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


spunko
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Cattle Prod
31 minutes ago, Hancock said:
2 hours ago, Cattle Prod said:

 The problem is that people have been stuffed with debt to pay for it. 

So without the debt to pay for it, then surely this means less is bought.

As I said, all I see is governments handing out printed money for free, because people can't take on more debt. That could well do the trick. Does anyone know when was the last time we had a global fiscal stimulus, was it the late 1940s?

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1 minute ago, Cattle Prod said:

As I said, all I see is governments handing out printed money for free, because people can't take on more debt. 

Therein lies the problem, as surely they've dropped all all they can out of the helicopter ... will involve another lockdown of sorts to do it again.

We're getting tax rises instead.

 

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15 minutes ago, Cattle Prod said:

As I said, all I see is governments handing out printed money for free, because people can't take on more debt. That could well do the trick. Does anyone know when was the last time we had a global fiscal stimulus, was it the late 1940s?

That is one of the main themes of this thread, isn't it? Probably stated in the first post I reckon.

The consumer is tapped out.

Government now has to take up the spending reins. This part hasn't even started yet. It could take years for infrastructure spending to get going. We are still at the very beginning of the cycle.

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Cattle Prod
30 minutes ago, Hancock said:

Therein lies the problem, as surely they've dropped all all they can out of the helicopter ... will involve another lockdown of sorts to do it again.

We're getting tax rises instead.

 

We are (which might just backfire) but the yanks aren't. Oil and gas earnings are global, and in dollars.

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Hi

First time caller, long time listener.

On the subject of the cure for high oil prices being high oil prices, what effect could the lifting of sanctions on Iranian oil have? How much supply could they rapidly add to the market? Could this be an example of politics following the macro, where market forces drive real politik?

 

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Just now, Axeman123 said:

Hi

First time caller, long time listener.

On the subject of the cure for high oil prices being high oil prices, what effect could the lifting of sanctions on Iranian oil have? How much supply could they rapidly add to the market? Could this be an example of politics following the macro, where market forces drive real politik?

 

much of Iran's oil is already going into china and north korea.  The capacity is already taken up, in my view.

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Cattle Prod

Imports were up, but only slightly. The main differential to last week was that refinery runs were lower, so this is probably post hurricane noise. Jet fuel hasn't ticked up yet, they're going to need some for the GE90s about to start revving up.

image.png.58c20f62b566573ec3fcb240ee9997ae.png

Interesting to see the US is back into KSA for 560kbpd...interesting. And Russia for 265. They could have got it from Canada or Brazil, but maybe they wanted to buy some of China's oil too.

Or maybe it's just blend requirements :D but one to watch.

Edited by Cattle Prod
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leonardratso
4 hours ago, Noallegiance said:

Wishing I'd bought more Thungela!

shit yeah, im +150% up on THG, when they first appeared after they were split from BHP? was it? i read an article saying they were worthless, so i bought a load more on the back of that professional traders advice....hahahhaa stupid bastard.

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JimmyTheBruce
1 hour ago, Hancock said:

They were paying a rate of 6.59pc," he said. "They have just switched and were able to release £142,000 and we got the rate down to 4.59pc.

He must have truly moved heaven and earth to get them such a great deal in the current environment.

I don't know whether to be more disgusted at the spivvery or the stupidity.

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Cattle Prod

Anyone else things China is scrambling for dollars right now to pay for all the energy they are short of? Pity they can't print them.

image.png.e846bc6221d81c099b937943cb734af9.png

What's this going to break...

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jamtomorrow
30 minutes ago, Cattle Prod said:

Anyone else things China is scrambling for dollars right now to pay for all the energy they are short of? Pity they can't print them.

image.png.e846bc6221d81c099b937943cb734af9.png

What's this going to break...

Treasuries?

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DurhamBorn
2 hours ago, Cattle Prod said:

As I said, all I see is governments handing out printed money for free, because people can't take on more debt. That could well do the trick. Does anyone know when was the last time we had a global fiscal stimulus, was it the late 1940s?

Late 60s would be the closest,though mainly the US of course rather than global.Back then they feared unemployment and enacted tax cuts to heat up the labour market,then followed with lots of government spending and military on top.So very loose fiscal walked head long into the oil crisis.Because the liquidity to pay for the oil was there,they had to pay and then try to pass on,hence the huge inflation spike and industries killed off one after the other.Fiscal increases like that go through the economy and end up in energy and housing usually.This time i think it will be just energy due to the structure of the cycle.

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HousePriceMania
4 hours ago, Hancock said:

Cash machine debt spenders, will stop spending. (WTF was an 80 year old doing with a mortgage)
https://www.telegraph.co.uk/personal-banking/mortgages/over-55s-turn-homes-cash-machines-property-boom/

Infomercial for lenders.

image.png.d3c666468140703e70874d6f582751c6.png

Older homeowners have cashed in on soaring house prices to withdraw thousands of pounds from the value of their properties.

Falling interest rates for equity release mortgages, coupled with rising house prices, have made it much more cost effective for older people to release funds from their properties. 

Equity release has surged in popularity in recent years among over-55s, who have been keen to unlock the wealth accrued by decades of house price growth. 

The lower cost of a lifetime mortgage, the most common form of equity release, has made switching existing loans much more attractive. Borrowers paid an average interest rate of 3.4pc last year, down from 5.79pc in 2015, according to figures obtained under the Freedom of Information act by mortgage broker Responsible Life. 

The data was released by the Financial Conduct Authority, the City watchdog, which since 2015 has required lenders to report the initial interest rate of every lifetime mortgage sold.

Steve Wilkie, of Responsible Life, said: "It is hugely important that not only have advertised rates dropped, but the real rates customers have been able to secure have been falling too.

"Just because advertised rates fall, these rates are not available to all borrowers because of affordability criteria. It proves progress in the equity release market isn’t just window dressing."

More than 214,000 lifetime mortgages were bought between 2015 and the end of 2020, according to the FCA. The number of lifetime mortgages sold has increased by 74pc over the past five years. 

Although equity release plans are intended to last until the homeowner dies or enters long-term care, the potential of significantly lower interest rates has tempted borrowers to remortgage, even if they must pay hefty exit fees on their original loan.

'I switched my equity release loan and saved thousands'

Patrick Buckingham, 82, said it was a "no-brainer" to switch his lifetime mortgage to a lower rate. He first released £100,000 from his five-bedroom house near Warwick in 2017 to help his two grandchildren onto the property ladder.

"I always planned to use this property as part of my retirement plan and had it in my mind that, if it came down to it, I could sell my house and turn it into cash to live on. 

"In the end I haven’t needed to do that, but the lifetime mortgage has still allowed me to free up some money without having to downsize. I see it as a very logical progression in my financial planning," he said. 

When Mr Buckingham's wife, Ausma, passed away in 2018 it triggered a clause which allowed him to pay off the mortgage early and without penalty. The clause allowed him to do so if either he or his wife died within three years of taking out the loan. 

"I had noticed how equity release interest rates had fallen and didn’t need any prompting to switch.

"I managed to get my rate down from 3.90pc to 2.27pc and I was delighted, it is saving me about £140 a month," he added. 

The number of lifetime mortgages available have doubled in the last two years, according to the Equity Release Council trade body, rising to a record high of 668 in July 2021.

Simon Chalk, of equity release adviser Later Living Now, reported an increase in lifetime mortgage borrowers remortgaging to make the most of cheap interest rates. 

"I recently helped a couple who had taken their first lifetime mortgage 13 years ago to release around £38,000. They were paying a rate of 6.59pc," he said. "They have just switched and were able to release £142,000 and we got the rate down to 4.59pc. That is a huge difference.

"But it's important not to get carried away with the headline rate and to remember remortgaging will also come with additional administration fees, advice charges and legal fees - all of which add to the total debt."

#Ponzi

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Interesting UK electricity grid supply chart, yearly figures since 2012. Can anyone explain why total electricity generation has gone down from approx. 300TWh to 250? I think that's a striking drop. The site says due to efficiency increases but is that correct? And if so might these efficienices continue at a similar rate?                                                                                       http://www.mygridgb.co.uk/historicaldata/

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belfastchild
7 minutes ago, JMD said:

Interesting UK electricity grid supply chart, yearly figures since 2012. Can anyone explain why total electricity generation has gone down from approx. 300TWh to 250? I think that's a striking drop. The site says due to efficiency increases but is that correct? And if so might these efficienices continue at a similar rate?                                                                                       http://www.mygridgb.co.uk/historicaldata/

Reduction of coal fired stations and nuclear.
Increase in renewables hasnt filled the gap.
Theres a rumour that the move to low energy lighting was to save building a power station or two!
Offshoring manufacturing helped.
Efficiencies will continue at a smaller rate, most lighting, a rated appliances.
Electric heating and electric cars on the other hand....

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1 minute ago, Errol said:

 

Do I buy BP at this price? I may have missed out, but this question is as old as time itself. When? Or is it the only way is up? Do I wait for the BK? I have followed the thread, near enough understand most of the simple stuff, but think I will go in. Wish me luck.

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BurntBread
12 minutes ago, Phil said:

Do I buy BP at this price? I may have missed out, but this question is as old as time itself. When? Or is it the only way is up? Do I wait for the BK? I have followed the thread, near enough understand most of the simple stuff, but think I will go in. Wish me luck.

If I didn't have a fair chunk already, I would probably be buying a slice at these levels. I think one of the great insights from this thread is "laddering", to try to take some of the emotion out. Especially with a BK possibly coming, but possibly not, it seems a good way of spreading risk: if the price just keeps on going up, then at least you have a first allocation bought, and you're not completely left struggling to time an entry, and can look a bit more dispassionately at other opportunities (maybe that should be called something like "trying to catch a thrown spear"?). Conversely, if there is a BK, you haven't poured all your resources in at a high price, and you've got the comfort of following a plan: "plan the trade; trade the plan". If he will forgive me for saying it, I think @Hancock is wrestling with the psychology of it (although I think he has a more impressive amount of wealth to conjure with than I do).

Obviously I'm just a beginner, but I've found it much easier -- in fact almost reassuring -- looking at red numbers when I know I still have some money I want to put into that stock. I bought a bit more Rio recently, which might not have been a good idea, but I was happy with the price first time round, and I'm even more happy now.

I haven't tried to use Graham's formula to value stocks yet, and I don't have DB's skills nor confidence in his models, but I do have a reasonably good memory. I will therefore take DB's name in vain and quietly quote something he said that might be out of date, but might help with difficult decisions ... namely that he would happily buy BP below £3.50.

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4 hours ago, Cattle Prod said:

We are (which might just backfire) but the yanks aren't. Oil and gas earnings are global, and in dollars.

Read recently the Dems were wanting to put up capital gains tax to 40%.

The initial thesis of the deflationary bust was we get the bust, then global govts spend trillions on infrastructure spending.

But Covids come along, and this money has seemingly been spent on paying people to sit at home for 18 months, back handers to friends of politicians, some needless APP costing 50 billion, and a load of PPE. (similar scams have happened all around the world)

So to a significant degree it messes up the original theory for infrastructure spending.

Realise Bidens got his infrastructure plan, but huge swathes of that money doesnt actually go on infrastructure, i.e $400bln is for boomers old age care!

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Noallegiance
26 minutes ago, BurntBread said:

If I didn't have a fair chunk already, I would probably be buying a slice at these levels. I think one of the great insights from this thread is "laddering", to try to take some of the emotion out. Especially with a BK possibly coming, but possibly not, it seems a good way of spreading risk: if the price just keeps on going up, then at least you have a first allocation bought, and you're not completely left struggling to time an entry, and can look a bit more dispassionately at other opportunities (maybe that should be called something like "trying to catch a thrown spear"?). Conversely, if there is a BK, you haven't poured all your resources in at a high price, and you've got the comfort of following a plan: "plan the trade; trade the plan". If he will forgive me for saying it, I think @Hancock is wrestling with the psychology of it (although I think he has a more impressive amount of wealth to conjure with than I do).

Obviously I'm just a beginner, but I've found it much easier -- in fact almost reassuring -- looking at red numbers when I know I still have some money I want to put into that stock. I bought a bit more Rio recently, which might not have been a good idea, but I was happy with the price first time round, and I'm even more happy now.

I haven't tried to use Graham's formula to value stocks yet, and I don't have DB's skills nor confidence in his models, but I do have a reasonably good memory. I will therefore take DB's name in vain and quietly quote something he said that might be out of date, but might help with difficult decisions ... namely that he would happily buy BP below £3.50.

Similarly with only selling profits. Taking chips of the table but still being in the game in rising stocks is a winner.

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Animal Spirits
3 hours ago, Cattle Prod said:

Anyone else things China is scrambling for dollars right now to pay for all the energy they are short of? Pity they can't print them.

image.png.e846bc6221d81c099b937943cb734af9.png

What's this going to break...

TIC data shows Mainland China US treasury holdings generally falling since Feb but picking up again in July, this also coincides with the peak in yields on a number of long term government bond yields during Spring (which as already mentioned are on the rise again).

https://ticdata.treasury.gov/Publish/mfh.txt

China's holdings have been in a down trend since 2013. Depending on your viewpoint this could be for geopolitical reasons or a reflection of a deflationary trend in trade (maybe both).

A simplified example of USD/China money flow:

USD > Chinese commerical banks >  PBOC (Swap USD for Reserve asset) > China US treasury holdings increase

Edited by Animal Spirits
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35 minutes ago, BurntBread said:

. If he will forgive me for saying it, I think @Hancock is wrestling with the psychology of it (although I think he has a more impressive amount of wealth to conjure with than I do).

Yes, it is a headache, as i say i've money in a SIPP that i've no problems spending on shares, its like monopoly money to me, or money i may not live long enough to spend!

Its the money that was set aside to buy a house that's the issue. A house is stability, whereas stocks are a more complex bumpy ride.

Its akin to selling your house to play the stock market when you've a young child, you'd have to be daft to do so. ... especially as my expertise of what to buy is based on reading "credit-deflation-and-the-reflation-cycle-to-come".

Still tilting towards there being a bust in the next 12 months as the global economy seems to be an absolute clusterfuck at the moment, but it seems no matter what i do its a gamble. Joys of living on planet ponzi!

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Bobthebuilder
1 hour ago, Phil said:

Do I buy BP at this price? I may have missed out, but this question is as old as time itself. When? Or is it the only way is up? Do I wait for the BK? I have followed the thread, near enough understand most of the simple stuff, but think I will go in. Wish me luck.

I bought BP too early, bought a couple more chunks during 2020, but my timing was bad. I am just about evens here with them as of today. Some others here caught the bottom and will be well in the green.

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