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

[Pip321]

1 hour ago, RJT1979 said:

Is it really worth hassle fucking with your mobile connection for 5 quid a month? I'm on some ee 9 quid a month with 20gb data and it does not seem to be going up so will stick with it

Most in here would disagree with you. I am hugely frugal….but a as a generic point being made about most people I think you are right.

The £80 a month deals will suffer, maybe the new posh phone may suffer but many will consider (wrongly) that paying £20 a month isn’t even an outgoing.

Behavioural economics highlights this. Ask any customer if the price of their insurance is important when they renew and 100% will say yes. Ask customer whether they sought a lower quote and less than half do.

Consiously we want to move our phone contract but subconsciously many can’t be arsed. Lower hanging fruit first.

Ps I pay £7 for my sim. But if everyone budgets like me the world would stop spinning by Friday 😆

[sancho panza]

23 hours ago, planit said:

The next question is how correct DHunter is, from here new highs is one hell of a call.

Mathematically it is pretty easy, all you need is tech bouncing 75% back up along with all the increases of energy and other stocks and S&P will have new highs.  

Oil is chugging along nicely, I have not sold my BP stake (but trading some along the way) as I still see there is a way too go. EIA has belatedly after the fact upped it's Q2 oil price target

https://oilprice.com/Latest-Energy-News/World-News/EIA-Sees-Brent-Crude-At-107-In-Q2-2022.html

As CP has flagged up, the view there is no more oil output is going mainstream but there seems to be a sense of denial (Biden seriously thinks Brazil is keeping a few million bpd production back?). This will be a tailwind for a while.

It's surprising that the reduced China demand has not resulted in a fall of oil prices, if this consolidation doesn't fall then there will be a further tear higher. 

 

For a laugh the Planit call is for S&P 5500, NDX 15750 and oil $150.

Hopefully that will all tick the boxes for a Sancha crash into a recession.

 

I jsut had a quick look at TLT on my very basci unsophisticated chart set up and I think you may early with that topping call.I've seen some experienced traders buying that dip for a while and getting a kicking.some calls might be the trade there

I think the issue ref DH for me-sat in oilies cheap,goldies cheap,comms cheap-is that we haven't got much to lsoe if he's wrong.If he's right then it's likely that he's right because we see a sectoral shift to value.Big tech may bounce but likely next trip up in S&P will be on the back of value regrading.

AS you say,can't beleive what we're seeing in terms of delusion from the MSM and their chimps in gubbermint.As someone joked th other week,'Biden reduces the SPR to lwoer prices and then refills it at even higher prices'...

Good point ref China.I think your $150 buck call on oil could be on the lwo side Planit given that point.I'm still fimrly in the camp that oil hasn't topped yet pre BK roll over-could be wrong but that's where our moeny is.Personally,I think $200 is possible as that's totally in line with 08 in real terms and the supply situation is way way worse now.

I'm wroking on my BK roll over lsit and will psot it up for laughs and feedback see if it pays out.

[DoINeedOne]

2 hours ago, ashestoashes said:

What's the telecoms equivalent of just heating one room and putting on an extra jumper ? Have you taken into account that people will use the phone less and chase cheaper deals ?

 

1 hour ago, belfastchild said:

 

Just go out for a walk anywhere and see the number of phone zombies about, yes it might only be whatsapp or whatever but it looks like life support (or fake life) for most people.

 

This most people can't go 5 minutes without checking there phones, it actually drives me mental when im in a pub, restaurant or anywhere and everyones just zoned out not talking to each other

 

Not investment advice 

[geordie_lurch]

More recession confirmation - well that it's incoming at least: https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/gdpmonthlyestimateuk/march2022?

1. Main points

• Gross domestic product (GDP) fell by 0.1% in March 2022, after no growth in February 2022 (revised down from 0.1% growth).

• Services fell by 0.2% on the month and was the main contributor to March’s fall in GDP, reflecting a large decrease (15.1%) in the wholesale and retail trade and repair of motor vehicles and motorcycles industry.

• Production also fell on the month by 0.2%; these falls were partially offset by construction, which grew by 1.7%.

• Output in consumer-facing services fell by 1.8% in March 2022, following a 0.5% (revised down from 0.7%) growth in February 2022; non-consumer facing services grew by 0.2% on the month following a 0.1% fall in February (revised down from 0.0%).

• Monthly GDP is now 1.2% above its pre-coronavirus (COVID-19) pandemic level (February 2020).

• Services is now 1.5% above its pre-coronavirus level, while construction is 3.7% above and production is 1.6% below; within services, consumer-facing services were 6.8% below their pre-coronavirus levels in March 2022, while all other services were 3.6% above.

[sancho panza]

18 hours ago, Cattle Prod said:

Oil price as a % of GDP is a good metric to see where we are over time, and there is still some way to go to the peak in the 70s. Probably $200 at present day GDP, and as GDP will likely increase over the cycle, I can easily see room for @DurhamBorns $300 before it crushes the world economy

For me as a student of history-there's a hsitorical precednet for $200 for sure and with an overshoot given the supply side issues we all familair with,then $300 is entirely possible tho unlikely.AS we've seen previously,oil price peaks after we've actually enttered recession and stock market peaks often.But for any BK to occur an oil price spike has been present over the last 30 years of data I've looked at.

18 hours ago, Cattle Prod said:

t is speculation all right, fairly uncharted territory, this is happening with a strong dollar. Thoughts:

- If the Fed pivots and dollar falls, oil will spike 

- If the Fed doesn't pivot, continues tightening, oil demand should get curtailed via the strong dollar and we get a severe correction. This would be BK, I suppose.

My thinking is the Fed will pivot.The BK wave is beginning to lok like it will roll over and history shows us the Fed -who beleive they're omnipotent and can withstand the tide- will have a go at stopping it.Given teh stong dollar will destroy EM's and demand/supply thereof,I can't see how the Fed won't be forced to step in and cut/QE etc.

Fed is faced with a stagfaltionary recession,there is now way out imho-they either cut/QE and we get an inflationary recession,or they don't cut and we get a deflationary recession.LIkelihood is they'll f*** up do too much/too little and we'll get a bit of both.

I sjut can't see a sitaution in which the Fed will do a Volcker.They quite simply don't have the people.

19 hours ago, Harley said:

A long techy one.....

It would be interesting to understand your thought process to help challenge mine.

I looked at the charts of AU, but not the financials (apart from a below personal target of 3%, but maybe that's my first challenge!).  I usually just buy GDX and GDXJ to cover the poor div payers and those with iffy financials.

To me the charts still may have more downside to come.  That's based on looking at the monthly.  Momentum is overbought, the MACD is weakening, and both candle types don't show a bottoming.

 

I have a simple but relatively reliable chart set up I use for the coma scores.But obivously,depsite the below,my read on the chart is personal.As is my view on the sector.The other bits of the coma scores are matehmatical and I don't want to go itno them as I'm happy they work for us for what they're inteneded which is to find the value in the sector for 'spray n pray'

1 histoircal precednt allows for share price to more than halve.

2 historical precednt allows for price to halve from here

3 wihtin historical precedent

4 historical procedent allows for price to double from here

5 historical rpecednt  allows for preice to more than double

[HousePriceMania]

Someone said this week they think it's going to be a long slow grind down, with lower lows.

I think they are right, unless the FED and the BOE come out with IRs cuts and more QE ( unlikely ) right now then sell in May and go away has never had a more truer ring.

It's all well and good being in it for the long term but if the long term means 80% falls that you could have capitalised on then being in it for the long term need some adjustment to your strategy.

No one knows what's coming so good luck all.

[kibuc]

Silver is puking big time, crypto-style, because reasons. It's a shame I have no more dry powder.

[HousePriceMania]

P.S. for reference I have sold out 1/3 or my holdings in the last week. I've kept all my shorts.

[Heart's Ease]

 

As if by magic ... still listening. 

[Jesus Wept]

Markets (Ftse) down loads this morning (-2.3%)  and I’m up. 

Loving my telecoms ! 

Mind I still think they will take a hit as they get dragged down by rest of market (as they are in ETFs and also people need to cover margin calls). 
 

We need to discuss this ETF effect on the BK more I think ! 

[Axeman123]

10 minutes ago, HousePriceMania said:

Someone said this week they think it's going to be a long slow grind down, with lower lows.

I think they are right, unless the FED and the BOE come out with IRs cuts and more QE ( unlikely ) right now then sell in May and go away has never had a more truer ring.

It's all well and good being in it for the long term but if the long term means 80% falls that you could have capitalised on then being in it for the long term need some adjustment to your strategy.

No one knows what's coming so good luck all.

I agree that if CBs don't pivot then that slow grind down would be the innevitable outcome. I just don't get the idea that CBs are uber-hawks. BoE and the Fed have only got to 1%, and ECB haven't even got their first raise in yet. CBs have shown zero stomach for painful responsibility over kicking the can, and I doubt they have spontaneously grown one now.

I watched the latest DH interview linked above, and share his view: a pivot will come, but markets will sniff it out ahead of time.

[Democorruptcy]

14 minutes ago, kibuc said:

Silver is puking big time, crypto-style, because reasons. It's a shame I have no more dry powder.

US inflation yesterday hadn't dropped as expected. If that makes it harder for the Fed to pivot, more likely to raise rates and the real yield on the 10yr improves (is less worse), that's not usually good for PMs. Re 'crypto-style', if people have shorted crypto maybe margin calls are making them sell their other assets like silver etc.

[moneyscam]

13 minutes ago, HousePriceMania said:

Someone said this week they think it's going to be a long slow grind down, with lower lows.

I think they are right, unless the FED and the BOE come out with IRs cuts and more QE ( unlikely ) right now then sell in May and go away has never had a more truer ring.

It's all well and good being in it for the long term but if the long term means 80% falls that you could have capitalised on then being in it for the long term need some adjustment to your strategy.

No one knows what's coming so good luck all.

What you say is right but also depends on how much of both your 1) total liquidity and 2) net worth is invested. 

My strategy is very simple. No more than 30% of my cash liquidity is invested in the market. It can all be wiped out and I would survive the loss. Many denigrate cash at the moment (and this is logical given 10% inflation) however they don't appreciate the other side of the equation which is optionality. Just like a call option has value so does cash in that in the event of a BK you can buy back in at much cheaper valuations and better dividend yields as many of you did at March 2020 lows. Things you cannot do if you're over 80% invested (unfortunately many people are positioned this way, just look at all the crypto sob stories now)

Like you said no one knows exactly what is coming. I have my bearish view at the moment but if I am wrong (and DH finally gets proved right) I will still gain on my portfolio. If I am right then I am positioned well to take advantage and can stomach the loss on the portfolio comfortably. The best one can do is plan for all possible scenarios that whichever way it goes you are still left largely intact. The only thing I haven't done yet as I wanted a cheaper entry point is put in a sufficient hedge. I'm hoping we put in a short term bottom and then rally from here so the eventual cost of my insurance hedge is cheaper but if not then overall I am still comfortable with the risk I face on my total net worth with or without the hedge.

[planit]

6 minutes ago, Axeman123 said:

I agree that if CBs don't pivot then that slow grind down would be the innevitable outcome. I just don't get the idea that CBs are uber-hawks. BoE and the Fed have only got to 1%, and ECB haven't even got their first raise in yet. CBs have shown zero stomach for painful responsibility over kicking the can, and I doubt they have spontaneously grown one now.

I watched the latest DH interview linked above, and share his view: a pivot will come, but markets will sniff it out ahead of time.

The question is whether the pivot has already come in the credit markets.

The Fed talked a lot and the credit markets have done the tightening, the movement has been very fast and further than I expected, US 10Y from 1.66% to 3.2% in 2 months!

The narrative has already moved to talk of recession.

 

Obviously, I and @sancho panza disagree on the chart and either one of us could be right but I still feel 3.2% was a high peak and the current chart will have a huge bearish engulfing on the weekly.

 

[invalid]

11 minutes ago, HousePriceMania said:

Someone said this week they think it's going to be a long slow grind down, with lower lows.

I think they are right, unless the FED and the BOE come out with IRs cuts and more QE ( unlikely ) right now then sell in May and go away has never had a more truer ring.

It's all well and good being in it for the long term but if the long term means 80% falls that you could have capitalised on then being in it for the long term need some adjustment to your strategy.

No one knows what's coming so good luck all.

 

That was me and I still hold that view but have now had second thoughts on timescales.

The BIB in your post is what I should have added to mine - I totally agree. We have seen it before where things are heading in a direction and are likely to continue on that path if left alone. Then the FED/BOE intervene and the direction changes or the can gets kicked down the street.

The difference now is that they are running out of tools in the toolbox and the can is now kicked to the end of the street.

It's playing out just as DB predicted where the CBs are forced to act but now have limited options.

So previously I went with 12 months at least of grind down.  I'm going to change that to 3 to 6 months of grind down and then the CBs will take some action. I'll go with a hold of IRs or perhaps small cut. A modest amount of printing via QE. This will cause the markets to rally.

Uncle Dave will be happy and say told you so, watch and learn. It will look like a melt up but will soon flop and be back to the grind down. Lots will use a melt up to exit their positions (myself included) and either hold cash or rotate sectors, in turn triggering the grind down.

Then in the following months (years?) we get to the position where the CBs are really under pressure to take more drastic action. This then leads to DBs scenario.

 

As ever, just my random thoughts and speculation. Still plenty of scope for curve balls to be thrown into the mix on this.

 

[planit]

This is the first time I can remember there being a 50/50 split of 'this is the BK or not BK'

This is the best basement pub in town.

Cheers everyone 

[sancho panza]

2 hours ago, M S E Refugee said:

I haven't listened yet.

 

Lots to appreciate right there,but have to say think he's wrong on oil as he mainly sees demand/USD as drivers of price when supply issues are foremost issue.

Interesting he sees rates peaking here.Also talks difference between trading calls and cycle calls.

9 minutes ago, planit said:

The question is whether the pivot has already come in the credit markets.

The Fed talked a lot and the credit markets have done the tightening, the movement has been very fast and further than I expected, US 10Y from 1.66% to 3.2% in 2 months!

The narrative has already moved to talk of recession.

 

Obviously, I and @sancho panza disagree on the chart and either one of us could be right but I still feel 3.2% was a high peak and the current chart will have a huge bearish engulfing on the weekly.

 

In the DH interview above,he argues that rates have peaked,says big bank reporting year end CPI at 3%.We don't necessairly need IR cuts/QE etc etc to get a weaker dollar jsut taking foot off the pedal on hikesmight be enough.

If you have time P,tkae a lsiten to that DH interview.

[HousePriceMania]

4 minutes ago, planit said:

This is the first time I can remember there being a 50/50 split of 'this is the BK or not BK'

This is the best basement pub in town.

Cheers everyone 

I am 100% sure that it is, or isn't the BK

[desertorchid]

As has often happened in the past, the frustrating thing about markets melting is how smug buy to letters can merely refer to Rightmove and note how their portfolio remains insulated and highly valued and their wealth intact. Now occasionally there is a lag and some fall in house prices but property really is very attractive if you can avoid the emotional trvails of market/bond/crypto/commodity investments.

[HousePriceMania]

10 minutes ago, invalid said:

 

That was me and I still hold that view but have now had second thoughts on timescales.

The BIB in your post is what I should have added to mine - I totally agree. We have seen it before where things are heading in a direction and are likely to continue on that path if left alone. Then the FED/BOE intervene and the direction changes or the can gets kicked down the street.

The difference now is that they are running out of tools in the toolbox and the can is now kicked to the end of the street.

It's playing out just as DB predicted where the CBs are forced to act but now have limited options.

So previously I went with 12 months at least of grind down.  I'm going to change that to 3 to 6 months of grind down and then the CBs will take some action. I'll go with a hold of IRs or perhaps small cut. A modest amount of printing via QE. This will cause the markets to rally.

Uncle Dave will be happy and say told you so, watch and learn. It will look like a melt up but will soon flop and be back to the grind down. Lots will use a melt up to exit their positions (myself included) and either hold cash or rotate sectors, in turn triggering the grind down.

Then in the following months (years?) we get to the position where the CBs are really under pressure to take more drastic action. This then leads to DBs scenario.

 

As ever, just my random thoughts and speculation. Still plenty of scope for curve balls to be thrown into the mix on this.

 

That's pretty much where I am.
I sold out everything last May prematurely, hoping for a crash, but the market has been driven by mad speculation using helicopter money and easy credit.  Hell, I have accesses to £250K credit on IB for not a lot of deposit !!!

No crash came last year so I bought back in Sept time, jst in time to catch some nice gains in oillies.

Most stuff was around the same price, some US stocks that I held had shot up but that was it.
Im happy to do the same this year
I will be 75% out by end of may with a view to buying back in come sept.
 

[HousePriceMania]

22 minutes ago, Democorruptcy said:

US inflation yesterday hadn't dropped as expected. If that makes it harder for the Fed to pivot, more likely to raise rates and the real yield on the 10yr improves (is less worse), that's not usually good for PMs. Re 'crypto-style', if people have shorted crypto maybe margin calls are making them sell their other assets like silver etc.

[HousePriceMania]

6 minutes ago, desertorchid said:

As has often happened in the past, the frustrating thing about markets melting is how smug buy to letters can merely refer to Rightmove and note how their portfolio remains insulated and highly valued and their wealth intact. Now occasionally there is a lag and some fall in house prices but property really is very attractive if you can avoid the emotional trvails of market/bond/crypto/commodity investments.

I hope they're not referring to their share price that I shorted ?

Smug you say, yes I am.

[Sidd]

48 minutes ago, kibuc said:

Silver is puking big time, crypto-style, because reasons. It's a shame I have no more dry powder.

Same boat, most funds allocated in the miners. I stopped watching, will do a DB and mow the lawn and continue life etc. I did what i had to for this year, when the miners bounced a few months back i sliced and paid 10% towards my mortgage so happy days for now. Now happy to sit and wait. Only wished i had more funds at present to buy some more telcos and insurance shares, but no harm in waiting a bit more.

[ThoughtCriminal]

There are economic bombs ready to blow up everywhere you look, but this is a big one.

 

 

[sancho panza]

1 hour ago, kibuc said:

Silver is puking big time, crypto-style, because reasons. It's a shame I have no more dry powder.

DH keeping the faith in thatvid K.The section on metals worth a lsiten if you haevn't got time for the whole lot

Interesting taking the silver miners off the Nov 18 lows,Hoch,Fres,AXU look oversold.

We're still laddering in.
DH has a great section on sentiment and talking about tops/bottoms,a good reminder sometimes