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

[belfastchild]

8 minutes ago, Harley said:

 How did I not know about the Prof before?  Tim (and is it Paul?) good value too!

His year in review is always worth waiting for!

[Harley]

4 minutes ago, sancho panza said:

This run up in the oil price has all the hallmarks of the oil price rises that occurred before the recessions in 1990,2000,2008.Whether and when we get the BK is the next question.

Here's the origianl piece from April 21.I also include the warning markers in terms of the GDP and it's deflator jsut for context but the central point remains that hsitotically,oil price rises precede recessions.

https://www.dosbods.co.uk/topic/10490-credit-deflation-and-the-reflation-cycle-to-come-part-2/page/1171/

Personally,I don't set too much store by the exact date of the start/end of the technical recession as I can't really make any money off it or move asset classes on the back of it.What I can try and trade is market tops/bottoms.I psoted the chart as a reference point I suppose.

Also,GDP data is heavily gameable,eg imputed rents which are around 8% of USA GDP and are effectievly an accounting fiction.They would have been lower back in the early 90's but the point needs considering.

GDP also is rarely quoted per capita but it should be imho,as we'd have a very different outlook on our national wealth if we did.

The inflation data is also game able depending which measure they use eg CPI/CPIH/RPI and when it comes to real GDP which deflator they use and what it excludes.

Here are some charts for the recessions concerned using Real GDP measures.You can see that sometimes a quarter or two before the technical recession begins,the weakness is apparent.The crucial aspect in terms of Real GDP is that the implied price deflator used excludes imports which means that it's not particualrly reliable

https://www.bea.gov/data/prices-inflation/gdp-price-deflator

A lot of the following is from a previous post

1990

You can see that in Q4 1989,there was already a likely negative GDP print in real terms or at least sever weakness economically.

Oct 1988 Oil bottoms monthly close $13.58,intraday $12.28

Jan 1990 WTI at $24.20 intraday peak a 78% rise from Oct 1988

Jan 90 S&P 500 first attempt at 360 intraday

May 90 S&P 500 peaks around 360

July 1990  US recession starts with oil at $20.69

Sept 1990 oil peaks at monthly close $39.51

Oct 1990 oil intraday peak $41.15

Oct 1990 S&P 500 bottoms

March 1991 US recession ends with oil at $19.63

https://www.macrotrends.net/countries/USA/united-states/gdp-gross-domestic-product

 

2000

Dec 1998  Oil bottoms at $10.35,turns up

Mar 2000 S&P 500 Intraday peak

Aug 2000 S&P500 monthly peak

Sep 2000 Intraday oil peak at $37.80

Jul-Sept 2000 Real GDP 0.53%-possible start of US recession not using real world view of economy.

Nov 2000 Oil peaks on monthlies at $33.82

Mar 2001 US recession begins

Nov 2001 US recession ends.

Aug 2002 S&P bottoms on the monthlies

 

2008

Jan 2007 Oil bottoms on the monthlies at $58.14

Oct 2007 S&P peaks on monthlies at 1550

Dec 2007 US enters recession with Oil at $95.98

June 2008 Oil peaks at $140-monthlies

Feb 2009 S&P bottoms around 730 on the monthlies

June 2009 US recession ends with oil at $69.89

 

 

Obviously with any of this you have to apply your own judgement.It's been interesting for me to run back over this stuff from last year.There are obviously many other factors involved in the deciosn to move to cash,UST's or go short.

 

Towards the end of the podcast I just posted they mention how long it took to recover from such things as the South Sea (or was it Tulip?) Bubble, etc.  Also how a real crash needs not just a fall in price but revulsion and that we've not had that for a very long time.  So much else too.  It could be very brutal if/when it happens.  Stealth theft by inflation seems almost caring by comparison!

[Festival]

7 minutes ago, sancho panza said:

This run up in the oil price has all the hallmarks of the oil price rises that occurred before the recessions in 1990,2000,2008.Whether and when we get the BK is the next question.

Here's the origianl piece from April 21.I also include the warning markers in terms of the GDP and it's deflator jsut for context but the central point remains that hsitotically,oil price rises precede recessions.

https://www.dosbods.co.uk/topic/10490-credit-deflation-and-the-reflation-cycle-to-come-part-2/page/1171/

Personally,I don't set too much store by the exact date of the start/end of the technical recession as I can't really make any money off it or move asset classes on the back of it.What I can try and trade is market tops/bottoms.I psoted the chart as a reference point I suppose.

Also,GDP data is heavily gameable,eg imputed rents which are around 8% of USA GDP and are effectievly an accounting fiction.They would have been lower back in the early 90's but the point needs considering.

GDP also is rarely quoted per capita but it should be imho,as we'd have a very different outlook on our national wealth if we did.

The inflation data is also game able depending which measure they use eg CPI/CPIH/RPI and when it comes to real GDP which deflator they use and what it excludes.

Here are some charts for the recessions concerned using Real GDP measures.You can see that sometimes a quarter or two before the technical recession begins,the weakness is apparent.The crucial aspect in terms of Real GDP is that the implied price deflator used excludes imports which means that it's not particualrly reliable

https://www.bea.gov/data/prices-inflation/gdp-price-deflator

A lot of the following is from a previous post

1990

You can see that in Q4 1989,there was already a likely negative GDP print in real terms or at least sever weakness economically.

Oct 1988 Oil bottoms monthly close $13.58,intraday $12.28

Jan 1990 WTI at $24.20 intraday peak a 78% rise from Oct 1988

Jan 90 S&P 500 first attempt at 360 intraday

May 90 S&P 500 peaks around 360

July 1990  US recession starts with oil at $20.69

Sept 1990 oil peaks at monthly close $39.51

Oct 1990 oil intraday peak $41.15

Oct 1990 S&P 500 bottoms

March 1991 US recession ends with oil at $19.63

https://www.macrotrends.net/countries/USA/united-states/gdp-gross-domestic-product

 

2000

Dec 1998  Oil bottoms at $10.35,turns up

Mar 2000 S&P 500 Intraday peak

Aug 2000 S&P500 monthly peak

Sep 2000 Intraday oil peak at $37.80

Jul-Sept 2000 Real GDP 0.53%-possible start of US recession not using real world view of economy.

Nov 2000 Oil peaks on monthlies at $33.82

Mar 2001 US recession begins

Nov 2001 US recession ends.

Aug 2002 S&P bottoms on the monthlies

 

2008

Jan 2007 Oil bottoms on the monthlies at $58.14

Oct 2007 S&P peaks on monthlies at 1550

Dec 2007 US enters recession with Oil at $95.98

June 2008 Oil peaks at $140-monthlies

Feb 2009 S&P bottoms around 730 on the monthlies

June 2009 US recession ends with oil at $69.89

 

 

Obviously with any of this you have to apply your own judgement.It's been interesting for me to run back over this stuff from last year.There are obviously many other factors involved in the deciosn to move to cash,UST's or go short.

 

This info seems to imply oil will peak a number of months after the S&P has already peaked if it follows previous recessions. Given the 10 year to 2 year UST yield curve hasn't inverted yet it may be we have quite a way to go on the oil price? 

[Harley]

11 minutes ago, belfastchild said:

His year in review is always worth waiting for!

No wonder he gets invited everywhere.  The bit about Daniela was one of many fun stories.

PS:  A defo add.  I've built up a decent ecosystem of podcasters, etc now my last bastion of regular msm (TalkRadio) has shown both its hand and that it habitually knows nothing about anything.

[sancho panza]

8 minutes ago, DurhamBorn said:

Russia is playing an amazing game,buying back some of the best inflation assets in the world for nothing.Is the attack on Ukraine really an attack on the dollar system?.

The west spent 35 years exchanging deficits for other countries labour.Thats ending,and fast.The more goes on the basics the less people have.More work,less disposable is where this goes.

I think for funds Asia,Japan and Latin America are the places to be.I thought the dislocation would be mostly financial,but this inflation looks really nasty.

 

That bit in bold is starting to loom up in the background as a reason/consequence for what's going on.People in the West think their govts are in charge of this situation.I'm not so sure.If Gromen;s right then the Chinese are currently swapping yaun for Russian gas/oil.

 

I don't know if you remember but about two years or more back we had an excellent discussion down ehre about the dollar and the conclusion was that the dollar had one crisis left in it.It's playing out.If you haven't watched that Gromen vid DB then I'd reccomend it.Nothing you don't already know I guess but brings it all together under one roof so to speak.

He talks a lot about how these oil price rises are the beginning of a long cycle of rises and price inflation more generally.I speak as someone who was a committed deflationist until I listened to your reasoning and luckily,it got me postioning for it before it arrived.Thanks for your efforts.

[sancho panza]

9 minutes ago, Harley said:

Towards the end of the podcast I just posted they mention how long it took to recover from such things as the South Sea (or was it Tulip?) Bubble, etc.  Also how a real crash needs not just a fall in price but revulsion and that we've not had that for a very long time.  So much else too.  It could be very brutal if/when it happens.  Stealth theft by inflation seems almost caring by comparison!

That's a key theme that would confirm a generational bottom.The assets that are pumped up on steroids have a long way to fall-junk bonds,govt bonds,real estate and big tech stocks.

[Hardhat]

Support at 250 for POLY?

Considering opening a ladder.

However after reading many of @Harley's posts over the last few years I always have counterparty risk/ likelihood of return of capital on my mind. Still think there's there's chance that the shares are confiscated.

[nirvana]

anyone bottom picking Evraz here? 

@Democorruptcyyou're a shrewd gambler, tempted?

[Harley]

4 minutes ago, sancho panza said:

That bit in bold is starting to loom up in the background as a reason/consequence for what's going on.People in the West think their govts are in charge of this situation.I'm not so sure.If Gromen;s right then the Chinese are currently swapping yaun for Russian gas/oil.

 

I don't know if you remember but about two years or more back we had an excellent discussion down ehre about the dollar and the conclusion was that the dollar had one crisis left in it.It's playing out.If you haven't watched that Gromen vid DB then I'd reccomend it.Nothing you don't already know I guess but brings it all together under one roof so to speak.

He talks a lot about how these oil price rises are the beginning of a long cycle of rises and price inflation more generally.I speak as someone who was a committed deflationist until I listened to your reasoning and luckily,it got me postioning for it before it arrived.Thanks for your efforts.

I'm starting to buy the idea of Chinese fingerprints on this, with their control over much of the Western leaders and pushing Russia towards them and co.  That was the West's biggest geo-political mistake for a very long time, so much so you have to wonder.

[Harley]

3 minutes ago, nirvana said:

anyone bottom picking Evraz here? 

You said one post today.  I've been waiting! 

[sancho panza]

7 minutes ago, Festival said:

This info seems to imply oil will peak a number of months after the S&P has already peaked if it follows previous recessions. Given the 10 year to 2 year UST yield curve hasn't inverted yet it may be we have quite a way to go on the oil price? 

I wouldn't time too much of the specific moves as the sample is small and particualrly with reference to the US yield curve given how active the Fed has been over the last ten years(I'm not sure it has the predictive power it used to),what I'd use it for is as a warning to be careful and reassess your risk profile as the oil price moves up.

There are no guarantees of a BK deflationary wave and subsequent market crash,but the basement hive mind is switched onto the possiblity that Hussman might be finally right.

I'm not ready for selling up yet /moving short,but this oil price definitely feels like it will haev an impact on demand and that's aside from broader geo political uncertainty.

[Harley]

4 minutes ago, Hardhat said:

Support at 250 for POLY?

Considering opening a ladder.

However after reading many of @Harley's posts over the last few years I always have counterparty risk/ likelihood of return of capital on my mind. Still think there's there's chance that the shares are confiscated.

FFS, don't fecking listen to me!

[belfastchild]

1 minute ago, Hardhat said:

Support at 250 for POLY?

Considering opening a ladder.

However after reading many of @Harley's posts over the last few years I always have counterparty risk/ likelihood of return of capital on my mind. Still think there's there's chance that the shares are confiscated.

I may have mentioned before buying a mineral/commodity company during the dot.com crash. Things looked to balance out then it went private, all of a sudden, just one day, bang.
Was IIRC about 3 years before various wranglings took place. Did get my money back with a slight profit but of course the company was making shitloads in the meantime.
Its why I made my post about gambling and a few people have mentioned it in the past about the likes of BT etc, you are going well, doing fine then either bang, it gets taken over and someone else gets the profit or it goes bust, gets bought out for pennies due to overseas constraints and you get nothing and someone else gets an awful lot for not a lot.
Look at adrs etc, I see them sometimes as akin to paper silver etc. All well and good until someone decides they havent made enough money this month and take their ball away.

[sancho panza]

11 minutes ago, Harley said:

I'm starting to buy the idea of Chinese fingerprints on this, with their control over much of the Western leaders and pushing Russia towards them and co.  That was the West's biggest geo-political mistake for a very long time, so much so you have to wonder.

 

Covid,China style lockdowns,huge debt issuance by Western govts to fight a respiratory virus that spread anyway.

Then Russia invades Ukraine,oil price spike,Russia sells commodities in yuan,China finally doesn't have to compete on dollar terms.................the only winner from this tragedy is China.

It really feels like teh West has been hobbled over the last two years,but that it doesn't know it yet.

[Yadda yadda yadda]

Just now, sancho panza said:

 

Covid,China style lockdowns,huge debt issuance by Western govts to fight a respiratory virus that spread anyway.

Then Russia invades Ukraine,oil price spike,Russia sells commodities in yuan,China finally doesn't have to compete on dollar terms.................the only winner from this tragedy is China.

Not sure I dare own Chinese shares.

[ONC]

Yes, just got EVraz at 69p (£3k),  now my average is £1.13.   Really is all is nothing at this price. Hoping that Russia is playing long game and want to play ball after this is all over. Fingers crosses.

10 minutes ago, nirvana said:

anyone bottom picking Evraz here? 

@Democorruptcyyou're a shrewd gambler, tempted?

 

[nirvana]

7 minutes ago, Harley said:

You said one post today.  I've been waiting! 

sorry boss I got rained on and had to come back......missed the Gold spike down to 1912 so now I'm like the rest of the goldbugs 

[Democorruptcy]

10 minutes ago, nirvana said:

anyone bottom picking Evraz here? 

@Democorruptcyyou're a shrewd gambler, tempted?

I can't comment because we are not allowed to talk about gambling in here, or the more righteous (who lack the balls to do it) might throw their toys out of their prams again.

[Harley]

20 hours ago, Harley said:

Feck, I put a limit sell order on this week.  I only had 2% to go to break even!

PS:  Maybe it got triggered, hence the fall.  Big boy is me!

Oh yes, I can quote myself 'cause I can do anything today!  My limit sell order on the scottish play got triggered at the top yesterday before the fall (£0.785).  So I have managed to finally exit at a token profit!  After all "no div, no play"!

[Sasquatch]

Some inflation information for you all. In a way this is directly from the 'coal face'.

I've been keeping one of our key clients up to date regarding construction tender price increases. It's pretty brutal out there. Builders are picking and choosing tender opportunities and passing on all of the materials and subcontractor price increases. As far as I can tell the builders are maintaining or even increasing their margins.

Data below is from the same contractor from two very similar projects, one now completed on site, one currently on site.

Tender submission date for project 1 was December 2018. Tender date for project 2 was November 2021. Therefore a 3 year gap.

DOT type 1 hardcore supplied and laid per m3  =  50% increase

Reinforced concrete in foundations per m3  = 20% increase

Steel reinforcement mesh in concrete slabs  =  110% increase (!)

Steelwork frame per tonne supplied and erected  =  35% increase

Facing bricks supplied and laid  =  30% increase

In my 30+ year career I've never seen price rises like this.

 

 

[Yellow_Reduced_Sticker]

10 hours ago, wherebee said:

surely you want to wait a few days.  If peace talks break through this week, that POLY holding could quad in price!

 

MAYBE who knows?

 

But I think there is something else afoot here (Russian scam) and sadly for us ruskie ADS holders I think we are going to get cleaned out!

 

Last night I cancelled another BUY LIMIT and got an email confirming the cancellation. So the POLY was some f*** up at there end during volatility, cos i remember it was a job to cancel it, i kept clicking the X icon until it deleted.

 

I'm a SUCKER though because I'd still want to buy some more Gazprom - it was the share I always wanted AND now at a once in a life-time AMAZING YRS Price!

 

 

 

[Don Coglione]

1 hour ago, Jesus Wept said:

A $500bn market cap company a few months ago.

 

Now ‘worth’ $200m …..

effectively zero…

fuck….

My original £18k stake, which had all-but doubled to £35k just a few months ago, is currently worth a little less than 250 quid...

[Sasquatch]

Especially for @DurhamBorn

 

 

[Harley]

8 minutes ago, Sasquatch said:

DOT type 1 hardcore supplied and laid per m3  =  50% increase

FFS!  Lucky I have bags and bags in the yard!

[Harley]

10 minutes ago, Yellow_Reduced_Sticker said:

 

MAYBE who knows?

 

But I think there is something else afoot here (Russian scam) and sadly for us ruskie ADS holders I think we are going to get cleaned out!

 

Last night I cancelled another BUY LIMIT and got an email confirming the cancellation. So the POLY was some f*** up at there end during volatility, cos i remember it was a job to cancel it, i kept clicking the X icon until it deleted.

 

I'm a SUCKER though because I'd still want to buy some more Gazprom - it was the share I always wanted AND now at a once in a life-time AMAZING YRS Price!

 

 

 

I see no ships....