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

[DurhamBorn]

2 hours ago, ONC said:

Here is a “company” version? Ticker:HFEL

https://www.londonstockexchange.com/stock/HFEL/henderson-far-east-income-limited/company-page
 

Are these the same? But no 5%initial fee?

 

 

Yes,its an investment trust,they are classed as a company.They can borrow etc,hold back divis.I like investment trusts.

[CannonFodder]

5 minutes ago, DurhamBorn said:

Yes,its an investment trust,they are classed as a company.They can borrow etc,hold back divis.I like investment trusts.

Is it capped as an etf with HL or is it classes as a fund with no cap in monthly fees?

[Democorruptcy]

A reminder of the 2022 withholding taxes by country. The rate that applies isn't necessarily for the country the firm operates in, it's the country the firm is resident in for tax purposes.

https://topforeignstocks.com/2022/01/19/dividend-withholding-tax-rates-by-country-for-2022/

[DurhamBorn]

10 minutes ago, CannonFodder said:

Is it capped as an etf with HL or is it classes as a fund with no cap in monthly fees?

None,its a company so no holding fees at all.Investment trusts are companies with a board of directors and their assets are the shares they own etc.

[Noallegiance]

On 25/06/2022 at 17:08, DurhamBorn said:

Its 100% obvious the government intend to remove small landlords.They will keep turning the screw.Lots of money will be going into the wealth managers intstead.

Chancellor in talks with UK insurers as he seeks to ditch EU rules and unlock vast sums for UK infrastructure (msn.com)

[HousePriceMania]

 

 

I think we're at the point where you have to move everything into assets.

 

I certainly am. The 0.25% IR raises from the BoE tell me all I need to know about what their only priority is.

[Bus Stop Boxer]

3 hours ago, Yadda yadda yadda said:

I see this as a really bad sign. It feels to me (gut feeling - no analysis) that the slump in demand is too swift.  The economy falling over at still very low interest rates reeks of hyperinflation and currency collapse incoming. I have understood the bullwhip concept of a product ordering cycle becoming misaligned with consumption and generating a surplus of goods. This will crush manufacturing orders for a time. Additionally excess stock will be cleared at low prices temporarily reducing inflation. However, I don't think that is the full story. It feels to me that consumption is well down. There is no bullwhip effect for food. Oil is maxxed out. Housing, especially in the US with lifetime fixed mortgages, is over the precipice and getting reacquainted with gravity.

As I see it interest rates, at least in the US, are not going much higher. They may go back down towards zero with inflation still 'elevated'. It looks like a dollar death spiral. The Euro must be in an even worse position. The Pound might be the least bad of the three as slow and steady rate rises might be maintained. Of course, it might get flushed.

Am I wrong?

When you put it like that

Spandau. Gold.

[Yadda yadda yadda]

1 hour ago, HousePriceMania said:

 

 

I think we're at the point where you have to move everything into assets.

 

I certainly am. The 0.25% IR raises from the BoE tell me all I need to know about what their only priority is.

Where does the state of California get the money? Do they just borrow it with the expectation of being bailed out later?

States that pay their own way can't be impressed. That inflation will bite them too.

[Axeman123]

18 minutes ago, Yadda yadda yadda said:

Where does the state of California get the money? Do they just borrow it with the expectation of being bailed out later?

States that pay their own way can't be impressed. That inflation will bite them too.

I remember reading that Democrat controlled states were drowning in debt and unpayable pension obligations, until Biden gave them hundreds of billions as "covid relief" to kick the can for another decade or whatever. This was all monetised by the Fed, and the wild spending it funds is the Dems entire power base for elections. That ship seems to have sailed for the future though.

American cities go bankrupt all the time, but I don't think any states have yet.

[Presuming Ed]

2 hours ago, honkydonkey said:

It's this one.

Henderson Far East Income Ltd Ord Fund factsheet | Trustnet

Funnily enough look at No.10.

Something to bear in mind with HFEL is that its chunky 8% dividend yield does not really reflect the natural yield of its portfolio constituents (e.g. in the current Top 10, although it has big hitters like RIO and BHP, it also has Macquarie Group as its biggest holding, which is only currently yielding 3.7%, Telkom Indonesia 3.7%, Vinacapital Vietnam 2% etc.)

It juices the dividend by writing options and, judging by how often its Top 10 changes, I suspect they might be also holding some companies short term in order to harvest dividends. 

This all naturally acts as a drag on share price growth, which has been pretty anaemic.   

That said, I do actually hold it but I look at it almost like an annuity but with a chance of actually getting my principal back. I also like its tilt towards value vs growth stocks.  But I think it's unlikely to ever shoot the lights out on the capital growth front. 

[ThoughtCriminal]

6 hours ago, sancho panza said:

Is there any section that's doing worse eg SUV's? I'm in the market for one of those fingers crossed.Presume small cars are holding up well.

luxury xcars?

I'd imagine the used car market is extrememly sensitive to the economy and the mood,much like barbers who apparently are samong the first to see recessions coming.

 

 

Top end (luxury cars) and bottom end (cheap runarounds) seem to be better, but everything in the middle is just dead.

 

What kind of SUV are you looking for?

[DurhamBorn]

1 minute ago, Presuming Ed said:

Something to bear in mind with HFEL is that its chunky 8% dividend yield does not really reflect the natural yield of its portfolio constituents (e.g. in the current Top 10, although it has big hitters like RIO and BHP, it also has Macquarie Group as its biggest holding, which is only currently yielding 3.7%, Telkom Indonesia 3.7%, Vinacapital Vietnam 2% etc.)

It juices the dividend by writing options and, judging by how often its Top 10 changes, I suspect they might be also holding some companies short term in order to harvest dividends. 

This all naturally acts as a drag on share price growth, which has been pretty anaemic.   

That said, I do actually hold it but I look at it almost like an annuity but with a chance of actually getting my principal back. I also like its tilt towards value vs growth stocks.  But I think it's unlikely to ever shoot the lights out on the capital growth front. 

Agree,and i look at it like that as well.Id consider any capital gains a bonus.I think they probably use some capital gains towards the divi as well.However there is a very good chance looking forward there might be some decent capital gains and maybe dividend growth.I think they got out of China a while back,but seem to of got back in.I hope they keep a similar top 10 going forward.

[Cosmic]

10 minutes ago, ThoughtCriminal said:

Top end (luxury cars) and bottom end (cheap runarounds) seem to be better, but everything in the middle is just dead.

 

What kind of SUV are you looking for?

Any 2018+ Leon ST DSG 150ps petrols taking up space?

[ThoughtCriminal]

8 minutes ago, Cosmic said:

Any 2018+ Leon ST DSG 150ps petrols taking up space?

Every variation of Leon on there except that 😂

[sancho panza]

6 hours ago, Joncrete Cungle said:

https://en.m.wikipedia.org/wiki/Gideon_Gono

He sent in the police to arrest businessmen for failing to reduce their prices. On one occasion, he personally visited shop owners in Harare to demand they lower prices.

 

The parallels are getting frighteningly similar

Gideon came up with some great quotes.According to WIki he authorized the ZIm$200,000 note in Aug 2007 before building up to launching the ZIm$100,000,000,000 note in July 08.

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

This is his finest quote in my eyes

https://www.inspiringquotes.us/quotes/eCHr_yQE2fNLF

"I found myself doing extraordinary things that arent in the textbooks. Then the IMF asked the U.S. to please print money. The whole world is now practicing what they have been saying I should not. I decided that God had been on my side and had come to vindicate me."

6 hours ago, Yadda yadda yadda said:

I see this as a really bad sign. It feels to me (gut feeling - no analysis) that the slump in demand is too swift.  The economy falling over at still very low interest rates reeks of hyperinflation and currency collapse incoming. I have understood the bullwhip concept of a product ordering cycle becoming misaligned with consumption and generating a surplus of goods. This will crush manufacturing orders for a time. Additionally excess stock will be cleared at low prices temporarily reducing inflation. However, I don't think that is the full story. It feels to me that consumption is well down. There is no bullwhip effect for food. Oil is maxxed out. Housing, especially in the US with lifetime fixed mortgages, is over the precipice and getting reacquainted with gravity.

As I see it interest rates, at least in the US, are not going much higher. They may go back down towards zero with inflation still 'elevated'. It looks like a dollar death spiral. The Euro must be in an even worse position. The Pound might be the least bad of the three as slow and steady rate rises might be maintained. Of course, it might get flushed.

Am I wrong?

Fro me there are two types of recessions,inventory and credit.Inventory is where say,a country builds too many bicycles,sells them off cheap,then begins again.Credit recessions feature debt deflations/contractiosn in credit and are much rarer.

This credit recession we're facing (imho) is one where we may get rising prices feeding into it.

These initial data oints are aothcy at best.The msot important thing I think we'll see confirm it's time to batten down the hatches is the Fed pivoting.Fed pivot in itself is meaningless in the scheme of things but it's tells usa great deal about what's coming.

and I think you're right,it's beginnign to look like the dollar death spiral.How long before oil isn't primarily traded in USD?5 years,10 max?

[HousePriceMania]

13 minutes ago, sancho panza said:

Gideon came up with some great quotes.According to WIki he authorized the ZIm$200,000 note in Aug 2007 before building up to launching the ZIm$100,000,000,000 note in July 08.

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

This is his finest quote in my eyes

https://www.inspiringquotes.us/quotes/eCHr_yQE2fNLF

"I found myself doing extraordinary things that arent in the textbooks. Then the IMF asked the U.S. to please print money. The whole world is now practicing what they have been saying I should not. I decided that God had been on my side and had come to vindicate me."

Fro me there are two types of recessions,inventory and credit.Inventory is where say,a country builds too many bicycles,sells them off cheap,then begins again.Credit recessions feature debt deflations/contractiosn in credit and are much rarer.

This credit recession we're facing (imho) is one where we may get rising prices feeding into it.

These initial data oints are aothcy at best.The msot important thing I think we'll see confirm it's time to batten down the hatches is the Fed pivoting.Fed pivot in itself is meaningless in the scheme of things but it's tells usa great deal about what's coming.

and I think you're right,it's beginnign to look like the dollar death spiral.How long before oil isn't primarily traded in USD?5 years,10 max?

10 years you say... 

Where in this chart do you think we are? 

 

 

Best case, start of 1922

If the US go QE then seriously get out of cash, dollars 

[sancho panza]

4 hours ago, janch said:

On the contrary, he's probably laughing as he has plenty of money to pay the coupons according to the article but the US won't let him:

Russia’s finance minister Anton Siluanov has called the situation a “farce”, claiming it is not a true default but rather a piece of financial engineering by the White House. Russia has tried to pay creditors with roubles, but doing so violates the bond terms.

 

Russia’s coupon payments were rendered impossible by the United States. The Office for Foreign Asset Control – the branch of the US Treasury Department that deals with financial sanctions – had allowed Western investors to continue to receive debt payments as part of the initial volley of sanctions at the start of the war in Ukraine.

That exemption was allowed to lapse last month, meaning payment became effectively impossible.

 

 

and no doubt SLeepy Joe will be wlaking round the old folks home in a year or two wondering why the workd ditched the USD as its reserve currency of choice.

43 minutes ago, ThoughtCriminal said:

Top end (luxury cars) and bottom end (cheap runarounds) seem to be better, but everything in the middle is just dead.

 

What kind of SUV are you looking for?

Mrs P has a Kia Sorrento that does 30 to the gallon.We now live in the boonies,so I'm pondering changing her 7 year old(jsut out of warranty for a 3 year old which does better mileage(47 mpg mixed).Middle class problem I know.

ALos my 11 plate Saab will need replacing and am wondering about what cars you've heard are relaible/good on fuel/cheap to repair?Ideally an estate or kia sportage type size.I normally buy 3-4 years old at point of max steepness in depreciation curve and then run it for to 200,000 miles.

I know nothing about cars except that the mechanic I know is hoenst but not cheap,but all he sells are saabs.

Any ideas/reccomendatiosn gratefully received TC but no pressure.

What's your view on these hybrids? Are they worth the bother?Or is ti best to get hte latest

[MrXxxx]

7 hours ago, sancho panza said:

Don't get me wrong,life as a single person on benefitrs isn't great but for thsoe that work the system sensibly,then 16 horsu plus time with the littlies beats grafting 80 horus a week between two of you trying to raise kids

This is the crux of the matter, those that believe that working hard gets you things in life are naive, yet those who 'play the system' are the ones that really get the full benefit....the former eventually wake up one morning and realize they have been 'taken for a mug' [like I did], they then get angry with the unfairness of the system and if they can they choose to op out.

[Agent ZigZag]

Get yourself  a Skoda Greenline hatchbike Panza. Easy to get hold of parts  as effectively a VW excellent milage to the gallon. No road tax. All the taxi drivers use them. If you fall on hard times then you are ready to go at the taxi game

[CannonFodder]

I think now is the fed's choice to protect the economy (pivot) or protect the dollar's rep (dont ease into an inflating dollar). As reputation is faith and dollar is fiat - this is really protecting the dollar

On top of freezing russia afganistan and Venezuelan reserves, inflating away dollar debt would kill off foreign buyers of the debt. It is just too much.

I think fed want to protect dollar but midterms in november and pressure will be immense. To protect dollar is to cause domestic recession.

We shall see. I may be wrong. My bets are on them pivotting

 

[Axeman123]

38 minutes ago, sancho panza said:

Fro me there are two types of recessions,inventory and credit.Inventory is where say,a country builds too many bicycles,sells them off cheap,then begins again.Credit recessions feature debt deflations/contractiosn in credit and are much rarer.

Perhaps we get both? We seem to be getting an inventory recession right now, which would presumably lead to the pivot/melt-up, and that would then lead to further tightening and credit recession.

[HousePriceMania]

8 minutes ago, CannonFodder said:

I think now is the fed's choice to protect the economy (pivot) or protect the dollar's rep (dont ease into an inflating dollar). As reputation is faith and dollar is fiat - this is really protecting the dollar

On top of freezing russia afganistan and Venezuelan reserves, inflating away dollar debt would kill off foreign buyers of the debt. It is just too much.

I think fed want to protect dollar but midterms in november and pressure will be immense. To protect dollar is to cause domestic recession.

We shall see. I may be wrong. My bets are on them pivotting

 

Look at the actions of the FED, Bow and ECB since 2008.

Chances are they're going to go -ve and QE ASAP. 

That does signal the end of the dollar and most likely the £. 

The central bankers could of course have a different plan, 1930s style depression, but their actions, their history, their response at every turn, their lies all point to more of the same. 

Once you pop you can't stop. 

I think the question is only how long we have before we all start buying physical assets, food supplies and baseball bats 

 

[HousePriceMania]

9 minutes ago, Axeman123 said:

Perhaps we get both? We seem to be getting an inventory recession right now, which would presumably lead to the pivot/melt-up, and that would then lead to further tightening and credit recession.

Sounds like an idea for a thread. 

 

Reflation cycle and the credit deflation to come? 

[Axeman123]

4 minutes ago, HousePriceMania said:

Look at the actions of the FED, Bow and ECB since 2008.

Chances are they're going to go -ve and QE ASAP. 

That does signal the end of the dollar and most likely the £. 

The central bankers could of course have a different plan, 1930s style depression, but their actions, their history, their response at every turn, their lies all point to more of the same. 

Once you pop you can't stop. 

I think the question is only how long we have before we all start buying physical assets, food supplies and baseball bats 

 

I might have said your first line myself a few weeks ago, but it seems hard to say the fed aren't serious about fighting inflation this time. They just keep going in spite of some very ominous signs. That doesn't mean they won't pivot soon, but I think they will wait for a real crisis first. The dramatic speed of the slow-down emerging certainly implies it won't be long until we find out.

If do get pivot=>melt-up=>tighten=>BK, I would expect far better prices for most things post-BK at least for a while. The decade after would be a very bad time to hold fiat though.

[Axeman123]

In fed speak:

Inventory recession = soft landing

Credit recession = Hard landing