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

[Castlevania]

4 hours ago, Chewing Grass said:

Mrs Chewys mothers house was built in 1960, a builder would get 4 houses on the plot now.

In the village I grew up in a developer in the 1970’s built a row of linked (via garage) houses, so more like living in a semi as opposed to a terrace. The developer had hoped to get planning permission for a second row of houses backing onto the first which was denied. So you have 1300 sq foot 3 bed houses with a 40-50 metre long garden. I’d happily live in one.

Nowadays, the houses are smaller and you don’t get such a huge garden.

[MrXxxx]

1 hour ago, Lightly Toasted said:

... as long as they bear fruit.

I tried saving seeds of some tomatoes I'd really liked one year, very mixed results due to them being F1 hybrids.

https://www.rhs.org.uk/vegetables/f1-hybrids

... Seeds saved from F1 hybrid plants will not produce plants that are true to the parent type ...

Although they are F1 Hybrids, hybridization in plants in contrast to animals is far less r.e sterility, often producing cases of hybrid vigour i.e better growth/seed set, and so larger harvests.

[Castlevania]

16 minutes ago, MrXxxx said:

Can I just confirm that I understand the point that you are making here...so as those 'inflation' stocks that give an above average/good return in high inflation periods are a small percentage of the whole 60%, AND as we only have 60% of a potential 100%, the return only has a slight impact on the 'whole' 100% inflation rate erosion effect that our capital is being subject to?...

....to give an example, say we had a 50/50 stocks/cash portfolio and 10% of the stocks were 'Inflation' stocks returning twice the inflation rate and the others returned zero growth, we would still only be 'covering' 10% of the actual inflation rate 'cost' to our portfolio capital [50% stocks x 10% inflation stocks x twice inflation rate (x2)].

S&P500 Oil and gas stocks make up less than 4% of the index.

[MrXxxx]

1 hour ago, Lightly Toasted said:

I've had a few that didn't fruit, more that produced weird misshapen fruit, and one or two that were really nice 

Being a bit short of growing space, I don't take the gamble any more.

For those interested here is the basis of why this happens [https://knowgenetics.org/mendelian-genetics/], believe it or not, although Mendel published his findings just 8 years after Darwin's 'Origin of species' was published; this helped to confirm Darwin had got it right, he [Darwin] never read or knew of Mendel's work [https://www.forbes.com/sites/johnfarrell/2017/04/09/how-mendel-channeled-darwin/?sh=21ef6a383470].

[MrXxxx]

25 minutes ago, Pip321 said:

Being frugal is now a rather bad habit although pre covid we enjoy holidays. However a Luxury hotel isn’t our thing whereas a cute old historic building in Florence etc might be….and I always end up finding a deal for £400 a week

I can relate to this statement, as I am the same. Having been 'bought up' to be frugal/be a saver, however hard I try the habit is no so ingrained I don't think I can change...in fact, if I 'splashed the cash' it would probably make me unhappy [seriously!]...I know it sounds crazy, but its true.

[Bobthebuilder]

10 minutes ago, MrXxxx said:

Although they are F1 Hybrids, hybridization in plants in contrast to animals is far less r.e sterility, often producing cases of hybrid vigour i.e better growth/seed set, and so larger harvests.

These are plants from 2020, huge amount of fruit. Thought it was something to do with them being commercial grown, rather than Suttons seeds etc.

[MrXxxx]

14 minutes ago, Castlevania said:

S&P500 Oil and gas stocks make up less than 4% of the index.

..with the five FANGS making up ~17%!

[MrXxxx]

5 minutes ago, Bobthebuilder said:

These are plants from 2020, huge amount of fruit. Thought it was something to do with them being commercial grown, rather than Suttons seeds etc.

Nice tomatoes...but don't go putting pictures of your 'plums' in this thread!

[Bobthebuilder]

7 minutes ago, MrXxxx said:

Nice tomatoes...but don't go putting pictures of your 'plums' in this thread!

Here is the cherry and my plums together.

 

 

 

[ThoughtCriminal]

 

 

Tesla's slow motion crash crept under the radar.

[Castlevania]

39 minutes ago, MrXxxx said:

..with the five FANGS making up ~17%!

It was around 25% last Summer

[Castlevania]

50 minutes ago, Bobthebuilder said:

These are plants from 2020, huge amount of fruit. Thought it was something to do with them being commercial grown, rather than Suttons seeds etc.

Is that in a greenhouse?

[Bobthebuilder]

5 minutes ago, Castlevania said:

Is that in a greenhouse?

No, just against the fence on a sunny patio.

[Bobthebuilder]

53 minutes ago, Cawn said:

I'm interested in what experience fellow forumers have had on this transition. A very good point MrX.

Has anyone successfully transitioned from working and living frugally to not working and spending to enjoy rather than just exist while making regular drawdowns on saved capital.

From my experience of friends and family people very rarely change their habits so hence how you lived ten years prior retirement will establish how your spending pattern pans out post retirement. I honestly think many over work, over save and over go without pre retirement.

I think its hard wired and its just how it is.

I first got into the frugal thing about 20 years ago, reading stuff like River Cottage and a blog called down the lane.

It can be counter productive IMO, spending money on assets you already own is worthwhile, capital investment as they call it.

My old man was really frugal, bad for his health I think. When he had cancer a few years ago, he was telling me he didn't want to eat and told me about all the money he was saving because of that. Crazy, I tried to get him to spend money on himself, but he was too far gone.

Don't be the richest coffin in the grave yard was something we used to laugh about, but it came true for him in the end.

[DurhamBorn]

2 hours ago, MrXxxx said:

Can I just confirm that I understand the point that you are making here...so as those 'inflation' stocks that give an above average/good return in high inflation periods are a small percentage of the whole 60%, AND as we only have 60% of a potential 100%, the return only has a slight impact on the 'whole' 100% inflation rate erosion effect that our capital is being subject to?...

....to give an example, say we had a 50/50 stocks/cash portfolio and 10% of the stocks were 'Inflation' stocks returning twice the inflation rate and the others returned zero growth, we would still only be 'covering' 10% of the actual inflation rate 'cost' to our portfolio capital [50% stocks x 10% inflation stocks x twice inflation rate (x2)].

Its the paradox and why the market hurts the most it can.The areas that gain from the next cycle tend to be the worst performers of the last one so passive funds hold hardly any,instead they mostly own the shares that have done well from the cycle because they become such a big part of the index.Its why when everyone says passive is the only certain way to do well you know we are close to the end of a cycle.Without any macro at all i know BTL and passive investing will likely be poor investments or terrible retirement destroying ones,simply because almost everyone thinks the opposite.BTL for instance would collapse without ever increasing housing benefit.

[DurhamBorn]

11 hours ago, Juniper said:

I was just coming on to mention this. It’s a cracker of a podcast, even more so than his other recent ones IMO. 

His theory that the US also wants to break the dollar system so that they can re-shore manufacturing as a security measure fits in my mind alongside @DurhamBorn’s excellent explanation of raising rates to force repo money into the market. No point in releasing dollars if they disappear into another country’s FX reserves, they want companies to invest at home.

I still have a lot to figure out but it’s making more sense. He also points out how the war gives good cover for the plan because there would be uproar if they just broke the dollar system and made people poorer without an excuse.

Thats right and its exactly what this cycle is about,a rush between inflation destroying your economy and re-shoring production.Fed has the liquidity in the system already,easily enough,and raising rates is all about moving that liquidity out into the banking sector then into the economy in loans etc.Inflation is now giving the investment signals they want to ensure on-shoring continues.Im convinced they are concentrating on getting that repo out.Everyone argues the US got rich because of the reserve currency,id argue they got lazy then poorer because of it,always a cycle.Kill the dollar system yourself you can leave the chinks,ruskies,pakis and everyone else to worry about what they take in payment while the US does what it will likely always do,re-tool and plant the Star Spangled Banner on Mars and beyond.

 

[JMD]

2 hours ago, Bobthebuilder said:

Here is the cherry and my plums together.

 

 

 

I see what you did there!

[JMD]

1 hour ago, Bobthebuilder said:

No, just against the fence on a sunny patio.

Please can we stop with the inuendo?!

[Chewing Grass]

6 minutes ago, JMD said:

Please can we stop with the inuendo?!

No its a perfectly good board game.

It’s all in the mind... so what’s in your mind? It's all good, clean fun - at least that's the intention. But you never know what might slip out when you're playing Innuendo.

https://www.amazon.co.uk/Rocket-Games-ROC346-Innuendo-Board/dp/B001HN6Q70

[MrXxxx]

52 minutes ago, DurhamBorn said:

The areas that gain from the next cycle tend to be the worst performers of the last one so passive funds hold hardly any,instead they mostly own the shares that have done well from the cycle because they become such a big part of the index.

Yes and no. Agree if you are looking at passive CAP-weighted indices, but if you go for an equally-weighted sample of any index then this should alleviate/'smooth' this issue as when they are rebalanced you will get x more of the weaker share for the next cycle than of the current 'darling' share...operating in a similar way to the 'Dogs of the DOW' approach....obviously you could also tilt your portfolio with a choice/set of passive indexes/ETF's but then is this still a passive?...I think no, as you are being active.

[MrXxxx]

43 minutes ago, JMD said:

Please can we stop with the inuendo?!

[wherebee]

52 minutes ago, JMD said:

Please can we stop with the inuendo?!

woman walks into a bar and orders an innuendo.  So the barman gives her one.

[Barnsey]

Half way through a much postponed trip to Florida, few random observations:

- Insane demand everywhere, be in no doubt that the US economy remains on fire, Spring Break busiest in 5 years apparently. Far fewer Brits out here than normal however.

- Surging inflation, petrol prices have stabilised but were going up 20c a day, so glad I prepaid the fuel for the rental car! Fav Mexican fast food $9.59 3 days ago, up to $13.59 today (introduced $4 steak surcharge). $338 for a 2 day ticket to Universal Studios, Busch Gardens $30 to park and $12 for a bottle of bud for the lady which I declined, and in no way putting any of the yanks off, truly manic behaviour all round, pent up demand in its most greedy form.

- Chronic shortage of rental cars, 2 hour queue at the Budget desk upon arrival which has never happened to us before (for prepaid), other desks had already closed to new customers as no more availability. We got a fluke offer via an Irish website otherwise we couldn't have done it, 3-4x normal prices.

- Cashback credit cards advertised on TV for building credit are paying cashback in bitcoin.

- Severe lack of staff everywhere, hotels running on 50% even though at capacity. Queues and more queues.

- Housing market on fire, US versions of Zoopla etc advertising exclusive early viewing (same day) of properties as a major perk.

- Used car market seems to be stabilising at long last but all new car ads have caveat that you must check with dealership that your order will include advertised options due to chip shortage.

- More begging than previously observed by "average" people citing family struggling with medical bills in particular, really sad.

- Very few bargains to be found in outlet malls, now officially cheaper in the UK for most branded stuff.

Basically, prices are insane but everyone except us happily paying them.

 

[Bobthebuilder]

You've called my bluff I'm not so hot,
Now is that love
My assets froze while yours have dropped,
Now is that, is that
It's the cupid cupid cupid disguise
That more or less survived
Now that is love.

 

 

[The Grey Man]

4 minutes ago, Barnsey said:

Half way through a much postponed trip to Florida, few random observations:

- Insane demand everywhere, be in no doubt that the US economy remains on fire, Spring Break busiest in 5 years apparently. Far fewer Brits out here than normal however.

- Surging inflation, petrol prices have stabilised but were going up 20c a day, so glad I prepaid the fuel for the rental car! Fav Mexican fast food $9.59 3 days ago, up to $13.59 today (introduced $4 steak surcharge). $338 for a 2 day ticket to Universal Studios, Busch Gardens $30 to park and $12 for a bottle of bud for the lady which I declined, and in no way putting any of the yanks off, truly manic behaviour all round, pent up demand in its most greedy form.

- Chronic shortage of rental cars, 2 hour queue at the Budget desk upon arrival which has never happened to us before (for prepaid), other desks had already closed to new customers as no more availability. We got a fluke offer via an Irish website otherwise we couldn't have done it, 3-4x normal prices.

- Cashback credit cards advertised on TV for building credit are paying cashback in bitcoin.

- Severe lack of staff everywhere, hotels running on 50% even though at capacity. Queues and more queues.

- Housing market on fire, US versions of Zoopla etc advertising exclusive early viewing (same day) of properties as a major perk.

- Used car market seems to be stabilising at long last but all new car ads have caveat that you must check with dealership that your order will include advertised options due to chip shortage.

- More begging than previously observed by "average" people citing family struggling with medical bills in particular, really sad.

- Very few bargains to be found in outlet malls, now officially cheaper in the UK for most branded stuff.

Basically, prices are insane but everyone except us happily paying them.

 

A very detailed post.

Based on facts. Scary.