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

[Transistor Man]

[One percent]

6 minutes ago, Bobthebuilder said:

A few thread points in this aunty beeb piece. Inflation at 9% highest in 40 years, that will be 1982 then. Funny how you chaps on here were saying this a few years ago.

https://www.bbc.co.uk/news/business-61483175

 

I’m not familiar with economics but anyone with a passing knowledge of 20th century history knows that printing to infinity and beyond will at some point, lead to inflation.  

[Boon]

In a perverse way I wonder if we'll get a second round of 'it's transitory' regarding inflation? 

Might peak later this year but might drop off sharply after that. Thing is, government might proclaim this to be a massive success but the huge energy bills will still be here.

[Bobthebuilder]

2 minutes ago, One percent said:

I’m not familiar with economics but anyone with a passing knowledge of 20th century history knows that printing to infinity and beyond will at some point, lead to inflation.  

It is quite incredible really, DB and others said years ago that 9% inflation was the likely target and the cycle that started in 1982 was coming to an end, credit deflation and the reflation cycle to come.

It has been a joy reading this thread over the years.

[wherebee]

12 minutes ago, One percent said:

I’m not familiar with economics but anyone with a passing knowledge of 20th century all of fucking history such as the roman empire, the assyrian empire, the french royals, etc etc etc, knows that printing to infinity and beyond will at some point, lead to inflation.  

 

[Plan-b]

1 hour ago, Bobthebuilder said:

It is quite incredible really, DB and others said years ago that 9% inflation was the likely target and the cycle that started in 1982 was coming to an end, credit deflation and the reflation cycle to come.

It has been a joy reading this thread over the years.

@Bobthebuilder you might appreciate these song lyrics from the early 1980's, shows how history is definitely repeating itself, it's the same shit all over again...

https://genius.com/Uk-subs-warhead-lyrics

 

 

[belfastchild]

8 hours ago, AWW said:

Ah I see. So, the study didn't consider the energy expended to produce a car vs a bike, nor the fact that fit people burn fewer calories than unfit people when not exercising. It was a simple energy cost to produce, say, 1 litre of diesel vs 1 Mars Bar (or whatever).

The calculations did. Full lifecycle with annual coefficients. Granted no mention of fit vs fat (can fat ones walk 4 miles or get on a bike?).
It was also heavily weighted towards CO2 which of course was also later studied as well to only give part of the picture.

Its not that difficult to grasp when you think about it in terms of evolution and migrating to the most efficient way of doing things. Up to a point its more efficient to walk, then cycle, then get the car. Granted, the margins arent that big unless you are at the wider areas of the scale (walking 5 mins, driving 20 miles etc), but it really is the way transport etc has evolved, drive from rural location to nearest train station, everyone get the train to the city station, walk/cycle/taxi from there.

[Bobthebuilder]

9 minutes ago, Plan-b said:

@Bobthebuilder you might appreciate these song lyrics from the early 1980's, shows how history is definitely repeating itself, it's same shit all over again...

https://genius.com/Uk-subs-warhead-lyrics

 

 

https://genius.com/The-exploited-uk-82-lyrics

[MrXxxx]

10 hours ago, Chewing Grass said:

This tells me more than I knew before...

 

OK bear with me on this ramble, but this got me thinking on a number of levels..."Why is property so important?" and "Why property is important?"....everyone has a) a basic, short-term primary need for shelter i.e 'protection from the elements'/survivability, and b) a practical, secondary long-term need for shelter i.e storage of our physical assets/a 'castle' to keep our valuables in.

The primary need can be met in a fairly flexible fashion through either buying or renting, even with the weaker rental/tenant laws in the UK i.e. if you are given a months notice on your rental you can find an alternative fairly easy or worse case scenario spend a period of time in a hotel/B&B...you are mobile/flexible.

The crux of the matter is the secondary need, where we are reliant on a storage area for our physical assets/possessions that we have 'collected' over a period of time. With notice given you have to consider storage, and if you find yourself without shelter at very short notice this can be an issue. OK, you can use a storage facility but this still a) incurs expense, b) incurs a  certain amount of time commitment to organize, and so becomes an irritation/issue.

Most/the majority of these 'assets'/possession are fairly ephemeral but bulky consumerist items...we have been 'encouraged' to buy these on a whim/a desire/a spurious justification that our life will be incomplete/'less better' without them. Even furniture a most basic household item has fallen into this category, where we are encouraged to express ourselves through a design 'look', a secondary aspect, rather than its primary function. Further, being consumerist items their value over time reduces, as they are being continually replaced with 'better'/more 'up to date' versions of the same item to encourage us to replace them....so we continue to add to our 'store of assets', need more space to 'store our assets', and so incur lower levels of mobility. Consider the most unique/emotional/irreplaceable possessions that you have, are they bulky or could you fill a single box with them?

As a result of this, we have created a 'need to buy a property, to store our property', the secondary factor has become more important than the primary, and the importance of property has changed. So let's think about this rationally, what do we do with these possessions, what happens when we die, and how could this be changed?

Well we have to 'house' them, for the most part they have little value, and/or do not justify the high cost incurred via property ownership for their storage. When we die most are given away and/or dumped, with only the most valuable items being passed on/kept, and these are once again are usually the smallest...so we have spent a lifetime of storing ephemeral, consumerist, easily replaceable items at great cost, and for what?....because overtime we have become conditioned to do this through consumerism and/or societal norms of 'property ownership'; look at truly nomadic people where they seasonally have to move, do they do such a thing?

So how do we change this mindset?...a) become less consumerist, and b) rationalize our assets. The former is predicated on a reward complex, where we 'buy to feel better', so try to replace this desire by spending on experiences/memories, rather than 'Things', as the former are far easier to transport. To resolve the latter ask yourself "How often do I use it [i.e. how many times in the last year], how irreplaceable is this item, and can it be replaced with a more compact version?"...if the answer is "Never" or "Its replaceable" then dump it/give it away, if the answer is "Often" or "Irreplaceable" then put it into a single cardboard box...when the box becomes full then there will be some items that no longer fit into the "Often" [or maybe even "Irreplaceable"] category.

Finally, there is an argument of 'needing to buy a property' for a sense of stability/community in ones life. This is usually achieved through social/personal connections with others, not with owning a property. If you are able to develop strong, meaningful bonds with a few people based around emotional 'possessions' more than just physical 'possessions', then these can be enjoyed regardless of whether you own or rent.

[BadAlchemy]

19 minutes ago, One percent said:

I’m not familiar with economics but anyone with a passing knowledge of 20th century history knows that printing to infinity and beyond will at some point, lead to inflation.  

Frustrating isn't it. I often wonder if there is a big conspiracy/agenda to cover up this fact or whether journalists, and majority of people, just could not understand a simple thing like a chart of money supply going exponential, even if you shoved it in their face. I suppose TPTB need to maintain the illusion that everything is normal/under control or the currency would die very quickly. (And perhaps we should just be grateful of that and buy gold etc. while still cheap?).

BBC article, like every other idiot I talk to assures us that inflation is 'due to the Ukraine war'... and is merely a 'global ptoblem' anyway. It's like listening to the school child claiming that the dog ate their homework!

[Lightscribe]

23 minutes ago, BadAlchemy said:

Frustrating isn't it. I often wonder if there is a big conspiracy/agenda to cover up this fact or whether journalists, and majority of people, just could not understand a simple thing like a chart of money supply going exponential, even if you shoved it in their face. I suppose TPTB need to maintain the illusion that everything is normal/under control or the currency would die very quickly. (And perhaps we should just be grateful of that and buy gold etc. while still cheap?).

BBC article, like every other idiot I talk to assures us that inflation is 'due to the Ukraine war'... and is merely a 'global ptoblem' anyway. It's like listening to the school child claiming that the dog ate their homework!

My work colleagues know not to mention Brexit, Covid and War in the same breath as inflation now, otherwise they get ‘another’ 15 minute lecture as a reminder.

 

[One percent]

9 minutes ago, BadAlchemy said:

Frustrating isn't it. I often wonder if there is a big conspiracy/agenda to cover up this fact or whether journalists, and majority of people, just could not understand a simple thing like a chart of money supply going exponential, even if you shoved it in their face. I suppose TPTB need to maintain the illusion that everything is normal/under control or the currency would die very quickly. (And perhaps we should just be grateful of that and buy gold etc. while still cheap?).

BBC article, like every other idiot I talk to assures us that inflation is 'due to the Ukraine war'... and is merely a 'global ptoblem' anyway. It's like listening to the school child claiming that the dog ate their homework!

They were peddling the same lines on LBC this morning.  It’s global innit.  Well, yes, i guess it is as all western economies have been printing away.  It’s either global rank incompetence or a cabal plan. 

[DurhamBorn]

38 minutes ago, Bobthebuilder said:

A few thread points in this aunty beeb piece. Inflation at 9% highest in 40 years, that will be 1982 then. Funny how you chaps on here were saying this a few years ago.

https://www.bbc.co.uk/news/business-61483175

 

For my work,today and that headline is like when a surgeon performs a life saving operation.Decades of work and learning.The whole basis of this thread and the macro was that we were going to roll back 40 years of dis-inflation.Iv never seen so many macro indicators that were saying so on the ones i use.Yes investing and cross market is where you make your money,but the crucial work is the underlying roadmap.Im very proud of the work i did on this cycle,iv no doubt it was up there with the best macro strategists in the world,but then there arent many now.Macro tourists mostly.

Its also tinged with sadness.Millions of decent,ordinary people are suffering,and about to suffer.The cycle allowed the worst kind of polos to emerge,it allowed the left to infiltrate all institutions.I also sometimes feel my work was wasted to a large extent.I also have a feeling of "what now".I see zero understanding still of how bad this is from polos,and they are making huge policy errors.Welfare,immigration etc are some of the main problems,yet there is nobody in power saying so.

I think we look in good shape in the areas we are in still,but there is still a risk of systemic collapse.I think the most likely outcome is inflation around 5% and rates 3.5% to 4% in a couple of years,as companies onshore everywhere.

[Harley]

11 hours ago, sancho panza said:

That's why I'm a confirmed 'spray n pray'er............

Reality is that I know people who were inside Lehamn/RBS back in 07/08,helped create the crisis and still failed to see it coming.Even insiders get it wrong.

Having said that,the simple reality of life is that some traders,for whatever reason,jsut have that gift of knowing what to buy/sell and when to buy/sell.The'yre not necessairly from the best schools/unis(some of em don't even have an O' level to their name),they jsut have that skill and academics can't really explain where it comes from.

My point is that I've been floating around this here basment for some time and I've noted who has a nose for value/opportunity/skewed risk reward set up etc etc..Don't get me worng,I 100% own all our trades but I do take inspriation and creative ideas from people I perceive to have the skill outlined above either on a sectoral or macro basis.

I have no shame when it comes to stealing good ideas

Bottom line for me is I see all of this as just a skewed probability game.  You try to skew it the right way, a bit, but bottom line, that's all it is.  That's my #1 alpha.  Keeps you grounded while most "clever" people end up flying too close to the sun.

I've been doing my occasional "blank sheet" review of what I'm doing.  The number one take away is I have not fully addressed the above as it's my losses that are dragging me down.  Poor risk management because I was trying to be too clever.  Better I mechanise it as much as possible as too much "cleverness" mucks it up.

I pick well but sell badly.  How often do we hear that!

[Chewing Grass]

Well if you are monthly paid, just had your direct debits go out, been filling the car up and buying food then this is the first weekend you will be feeling 'the pinch'.

If you hit the card this month for 'essentials' then you have just doubled down on next month.

 

[DurhamBorn]

6 minutes ago, Harley said:

Bottom line for me is I see all of this as just a skewed probability game.  You try to skew it the right way, a bit, but bottom line, that's all it is.  That's my #1 alpha.  Keeps you grounded while most "clever" people end up flying too close to the sun.

I've been doing my occasional "blank sheet" review of what I'm doing.  The number one take away is I have not fully addressed the above as it's my losses that are dragging me down.  Poor risk management because I was trying to be too clever.  Better I mechanise it as much as possible as too much "cleverness" mucks it up.

I pick well but sell badly.  How often do we hear that!

Early selling has cost me huge amounts over the years,im better now,but it still happens too regular.I find it happens when one of my biggest holdings runs hard.Suddenly they move into double figures of wealth and others hit ladders so you sell.I tend to slice now instead and iv found that works better for me.

[Democorruptcy]

38 minutes ago, Plan-b said:

@Bobthebuilder you might appreciate these song lyrics from the early 1980's, shows how history is definitely repeating itself, it's same shit all over again...

https://genius.com/Uk-subs-warhead-lyrics

 

 

Given the money we are sending to Ukraine while people here can't afford energy, NHS waiting lists, etc. this is an appropriate 80's song:

Quote

 

You choose your leaders and place your trust
As their lies wash you down and their promises rust
You'll see kidney machines replaced by rockets and guns
And the public wants what the public gets
But I don't get what this society wants

https://lyricfinder.org/lyrics/949182/the-jam?track=going-underground

 

 

 

 

 

[Axeman123]

9 hours ago, AWW said:

Ah I see. So, the study didn't consider the energy expended to produce a car vs a bike, nor the fact that fit people burn fewer calories than unfit people when not exercising. It was a simple energy cost to produce, say, 1 litre of diesel vs 1 Mars Bar (or whatever).

No idea, it was just my first thought. I haven't even read the study, just chipping in.

Various search results give a number of around eight thousand nutritional calories equivalent in a litre of diesel. At 2000 calories a day that would sustain a human for four days, if the human body could process it directly. Alas we have to process it through agriculture etc first, with massive losses at each step.

[Chewing Grass]

@DurhamBorn did you spot Paul McCartney...

[Noallegiance]

[Majorpain]

https://www.constructionenquirer.com/2022/05/18/british-land-expects-tender-price-inflation-to-hit-10/

Quote

In its result statement to the city this morning British Land said: “Our inflation forecast (based on tender price inflation) has increased to around 8-10% in 2022 from our previous forecast of 4.5%, but we expect that to moderate over the next 18 months as wages and commodity prices remain elevated but do not increase at the same rate.

“Our forecast for 2023 and 2024 is around 4-5% (from 3.5%). We expect the rate of increase to moderate and capacity to emerge as some development projects in the market are deferred or cancelled.

Developer targeting cost increases of 10% this year and falling to around 5% from next year as was predicted here.

[baffledbyzirp]

1 hour ago, Boon said:

In a perverse way I wonder if we'll get a second round of 'it's transitory' regarding inflation? 

Might peak later this year but might drop off sharply after that. Thing is, government might proclaim this to be a massive success but the huge energy bills will still be here.

Has anybody else spotted that 'transitory' is an anagram of 'start irony'?

Inflation in its simplest form is a ratio of goods : money. If you massively increase the denominator, prices reflect the relative size adjustments. In the first round we saw inflation in financial assets because the helicopter dumped its payload on Wall Street. In recent years cash was distributed at the base through policies including stimulus cheques and bounce back loans. The Cantillon Effect was demonstrated perfectly. If you give hand outs to the wealthy it isn't spent on milk and heating bills. We are seriously behind the curve and the feedback loops, in the form of increased wages, will become self-perpetuating.

In the early noughties Greenspan was shocked that wage rates were resistant to change but people were anxious due to the dotcom bust, 911 and the subsequent wars. There was also sufficient slack in the system to favour employers. Now there are supply side constraints that strengthen the hand of workers and no more cheap labour from Europe; our working class has gone home. We could see a sustained period when wages play catch up with prices and vice versa until someone has the balls to employ a circuit breaker. In the meantime I like oil, commodities, utilities, insurers, telecoms and fags i.e. the things you can't live without regardless of price.

 

[Sasquatch]

Currently assessing a tender for a construction project for a client. General rates (and therefore the overall cost) are about 10% up on tenders from around 6 months ago. I always carefully check back like for like items such as concrete per m3, steel per tonne etc etc. For this particular tender we had 5 prices in from builders and a spread from bottom to top of 53% .

I've got stacks of cost data and would need to do some more number crunching but I'm reasonably confident that in our small part of the construction world, we have seen at least a 20% increase in the last 2 years. 

Builders are still very busy and worried about future price increases so that might be slightly distorting current figures. Even so, it's eye watering stuff.

[Harley]

52 minutes ago, BadAlchemy said:

Frustrating isn't it. I often wonder if there is a big conspiracy/agenda to cover up this fact or whether journalists, and majority of people, just could not understand a simple thing like a chart of money supply going exponential, even if you shoved it in their face. I suppose TPTB need to maintain the illusion that everything is normal/under control or the currency would die very quickly. (And perhaps we should just be grateful of that and buy gold etc. while still cheap?).

BBC article, like every other idiot I talk to assures us that inflation is 'due to the Ukraine war'... and is merely a 'global ptoblem' anyway. It's like listening to the school child claiming that the dog ate their homework!

People work in cognitive boxes.  Every now and then their boxes get kicked along and things break inside.

[snaga]

1 hour ago, Boon said:

In a perverse way I wonder if we'll get a second round of 'it's transitory' regarding inflation? 

Might peak later this year but might drop off sharply after that. Thing is, government might proclaim this to be a massive success but the huge energy bills will still be here.

inflation is always transitory, whether it's 6 months or 60 years is anyone's guess.