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

[JimmyTheBruce]

13 minutes ago, Starsend said:

Sold the last of my SSE this morning. Too many unknowns for my liking going forward if millions of people can't pay their bills next year. Up about 35% inc. divis over two and a bit years so prob kept up with inflation at least.

Still holding National Grid. Not decided on what do with them yet. Anybody else holding?

Sold most of my SSE last week, just left a free bet on.

I've kept my NG up until now.  I'm (probably naively) assuming they will escape some pain as they're not directly consumer facing.

[DurhamBorn]

31 minutes ago, Plan-b said:

Yeah right, the old school economists say that the only way to properly tackle inflation is to have interest rates higher than inflation.

Interest rates are being set by currency this cycle,not inflation.Its a supply side cycle.Everyone is competing for scarce resources.If your currency goes to shit your in collapse territory.Everyone thinks CBs will save housing markets,but they wont.The best way to actually invest this cycle is find the countries with the most resources per capita and invest in their domestic companies and bonds.Norway,Turkey,Brazil,Chile,Argentina (i know) etc.Even Ireland with its huge food production.

My cycle inflation target is 65% the same as it was 4 years ago when everyone said we would never have inflation again.3.5% rates in the UK are most likely,up to 4.25%,i expect negative rates for most of the cycle,but down to -3.5% from -10%.Normally that would help house prices,but the inflation is in all things people have to use so its grinding down income.

Leveraged BTL has mortgage costs going up 100% to 200%,repair bills up 100%,regulation costs,tax etc etc,rent maybe up 10% if they are lucky.

 

[DoINeedOne]

Dog food we buy has increased again now up around 50% this year, thankfully the dog gives me less shit than the rest of the family so will continue to eat well

The others can have beans on toast

[Plan-b]

8 minutes ago, DurhamBorn said:

3.5% rates in the UK are most likely,up to 4.25%,i expect negative rates for most of the cycle,but down to -3.5% from -10%.Normally that would help house prices,but the inflation is in all things people have to use so its grinding down income.

Negative Interest rates DB? In time scales roughly when do you see negative interest rates?

[Lightly Toasted]

39 minutes ago, Axeman123 said:

An interesting set of questions

While Germany could just stop sending electronic "paper" to the PIGS etc, surely they could stop sending food? Who would be worse off in that scenario? While Germany could leave the EU, if it could bear chrystalising the total loss of TARGET2 ballances, how much of their success has been down to an artificialy cheap currency? Probably for the best long term, but a tough sell with short-term pain for a long-term lower standard of living 

How homogenous is the german population? Lots of Merkel's millions too within the rest of the EU could swamp the country if they had warning of the borders closing. An EU breakup could be the trigger for migrant dumping on a mass scale IMO.

Not that they would necessarily head for a collapsing Germany (or Britain for that matter). Why choose somewhere where you'll freeze and starve, when you could go somewhere else and just starve? 

As for Target2, surely it's a sunk cost at this point. The longer the current model is sustained, the greater the destruction of German wealth that could have been invested more wisely. The alternative to implosion (fiscal union financed by Germany) seems like a pipe* dream at this point.

* opium, not gas.

[JMD]

On 07/08/2022 at 16:55, DurhamBorn said:

Iv been leaning all our portfolios to outside sterling.Not all,but much more leaning.An example i made was i wanted to lower my telecoms a bit,so i sold some BT (luckily at £1.89 area) instead of the others because BT earns nearly all of its money in sterling.The irony is i see a chance sterling could be the best performing currency mid cycle,but that depends a lot on energy storage etc and finding ways to store and use our wind energy better.My main worries are around bennies and state worker pensions,then state spending in general.If we dont see huge reform we are going down.Again,the irony is i knew the inflation we would get now from my work,but i thought they must be aiming for it to save them from a bankrupt state.I assumed they would hold down bennies and state worker pensions etc during the inflation.The fact they havent means the inflation was for nothing and has instead pushed us closer to collapse.The only explanation is that the left now control the media,government,unis,charities,everything and they are mostly inflation protected,so they will take all wealth rather than give some up.I think Truss understands some of it,and has advisors that do,but i think doing what needs doing will not be possible as the left machine turns on her.I think the state at present roadmap will destroy the economy in 3 years.Thats how close we are.The cycle is underway as we expected,but these are developments within the cycle,there will be more to come.

I noticed Olive Oil was now up 55% from when i bought 3 years worth.Imagine someone worked all their lives and saved cash.The government has stolen 55% of it in a few months.Incredible stuff.My son is getting a 2nd pay rise in a year and then a 3rd in Jan,thats Weimer stuff right there.What next,monthly pay increases,weekly,daily?

Was rereading your post DB and Interesting you think that without big government reforms, re benefits etc, we might have only 3 years before economy destroyed.

Anyway your 3 year estimate did remind me that some macro commentators have the 2025-26 period as their thesis 'crises zone' (Hunt and Murrin come to mind), plus I think some of the big cycle theories such as the well known Kondratiev and (the not so known) Benner cycles predict market highs in 2026, followed by crash, etc...   Spooky Witchcraft, we'll see!?!               

 

Btw Benner is a 150 year old commodity cycle, based on corn and pig prices unfortunately - and not for energy!!... But looks curiously accurate date-wise, although it predicts 2007 as being 'only' a market high, and not a full-on panic. 'Accurate dates' aside, are our modern interpretations of these cycle theories mere 'confirmation bias' - what do others think is going on here?                             https://therationalinvestor.com/blog/how-the-benner-cycle-predicts-100-years-of-market-movement

[marceau]

53 minutes ago, Starsend said:

 

Raab is basically saying we need to get it back to how it was. What a dimlow, hasn't he noticed things have changed just a little and are never going back. Fucking monkey.

The entire UK political project for the last 25 years has been the thousand-year Blair-reich. They won't drop it until they're forced to.

[Axeman123]

18 minutes ago, DurhamBorn said:

The best way to actually invest this cycle is find the countries with the most resources per capita and invest in their domestic companies and bonds.Norway,Turkey,Brazil,Chile,Argentina (i know) etc.Even Ireland with its huge food production.

Any thoughts on Colombia? 4th largest economy in Latin America, and heavily tipped elsewhere.

It would be great if someone could put some metrics (akin perhaps to coma scores) to candidate countries. 

[Bobthebuilder]

11 minutes ago, Plan-b said:

Negative Interest rates DB? In time scales roughly when do you see negative interest rates?

Negative rates as in BOE base rate being below the inflation rate.

As it stands for me, I do not have a single share that pays a dividend to match current inflation.

[JMD]

This stock data can I know be accessed from many other places but it is interesting I think to see it presented in table fashion.

The website itself is looking very dated however the data is updated daily/weekly. Good for making quick comparisons. For example the stock p/e's of the FTSE are clearly and wildly decoupled from those of the SP500. 

                                              http://topstocktable.com/FTSE-100/FTSE100-PE.html

[Axeman123]

14 minutes ago, Lightly Toasted said:

Not that they would necessarily head for a collapsing Germany (or Britain for that matter). Why choose somewhere where you'll freeze and starve, when you could go somewhere else and just starve? 

As for Target2, surely it's a sunk cost at this point. The longer the current model is sustained, the greater the destruction of German wealth that could have been invested more wisely. The alternative to implosion (fiscal union financed by Germany) seems like a pipe* dream at this point.

* opium, not gas.

The migrants must have coma scores for destination coutries, as they seem very switched on to going where the money is. Energy cost and climate could be a wild card though, as you say.

Humans are notoriously bad at dealing with sunk costs rationally. I am not the expert on Germans, but my impression is that they will tend to regard TARGET2 as a savings account balance and expect full settlement.

[Plan-b]

10 minutes ago, Bobthebuilder said:

Negative rates as in BOE base rate being below the inflation rate.

As it stands for me, I do not have a single share that pays a dividend to match current inflation.

Got it, Cheers 

[SpectrumFX]

3 hours ago, stoobs said:

Interesting reading others talking about peak earnings when younger.

My peak earnings were around 2001-2002 in my early-thirties. No responsibilities, flexible, willing (and fit enough) to put up with stupid amounts of travel and hassle.

I'd always assumed I was a complete outlier as the narrative when I was growing up had been steady growth of earnings from starting work until retirement.

However, that old narrative is from an age of jobs-for-life and promotion throughout your career.

I have the same job title today as I had in 1994, but have changed employers a dozen times. I don't want to manage, team lead or veer off into other roles. I enjoy what I do and see no need to change that.

My peak earnings figure was on a University job on a fixed salary scale. My current job is at a higher point on the same salary scale, but the whole pay scale has dropped about 20% on an RPI basis in the last 10 years.

They also sacked off the final salary pensions in the same timeframe.

 

[Bobthebuilder]

1 minute ago, Plan-b said:

Got it, Cheers 

I have just posted on another thread that,  my bank has just increased its SVR to 4.75%.

Everything is starting to get expensive.

[feed]

In the United Kingdom, BBA Mortgage Rate refers to end month weighted average interest rate of UK monetary financial institutions (excl. Central Bank) sterling revert-to-rate mortgage to households. Mortgage priced at the standard variable rate.

 

 

[Noallegiance]

US CPLie is 8.5%

Party time! We're all saved!

[M S E Refugee]

Has anybody got any thoughts about Begbies Traynor ? , they deal with insolvency.

This must be a growth area!

[Lightscribe]

CPI data released soon. Widely expected to be 8.7% down from 9.1%. Looks like the Fed policy is working, yay stock rally! Oil dropping and high employment, when really it’s leads and lags (as DB would say).

Still can’t see where Hunters melt up is coming from without more liquidity, but certainly a dead cat bounce further upwards before the winter clusterfuck then Fed pivot and moon time QE.

https://investorplace.com/2022/08/theres-a-pivot-coming/

This seems to be confirmed in the latest shopping container info (my brothers business).

He says container prices have dropped from $20k to $8k and that they’re trying to encourage imports for the last month or so but there’s no takers. That’s leaving them no choice but to cancel them, so another supply chain bubble looks to be air pipe.

[Yadda yadda yadda]

52 minutes ago, Plan-b said:

Negative Interest rates DB? In time scales roughly when do you see negative interest rates?

Real interest rates. Eg inflation at 7% and interest rates at 3.5% is a negative 3.5% real interest rate.

[JMD]

1 hour ago, Starsend said:

 

Raab is basically saying we need to get it back to how it was. What a dimlow, hasn't he noticed things have changed just a little and are never going back. Fucking monkey.

Tbc I don't vote for any of the legacy political parties, so am not speaking as a conservative supporter (aghh!!).

But my assumption - as soon as I saw that Raab had gone over to the Rishi Sunack 'dark side' Camp (given that Raab himself is one of the Truss/Patel/Kwarteng/Raab 'Britain Unchained' clique) - was that after Sunack does ultimately lose, Raab will act as a conveniently placed bridge-builder (being on the 'losing side') within the conservative party to help heal divisions, bring party back together, etc...

Once the candidates were declared, i think Truss (the most 'awkward'!? of politicians) was always the shoe-in for PM, and therefore this contest is mostly political theatre! Yes I'm being very cynical, but I comment only because if this is true, I think very big 'planned' policy changes lie ahead. Of course whether the plans can be turned into reality is another story.

[JMD]

1 hour ago, Starsend said:

Sold the last of my SSE this morning. Too many unknowns for my liking going forward if millions of people can't pay their bills next year. Up about 35% inc. divis over two and a bit years so prob kept up with inflation at least.

Still holding National Grid. Not decided on what do with them yet. Anybody else holding?

Keeping mine for the 5% divi. (But did sell my energy utilities)

[HousePriceMania]

All the contractors have disappeared.  They all went permy, making it looks like wages were rising.

https://www.msn.com/en-gb/money/other/where-have-all-the-uk-s-self-employed-gone/ar-AA10sCG7?ocid=entnewsntp&cvid=81fc74d0883e44b4ae12baebf87150ab

 

 

[Lightscribe]

8.5% for July as expected.

[sancho panza]

15 hours ago, Chewing Grass said:

Can't see John Lewis surviving for long in the coming recession with falling sales and a workforce of woke youngsters.

Our local Waitrose became a Lidl,which tells a layman like me the direction of travel isn't going to be kind to John Lewis.Also Mrs P and her friends are the type who'd have frequented M&S and JL stores in the past in terms of earnings/disposable income and I don't think any of them shop there.Another cold winter and things will be even worse for both those co.s.

We've discussed before but it's worth reiterating,the JL leadership team have very little retail experience.Diverse though.The only two males seem to carry the bulk of said experience.FInance lady has been there 14 years too.But otherwise the other 4,look very lightweight imho especially going into the recession that will likely take it down.

https://www.johnlewispartnership.co.uk/about/meet-the-board.html

4 hours ago, M S E Refugee said:

Energy costs pushing Europeans into food poverty – Bloomberg https://www.rt.com/business/560571-europe-energy-costs-food-poverty/

I wonder when the Sheep are going to work out that the sanctions weren't a good idea.

I think Shaun Ricards nailed the essence of the western sanctions when he said

'the only people we seem to be sanctioning is ourselves.'

[Starsend]

11 minutes ago, HousePriceMania said:

All the contractors have disappeared.  They all went permy, making it looks like wages were rising.

https://www.msn.com/en-gb/money/other/where-have-all-the-uk-s-self-employed-gone/ar-AA10sCG7?ocid=entnewsntp&cvid=81fc74d0883e44b4ae12baebf87150ab

 

 

Labour and Tory Governments for the last twenty years have relentlessly hounded anybody with the balls to work for themselves, especially if you were working with the 'white heat of technology'.

Hardly surprising if people don't want the demented cretins on their back any longer.

They'll be moaning pretty soon about a lack of flexibility in the economy. These people are so stupid it's incredible, it wasn't always like this, even in living memory.