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

[Bilbo]

48 minutes ago, sancho panza said:

I think council tax is the real problem here as central gvot has little control over how the local loons blow their budgets but central govt will get the bill when it goes worng.

We need some of these councils to start going bust soon and give the govt a wake up call.

As the FT chap says,much likely more than 12 in deep trouble.Post below on Croydon council which is in deep trouble having invested in a hotel(in administration) and shopping centres.

https://www.ft.com/content/600882a5-51cd-43bb-8f6f-c8283b4a7000

 

 

https://www.instituteforgovernment.org.uk/blog/croydon-councils-bankruptcy-warning-uk-government

Croydon also invested to buy commercial properties – ranging from a shopping centre to a hotel – in the hope of generating a steady stream of rental income to supplement locally-raised tax revenue and central government grants. While this strategy might have worked prior to coronavirus, closures during the pandemic sharply reduced the income they received from these investments. The Croydon Park hotel, acquired in September 2018, went into administration in June this year, and the Colonnades retail park, acquired in May 2019, closed in March 2020

Labour Slough Council Bankrupt and now in special measures due to property purchases.

https://www.telegraph.co.uk/business/2021/10/26/labour-controlled-council-taken-property-bets-leave-100m-black/

 

[DurhamBorn]

51 minutes ago, Harley said:

Talking of which what happened to Orange's cash flow.  Operating looks fine on the surface but dig down and true operating is well down but compensated by an equal rise in non cash items.  

Lots of lumpy payments from people who co fund fibre builds etc.They bought out a telco in Romania as well,could of been some,and they bought out their partner in Orange Bank.Results very decent and fully expect steadily increasing cash from here.

They look in a good place.

[Loki]

1 hour ago, Cattle Prod said:

I'm up to the gunwales in OTM GDXJ Jun 22 calls, FWIW. 

Are you tempted to trade WTI in the bust? 

[Harley]

14 minutes ago, DurhamBorn said:

Lots of lumpy payments from people who co fund fibre builds etc.They bought out a telco in Romania as well,could of been some,and they bought out their partner in Orange Bank.Results very decent and fully expect steadily increasing cash from here.

They look in a good place.

Cash flow TTM net income down yoy from 5bn to 1.4bn!  Compensated by non cash items from -0.7bn to 2.4bn and a swing in working capital so "you" wouldn't notice a change in the summary Funds From Operations figure.  That sort of stuff sets off my alarm.

[Hancock]

You'd think Elon would be aware that he has been getting handed other peoples money via ZIRP and printed money for the last decade or more.

https://www.telegraph.co.uk/world-news/2021/10/27/joe-biden-democrats-vow-make-billionaires-cry-new-tax-super/

[ThoughtCriminal]

3 hours ago, Cattle Prod said:

He's talking about a short term pullback before more melt up.

I know, i wasnt referring to BK. 

 

It was the fact we'd reached one of his long predicted milestones that i thought was interesting. 

[Eventually Right]

30 minutes ago, Hancock said:

You'd think Elon would be aware that he has been getting handed other peoples money via ZIRP and printed money for the last decade or more.

https://www.telegraph.co.uk/world-news/2021/10/27/joe-biden-democrats-vow-make-billionaires-cry-new-tax-super/

 

 

And that’s on top of the government subsidies for electric car buyers, that allowed Tesla to be remotely viable for years…

[Lightscribe]

Not sure if anyone posted this earlier, but she’s on the ball and my type of woman. Financially savvy and got great physical er..assets for the… erm inflation cycle. 

[Eventually Right]

2 hours ago, Cattle Prod said:

I'm up to the gunwales in OTM GDXJ Jun 22 calls, FWIW. 

What kind of strikes, if you don’t mind me asking?

I’ve got a lot of $50 January 2023s, but already wanting to roll them to January 2024’s for less risk.

Spreads on most of the 2024s are massive at the moment though.

[Hancock]

46 minutes ago, Eventually Right said:

And that’s on top of the government subsidies for electric car buyers, that allowed Tesla to be remotely viable for years…

A few billion should surely be enough for 1 man to live a fulfilled life and create anything he desires.

$250bln is an absurd sum of money, and is why we are where we are ... with too much from the workers handed directly to the 1%ers.

Even if he lost 99% of his wealth im sure he'd manage with a mere $5bln.

[desertorchid]

1 hour ago, Hancock said:

A few billion should surely be enough for 1 man to live a fulfilled life and create anything he desires.

$250bln is an absurd sum of money, and is why we are where we are ... with too much from the workers handed directly to the 1%ers.

Even if he lost 99% of his wealth im sure he'd manage with a mere $5bln.

To be fair the 1% idea is a misnomer. It's more like the 0.001%. This is the group with the billions, this is the group with influence and power in business and politics. 2-3 million quid puts you as a 1%er. That may give you a certain freedoms, but I do not think you're a primary cause of the West's problems right now.

[Noallegiance]

3 hours ago, Lightscribe said:

Not sure if anyone posted this earlier, but she’s on the ball and my type of woman. Financially savvy and got great physical er..assets for the… erm inflation cycle. 

Danielle DiMartino Boobs

[Mapper]

2 hours ago, Noallegiance said:

Danielle DiMartino Boobs

I wonder how much her assets have grown in this era of easy money.

[Mapper]

It's the gift that keeps on giving.

Happy to oblige ladies. Who wants to go first?

[ThoughtCriminal]

7 hours ago, Cattle Prod said:

I didn't hear him talk about a short term pullback till recently?

Its a good while back now that he first mentioned it. You clearly dont live on twitter like me. 

 

Lucky bastard 😂

[MrXxxx]

9 hours ago, Lightscribe said:

Not sure if anyone posted this earlier, but she’s on the ball and my type of woman. Financially savvy and got great physical er..assets for the… erm inflation cycle. 

Knees are a bit knobbly!

[HousePriceMania]

https://www.bloomberg.com/news/articles/2021-10-28/repsol-boosts-buybacks-as-profit-jumps-on-oil-s-recovery

Repsol profits jump....

Anyone buying ?

 

Market Summary > Repsol SA

11.05 EUR−0.41 (3.61%)today

28 Oct, 10:26 CEST ·Disclaimer

BME: REP

[Barnsey]

Thought Sunak presented a decent budget yesterday even though I gain next to nothing. VERY interesting comment in the speech about reaffirming the Bank of England's mandate to control inflation.

[geordie_lurch]

This seems important via Zerohedge here

"No need to fear a taper tantrum, they said. It's all in the price, they said. Central banks have made it very clear what they are doing and there will be no surprises, they said.

Well, they - as usual - were full of shit, because moments ago this is what happened in Australia where the central bank unexpectedly did not offer to buy the April 2024 yield target bond: the yield on the 2Y bond just exploded, doubling in the matter of minutes from 25bps to 50bps as the central bank's 0.1% yield curve control was summarily executed in broad daylight.

 

This was a VaR shock inducing, bond crushing 5-sigma move, and the biggest one day surge in 2Y yields since the Lehman crisis!

Heading into the Thursday session, markets were expecting the RBA to buy the April 2024 bond in order to contain the recent blow out in yields, which had moved far beyond the central bank's official 0.1% YCC barrier in the past day. However, the central bank shocked traders when it decided against buying any of the target bond, telegraphing that its Yield Curve Control - at least on the short end - is now, for all intents and purposes, over.

Not only will the move fuel expectations for Governor Lowe to entertain the idea of an earlier rate hike, but it will reprice the entire short-end of the Australian yield curve, which will soon pancake in preparation for the coming inversion, which in turn will lead to shockwaves that will be felt in Europe and the US as soon as tomorrow, pouring even more fuel on the recent short-end fire that today sent the US 2Y above 50bps , and was at 0.52% at last check moments ago"

 

[Festival]

On 26/10/2021 at 18:32, Harley said:

Just a follow up on planning.  Another to follow with DB's inflation numbers.  I wanted to post this as I've been looking at online pension drawndown calculators.  There are loads, although many are rubbish (even from some large providers) because they ignore inflation, etc!  All just an FYI, DYOR, information purposes only, just what I'm currently assessing, comments welcome, no liability accepted, etc!

Personally, I liked the following one because it seems to use the same maths as I was using in Excel:

https://www.noelwhittaker.com.au/resources/calculators/retirement-drawdown-calculator/

It's for use from when you are about to retire so any accumulation period before that needs to be worked on separately.  I attach a screen shot where I assumed a day 1 pension pot of £400k, 8% inflation, a mere 2.25% investment return, and £10k pre tax drawings per year (so excludes other income such as the state pension).  No, I don't have £400k, I just wanted to keep the maths easy (see later)! 

So that'll last 20 and a bit years, assuming many things like no BK!  I knew that using my prior formulae.  You can play with any variable at a time.  I used a 2.25% rate of return based on the average of the following assumed portfolio mix: Hard Assets (5%), Equity (3%), Bonds (1%), and cash (0%) where each asset class was 25% of the total portfolio (i.e. The Permanent Portfolio).  That's how I derisk the portfolio (e.g. reduce the impact of a BK).  What I like is being able to use those returns to drive my investing goals - that is, not take on more risk than is needed.  I could also adopt a different approach and do separate calculations for a floor v upside portfolio approach where I use a low return for the essential floor and a higher return for the discretionary upside.  The point being I can slice and dice my portfolio and run the calculator on each segment.  I could also use different inflation rates for the 20 year period I'm targeting but then I would need DCF calcs to discount the results back to year one monies.

PS:  Compounded inflation:  Note how £10k pa in year one at 8% annual inflation becomes £50k after 20 years.

 

Its a really good calculator for illustrating how inflation destroys your capital sum towards the back end of the cashflow as the year on year increase in expenditure eats away at your investments if inflation runs. 

I run a form of Harry Browne's personal portfolio although skewed towards the reflation shares and gold discussed here and away from bonds. I think this has the effect of reducing volatility but also reducing long term returns as well because I probably hold too much cash over the long term. It makes me quite sanguine about what long term returns you can achieve vis a vie what many financial advisors would assume. I think this choice lowers my long term returns by 1-2% p.a.

The one thing the calculator doesn't take into account is the tendency for annual expenditure to fall as you get older. Our budget has fallen by about a third in the last decade or so in part because 3 kids have now departed, and in part because we are more frugal and questioning of where we spend money vs the actual enjoyment you get from spending. I can only imagine spending less still in retirement and less still once your health starts to decline. I don't know how to model this effect in the calculator given the inflation is still there but annual expenditure is declining at the same time.

 

 

[jamtomorrow]

37 minutes ago, geordie_lurch said:

This seems important via Zerohedge here

"No need to fear a taper tantrum, they said. It's all in the price, they said. Central banks have made it very clear what they are doing and there will be no surprises, they said.

Well, they - as usual - were full of shit, because moments ago this is what happened in Australia where the central bank unexpectedly did not offer to buy the April 2024 yield target bond: the yield on the 2Y bond just exploded, doubling in the matter of minutes from 25bps to 50bps as the central bank's 0.1% yield curve control was summarily executed in broad daylight.

 

This was a VaR shock inducing, bond crushing 5-sigma move, and the biggest one day surge in 2Y yields since the Lehman crisis!

Heading into the Thursday session, markets were expecting the RBA to buy the April 2024 bond in order to contain the recent blow out in yields, which had moved far beyond the central bank's official 0.1% YCC barrier in the past day. However, the central bank shocked traders when it decided against buying any of the target bond, telegraphing that its Yield Curve Control - at least on the short end - is now, for all intents and purposes, over.

Not only will the move fuel expectations for Governor Lowe to entertain the idea of an earlier rate hike, but it will reprice the entire short-end of the Australian yield curve, which will soon pancake in preparation for the coming inversion, which in turn will lead to shockwaves that will be felt in Europe and the US as soon as tomorrow, pouring even more fuel on the recent short-end fire that today sent the US 2Y above 50bps , and was at 0.52% at last check moments ago"

 

 

[moneyscam]

1 hour ago, geordie_lurch said:

This seems important via Zerohedge here

"No need to fear a taper tantrum, they said. It's all in the price, they said. Central banks have made it very clear what they are doing and there will be no surprises, they said.

Well, they - as usual - were full of shit, because moments ago this is what happened in Australia where the central bank unexpectedly did not offer to buy the April 2024 yield target bond: the yield on the 2Y bond just exploded, doubling in the matter of minutes from 25bps to 50bps as the central bank's 0.1% yield curve control was summarily executed in broad daylight.

 

This was a VaR shock inducing, bond crushing 5-sigma move, and the biggest one day surge in 2Y yields since the Lehman crisis!

Heading into the Thursday session, markets were expecting the RBA to buy the April 2024 bond in order to contain the recent blow out in yields, which had moved far beyond the central bank's official 0.1% YCC barrier in the past day. However, the central bank shocked traders when it decided against buying any of the target bond, telegraphing that its Yield Curve Control - at least on the short end - is now, for all intents and purposes, over.

Not only will the move fuel expectations for Governor Lowe to entertain the idea of an earlier rate hike, but it will reprice the entire short-end of the Australian yield curve, which will soon pancake in preparation for the coming inversion, which in turn will lead to shockwaves that will be felt in Europe and the US as soon as tomorrow, pouring even more fuel on the recent short-end fire that today sent the US 2Y above 50bps , and was at 0.52% at last check moments ago"

 

Hmm, seems to me Australia is a test ground for more than authoritarian vaxx mandates / lockdowns. Could this be the opening move to ratchet up rates which then cause defaults in their overleveraged bubblicious housing markets so that Blackrock etc can come in and pick these assets up for pennies on the dollar? And then will they rent these properties back to them but only as long as they're quadrillion jabbed and signed up to digital ID / social credit score? Great reset incoming!

Or maybe I'm just being a conspiracy loon but it is very strange for a central bank to say it is employing YCC and then trash it soon after. Bears keeping an eye on.

[Axeman123]

50 minutes ago, jamtomorrow said:

 

I think this is a deliberate signal of changing tides. Expect a roll out of similar globally. Inflation leaves no alternative to ending QE and raising rates, and governments are just going to have to tough out any taper tantrum type response. Really positive sign for the thesis of this thread.

[HousePriceMania]

I view the western central bankers as a cartel, they have clearly been working in unison with interst rates, QE, reponse to the housing bubbles, response to CV19 etc, but are they starting to break ranks or is all this being orchestrated ?

If it is being orchestrated, what are they up to, asset crash and grab ?

[HousePriceMania]

6 minutes ago, moneyscam said:

 

Or maybe I'm just being a conspiracy loon 

If everyone agrees then are you still a loon ?  I seem to be a loon too.