Credit deflation and the reflation cycle to come (part 5)

[Loki]

43 minutes ago, Yadda yadda yadda said:

I had never heard of the Bank of London until today. Apparently it was set up in 2021. I wonder who is behind it.

 

Is that like the "City of London", its own jurisdiction etc 

[Democorruptcy]

A bit of red in here

 

[Axeman123]

If ever there was a time to be in a too big to fail bank this is it, I expect every small bank will face outflows and be forced to chrystalise losses on Treasury holdings.

[darkmarket]

7 minutes ago, DurhamBorn said:

zero affect,it hasnt gone up ins smoke,its moved to someone else.Liquidity moves thats all.They lend to people with no free cashflow mostly so as rates increase those struggle more and more to pay back the loans.The money was loaned to the companies who paid their staff who bought / put fuel in their cars etc.It just moves.Inflation cycles send all the money to the de-complex areas.Of course in time thats just as bad because once the distribution cycle distributes all the other savings and assets the whole thing collapses,but there are trillions and trillions of housing,bond and bubble wealth to distribute yet,the inflation areas have just had the first look at the summit of Everest from Pang La,they have a long long way to go yet.

The sense in which it could be said to have gone up in smoke may be the margin call and liquidation effect. The money existed on the assumption of collateral for a highly leveraged position retaining its value. In turn, that rested on the assumption that Powell wouldn't raise rates so aggressively,  or would pivot.

I found it interesting that Sam Altman called on depositors to withdraw. Given his authority, that was enough to ensure the bank wouldn't survive Friday. My sense is that he was playing poker with Powell: by creating a bank failure, his hope would have been that Powell would be forced into that pivot or a return to QE. As you well know, many of Silicon Valley's business models depend on low rates as companies run at a loss for extended periods until they kill the incumbents.

So for the moment, as in the liquidation of a leveraged position, there is an immediate removal of liquidity from the system. We'll learn more about what that liquidity was underpinning as events unfold, but I suspect Mandelson's sudden involvement to indicate that the UK concern is the health of its onshore and, more significantly, offshore financial services industry.

[Lightscribe]

58 minutes ago, Noallegiance said:

The irony of that chart being for a 'stable' coin.

It’s a ‘tether’ equivalent pegged to the US $. That goes so does the whole of crypto.

 

[Sidd]

2 hours ago, ThoughtCriminal said:

Look at the fucking cunts on that thread demanding SVB be bailed out. Their love of capitalism is a mile wide and inch deep.

 

I'd hang them next to the bankers.

I have actually tried to take any emotional side out of all these bits of news. Now I just try to understand what is their next move (be it bank bail outs out or endless house price support) and worry about how it impacts us, how we protect our wealth and how we can make money out of it. Every event is just another investment opportunity.

[DurhamBorn]

39 minutes ago, darkmarket said:

The sense in which it could be said to have gone up in smoke may be the margin call and liquidation effect. The money existed on the assumption of collateral for a highly leveraged position retaining its value. In turn, that rested on the assumption that Powell wouldn't raise rates so aggressively,  or would pivot.

I found it interesting that Sam Altman called on depositors to withdraw. Given his authority, that was enough to ensure the bank wouldn't survive Friday. My sense is that he was playing poker with Powell: by creating a bank failure, his hope would have been that Powell would be forced into that pivot or a return to QE. As you well know, many of Silicon Valley's business models depend on low rates as companies run at a loss for extended periods until they kill the incumbents.

So for the moment, as in the liquidation of a leveraged position, there is an immediate removal of liquidity from the system. We'll learn more about what that liquidity was underpinning as events unfold, but I suspect Mandelson's sudden involvement to indicate that the UK concern is the health of its onshore and, more significantly, offshore financial services industry.

The key thing about this cycle is its an equity story,not  debt story.The cost of money will remain too high to fund growth for none free cash companies with debt.If you cant raise equity then you dont have a business.Im very pleased to see that the first to roll over is the bank most exposed to the above.The cycle is in play.I think your very right that vested interests know they are cooked unless the Fed pivots,but they dont understand the fact they dont matter.In a reflation its the dirty job creating companies they want back,even if they dont say it.Sinking liquidity into jam tomorrow companies is over for the cycle.They were last cycle.Like i said at the start of this thread,the thing that matters more than anything,the first thing you roadmap from is the cost of money.Huge numbers of people forgot that.

Of course the real message of whats going on is that the government has stolen all that money by borrowing it all at tiny coupons and spunking it on welfare.The message is tech cant borrow at tiny coupons,but nor can government (though in the short term yields will fall as a rush to safety).

The risk though is if one of the big ones rolls over and all those derivatives come into play.Currency and rate hedges could become worthless then there is  huge problem.I suspect the Fed and other CBs only care about that,making sure counterparties hold,they might have to sacrifice bond holders and creditors on lots of these smaller banks.

[darkmarket]

5 minutes ago, DurhamBorn said:

The key thing about this cycle is its an equity story,not  debt story

Agreed, and the issues we're seeing here and with the near-collapse of UK pension funds is that the form of that equity is crucial, nothing is risk-free. It must sting a bit to be commanded to hold a certain level of government bonds only for them to suddenly drop in valuation, but as you say, that brings us back to unrealistic expectations that cycles or shifts were a thing of the past.

8 minutes ago, DurhamBorn said:

The risk though is if one of the big ones rolls over and all those derivatives come into play.

I'm not sure whether the reports of missing deposits at Wells Fargo on Friday were a sign of that beginning, it seems plausible if extreme. The automotive industry and its associated finance industry, with the asset-backed security bubble it created, were likely the first domino there. Those ABS are likely to be integrated into portfolios which also include other derivatives, so we may learn quickly why they haven't created more dislocation so far, and what needs to be marked to market as a consequence.

My hope is that these processes don't lead to even greater consolidation of the banking industry, but for the moment that may be overly optimistic. Certainly, in the UK and most of the EU, there isn't far to go before you reach the G-SIBs.

 

[belfastchild]

To be utterly ridiculous for a minute...
Ive regailed many a story of amassing a huge (2000+) dvd collection. All picked up for less than 10p each and extras sold on etc.
Well a localish (25 miles away) charity was selling dvds for 1p each, box sets were 1p per disc. So less than a gallon of diesel and 250ish dvds later along with 2 hours out of my life

Charities have stopped taking them in apparently, have thousands they want rid off and a few charities have just sold them off bulk to people to put on ebay by the pallet load!

So if anyone is interested, worth keeping an eye out, the charity put it up on their facebook page as a weekend only thing. (were selling 10 for a quid a while back).

Right back to the collapse of the banking system... ;-)

[feed]

34 minutes ago, DurhamBorn said:

.I think your very right that vested interests know they are cooked unless the Fed pivots,

Ackman.

 

[feed]

15 minutes ago, belfastchild said:

To be utterly ridiculous for a minute...
Ive regailed many a story of amassing a huge (2000+) dvd collection. All picked up for less than 10p each and extras sold on etc.
Well a localish (25 miles away) charity was selling dvds for 1p each, box sets were 1p per disc. So less than a gallon of diesel and 250ish dvds later along with 2 hours out of my life

Charities have stopped taking them in apparently, have thousands they want rid off and a few charities have just sold them off bulk to people to put on ebay by the pallet load!

So if anyone is interested, worth keeping an eye out, the charity put it up on their facebook page as a weekend only thing. (were selling 10 for a quid a while back).

Right back to the collapse of the banking system... ;-)

i recently picked up a 14 disc Hitchcock collection, from world of books, for £3.50.  Shipped.

At this stage it's pretty much just the postage.  

[M S E Refugee]

11 minutes ago, feed said:

Ackman.

 

 

 

[Lightscribe]

Aaaand it’s gone…

 

[Red Debt Redemption]

35 minutes ago, belfastchild said:

To be utterly ridiculous for a minute...
Ive regailed many a story of amassing a huge (2000+) dvd collection. All picked up for less than 10p each and extras sold on etc.
Well a localish (25 miles away) charity was selling dvds for 1p each, box sets were 1p per disc. So less than a gallon of diesel and 250ish dvds later along with 2 hours out of my life

Charities have stopped taking them in apparently, have thousands they want rid off and a few charities have just sold them off bulk to people to put on ebay by the pallet load!

So if anyone is interested, worth keeping an eye out, the charity put it up on their facebook page as a weekend only thing. (were selling 10 for a quid a while back).

Right back to the collapse of the banking system... ;-)

@King Penda

[Long time lurking]

Consistency is everything 

 

Edited March 11, 2023 by Long time lurking

[feed]

10 minutes ago, Lightscribe said:

Aaaand it’s gone…

 

 

 

 

[King Penda]

14 minutes ago, Lightscribe said:

Aaaand it’s gone…

 

Stops Her stealing it

[Sugarlips]

Re: i f one of the big ones fail 

Does Credit Suisse fit the bill  ?  

 

[sancho panza]

1 hour ago, Sidd said:

I have actually tried to take any emotional side out of all these bits of news. Now I just try to understand what is their next move (be it bank bail outs out or endless house price support) and worry about how it impacts us, how we protect our wealth and how we can make money out of it. Every event is just another investment opportunity.

This is what I got worng psot 2008,I focused on what they should do rather than what they would do.

I think this is the starter course for the main BK which will feature the impact from the collpase of resi/commercial real estate and junk bond markets.

Gonna be brutal.

We remain long Oil,gold,comms,baccy in that order,prob got 15% cash at the mo(due to selling ladders of BP/Shell/Rolls last week) some of which will be redeployed monday

1 hour ago, DurhamBorn said:

The key thing about this cycle is its an equity story,not  debt story.The cost of money will remain too high to fund growth for none free cash companies with debt.If you cant raise equity then you dont have a business.Im very pleased to see that the first to roll over is the bank most exposed to the above.The cycle is in play.I think your very right that vested interests know they are cooked unless the Fed pivots,but they dont understand the fact they dont matter.In a reflation its the dirty job creating companies they want back,even if they dont say it.Sinking liquidity into jam tomorrow companies is over for the cycle.They were last cycle.Like i said at the start of this thread,the thing that matters more than anything,the first thing you roadmap from is the cost of money.Huge numbers of people forgot that.

Of course the real message of whats going on is that the government has stolen all that money by borrowing it all at tiny coupons and spunking it on welfare.The message is tech cant borrow at tiny coupons,but nor can government (though in the short term yields will fall as a rush to safety).

The risk though is if one of the big ones rolls over and all those derivatives come into play.Currency and rate hedges could become worthless then there is  huge problem.I suspect the Fed and other CBs only care about that,making sure counterparties hold,they might have to sacrifice bond holders and creditors on lots of these smaller banks.

A few harsh but true home truths there DB.There's going to be a lot of tech businesses that have been given loads of easy cheap moeny to burn getting schoked at the banks telling them to f##k off.

As I've said from day one I think we'll get a credit deflation in the credit markets.

Personally,I think the pressure on powell will be too much and he'll pivot but as you allude,it won't be the sort of pviot that will see tech unciorns getting more dollars too burn.

I think a blow out BK roll over in derivatives marekts is on the cards,possibly later in the year.I think we may see the weak dollar phsae that sets up the BK as a result of the SVB blow out.time will tell.

I think later in the year we could well see the otehr DB and credit susisee and the like implode.time will tell.Look at the devastation in the UK due to LDI last sept/oct...

I think we're about 43 seconds where the BK starts to crest.

 

[Sugarlips]

48 minutes ago, belfastchild said:

To be utterly ridiculous for a minute...
Ive regailed many a story of amassing a huge (2000+) dvd collection. All picked up for less than 10p each and extras sold on etc.
Well a localish (25 miles away) charity was selling dvds for 1p each, box sets were 1p per disc. So less than a gallon of diesel and 250ish dvds later along with 2 hours out of my life

Charities have stopped taking them in apparently, have thousands they want rid off and a few charities have just sold them off bulk to people to put on ebay by the pallet load!

So if anyone is interested, worth keeping an eye out, the charity put it up on their facebook page as a weekend only thing. (were selling 10 for a quid a while back).

Right back to the collapse of the banking system... ;-)

I remember the 90's when LP's we're worthless, strong demand for them now. More recently cassettes were also 10 a penny, they are getting more scarce now. CDs will also follow this trend over time. If you have the space now's the time to load up, especially if you envisage internet outages in our near future.

[Axeman123]

Just finished watching this:

This fella* reckons the Fed need a rate cut on Monday morning, or it all collapses! He is quick to point out all of this is the delayed consequences of QE. An apolocalyptic take on where from here.

If we see what he predicts I would expect gold to moon.

*Apparently he called the SVB stuff 10 months out.

[feed]

9 minutes ago, Sugarlips said:

I remember the 90's when LP's we're worthless, strong demand for them now. More recently cassettes were also 10 a penny, they are getting more scarce now. CDs will also follow this trend over time. If you have the space now's the time to load up, especially if you envisage internet outages in our near future.

Some of the British film institute and criterion collection movies are already commanding premium on DVD.  99% of it will be junk with millions of copies the latest marvel movie, but classic and older issue will have a market, no doubt.  I've started buying.  

[Lightscribe]

22 minutes ago, sancho panza said:

This is what I got worng psot 2008,I focused on what they should do rather than what they would do.

I think this is the starter course for the main BK which will feature the impact from the collpase of resi/commercial real estate and junk bond markets.

Gonna be brutal.

We remain long Oil,gold,comms,baccy in that order,prob got 15% cash at the mo(due to selling ladders of BP/Shell/Rolls last week) some of which will be redeployed monday

A few harsh but true home truths there DB.There's going to be a lot of tech businesses that have been given loads of easy cheap moeny to burn getting schoked at the banks telling them to f##k off.

As I've said from day one I think we'll get a credit deflation in the credit markets.

Personally,I think the pressure on powell will be too much and he'll pivot but as you allude,it won't be the sort of pviot that will see tech unciorns getting more dollars too burn.

I think a blow out BK roll over in derivatives marekts is on the cards,possibly later in the year.I think we may see the weak dollar phsae that sets up the BK as a result of the SVB blow out.time will tell.

I think later in the year we could well see the otehr DB and credit susisee and the like implode.time will tell.Look at the devastation in the UK due to LDI last sept/oct...

I think we're about 43 seconds where the BK starts to crest.

 

Certainly has the indications that we could be seeing the second leg down soon. BK with extra pickles to go… 🍔 

 

[Axeman123]

6 minutes ago, Lightscribe said:

Certainly has the indications that we could be seeing the second leg down soon. BK with extra pickles to go… 🍔 

You could be right, but we haven't seen a pivot yet. I am still in the "melt-up first" camp, as mad as that may sound. Never before in history have the Fed deliberately flown the plane into the mountainside on purpose, so I doubt they will start now.

Only a year ago Powell was Mr Transitory, and now many people seem to think he is an Inflation fighting Jihadi. Hats off to the fed for perception management I suppose.

[King Penda]

25 minutes ago, feed said:

Some of the British film institute and criterion collection movies are already commanding premium on DVD.  99% of it will be junk with millions of copies the latest marvel movie, but classic and older issue will have a market, no doubt.  I've started buying.  

Hammer house of horror going up rapidly I got the puzzle box for 20p

Edited March 11, 2023 by King Penda