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

[Errol]

 

[CannonFodder]

I get private health care through work, first time ever they are putting in a policy excess to discourage folk, they absolutely rammed. So many giving up on nhs and going private, private overwhelmed. I do wonder if private health care a growth sector in uk going forwards.

[DurhamBorn]

1 hour ago, Cattle Prod said:

@sancho panza has been warning of us what's happening at the coalface:

https://www.telegraph.co.uk/news/2021/12/11/tenfold-increase-patients-waiting-eight-hours-transferred-ambulance/

Time for local communities to get tighter, give old folks your number if they fall, do a first aid course and find out where the nearest defibrillator is. Because despite the government taking some of the highest taxes in history out of your pocket, they aren't going to help you. They have better things to spend it on, like Test and Trace, or piss ups in Downing Street.

 

The government is finished now i think.Half of the public sector is sat at home on full pay,bennies worse than ever.BOE will be out of printing room in a few months and due to where government has directed liquidity GDP wont reach escape velocity.Its inflation with no growth here.Obvious to anyone this is the worst government in history by a long shot.Labour of course are a disaster as well,so the likely result is Boris gone and a Liz Truss PM.

[CannonFodder]

2 minutes ago, DurhamBorn said:

The government is finished now i think.Half of the public sector is sat at home on full pay,bennies worse than ever.BOE will be out of printing room in a few months and due to where government has directed liquidity GDP wont reach escape velocity.Its inflation with no growth here.Obvious to anyone this is the worst government in history by a long shot.Labour of course are a disaster as well,so the likely result is Boris gone and a Liz Truss PM.

Perhaps an unfair question but do you see the UK collapsing in an inflation - sterling down toilet - brain drain - printy public sector spiral before say the US lead the way. 

Its on the edge of my radar but my radar not as good as yours.

[Hancock]

10 minutes ago, DurhamBorn said:

The government is finished now i think.Half of the public sector is sat at home on full pay,bennies worse than ever.BOE will be out of printing room in a few months and due to where government has directed liquidity GDP wont reach escape velocity.Its inflation with no growth here.Obvious to anyone this is the worst government in history by a long shot.Labour of course are a disaster as well,so the likely result is Boris gone and a Liz Truss PM.

Its also the majority of people with rock solid safe jobs in the so called private sector, such as the FCA, banks, building societies etc etc.. that are sat at home doing sweet FA.

Its why they can string this out endlessly as plenty are going to support being sat at home with the kids on full pay.

I despair at the thought of Liz Truss, she's an incompetent social climber and by being in govt by default means she supports lockdowns.

[Hancock]

1 minute ago, CannonFodder said:

Perhaps an unfair question but do you see the UK collapsing in an inflation - sterling down toilet - brain drain - printy public sector spiral before say the US lead the way. 

Its on the edge of my radar but my radar not as good as yours.

The one thing in the UK's favour is the rest of Europe, OZ/NZ, Canada and the USA are seemingly as bad if not worse.

[Hancock]

Its this kind of thing that i despair at, which also doesnt bode well for the "infrastructure rebuild".

Theyve got £40 bln for track and trace, and god knows how much for all this PPE and the tests.

But when it comes to electrifying the rail lines and creating "proper jobs" , the cupboard is bare.

https://www.telegraph.co.uk/business/2021/12/11/treasury-blocks-30bn-plan-electrify-britains-railways/?li_source=LI&li_medium=liftigniter-rhr

 

[Loki]

23 minutes ago, DurhamBorn said:

ever.BOE will be out of printing room in a few months and due to where government has directed liquidity GDP wont reach escape velocity.Its inflation with no growth here

Wow, that's bleak. You sound very definite too

[Hancock]

4 minutes ago, Loki said:

Wow, that's bleak. You sound very definite too

Wonder if thats why Omicron is being promoted by the MSM this weekend ...  lockdowns and helicopter money in January?

[Loki]

1 minute ago, Hancock said:

Winder if thats why Omiscron is being promoted by the MSM this weekend ...  lockdowns and helicopter money in January?

It sounds like all that would do is just extend everything for a while, as previous liquidity has been wasted, even if this round was properly used. Apologies if I have got you wrong @DurhamBorn

[Phil]

1 hour ago, CannonFodder said:

Perhaps an unfair question but do you see the UK collapsing in an inflation - sterling down toilet - brain drain - printy public sector spiral before say the US lead the way. 

Its on the edge of my radar but my radar not as good as yours.

Perhaps a brain drain, but the void has never been filled from the last brain drain. If it has,the void was fill by the forward thinking youth, then this is what we have. The BK isn’t far away. If your fortunate to have no debt ( imo) fill dem der boots after. It’s very close. I can smell it. 

[wherebee]

40 minutes ago, Phil said:

Perhaps a brain drain, but the void has never been filled from the last brain drain. If it has,the void was fill by the forward thinking youth, then this is what we have. The BK isn’t far away. If your fortunate to have no debt ( imo) fill dem der boots after. It’s very close. I can smell it. 

i've been anticipating a BK for 5 years.....

[jamtomorrow]

22 hours ago, wherebee said:

yeah, I think you are right.  I think a cheap android, up to date, is next.

Just done exactly this as a TOTP backup. "Old Faithful" main phone (5 years old) recently had its first crash & restart in months, and prompted me to consider the consequences of having to re-establish the 20 or so TOTPs that depend on it.

And then at some point Old Faithful will flip its final cycles and I'll probably double up the cheap backup model for a few years. That's Apple's nemesis right there: "good enough"

Bringing it somewhat back on topic ... is it just me, or is there still no 2FA at HL? Given we're nearly into 2022 - and in terms of WTF is going on with their IT, and therefore the general solidity of their platform - surely that's red flag territory?

[jamtomorrow]

8 hours ago, DurhamBorn said:

The government is finished now i think.Half of the public sector is sat at home on full pay,bennies worse than ever.BOE will be out of printing room in a few months and due to where government has directed liquidity GDP wont reach escape velocity.Its inflation with no growth here.Obvious to anyone this is the worst government in history by a long shot.Labour of course are a disaster as well,so the likely result is Boris gone and a Liz Truss PM.

That reads like a stagflation call for the UK @DurhamBorn. Is that what you're seeing?

[JimmyTheBruce]

6 hours ago, wherebee said:

i've been anticipating a BK for 5 years.....

Given the provenance of many posters on this site (myself included) one might suggest that timing crashes isn't our strong point 

[Craig]

Must admit silver is looking quite tempting right now. Where's the best place to buy coins? Assuming I'd be lumbered with duties if I used Silver 2 Go? 

[Loki]

29 minutes ago, Craig said:

Must admit silver is looking quite tempting right now. Where's the best place to buy coins? Assuming I'd be lumbered with duties if I used Silver 2 Go? 

eBay seller with perfect feedback, no VAT that way.  There's tubes of £25 going for £600, I put in a best offer of £550 but no bites yet. 

[planit]

I am waiting to buy back into PM miners, I can't see the tide turning whilst all the talk is about speeding up the tightening.

As soon as there is a sniff of loosening monetary policy due to the economy slowing down I will be paying attention.

 

BP has recovered much quicker than the oil price over the last 2 weeks. This combined with the fact most tech stocks seem to be in a bear market even though the S&P500 is still high leads me to believe there has been sector rotation over the last month.

I am still thinking there will be another pullback before moving higher but this week might well test my resolve if we continue moving higher (there needs to be a move up to suck everyone back in, too many people like me).

For one thing US and Asia seem to be a few weeks [US - 2 weeks, Asia - 4 weeks?] behind Europe and UK with regards to Omicron so their cases will not look bad for a while.

 

 

[DurhamBorn]

10 hours ago, CannonFodder said:

Perhaps an unfair question but do you see the UK collapsing in an inflation - sterling down toilet - brain drain - printy public sector spiral before say the US lead the way. 

Its on the edge of my radar but my radar not as good as yours.

No,we have too many good points,but we will and are sailing close now.The state has a massive structural deficit and that will be exposed soon.They will go after more tax first though hence freezing allowances while inflation runs.Since Labour last got in we have been gutting the working middle class to hand to others in bennies and state wages.I see the main problems in the UK as the bennies,mostly around children and mild disability,and also councils.From those two most other problems flow.

On councils,my partner works for one in nurse responding,out of 46 responders 9 are on the sick,several others on and off the sick,the bosses are all at home and the service is collapsing,councils outside of the frontline workers are now local mafia that exist only to enrich the officers/managers.The police are now getting there as well,they exist to give themselves a huge pension for life at 55.

The economy tries to fight back with inflation to claw back for the private sector,but those living on savings and none inflation protected incomes lose up to everything.

[DurhamBorn]

10 hours ago, Hancock said:

Its also the majority of people with rock solid safe jobs in the so called private sector, such as the FCA, banks, building societies etc etc.. that are sat at home doing sweet FA.

Its why they can string this out endlessly as plenty are going to support being sat at home with the kids on full pay.

I despair at the thought of Liz Truss, she's an incompetent social climber and by being in govt by default means she supports lockdowns.

She will make the best PM since Thatcher i think,if she gets it.You have to look loyal to the government until the right moment.The Ides of March.

[DurhamBorn]

2 hours ago, jamtomorrow said:

That reads like a stagflation call for the UK @DurhamBorn. Is that what you're seeing?

I think we might see a year of it.There is plenty of liquidity at the moment,but the government keeps doing idiotic things.Companies will start to invest to capture the higher prices,but at the moment they arent so that will mean longer with inflation and no/low growth.The narrative of transitory inflation is holding back investment.It is transitory of course at some point,but the fact is we wont see the increases given back,by 2030 i expect 63% inflation compounded up.

Its a distribution cycle,thats clear now,however, im seeing more damage earlier than i expected,more front end,that should see lots of higher wage demands etc

[Harley]

3 hours ago, jamtomorrow said:

Bringing it somewhat back on topic ... is it just me, or is there still no 2FA at HL? Given we're nearly into 2022 - and in terms of WTF is going on with their IT, and therefore the general solidity of their platform - surely that's red flag territory?

Neither HL nor II.  Rediculous at this point.  II uses a texted code which is not very secure (SIM hijack).  AJB manages 2FA as do several other players.

[CannonFodder]

Thank you DB

Yeah i have experience of councils, large departments outsourced except for the directors eg Highways. These depts then run by private sector directors in new companies. Then there are 4 to 5 council directors left that dont actually do anything other than look busy qnd approve the monthly invoice. OF course that is beneath them so they take on contract management admin. ON paper the admin should be challenging payments but in reality on technical ability now outsourced so everything waved through as no understanding left

[Harley]

3 hours ago, JimmyTheBruce said:

Given the provenance of many posters on this site (myself included) one might suggest that timing crashes isn't our strong point 

I'd be interested to know people's approaches but fear some/most are like my old one of listening to talking heads.  I now listen to the data.  There are no short cuts other than luck.

[Bricormortis]

18 hours ago, BadAlchemy said:

This has cheered me up on a dark winter day with silver and the miners in the doldrums!....

https://silverseek.com/article/undersupplied-silver-follow-base-metals-deficit

A report from the 'Silver Institute', with some interesting charts and stats, predicting a supply deficit over the coming years in industrial metals. Mentions causes such as the push for EV/green infrastructure and risks from 'resource nationalism' in LTAM countries (e.g. see Peru and Hochschild), and lack of investment to replace old mines with new (sounding similar to discussions on here wrt oil/gas supply squeeze).

Interesting, and I did not know until now that silver supply (and price moves) correlates strongly with copper (and zinc/lead etc) as over 50% of it comes as a byproduct of mining those metals rather than from primary silver mines.

Long-ish article but  conclusion/summary as follows...

"Conclusion

A billion ounces of silver demand this year is expected to outpace silver supply leaving a 7-million-ounce deficit — the first in six years.

Last year due to covid-related mine closures, production from primary silver mines fell 11.9%, silver output from lead-zinc mines declined 7.4% and silver from gold mines shrunk 5.7%. Silver output from copper mines actually increased 3.5% (data from the 2021 World Silver Survey).

This year could be quite different. While mines are no longer closed due to covid and therefore are expected to regain 2020’s lost output, there are other challenges ahead. As we have identified, they include a steadily increasing supply-demand gap for copper, with a 3.8Mt deficit predicted by 2025; supply shortfalls in other base metals including zinc and nickel due to a lack of new projects; and resource nationalism in Peru, the world’s second-largest copper producer and the third-biggest miner of silver, behind #1 Mexico and #2 China. Major copper miners (with silver by-products) Chile and the DRC could also see resource nationalism affect silver production.

Continued supply constraints on silver, when combined with robust industrial and investment demand, are likely to power silver higher heading into the new year and beyond.

Richard (Rick) Mills
aheadoftheherd.com"

The following is edited extracts from a News letter from Silver Chartists written by David Brady of Global Pro Trader.

It provides an opinion on wher we are heading re metals and bonds, QE and the taper,  whilst I thought I should share it with you it is not to be taken as financial advice, please do your own research.

...Hedge Funds, are also known as the dumb money because they tend to be maximum long when the price peaks and extreme short when it bottoms out. They have now slashed their net long position by 45%in just 3 weeks.

Such a dramatic drop in such a short time is typically associated with a pending rebound in price. However, their absolute net long position at 81k contracts is double or more their positions at the previous lows of 1721 and each of three lows at 1675. This suggest a bounce is coming, but then we?re going lower again, perhaps to my ideal target just below 1675. My preferred positioning for the bottom would be a net long of 50k or lower, ideally the Funds go net short. We are still some distance from there which confirms my belief that we have not seen capitulation yet.

But we need to reach capitulation in order for a truly sustainable bottom to be in place and for the rally to new record highs.  Gold rebounded to 1837 in less than a month. That isn't capitulation. When capitulation occurs, the rally climbs a wall of worry because so many have been burned by previous failed rallies and don't trust any rallies going forward, not until we're near the next euphoric peak. Seeing is believing for them. The rapid rally off the low in August showed that there were still too many willing to jump in at a moment?s notice and drive the price up.

When we bottom, it will be a somber affair, initially. While not absolutely necessary, a drop below 1675 would almost certainly provide us with the capitulation that sets us up for record highs next.

In summary, the risk remains for a positively divergent lower low in price below 1675 prior to take off. However, the rally to new record highs in 2022 is inevitable imho.

Related to this he goes on to note the position of the banks in the US 10 year Treasury Bond....

...They have raced to get to their longest position since 2018 at the fastest pace on record.

This means that they are positioning a big rise in bond prices, which means a sharp drop in yields. The rapidity of their positioning also suggest that it is coming sooner rather than later. When bond yields plummet, real yields are likely to hit new record lows too.

This also coincides with the peak and dump in the DXY. All of which would be extremely beneficial to Gold.

What could cause such a sharp drop in bond yields? A crash in stocks and oil prices would do it..

 When I refer to fundamentals, I am referring to the only fundamentals that matter these days: Fiscal and Monetary Policy.

Starting with the latter, the latest blowout CPI numbers just provide more ammunition for the Fed to proceed with its plan to taper its QE. This a policy error in the making. Ive been warning that this would happen for months and here we are. The Fed will curtail its QE just as the economy is slowing and stocks are near all-time-highs. If the end of QT is any guide or the near 90% cut in QEin July 2020, this is going to hit stocks hard in the next few weeks. Oil will fall too on weaker demand concerns just as they increase production. The combination of the two will cause a temporary deflationary shock and force the Fed to do another about-face to monetary stimulus on steroids. It?s not if, its only when.

With mid-term Congressional elections coming in 2022 and a sharp drop in stocks and a slowing economy, you can bet the Democrats are going to throw the kitchen sink at it in terms of fiscal spending. Again, it?s just a question of when. The combination of massive fiscal and monetary stimulus will have the same effect as post March 2020, but more-so this time imho.

 As stated before, the risk remains for a marginal lower low below 1675. The worst-case is a drop to 1500 before higher, but that is a very low probability at this time. Only a break of 1675 increases it chances. Gold has done nothing in the past few weeks and is waiting for a catalyst one way or the other. It feels like the calm before the storm.

GOLD.... We need a break of 1880 and then 1920 on the upside to confirm the bottom is truly in. Whereas a break back below 1760 and then 1720 puts 1675 and below squarely in the market?s crosshairs. I do believe the markets are going to get a lot more volatile in the next 2-3 months until the Fed rides to the rescue for the last time. Then we get the final melt-up in everything but the dollar, prior to the collapse in 2023 for everything but precious metals and miners.

 The COT data suggests a short-term bounce in Gold, but with Banks still very much short Gold, the risk of lower prices remains.

However, the COT data in the DXY and Bonds suggest a peak in the dollar and yields is coming sooner rather than later, likely driven by a sharp drop in stocks. The Fed has got the ammunition it needs to pull the trigger on the taper but it is likely to be a policy error and backfire dramatically, hitting stocks hard, oil too. When the Fed is forced to ditch the taper and turn on the spigots again, then Gold, Silver, and the miners finally begin their rally to new highs. Perhaps even before that, as in October 2008. But ahead of that, the capitulation in sentiment that eluded us in August may still be ahead. As I?ve said before, we could bottom above or below 1675, but the rally to 2300+that follows is inevitable imho.