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

[Plan-b]

11 minutes ago, Jesus Wept said:

Time to go long on Turnips. They’ve dropped 50% ! (36p to 18p on a yellow reduced sticker !). 
 

https://www.bbc.co.uk/news/business-61813857

Consumer crash and big deflation demand crunch coming? 

 

 

Working Just as Intended - Demand Destruction, works better than interest rate rises. 

BoE

[JMD]

16 hours ago, Axeman123 said:

 Sounds like Dave's doubling down... but always getting more and more extreme..... What next?                                                                                                                                                                         

[Plan-b]

The start of the Summer of Discontent?

https://12ft.io/proxy?q=https%3A%2F%2Fwww.ft.com%2Fcontent%2Ffd9a35f0-a061-44dc-a076-8496cfb27373

[Loki]

5 minutes ago, JMD said:

 Sounds like Dave's doubling down... but always getting more and more extreme..... What next?                                                                                                                                                                         

That's near enough 100% increase needed on the NASDAQ 

[ILikeCake]

Is now the time to buy some IBTL for a while rather than sitting in cash?

[ThoughtCriminal]

Very interesting thread and video interview.

 

Basically, green energy transition isn't happening. No ifs, no buts, no maybes. It's impossible.

[belfastchild]

25 minutes ago, Jesus Wept said:

Time to go long on Turnips. They’ve dropped 50% ! (36p to 18p on a yellow reduced sticker !). 
 

https://www.bbc.co.uk/news/business-61813857

Consumer crash and big deflation demand crunch coming?

 

Just been buying a fair few things on ebay again. Prices have dropped and anything buy it now is added to my list and within a day or two I get an offer on it. Watched a tool I dont really need for the garage go from 125 quid slowly up to 170 over the last year or more. Got an offer on it yesterday for 140 with next day delivery free.
Bought another merino/cashmere jumper for less than a tenner, bought the nephews and nieces some good quality older hardly used outdoor clothing for less than decathlon etc prices and debating a couple of offers on telescopes (although prices are still higher than when I first listed them 3 years ago, although the offers are bringing them close).

[HousePriceMania]

12 minutes ago, ILikeCake said:

Is now the time to buy some IBTL for a while rather than sitting in cash?

Good question?

Anyone knowledgeable on this ?

[Axeman123]

5 hours ago, Virgil Caine said:

The FOMC meets 8 times a year so they normally don’t have the opportunity to change rates every month

If you have near ZIRP then almost any interest rate rise is going to look massive percentage wise. The truth is historical interest rates averages have been much higher than they are now. Even in the first decade of the 21 st century they were higher than than the current figure so the predicted rise to 3.5% seems a return to the pre 2008 crash norms. The problem with low interest rates is it positively encourages people to speculate on asset price inflation rather than productivity, profits and share dividend yield.  In fact they almost guarantee malinvestment and bubble economics where money will ultimately be lost.  If businesses can not turn enough profit to accommodate 3% interest rates then they absolutely deserve to go bust.

100%. As you say the fed doesn't meet every month, August and October have no meetings for example. Their remaining chances to raise before the Nov 8th mid-term elections are July/September/November 2nd. I feel we can confidently discount at least November, and almost certainly Spetember, due to political considerations. December (if control of one or both houses changes) would also be unlikely, simply because that change would potentially have very big economic effects that would need consideration.

I agree that rates at 1.75% would be considered incredibly loose by historic standards, but at the same time for an economy hooked on near-ZIRP that is still going to cause a calamity. The real policy error was entering the Hotel California of ZIRP, of course. Checkout any time you like, but you can never leave...

[Noallegiance]

11 minutes ago, ThoughtCriminal said:

Very interesting thread and video interview.

 

Basically, green energy transition isn't happening. No it's, no bits, no maybes. It's impossible.

One would assume that people of this calibre have been consulted somewhere along the way...........surely..........

[DurhamBorn]

1 hour ago, Jesus Wept said:

That’s a very interesting take on it. 

Like you I have a fairly substantial holding in BAT and bought around 2550p a few times a across the various ISAs  - so up about 31% as of this morning. 

My T and VZ are showing a slight loss (5%).

Whats your thinking about selling these US telcos. Just plain overvalued? Still ? They’ve dropped massively over the last few years. Dividends have been fairly good. 5-6% 

The European telcos are all up 10-15%. 

Why the differentiation between the US and European telcos ?

I was going to take profits in Europe and ladder down on AT&T and Verizon ….if they experience further big falls in the general sell off. The opposite thinking to you. 
 

Interesting looking back…

 

 

Edited to add: Just put Turkcell on my watch list after having a look at it. 
Fallen 80% from an $11 high 5 years ago. How did you hear about this one? 

Was on my radar but Steve Kaplan brought it front and centre.I like US telcos like all telcos,but my work is saying sterling is going up against the dollar,i know im alone in the world on that,but thats what my model is showing.So not sure a 15% reverse in exchange is worth trying to outrun on telcos.Turkcell is ADR of course,but on a weaker dollar should far exceed cable/dollar.Turkcell is on a roughly 7.3% yield at todays prices,i think divs are usually August on them.

[Eventually Right]

17 minutes ago, JMD said:

 Sounds like Dave's doubling down... but always getting more and more extreme..... What next?                                                                                                                                                                         

What else can he do at this point?

Come out and say "oh, that massive melt-up I've been calling for for years, yeah, that's not gonna happen"

I'd love to see the twitter firestorm after that...

 

[Axeman123]

28 minutes ago, ILikeCake said:

Is now the time to buy some IBTL for a while rather than sitting in cash?

FYI: If you were expecting the dollar to weaken at the same time as US treasury yields fall you would have the option of IDTG, which is a currency hedged version of IBTL.

[BurntBread]

23 minutes ago, DurhamBorn said:

Was on my radar but Steve Kaplan brought it front and centre.I like US telcos like all telcos,but my work is saying sterling is going up against the dollar,i know im alone in the world on that,but thats what my model is showing.So not sure a 15% reverse in exchange is worth trying to outrun on telcos.Turkcell is ADR of course,but on a weaker dollar should far exceed cable/dollar.Turkcell is on a roughly 7.3% yield at todays prices,i think divs are usually August on them.

DB, one of your key skills (in addition* to FX, central bank liquidity strategy, business analysis, royal succession** and pizza) is riding the wave of the Cantillon effect through the different sectors. Thus, when you worry about cable hurting the US telcos, is that just over a relatively short period of a few months, or do you think it damages them as a long-term (multi-year/decadal) investment?

* It's always a bit of a puzzle whether you are one person, or a kind of Nicolas Bourbaki-esque front-man.

** I'm in the middle of reading a book about the succession crisis of Edward IV, and it's starting to look like the current crop of royals might not have a leg to stand on, so to speak.

 

[Calcutta]

3 hours ago, JoeDavola said:

Agree it seems the overall economic outlook for house prices is worse than 2008 because of the inflation. 

However here in NI ever since the pandemic started there has been very few houses coming on the market especially desirable houses in decent nick. And things have stayed quiet since the pandemic ‘ended’.

Add to this the fact that there’s virtually no house building happening. And the population of NI rising.

The situation seems to be that most people that bought a few years back can’t afford to ever move up the ladder now and in many situations couldn’t afford thhe house they’re in at todays prices; so there’s no housing ‘ladder’ any more.

So we have such a severe lack of supply both in sales and rentals that people can ask whatever price they want and someone will at least be trying to pay it if they can get the credit. A lot of cash buyers out there too.

I guess what I’m saying is instead of a reduction in house prices we could have a continual reduction in volume of sales as fewer folk than ever can afford to buy or afford to move.

I've got what was once the UKs biggest building site knocking up thousands of new houses right next to where I'm sat. It's handy for work, if they do BOGOF in a year or two I might be tempted. 

 

As for Avon, they've been winding down for years. Only decent thing to come out of there was the Scottish insult "Yer Da sells Avon". 

The markets? 3% down one day, 0.01% recovery the next. Standard. It could continue for a couple of years or collapse in a big burning heap around mid September. 

The big question to my mind is how much are people willing or able to lose on the FAANGs and BTC until it breaks something and everyone pulls out at the same time. History tends to suggest that'll happen. 

[JoeDavola]

6 minutes ago, Calcutta said:

I've got what was once the UKs biggest building site knocking up thousands of new houses right next to where I'm sat.

Yeah in a matket where there's a lot of building happening, I can see there being a problem, if not a crash then severe difficulty selling the houses.

The crash in 08 in NI had lots of newbuilds being sold by the builders at a fraction of what they had been sold for a few years earler. My folks bought a house from the builder at £170K and the identical house next door had been bought for £320K.

I know of someone else who bought a repo for £315K that had been originally sold for £700K as a newbuild.

[Loki]

13 minutes ago, BurntBread said:

It's always a bit of a puzzle whether you are one person, or a kind of Nicolas Bo

We have a blurry photo of a man cutting an over grown hedge down. You can't fake that sort of thing 

[ashestoashes]

3 hours ago, JoeDavola said:

There were many repos in 08-12 crash but I can’t see the gov of today letting that happen.

However anecdotally I am seeing sales fall through here and hearing stories of quite extreme borrowing to get on the ladder eg a 45 year old trying to get a 30 year mortgage.

you do know banks and investors are setting up to take property off distressed owners and rent it, so expect some economic shock that will make people unable to afford to own their homes or unable to remortgage

[JoeDavola]

3 minutes ago, ashestoashes said:

you do know banks and investors are setting up to take property off distressed owners and rent it, so expect some economic shock that will make people unable to afford to own their homes or unable to remortgage

I knew that was the case in America, wasn't sure if that was true in the UK.

It also depends on the kind of house - if it's a 5 bed terrace it can be rented as an HMO slum; lots of the houses coming on the market are falling to bits and only have two decent bedrooms so the rental returns vs cost of maintenance aren't great.

[Lightly Toasted]

4 hours ago, DurhamBorn said:

Notice how they mention 60 different items needed for lipstick and running out.Thats the key.If they made most of them themselves they would be fine.40 years of outsourcing all the bits to cheap countries and just putting them together is hammering them.We were right on here to try to mostly stick to de-complex,or at least consider it in every buy.

I fear we've hit "peak complexity", the point at which our ability to manage and fund (resource) the complex and inter-dependent systems we've created, is no longer equal to the task. In a previous civilisation this might have been reliance of irrigation to leverage more food from the available land, with some event stopping the irrigation from working and leading to the whole thing unwinding: less food -> fewer workers -> can't fix the irrigation -> less food; iirc Niall Ferguson discussed this in one of his books.

4 hours ago, wherebee said:

those sort of numbers, if you are running as a full time business with staff, accountants, etc, then that's great!

But... I suspect these fuckwits are one or two man bands and once the non payment of rent starts climbing, and the input costs start rocketing.... they are fucked.

Paul Getty supposedly said, “If you owe the bank $100, that's your problem. If you owe the bank $100 million, that's the bank's problem” ... might as well be hanged for 1000 sheep as for a lamb.

I wonder how clever these landlords have been in terms of creating personal protective structures. It's possible that they'll be better off than the little guy & his family who gets foreclosed and evicted.

[HousePriceMania]

7 minutes ago, ashestoashes said:

you do know banks and investors are setting up to take property off distressed owners and rent it, so expect some economic shock that will make people unable to afford to own their homes or unable to remortgage

Have you missed the last 22 years ?

[ThoughtCriminal]

🤣🤣🤣🤣🤣🤣🤣🤣🤣

[Democorruptcy]

13 hours ago, AWW said:

I sold out of half of my oil positions earlier in the week when the markets were being rather generous. I sold out of the other half today because it seems that western govts are even more clueless than I thought. They'll need a scapegoat and they've chosen the oil companies. Some risks can be quantified and an informed decision made about how big to bet. The risk posed by the clowns operating the levers of power in ours and other countries can't.

Of course, the question now is what to do about sitting in cash that's losing 10+% purchasing power annually.

Any views on any money market funds to park money rather than hold cash?

I created a watchlist of stuff like that a bit back but a lot have fallen by the wayside. Admittedly this one has the dreaded word "sustainable" in it. It features on HL's top Wealth Funds because they say

Quote

This fund is on the Wealth Shortlist of funds our analysts believe have the potential to outperform their peers over the long term. However, this is not a recommendation to buy.

We like the fund managers' relatively conservative approach. Sajiv Vaid and the team at Fidelity aim to provide a decent level of income, offer some stability in turbulent times, and perform differently to funds focused on shares. This means it could appeal to investors looking for income, and offer some diversification to a portfolio invested mostly in the stock market.

The approach means the fund is unlikely to be the highest-yielding corporate bond fund. But it could help the managers navigate the fund through a variety of market conditions. We think that over the long-term it has the potential to offer a good balance between delivering a good income, achieving some growth, and not taking excessive risk. It's also available to HL clients with low ongoing charges.

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/f/fidelity-sustainable-moneybuilder-income-class-w-income/research

Does this chart depict the write up, for a supposedly best of the best safe wealth fund? Anybody entering that at the start of the year can't be too happy?

 

[Eventually Right]

22 hours ago, DurhamBorn said:

Lots of things.CBs look like they want to slow consumption while still letting governments run deficits,that means inflation higher than rates for much longer.Lots of things getting in place for silver.Problem is im usually ready with the stocks to pull the trigger,but im not,need to do some work to decide where to allocate.Im not sure yet if to chase multi bagger smaller stocks or just go PanAmerican silver etc.Telcos are holding very nicely as hoped,but i might sell my yank telcos for a small profit and move that to miners as well.Im got ladders in many stocks i want for mid cycle and dont want to remove them.Lots of doom out there as usual,but seems here without running numbers they are trying for rates 3.5% inflation 5%.Could be around 18% more real loss over 3 years.

Are you tempted by the streamers/royalty cos at all DB?

I listened to a Lyn Alden podcast the other day, and something she said struck a chord-to paraphrase: "if you're bullish precious metals, and bearish energy, look at the miners, if you're bullish on energy look at the royalty companies"

If silver (and gold) go nuts, then I figure energy, or any other costs, won't matter-silver at $40 or $50 will overpower all that, and make miners multi-bag. But if energy/skilled labour costs etc also balloon, margins won't expand by as much as expected.  Plus, miners have additional risks (accidents/labour strikes/permitting problems/revised resource estimates/potential windfall taxes etc).

When I look at Wheaton's share price performance over the last 5 years (96% up) compared to some of the mining etfs (GDXJ 10%, SILJ -13%, SIL -17%) it does make me wonder whether the risk/reward is better in the royalty cos.  But I guess the other way to look at the figures above would be, "If we do get a bull run in PMs, and money finally starts to move to the sector, are the miners so beaten down that they go parabolic?"

[leonardratso]

wasnt woodford one of HL's wealth funds?