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

[Harley]

1 hour ago, DurhamBorn said:

I think out of everything Royal Mail showed the classic contrarian play.Hated by the market,talk of a long slow death,dividend slashed,workers striking etc.Yet a £10 billion turnover that just needed some inflation to spurt free cash much higher.They key was we spotted the inflation to come.

The irony now is the media are all over inflation that they said was gone for good,but all about the bad affects,you dont see any talk about how it works etc and its only here iv seen understanding of how certain sectors can leverage the returns.

Last year the media and everyone i talked to from factory managers to shop workers told me oil and gas was dead,green init now.BP has returned nearly 100% including divs since.My main worry is that the government etc got it so wrong we have a systemic risk on our hands.Notice now they are trying to blame the Russians 

So where next, or is there still some over-run where we can still profit from the inflation plays before they all catch up with some more buying action?

I expect this inflation to be a zig zag journey.  Base effects will kick in to lower the number so some will cry it's all over.....until it isn't.  Or it's so fecking bad even the base effects won't help it out lower!

Presumably then the best course might therefore be to just average in on the pullbacks if looking for a long term buy and hold?  This is what I'll do, while using spare funds to trade any "flim-flam" unfundamental momentum knocking around the markets.

PS:  Yep, RM was textbook but best not tell my postie in case he sold his gift!  I too sold down but "never" out!

[AyrshireBoy]

17 minutes ago, Loki said:

This means nothing to me.

 

Ah, Vienna looks 

Haha, better than here anyway. He's saying that the long term forecast for the European winter is looking cold with little wind.

[Harley]

13 minutes ago, Castlevania said:

Ah, but sometimes you think like the 0.001% which is always deserving of a “bogged”

No comment! 

[Harley]

53 minutes ago, AyrshireBoy said:

Haha, better than here anyway. He's saying that the long term forecast for the European winter is looking cold with little wind.

The chimney sweep was around this week.  There's something about chimney sweeps.  I don't think choosing one in Mary Poppins was a fluke.  They look odd and know stuff.  This bloke was on the money, nailing many things with few muttered words.  He said on leaving, looking around in that knowing way, it could be a cold winter. 

I love my life and the people I get to meet.  I may be remote but the stories I could tell about all the folk who've passed through.  My place used to be an old drovers stop over and I'm not sure much has changed!

Mr Market's wife is Mrs Nature, and she too likes to wait to occasionally remind those human upstarts who's really in charge.

[belfastchild]

47 minutes ago, DurhamBorn said:

Telcos are the only real struggle.

I'll have to repeat my thanks for your analysis on this. I mentioned before my first career was in telcos and had 10 years there. My mates who arent in finsec are still in telcos and Im too close. I see talk of woke culture, good managers being passed over for box filling appointments and most of my friends wanting out as soon as their kids leave uni as massive downsides for the sector. It was hard for me to see past that but Im sure its the same in every sector now post covid and all of the above will take years to play out. All timed nicely for the end of the decade (or earlier) when it will all go to shit anyway!

You have pointed out the fundamentals in the past and you can see it in the media, the single mum benefit dependents would rather cut food than their phones and wifi (Ive seen this first hand IRL - I know one who cant cope without wifi as they are payg and cant afford to sit all day on facebook/insta posting shit selfies if they actually had to pay for data - why I see a crunch coming when inevitably all this stuff will have to be paid for by the user rather than the telcos). Its no coincidence the sky rumours of telco tie up when they launch their new tv thing so that everything comes in house, all of it, services, supply, infrastructure, everything.

I still hear from my mates that the copper in the ground is worth more than BTs market cap but my answer to this was its no effing use in the ground then. It wont be post full fibre roll out and the move (if it ever happens) to VOIP rather than PSTN. Maybe they will start mining the copper after that. If there is a breakup then inevitably this 'legacy' network will go to some vulture fund who will make a killing on it (or never make a penny!).

I had another leaflet through the door yesterday asking if I wanted to sell my house for cash to an 'ethical' investor. If I hadnt done so much work to the house in the last 5 years I would probably take it this time around (as I was advised to in 2007 - take the money, rent back off them, buy it when they go bust). Ive a suspicion this time that if it happens again the government might step in (via banks etc as is already happening) to buy at knock down prices, keep the 'investors' on the hook and end up with a load of cheap council houses/local authority houses. 

 

[DurhamBorn]

5 minutes ago, Harley said:

So where next, or is there still some over-run where we can still profit from the inflation plays before they all catch up with some more buying action?

I expect this inflation to be a zig zag journey.  Base effects will kick in to lower the number so some will cry it's all over.....until it isn't.  Or it's so fecking bad even the base effects won't help it out lower!

Presumably then the best course might therefore be to just average in on the pullbacks if looking for a long term buy and hold?  This is what I'll do, while using spare funds to trade any "flim-flam" unfundamental momentum knocking around the markets.

PS:  Yep, RM was textbook but best not tell my postie in case he sold his gift!

Thats exactly how i see it.Inflation has run slightly above my roadmap and i think it will fall back at points,maybe late spring and that will see people thinking its all over etc.They dont understand what they are seeing,but its a distribution cycle.Inflation will eat away asset value across huge parts of the economy because people (mostly government payroll and benefit people) are spending to keep up.

The economy will slowly roll back to where wants get less spending because needs take up more.

There are some more risky plays we might consider.For instance M&G and DirectLine Insurance.They have risk from derivatives etc,but might leverage rate increases very nicely.They also hold RPI gilts where their promises are mostly CPI.Could easily double free cash in the right scenario,but a risk assets are slowly sold down.

Then things like Wetherspoons.Hit hard with cost push inflation,but maybe they can keep pace with inflation where rivals cant?.Im thinking of entering them IF they take another hit down by mentioning supply problems etc.Id want to open positions below £9 though,maybe below £8.50.

I think we are looking good on core holdings etc and just a case of holding cash and letting it build from divs to buy pullbacks.Im also open to trimming positions that get ahead of themselves.A prime example i sold 20% of my BT holding at 2.04p.I havent added it back as still a big holding,but topped up TEF Brasil and Germany with it.

Im being very careful sectors dont get out of hand though in my portfolio,energy is really borderline now due to performing so well,but im adding nothing to the sector sold down Drax to stay withing decent limits.

 

[Harley]

52 minutes ago, Harley said:

Have they run all this by @DurhamBorn, else yer, sure!  Never trust a sage unless they can rustle you up a decent pizza.  That's 99.9% of them gone!

Potential client to financial advisor:  "Is this portfolio a Pizza Hut portfolio or one lovingly made with authentic Italian Semolina topped with bargained Pizza Express Passata and baked in a Ferrari oven?"!

[Harley]

30 minutes ago, belfastchild said:

I see talk of woke culture, good managers being passed over for box filling appointments and most of my friends wanting out....

Exactly what I saw starting to happen at my last proper job.  I could even pinpoint the individuals and their cabal slyly taking over the place.  Most were new hire deadweights - cancerous parasites, only able to do their stuff off the backs of the good.  I got out while the memories were sweet.  My partner started to suffer similar too so I said call it a day and avoid the physical and mental decline.  Hard to sometimes see it when you're in it.  She got another job and totally did the right thing.  Simply toxic stuff.

[Bobthebuilder]

I want to say another thank you to the thread. When we started preparing for an inflation scenario I replaced my old draughty doors and windows with new super insulated wooden jobbies, plus a new A rated boiler, cost a bit of dosh, but I am well happy now going into this winter with energy costs. It's good to invest in your comfort sometimes or capital investment as some call it.(also keeps the other half happy)

I have one door left to do, but of course, the company have a big backlog now due to the usual supply chain problems and cannot give me a start date until next year.

Anyway, back on topic, I have a load of San Marzano tomato seeds to grow next year for my pizza sauce.

[belfastchild]

3 minutes ago, Bobthebuilder said:

Anyway, back on topic, I have a load of San Marzano tomato seeds to grow next year for my pizza sauce.

I grew some in the conservatory/plastic greenhouse this year as they failed last year. Probably need more sun than NI but next year I'll keep one in the conservatory and see what happens.
Slugs/creepy crawlies got most of the big ones but they were the last of my tomatoes to develop, had to pick the last of them last week and leave on the windowsill to ripen, probably could have done with a bit more.
About to have the last one in a sandwich for lunch (sacriledge I know!)

[Harley]

21 minutes ago, Cattle Prod said:

I'm convinced its the currency. In work, when I'm struggling with a geological problem, at a scale of say 10km, I zoom out to 100km or even 1000km, and study the patterns. Then zoom back in, and boom, problem solved. Most people are just stuck in the weeds the whole time, and cannot zoom out. That's why I love Luke Gromen's stuff, he's zoomed way out. Zoom out of money, currencies, and it starts to look faintly ridiculous. Why do we value bits of paper or digits on a screen that were once receipts for gold deposits? Because the government says they are valuable? That's fine when you trust the government. When I see people fighting in petrol stations because the government told them not to panic, I see that trust is gone. Zoom out to 1000km scale, all I see is gold.

Here's a simple fact: most gold ever mined sits in bank vaults. If you were ever in doubt that it is a currency, just think about that.

I zoomed out many years ago, but even more so over the last few years.  It helps if you decided to engage with life rather than sit at home on bennies, imprisoned in little minds, etc.  Not that everyone decides, some get thrown, some join up.  Ignorance may be bliss, but a whole lifetime, nah.  I can go tomorrow, an enriched and contented man, job done.  

[Hancock]

3 hours ago, DurhamBorn said:

Its got the same expire date as the last ones i got from Tesco before they stopped selling it.Looks like they arent making it anymore and found a big supermarket to take the stock in the warehouse.It is really good and at that price amazing value.

Must be a one off as nothing in the Morrisons ive just been to.

[Hancock]

2 hours ago, Axeman123 said:

The mood music is changing, surely preparing the public for what's next:

https://www.dailymail.co.uk/news/article-10075173/Former-chancellor-Lord-Lamont-calls-rate-hike-inflation-rises-3.html

I can see a rate rise at the next BoE meeting on 4th November.

[ThoughtCriminal]

And so it begins......... 

[belfastchild]

22 minutes ago, Cattle Prod said:

 I see that trust is gone.

Sorry to zoom in on just one comment but years ago I bought and read Dimitri Orlovs 5 stages of collapse. He describes it mostly in terms of the collapse of the soviet union. Heres a summary if readers havent already read it.
https://cluborlov.blogspot.com/p/the-five-stages-of-collapse.html

Im already past number 3 ;-)

Not to appear a doom and gloom merchant but if this winter does have a proper energy crisis in the uk then a lot of people will go past 3. Most people will still be sheep but again cross threading Im not getting as much shit from friends about having the jab as everyone I know now knows someone (maybe 2nd hand) who has taken a bad reaction.

I have a lot of friends in south america. Seeing very few facebook posts from them in the last couple of months. So either they are being censored or they have feck all to boast about on facebook.  On my last trip I went to one of the main streets in BA and went into this back room in a shop with shady guys and exchanged usd cash for a 40% uplift in the offical exchange rate. I thought they were probably counterfeit. No the guys will hold on to the dollars and in a month or two they were in profit. 200% import tax on luxury goods will do that to you...
I remember giving some of their kids maple leafs one year I was over. The parents wondered what the feck I was at. The grandparents knew exactly what I was doing...

[Yadda yadda yadda]

I walked past my local Costa Coffee this morning. Job advert in the door proclaiming £10.36 per hour in 36 point font. I've seen an increase in the number of shops advertising in their windows for staff but this is the first time that they've started shouting about the wage. Costa are one of the few high street businesses that used Eastern European staff in this part of London.

Shows to me that wage inflation is really getting under way on the high street. This isn't transitory, those wages aren't coming down again.

[Noallegiance]

8 minutes ago, Yadda yadda yadda said:

I walked past my local Costa Coffee this morning. Job advert in the door proclaiming £10.36 per hour in 36 point font. I've seen an increase in the number of shops advertising in their windows for staff but this is the first time that they've started shouting about the wage. Costa are one of the few high street businesses that used Eastern European staff in this part of London.

Shows to me that wage inflation is really getting under way on the high street. This isn't transitory, those wages aren't coming down again.

That's not far short of £13 for lorry driving. Nowhere near high enough for me to return.

[dnb24]

24 minutes ago, Noallegiance said:

That's not far short of £13 for lorry driving. Nowhere near high enough for me to return.

Dad just got a pay rise- he said he’s now on 2010 wages as a trucker! But this is the 3rd pay rise in a year- more than he’s had in 10years!!

[Castlevania]

37 minutes ago, belfastchild said:

Sorry to zoom in on just one comment but years ago I bought and read Dimitri Orlovs 5 stages of collapse. He describes it mostly in terms of the collapse of the soviet union. Heres a summary if readers havent already read it.
https://cluborlov.blogspot.com/p/the-five-stages-of-collapse.html

Im already past number 3 ;-)

Not to appear a doom and gloom merchant but if this winter does have a proper energy crisis in the uk then a lot of people will go past 3. Most people will still be sheep but again cross threading Im not getting as much shit from friends about having the jab as everyone I know now knows someone (maybe 2nd hand) who has taken a bad reaction.

I have a lot of friends in south america. Seeing very few facebook posts from them in the last couple of months. So either they are being censored or they have feck all to boast about on facebook.  On my last trip I went to one of the main streets in BA and went into this back room in a shop with shady guys and exchanged usd cash for a 40% uplift in the offical exchange rate. I thought they were probably counterfeit. No the guys will hold on to the dollars and in a month or two they were in profit. 200% import tax on luxury goods will do that to you...
I remember giving some of their kids maple leafs one year I was over. The parents wondered what the feck I was at. The grandparents knew exactly what I was doing...

Dollar Blue. I enjoyed that when I was in Buenos Aires. Went to the back of a clothes shop where there was a table. I put my Dollars down. He on the other side counted out a load of Peso. Deal done.

[wherebee]

https://www.news.com.au/finance/economy/victorias-controversial-bid-to-own-part-of-your-home/news-story

You will own nothing and you will be happy.

[JMD]

19 hours ago, Noallegiance said:

 

Wow!!... quick summary - DH now predicting broad rally, inc. the commods, up to SP 5500+, however he expects the ollies to rollover from here. Still crash/fall of upto 80%. Dxy to 80 pre crash, then massive printing will send it to approx 140!! Post crash he favours commods, energy, PM's, industrials. His other targets in the leadup to crash remain same, eg gold/silver will go to 2500/50dollars pre-meltup.                                                      Very interestingly (haven't heard him mention this before?) DH says the next cycle will be a 'distribution cycle', which I think @DurhamBornhas spoken about on her before(?). However, DH says this won't favour the health care sector - but frustratingly he doesn't elaborate - can someone please explain what DH might may about health care suffering, as I thought it was one of next cycles winners?

[Yadda yadda yadda]

8 minutes ago, JMD said:

can someone here explain what DH might mean about health care suffering, as I thought it was one of next cycles winners?

Healthcare is such a large proportion of the US economy that it ought to reduce in size. Reversion to mean. Just a theory.

[janch]

2 hours ago, Harley said:

Exactly what I saw starting to happen at my last proper job.  I could even pinpoint the individuals and their cabal slyly taking over the place.  Most were new hire deadweights - cancerous parasites, only able to do their stuff off the backs of the good.  I got out while the memories were sweet.  My partner started to suffer similar too so I said call it a day and avoid the physical and mental decline.  Hard to sometimes see it when you're in it.  She got another job and totally did the right thing.  Simply toxic stuff.

I kept moving to different sectors to try to find somewhere where being good at the job was a requisite.  I came to the conclusion that everywhere was shite: charities/civil service/business (insurance/utility companies/finsec)/university..........large and small places, just everywhere. 

It was probably better to do something like shelf-stacking/litter picking as at least then you might have the satisfaction of having done something useful although co-workers would probably be as much of a pain as anywhere else.

The only take-away from my years in the workplace is that I had a good nose into many types of organisations.  From what I see around me I can only think it's getting worse.............

[Yadda yadda yadda]

43 minutes ago, Cattle Prod said:

2 hours ago, ThoughtCriminal said:

And so it begins......... 

Expand  

Lebanon seems to be a bit of a canary in the coal mine these days. Their inflation rate is over 100%, I wonder do they regard gold as a currency over there? 

It won't happen here as nuclear will keep on trucking, but can you imagine living someone where the entire grid shuts down? All of it? How long would it take this place to go full Mad Max?! Less than a day, from observing petrol stations lately.

10 or 12 years ago there was a large scale power outage in my area because of a substation fire. Power was down for around 14 hours. Fortunately it was a Sunday at the height of summer. Power came back on just as the sun was setting, which was a relief. I'd spent the day in the garden reading the paper and listening to the battery operated radio. Sainsbury's was shut because the tills and lighting were down. The local shops were operating by candlelight with someone minding the door. If power had stayed down overnight I'm sure there would have been looting.

[janch]

2 hours ago, belfastchild said:

Im already past number 3 ;-)

I think I've reached the last stage!  Thanks for posting the link.  I need to read that book and it will be on my Christmas list this year.