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

[jamtomorrow]

Here comes the demand destruction.

Interesting to see a Chinese takeaway move fairly early. It's what I'd expect, hard-nosed business people with a viable exit route shut up shop out of choice, meanwhile the daft twats running all those lifestyle businesses have to cling on because they remortgaged up to the maker's plate to finance the startup costs, and they'd be homeless if the turnover dries up.

This could get very messy.

How long before the trickle of discretionary service businesses shutting up shop turns into a flood of insolvencies?

And how exactly will the Government intervene to prevent all that misallocated capital being (correctly) swept away (like they have done at every opportunity for the last 15 years)?

 

[Boon]

Seems obvious to me that more money handouts are coming. 

The plebs love it, and the elites love it. The middle class is gaslit to love it but unfortunately they will be the losers.

[feed]

https://www.teletrader.com/china-car-sales-jump-29-7-in-july/news/details/58414072?internal=1

China car sales jump 29.7% in July

China Association of Automobile Manufacturers (CAAM) said Thursday that sales in the country soared by 29.7% in July to come in at 2.42 million units.

Production of vehicles in the same month rose by 31.5% year over year to 2.46 million units, while China's production of new energy vehicles increased by 120% to 617,000 units, and the sales amounted to 593,000 units hitting a new record.

The figures come amid widespread concern over inflation and the possible geopolitical and economic implications of conflict between Taiwan and China.

 

[DurhamBorn]

19 minutes ago, jamtomorrow said:

Here comes the demand destruction.

Interesting to see a Chinese takeaway move fairly early. It's what I'd expect, hard-nosed business people with a viable exit route shut up shop out of choice, meanwhile the daft twats running all those lifestyle businesses have to cling on because they remortgaged up to the maker's plate to finance the startup costs, and they'd be homeless if the turnover dries up.

This could get very messy.

How long before the trickle of discretionary service businesses shutting up shop turns into a flood of insolvencies?

And how exactly will the Government intervene to prevent all that misallocated capital being (correctly) swept away (like they have done at every opportunity for the last 15 years)?

 

What i find upsetting the most is my skills and those like me were given zero worth for decades.Actually ever since iv had them and before.I was saying to my old boss the company would be better employing me as a macro strategist rather than a technician i could add 10,000 times the value to them.The macro got so obvious i could of taught school children and they would of spotted it.Not the cross market stuff,but the actual roadmap.The rubber band was stretched so far yet nobody was looking in the right direction.Sometimes i look at my old jotters with my roadmap and see the dates back then plotting to now and its incredible how close it is on inflation.

The pain is going to be incredible,but the worry for us on here is the country might go to the hard left.The left caused most of this of course,yet people will demand more actions to make things worse.Watching Sunak makes me feel sick.His answer is more bennies but fuck everyone else.That road just ensures everyone apart from him his wife and his mates end up on bennies in the end.The problem so far is the government trying to shield the parts of the population that are causing the problems (not their faults,the faults lie with polos) but its not sustainable.The New Labour government caused most of out problems,then for some reason the Tories didnt bother fixing them,they just carried them on.

 

[DurhamBorn]

1 hour ago, jamtomorrow said:

Here comes the demand destruction.

Interesting to see a Chinese takeaway move fairly early. It's what I'd expect, hard-nosed business people with a viable exit route shut up shop out of choice, meanwhile the daft twats running all those lifestyle businesses have to cling on because they remortgaged up to the maker's plate to finance the startup costs, and they'd be homeless if the turnover dries up.

This could get very messy.

How long before the trickle of discretionary service businesses shutting up shop turns into a flood of insolvencies?

And how exactly will the Government intervene to prevent all that misallocated capital being (correctly) swept away (like they have done at every opportunity for the last 15 years)?

 

Should add,look at the VAT on that,then there is another 25% green/social levy on the electric.Government killing all these companies for handouts.Thats why there will be a jump in the tax take,but then a slide starts.

[marceau]

45 minutes ago, Boon said:

Seems obvious to me that more money handouts are coming. 

The plebs love it, and the elites love it. The middle class is gaslit to love it but unfortunately they will be the losers.

I think that's nailed on until currency pain forces the govt to change course. In the meantime inflation runs much higher for much longer.

10 years of 10%+ in the 1970s, if they don't get a grip we'll end up with worse.

[Axeman123]

Apologies if this has already been posted:

From a small channel I am unfamiliar with, but actually really good.

My highlights (based on the first half):

DXY has topped, likely as a result of a "Bali Accord". At least for a while everyone gains from a weaker dollar, including foreign UST demand.

Fed is not political, but will have to limp the economy through to the November elections and then have ~18months to act before the next election etc.

We are in recession, yield curves are probably right. Points out that in his game 60:40 odds you take, and 90:10 almost never happens.

Gold is being held down by the beleif that the fed can do a Volker, but they can't.

[DurhamBorn]

34 minutes ago, marceau said:

I think that's nailed on until currency pain forces the govt to change course. In the meantime inflation runs much higher for much longer.

10 years of 10%+ in the 1970s, if they don't get a grip we'll end up with worse.

Yes,and the UK is mainly service who cant pass on all the inflation.Half the economy through the government is inflation linked,pensions/bennies.Private sector will collapse because it cant afford it now,never mind as its inflating.Government is hoping those on the state tit can help keep demand up while the inflation starts to fall,but our economy is far too skewed and that wont work.They need to cut spending on handouts and cut tax on business and working.We are in a systemic collapse at the moment,just the foothills,but looking up to the route to the summit.The key thing government needs to understand is the Russians,Chinese and other Emerging markets worked hard so our bennie class and state pensions could sit at home.Thats ended now.To carry on as before they would need to take all private assets,then collapse.The real worry is they take all private assets.

[DurhamBorn]

1 minute ago, Axeman123 said:

Apologies if this has already been posted:

From a small channel I am unfamiliar with, but actually really good.

My highlights (based on the first half):

DXY has topped, likely as a result of a "Bali Accord". At least for a while everyone gains from a weaker dollar, including foreign UST demand.

Fed is not political, but will have to limp the economy through to the November elections and then have ~18months to act before the next election etc.

We are in recession, yield curves are probably right. Points out that in his game 60:40 odds you take, and 90:10 almost never happens.

Gold is being held down by the beleif that the fed can do a Volker, but they can't.

EMs will gain hugely from the falling dollar,their bonds first then equities.Key thing im trying to understand now is do i take those profits when they run (some are running already) or hold them for the cycle due to the structure and multi polar world we are going to see.? .BK is the huge risk,but so it being trapped in the wrong currency when it plunges in tandem with inflation.

[marceau]

22 minutes ago, DurhamBorn said:

Yes,and the UK is mainly service who cant pass on all the inflation.Half the economy through the government is inflation linked,pensions/bennies.Private sector will collapse because it cant afford it now,never mind as its inflating.Government is hoping those on the state tit can help keep demand up while the inflation starts to fall,but our economy is far too skewed and that wont work.They need to cut spending on handouts and cut tax on business and working.We are in a systemic collapse at the moment,just the foothills,but looking up to the route to the summit.The key thing government needs to understand is the Russians,Chinese and other Emerging markets worked hard to our bennie class and state pensions could sit at home.Thats ended now.To carry on as before they would need to take all private assets,then collapse.The real worry is they take all private assets.

The problem is that there is private and 'private', the second type is the connected and powerful one, being almost entirely supported by public funds, either directly or via various laundry schemes. These were the cartels that engineered the current system, using the likes of Blair, Brown and their replacements as intermediaries to manage the electoral facade. They don't give a shit about the first type of private, in fact it's to their benefit that the first type suffer, removing competition.

As far as the power players are concerned the only distinction between their types of 'public' and 'private' are how much attention they get while sucking out money. The big boys are heavily stacked against the middle class here, and they are the ones who call the shots. They covertly manage governments, so in a private asset grab it won't be their assets getting taken. 

The theft could go on for a long time under those sorts of conditions.

[Axeman123]

1 minute ago, DurhamBorn said:

EMs will gain hugely from the falling dollar,their bonds first then equities.Key thing im trying to understand now is do i take those profits when they run (some are running already) or hold them for the cycle due to the structure and multi polar world we are going to see.? .BK is the huge risk,but so it being trapped in the wrong currency when it plunges in tandem with inflation.

Personally I am in the Dave Hunter "treasuries (and the dollar) will be the only safe harbour" camp re the BK. If one is set on a BK model, it seems obvious to really lean into it. If one thinks we might not necessarily get one OTOH then positioning for the decade after now and ride out any dips is obviously more prudent.

On a bigger question, if you are trying to monetise the falling dollar will EMs outperform PM miners? Although one might think you are diversifying, if every holding is trying to leverage the falling dollar are you really? EMs USTs PMs are essentially going to be correlated if the DXY drops IMO.

[invalid]

30 minutes ago, DurhamBorn said:

Yes,and the UK is mainly service who cant pass on all the inflation.Half the economy through the government is inflation linked,pensions/bennies.Private sector will collapse because it cant afford it now,never mind as its inflating.Government is hoping those on the state tit can help keep demand up while the inflation starts to fall,but our economy is far too skewed and that wont work.They need to cut spending on handouts and cut tax on business and working.We are in a systemic collapse at the moment,just the foothills,but looking up to the route to the summit.The key thing government needs to understand is the Russians,Chinese and other Emerging markets worked hard so our bennie class and state pensions could sit at home.Thats ended now.To carry on as before they would need to take all private assets,then collapse.The real worry is they take all private assets.

 

I've always liked your style, looking at the fundamentals and the basics that generate wealth.

In this case its work, real work, productive work, China making things and selling them to the west to transfer real wealth. Making plastic crap for your own consumption doesn't do much for wealth but if you export that plastic crap to someone else then its a nice way to take their wealth.

Again, as you say, too much work in the UK is non productive public sector and to be fair the large number of lifestyle/hobby businesses and zombie SMEs. It helps with moving wealth around but does nothing to generate it, rather the opposite, it consumes it.

Then chuck in the other big fundamental wealth creator, energy, cheap energy. We can all make a good guess on what happens when that cheap plentiful energy becomes scarce and expensive. Over the next couple of years we will find out and our predictions will be tested.

 

I share your concern that governments will become ever more desperate and will be eyeing up private assets for sure, I see pensions as being an obvious and easy target. It will be framed as only stealing form the rich peoples pensions but the reality is it will be the middle earners that worked all their lives and did the right things that get shafted.

 

[Pip321]

29 minutes ago, DurhamBorn said:

EMs will gain hugely from the falling dollar,their bonds first then equities.Key thing im trying to understand now is do i take those profits when they run (some are running already) or hold them for the cycle due to the structure and multi polar world we are going to see.? .BK is the huge risk,but so it being trapped in the wrong currency when it plunges in tandem with inflation.

My biggest dilemma hasn't been the long term direction but deciding on short term positions in these really nervous times, to try to take small advantages and be on the front foot. Many 'investors' dismiss the short term but it can make a huge difference to your personal sentiment and also to the return.

I am expecting the cycle to be right but bumps along the way depending on numpty panicking politicians perhaps doing really stupid things we have not even thought of yet (not economic things but war/allegiance/declarations). 

My solution....which doesn't even nearly answer your question, is to keep listening and have my eye on the exit and entry door and try ensure I am in assets that I can quickly sell/buy.

[Starsend]

1 hour ago, DurhamBorn said:

What i find upsetting the most is my skills and those like me were given zero worth for decades.Actually ever since iv had them and before.I was saying to my old boss the company would be better employing me as a macro strategist rather than a technician i could add 10,000 times the value to them.The macro got so obvious i could of taught school children and they would of spotted it.Not the cross market stuff,but the actual roadmap.The rubber band was stretched so far yet nobody was looking in the right direction.Sometimes i look at my old jotters with my roadmap and see the dates back then plotting to now and its incredible how close it is on inflation.

The pain is going to be incredible,but the worry for us on here is the country might go to the hard left.The left caused most of this of course,yet people will demand more actions to make things worse.Watching Sunak makes me feel sick.His answer is more bennies but fuck everyone else.That road just ensures everyone apart from him his wife and his mates end up on bennies in the end.The problem so far is the government trying to shield the parts of the population that are causing the problems (not their faults,the faults lie with polos) but its not sustainable.The New Labour government caused most of out problems,then for some reason the Tories didnt bother fixing them,they just carried them on.

 

Yeah it's pretty damn annoying when your skills start paying properly - as you retire.

My skills have suffered the same fate to a large degree because of the importing of hundreds of thousands of Indians. I'm unsure as to the economics of that continuing in the coming decade or so - certainly if the pound falls significantly against the rupee then it may make it less economic. Be bloody annoying to see a boom when I'm retired. I did notice a very marked uptick in phone calls / enquiries during covid when they couldn't fly their beloved cheap labour in.

[Starsend]

1 hour ago, marceau said:

I think that's nailed on until currency pain forces the govt to change course. In the meantime inflation runs much higher for much longer.

10 years of 10%+ in the 1970s, if they don't get a grip we'll end up with worse.

That's exactly what they want and what is required to get rid of the mountains of debt - so that's what we'll get.

The only question is can they control it and keep fooling everybody; to which I would say empathically no.

[Starsend]

2 hours ago, jamtomorrow said:

Here comes the demand destruction.

Interesting to see a Chinese takeaway move fairly early. It's what I'd expect, hard-nosed business people with a viable exit route shut up shop out of choice, meanwhile the daft twats running all those lifestyle businesses have to cling on because they remortgaged up to the maker's plate to finance the startup costs, and they'd be homeless if the turnover dries up.

This could get very messy.

How long before the trickle of discretionary service businesses shutting up shop turns into a flood of insolvencies?

And how exactly will the Government intervene to prevent all that misallocated capital being (correctly) swept away (like they have done at every opportunity for the last 15 years)?

 

That's an absolute shocker that. What other option do you have but to call it a day. As I've said recently there is an absolute avalanche of company folds and unemployment incoming.

[M S E Refugee]

12 minutes ago, Starsend said:

The only question is can they control it and keep fooling everybody; to which I would say empathically no.

Don't underestimate how dumb the Great British public are.

 

[Castlevania]

3 hours ago, jamtomorrow said:

Here comes the demand destruction.

Interesting to see a Chinese takeaway move fairly early. It's what I'd expect, hard-nosed business people with a viable exit route shut up shop out of choice, meanwhile the daft twats running all those lifestyle businesses have to cling on because they remortgaged up to the maker's plate to finance the startup costs, and they'd be homeless if the turnover dries up.

This could get very messy.

How long before the trickle of discretionary service businesses shutting up shop turns into a flood of insolvencies?

And how exactly will the Government intervene to prevent all that misallocated capital being (correctly) swept away (like they have done at every opportunity for the last 15 years)?

 

Are those quarterly bills?

[Starsend]

7 minutes ago, M S E Refugee said:

Don't underestimate how dumb the Great British public are.

 

True, and I do underestimate that all the time.

If they can fleece everybody else then I guess that stops them coming after those that do understand what's going on.

I'm positioned for high inflation for the rest of the decade. Everything else is mostly noise. 

[HousePriceMania]

3 hours ago, jamtomorrow said:

Here comes the demand destruction.

Interesting to see a Chinese takeaway move fairly early.

Would be worse for those Chinese takeaways if they had to pay tax too.

[marceau]

26 minutes ago, Starsend said:

That's exactly what they want and what is required to get rid of the mountains of debt - so that's what we'll get.

The only question is can they control it and keep fooling everybody; to which I would say empathically no.

There was another way with less inflation, but it's almost certainly not going to be taken. The path they're on also makes it likely that the tax bands won't move much, or may even stay frozen. Theft of middle class wealth on a massive scale.

[Lightly Toasted]

3 hours ago, jamtomorrow said:

Here comes the demand destruction.

Interesting to see a Chinese takeaway move fairly early. It's what I'd expect, hard-nosed business people with a viable exit route shut up shop out of choice, meanwhile the daft twats running all those lifestyle businesses have to cling on because they remortgaged up to the maker's plate to finance the startup costs, and they'd be homeless if the turnover dries up.

This could get very messy.

How long before the trickle of discretionary service businesses shutting up shop turns into a flood of insolvencies?

And how exactly will the Government intervene to prevent all that misallocated capital being (correctly) swept away (like they have done at every opportunity for the last 15 years)?

 

It's bad, but not yet that bad:

https://www.aberdeenlive.news/news/aberdeen-news/aberdeen-takeaway-boss-vows-fight-7442915

The embattled boss of an Aberdeen Chinese takeaway has promised to "fight on" after energy bills that plunged his business into turmoil were reduced.

Martin Tang appealed to provider SSE after he was issued with bills demanding more than £11,000 of extra expenses to power his shop, the Royal Crown in Torry. Martin later announced he was planning to close the store, saying the costs had made his business unviable.

But today, Martin was informed that his bills had been reduced substantially after the company took new meter readings. Rather than having to fork out £10,000 for gas this quarter, he will now only have to pay £3,087, and his electricity bill has been cut from £4,016 to £1,429...

[DurhamBorn]

1 hour ago, Axeman123 said:

Personally I am in the Dave Hunter "treasuries (and the dollar) will be the only safe harbour" camp re the BK. If one is set on a BK model, it seems obvious to really lean into it. If one thinks we might not necessarily get one OTOH then positioning for the decade after now and ride out any dips is obviously more prudent.

On a bigger question, if you are trying to monetise the falling dollar will EMs outperform PM miners? Although one might think you are diversifying, if every holding is trying to leverage the falling dollar are you really? EMs USTs PMs are essentially going to be correlated if the DXY drops IMO.

Things like Harmony Gold give you leverage to the leverage.EM and gold,and uranium etc.

[HousePriceMania]

13 minutes ago, Lightly Toasted said:

It's bad, but not yet that bad:

https://www.aberdeenlive.news/news/aberdeen-news/aberdeen-takeaway-boss-vows-fight-7442915

The embattled boss of an Aberdeen Chinese takeaway has promised to "fight on" after energy bills that plunged his business into turmoil were reduced.

Martin Tang appealed to provider SSE after he was issued with bills demanding more than £11,000 of extra expenses to power his shop, the Royal Crown in Torry. Martin later announced he was planning to close the store, saying the costs had made his business unviable.

But today, Martin was informed that his bills had been reduced substantially after the company took new meter readings. Rather than having to fork out £10,000 for gas this quarter, he will now only have to pay £3,087, and his electricity bill has been cut from £4,016 to £1,429...

 

[DurhamBorn]

26 minutes ago, marceau said:

There was another way with less inflation, but it's almost certainly not going to be taken. The path they're on also makes it likely that the tax bands won't move much, or may even stay frozen. Theft of middle class wealth on a massive scale.

Yep that was how Sunak planned to remove the assets.His aim was to stop the next generation getting them.IHT allowance is a joke now its frozen.Pension lifetime allowance still ok,but with no inflation link could be cut in half again.

IHT really is terrible though.Im not married so only have the basic allowance and three kids.Pension shields much more,but that might be a target,include it in inheritance would blow things out the water.I dont know how Sunak can even stand there in front of Tory members when all his policies have been to remove them of their assets and give them to his rich mates through Labour voters.Hopefully Truss offers him some crap job where he has no power.