% of 2021's net income.

Bad for a utility as well given teh politcal resistance to them rising prices with infaltion

I jsut quickly coma scored UU and at current price

Chart 1, Income 2,balance sheet 2,cash flow 2 sector 2(for the abvoe reasons,absolutely zero scope for raising prices above inflation)=9/25.

One to avoid unless you'ree in lower down,even then I'd look to sell and buy something that can leverage infaltion rather then get ummled by it.

1 hour ago, JMD said:

Yes agreed, (and perhaps this is far too political/granular for this thread but I think I need to declare) I've been voting ukip/brexit/reform parties since 2001 and would never vote for a main party again because mainstream politics is a manipulated game. At same time I am under no illusion that mine is just a protest vote, but better than not voting at all, so to that end I now vote SDP.                                                                                                                                              Didn't mean to imply KK would be much improvement, but i can see a concerted attempted internal conservative putch to remove Johnson (replace with Hunt, etc), and with the MSM not able to hide their glee at the prospect, so any step in the opposite direction is a good thing imo, but again this is mere comment as I don't vote for that tribe....     However, in terms of 'political games' i may place that paddy power bet if I can get those odds!

I think aprt of thsi thread's role is to try and predict the political outcomes and what may happen to moentary policy.Easy currently,as they're mainly all the same.

Toreis picking an obscure back bencher with a decent understanding of what's going on could be a deal breaker.

53 minutes ago, JMD said:

In a recent Wealthion, I was surprised to hear - because I thought Wolf had been predicting a US housing crash - to see Wolf Richter instead saying that US house prices would trend down over time, some bumps maybe but no market crash. This is part 2 of that interview where he comments about housing... Has he recently changed his forecast?             https://m.youtube.com/watch?v=tmCJPMJd3y4

Wolf's site is a must read(decl: I donate monthly to support it).Having said that I wouldn't tkae his tips.He went short a couple of years back(didn't we all) and got burned on the altar of Big Tech.

His analysis of the price action really cuts to the issue tho and his charts on US hosuing and who's buying US treausries are must reads imho as I will use them to help to try and predict the BK roll over> More broadly I think he's doing the job the MSM should be doing.