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

[janch]

2 minutes ago, Yadda yadda yadda said:

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.

Yes this was how it was in the 70s (note to self to get some batteries for the radio) but we did get used to it.  I'm not sure if people would be so patient today.

One thing they did then was to do rolling blackouts so if you lived in a town only a part would suffer a blackout at any one time so you could go to another part of town to get shopping/sit in a pub etc.  Shops didn't have electric tills then so they could keep going most of the time with candles.

Online shopping could be a bit of a problem........and WFH etc

[JMD]

14 hours ago, DurhamBorn said:

Its incredible isnt it how all of a sudden its inflation everywhere and the public are like rabbits in headlights.Utter cunts they are the lot of them at the BOE.Boris pretending the shit show is fantastic for rising wages,ignoring the fact without productivity gains those workers will be getting poorer.Its a distribution cycle upon us and they aint pretty.They never expected cost push inflation because velocity was so low,but they filled the M2 bucket so full it was certain.I notice today they think RPI might hit 7% and i had 6.7% on my inflation roadmap from 2016.BOE think they can sit keep rates on the floor,but the US long bond will force their hands.Love how they keep saying its all fine and the war will be over by xmas.Same old same old.

 

Durhamborn, please can you answer a couple of questions which I think are central to understanding the next cycle.                                                                                                                                                                                  You say that without productivity gains workers won't get richer. I understand this concept, but I wonder if it is still valid today? What I mean is a worker benefited financially in the past from, for example, becoming skilled in operating a faster machine. However today's automation and tech deployments mean most 'productivity gains' increasingly flow to the owner of the capitol, not the worker who is typically now becoming 'de-skilled', or maybe not even employed in the first place.                                                                                  You mention also that the 'distribution cycle' will not being pretty. Please could you elaborate a little more in terms of say the future consequences for the ordinary UK worker, and also perhaps how it benefits our chosen investment sectors? I find it fascinating but i think it is not spoken about much elsewhere(?), which automatically makes me think that the contrarians of this thread should know more about it!!

[Chewing Grass]

In respect to the next cycle I think a whole psychological change has occured and a lot of big retail will die the way Comet and PC World/Curries did 10 years ago.

Example, I jacked my Costco Membership in this year when I realised I could generally get everything I bought in bulk for half the price and the same quality elsewhere and get it delivered for free without paying their membership fee and wasting my time and fuel driving there.

Technically a lot of jobs can now be got rid of on the retail side but there will be more on the distribution side until that can be more extensively automated but automation in itself will create other problems and vulnerabilities to disruption through chronic centralisation.

[JMD]

5 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

Yes I agree, I note that many mp's are dropping all kinds of 'dog whistle' type messaging - onshoring/training/almost 'anti-business' - into their interviews of late.                                                                                       Actually, I saw that Norman Lamont last week coming out of my local Co-Op, he jumped into a waiting taxi. I don't live in or near London so assume he had just come from the local train station. Btw, he appeared very sprite for 79... but he's really short, I remember him always appearing so on TV... but I'm talking really-really short!!

[JMD]

5 hours ago, Castlevania said:

Think of it as if you bought a USD cash fund. You bought a $100 of cash. You have a choice of paying in USD or in GBP. In USD it costs $100 and in GBP it would cost you the current spot rate (1.36) so £73.50.

You then decide to sell in a year’s time. In dollars it’s still worth $100. However, if the GBPUSD rate has increased to say 1.50 then your $100 is now worth £66.67.

My point is it doesn’t matter which currency it’s denominated in I.e. if you buy the fund in USD or in GBP you are still exposed to currency risk when buying anything in a foreign currency to your own.

Thanks Castlevania. Yes I didn't want currency risk, so I ended up buying a load of this one... holds the physical, plus low charges...                                       https://www.hl.co.uk/shares/shares-search-results/i/ishares-physical-metals-physical-silver-etc

[Democorruptcy]

6 hours ago, M S E Refugee said:

They only seem to be down because UBS downgraded them, however there is an insane amount of Covid test kits being processed every week in our office and they all use the Tracked 24 service.

Didn't RMG do very well out of furlough? Lots of people awash with cash and ordering Amazon/Ebay stuff, so RMG had more parcels to deliver? Now the scurvy dogs have had to go back to work, that must have dropped off a bit?

The end of the PO/RMG exclusivity deal I posted about earlier in the year, can't be good for RMG? That's now happened:

Quote

 

 August 16, 2021 - 10:03 am

Marking the end of an exclusive Royal Mail partnership, a new agreement between the Post Office and DPD will see parcels delivered directly to its branches providing a quick and convenient location for people to collect their purchases. This is something that’s been predicting for a couple of years and became virtually inevitable once the Post Office became a separate business to Royal Mail.

The ‘Click and Collect’ service will initially be available at around 250 Post Offices this month before rolling-out to approximately 1,500 branches across the UK ahead of the peak Christmas period.

Customers making a purchase online will have the option to choose their local Post Office as the collection point for their parcels. DPD will deliver parcels directly to the Post Office and the Postmaster will process customer collections at the counter.

The Post Office, the UK’s largest retail network with 11,500 branches, previously had an exclusive Royal Mail partnership for parcel collections directly at its branches but has now opened up its network to external carriers for the first time in its 360-year history.

https://tamebay.com/2021/08/post-office-ends-exclusive-royal-mail-partnership-with-dpd-deal.html

 

 

[JMD]

4 hours 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...

Bit 'off-thread' of me to ask maybe, but can I ask what type of covid vaccine reactions your friends had?

[JMD]

3 hours ago, wherebee said:

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.

So the deal is that the state will initially own 25%, but what's the prediction this will turn into 50%+ if/when property correction occurs?... Actually it's a good idea, as eventually owning most of a banks assets provides an easy route to nationalising them after the next banking crash happens. But I think really should have started this scheme 10 years ago?                                                                                                                                       Plus it says if you are Aboriginee, you get special lower rates. Can I ask why that is Wherebee? Perhaps there is no logical answer you can provide, but is this kind of policy thing widespread?

[Boon]

4 hours 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 ;-)

Yes nice link. Will add that to the reading list.

The crucial thing is what number the public think we're at?

If we take the collective public thinking I think we're still at step 1, the fuel shortages have been the most visible but haven't been a massive inconvenience really. Goods shortages and/or factories not producing (because of cost) the next step up.

Of course collapses happen slowly then quickly etc. I genuinely feel that on this trajectory we may see social disorder aka 10 years ago but maybe worse in that it won't be just kids. 

That may be still a couple of years away but I could imagine that even after a couple of years of mega inflation the underclass finances will be screwed and there will be a huge push for the start of UBI - ie like the £20 thing just for a wider audience. If enough people riot I think the government will do it.

 

[DurhamBorn]

5 hours ago, Hancock said:

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

Did you check above the Passata area,its not on the shelves its on the top where they store stuff to put on the shelves latter but i suspect its just for the online orders they pick.Iv been back down today and got another 24  i had to get those steps they use though for the 3rd box as it was pushed right back,its above the passata but not ticket on shelf.Got the eye of a nice younger woman at the till,obvious she saw what a catch i was in a distribution cycle.

[DurhamBorn]

4 hours 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.

This below is the Lidl distribution centre,massive place.They are that desperate now they are posting this over Facebook and every agency mail lists.Just turn up,dont even need CV,interview ,perm job and start.Incredible.The food factories down in North Yorkshire who shafted locals and were 99% EU are all desperate for staff.Government needs to reform UC,but they are like rabbits in headlights.

 

"Come along to our recruitment open day for a tour of our warehouse, an interview and an opportunity to receive a job offer on the same day!

There is no need to bring your CV but please bring your ID i.e. passport to show your right to work in the UK.

Date: Saturday 16th October 2021.

Time: Please arrive between 9am and 5pm.

Location: Lidl Distribution Centre, Moordale Road, Aycliffe Business Park, Newton Aycliffe, Durham, DL5 6BA.

Our Warehouse Operatives benefit from competitive pay of £10.30 – £13.70 per hour*, 30 days' holiday and permanent contracts, whether you choose to work full or part time."

[JMD]

2 hours ago, Cattle Prod said:

I see what you did there!

People of all sorts are now openly mocking SAGE's latest predictions. I think you're absolutely right. Putting two recent thread comments together:

- The last 18 months have taken a toll on people, mostly because of government mandated lockdowns. It's taken a toll on me, I'm not afraid to say, even though I knew it was bullshit, was never afraid of the virus, flouted rules as much as I could and profited from it in the markets. The loss of liberty and being restricted from travelling to friends and family has left a scar, one that I never thought I'd get. I'll just add it to the scar collection and move on. But I can only imagine what the majority of people have gone through, those who were scared, those who believed in government etc. 

- Now they come out blinking into the light, and see the damage done to themselves. And they see that it was bullshit. Lockdowns were not needed. It was all unnecessary. They see Boris telling jokes at the Tory party conference as their gas bills go up 30% and can't get a doctor on the phone to discuss their damaged mental health. Not alone is there a loss of trust, but I think there is a simmering anger. The govt should tread very, very carefully from here.

Also to say it was really great to discuss stuff with like minded people on here. Nice to know there are more people who think like this out there. It's really satisfying to see ordinary people on here talking about making a few quid in their energy holdings in recent days. That was genuinely one of the main reasons I started posting on here, I think I put that in my first post. Many energy insiders could see the crisis coming from three years ago, but I was sick looking at the likes of Pierre Andurands smug face, when the ordinary guy never gets a chance. Anyway. Sun's shining, I'm off to chop wood.

CP, I certainly don't want to add to your scars (see what I did there!), but you did mention SAGE. Well just wait till you get a load of 'Independent Sage' part Deux... They are seeking an additional mandate for climate change analysis!... Talk about 'ministry of silly walks' - just a matter of time I think - but things are certainly getting very Pythonesque these days!!! 

[goldbug9999]

2 hours ago, JMD said:

However today's automation and tech deployments mean most 'productivity gains' increasingly flow to the owner of the capitol, not the worker who is typically now becoming 'de-skilled', or maybe not even employed in the first place.

This is why labour needs to be a buyers market i.e. ideally there should always be slightly more vacancies for job x than people who can do the job.

[M S E Refugee]

50 minutes ago, Democorruptcy said:

Didn't RMG do very well out of furlough? Lots of people awash with cash and ordering Amazon/Ebay stuff, so RMG had more parcels to deliver? Now the scurvy dogs have had to go back to work, that must have dropped off a bit?

The end of the PO/RMG exclusivity deal I posted about earlier in the year, can't be good for RMG? That's now happened:

 

Work has dropped off a little but we are still quite busy and things will crank up again now that we are approaching the Christmas period.

[ThoughtCriminal]

How does this not end up in financial collapse? 

[Loki]

11 minutes ago, ThoughtCriminal said:

How does this not end up in financial collapse? 

Looks like Singapore's COVID case rate 

 

[Harley]

1 hour ago, ThoughtCriminal said:

How does this not end up in financial collapse? 

Because they're not that lucky?!

[ThoughtCriminal]

1 minute ago, Harley said:

Because they're not that lucky?!

I am genuinely asking though Harley. 

 

Surely they cant just raise it indefinitely. 

 

Or do we get war first? 

[Phil]

12 minutes ago, ThoughtCriminal said:

I am genuinely asking though Harley. 

 

Surely they cant just raise it indefinitely. 

 

Or do we get war first? 

Taiwan? The drums are getting louder. Perhaps a swan ( don’t want to mention colour).

[Noallegiance]

24 minutes ago, ThoughtCriminal said:

I am genuinely asking though Harley. 

 

Surely they cant just raise it indefinitely. 

 

Or do we get war first? 

China really are in the drivers seat with regard to making something happen.

It's like they're egging on the West to step in between them and Taiwan. If we do or we don't there'll be some shooting anyway, it seems.

I don't think I've ever seen any graph go straight up indefinitely, nor reach a plateau.

What goes up, must come down.

[Castlevania]

2 hours ago, Loki said:

Looks like Singapore's COVID case rate 

 

They’ve flattened the curve.

Wrong axis.

[Castlevania]

1 hour ago, Harley said:

Because they're not that lucky?!

 

[Harley]

2 hours ago, ThoughtCriminal said:

I am genuinely asking though Harley. 

 

Surely they cant just raise it indefinitely. 

 

Or do we get war first? 

New global currency based on a form of Special Drawing Rights.  Bretton Woods II.  Maybe some currencies peg to it, like Latin America with the USD.  Maybe some use it full on, maybe with say crypto based derivatives.  But it's the backstop.

USD, etc are toast, they know and are toasting them for one more wild ride.   USD was never going to provide enough global liquidity in the end for the US to deliver.  Happened to the Roman Empire.  Wars.  They were the clearing mechanism.  But in the end they are not enough.

And/or possibly some sort of corporate currency, which they're working on, maybe run on behalf of the central banks, with the corporates getting a slice.  Think Mr Robot. 

Whatever, maybe a few geo currency blocks like China with chunks of Africa, the Far East, etc.

Big picture, history shows currencies come and go.  Perfectly normal.  Faith based and faith gets hollowed out.

That's why maybe two years back I was talking about the meaning of money, it's qualities, etc.  About value, about going back to principles.  John Locke and all that.  It was posted earlier today - the stages.  One of those is the loss of faith in things, money included.  Nothing satisfying about seeing these ideas crystalise.

Likely not overnight but timely enough to dance near the doors.  Think hards assets like Bill Gates.  Think stores of value, divisibility, acceptance, a medium of exchange,.....all the principles of money.  Think about alternatives possessing those qualities.

Maybe all comes clear by 2030's.  Maybe sooner.  You go broke slowly, and then all at once.  But the '30s are historic.  As the man says, take a big step back and look.  See, learn, distill, advance.  Let it come to you.

[Phil]

22 minutes ago, Harley said:

New global currency based on a form of Special Drawing Rights.  Bretton Woods II.  Maybe some currencies peg to it, like Latin America with the USD.  Maybe some use it full on, maybe with say crypto based derivatives.  But it's the backstop.

USD, etc are toast, they know and are toasting them for one more wild ride.   USD was never going to provide enough global liquidity in the end for the US to deliver.  Happened to the Roman Empire.  Wars.  They were the clearing mechanism.  But in the end they are not enough.

And/or possibly some sort of corporate currency, which they're working on, maybe run on behalf of the central banks, with the corporates getting a slice.  Think Mr Robot. 

Whatever, maybe a few geo currency blocks like China with chunks of Africa, the Far East, etc.

Big picture, history shows currencies come and go.  Perfectly normal.  Faith based and faith gets hollowed out.

That's why maybe two years back I was talking about the meaning of money, it's qualities, etc.  About value, about going back to principles.  John Locke and all that.  It was posted earlier today - the stages.  One of those is the loss of faith in things, money included.  Nothing satisfying about seeing these ideas crystalise.

Likely not overnight but timely enough to dance near the doors.  Think hards assets like Bill Gates.  Think stores of value, divisibility, acceptance, a medium of exchange,.....all the principles of money.  Think about alternatives possessing those qualities.

Maybe all comes clear by 2030's.  Maybe sooner.  You go broke slowly, and then all at once.  But the '30s are historic.  As the man says, take a big step back and look.  See, learn, distill, advance.  Let it come to you.

I fuckin love you H. 

[Hancock]

13 hours ago, DurhamBorn said:

Iv sold most of my Royal Mail.I expected £8 including divs minimum from the cycle but at over £5.60 i decided to re-deploy,at one point it was showing a 5 figure loss,but ended up making a fantastic profit as i added a lot at the bottom it was actually around my 3rd biggest holding.

Telcos are the only real struggle.The market simply doesnt like them because there has been little profit growth for a long time and they mostly have too much debt and very poor ROCE and the big one their returns on cost of capital are very poor.However on the plus side even the indebted have very good debt structures.Some are getting debt down to low levels (Tef Germany,Tef Brasil) and the big ones like Orange SA and even TEF have made good progress.

I see telcos right now as i saw tobacco back in the late 90s.A boring sector that was structurally undervalued about to consolidate.I dont expect the gains tobacco delivered,bit i do think as a sector they will provide nice returns.The key is they keep consolidating,(i think Orange might make a move in Belgium next after the recent Romania move) and that they all increase prices with or above inflation.As TEF Brasil's acounts showed their costs only increased at 40% of the inflation rate and until depreciation laps in 10 to 15 years that should mean much higher free cash.I would expect that to start feeding in from around now,so VOD should see a 5% increase in free cash for instance in its next results.

Just noticed RMG are 410, i sold mine in the mid 500s

Out of curiosity what percentage of your SIPP is in Telcos, as you seem to be frequently topping up in this sector.