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

[marceau]

7 minutes ago, Long time lurking said:

You are confusing $ with treasurers and you are right about them being stuck in the 70`s without $ as that is what it had have to have to trade with the outside world that is the $ hegemony 

What you miss thought is everything inside of China is funded by the Renminbi  ,which the central bank prints at will as it`s the the Yuan is pegged to the Dollar it`s basically a twin banking system developed to allow huge funding of targeted sectors of the economy when the loser in that funding race go bust they just segregate that money from the economy it`s QE without consequence for the central bank  

It`s a hard system to work out and it`s getting harder ,i had a link that done a good job of explaining the intricacies  but that link no longer says what it said 5 years ago   Yuan/Renbi are one of the same now 

FFS man, I'm replying to what you're writing, not what you mean in your head.

[Animal Spirits]

@wherebee Reference the Gold price movement, compare with the real yield on TIPS like the 5 year which has been positive since August last year.

Considering the pace of rate increases, it's a fair argument to suggest Gold has held up reasonably.

[Axeman123]

18 minutes ago, Long time lurking said:

From where i`m sitting Russia seems to be offering/providing  the security and a stability while China provides the economic benefits 

They seem to have worked that out nicely. It will likely be how Russia intends to stay relevant in the partnership. The history of the one child policy means China won't have disposable males for ground war for at least 20 years. In the interim they will have to offer wives as trophy to make the gamble worthwhile for unmarriageable rural males, but that still won't work for hot wars as the odds aren't favourable enough.

26 minutes ago, Long time lurking said:

the difference is they are offering something far more appealing than the west are, which for the last year has been nothing but threats and ultimatums 

It all comes down to rising vs falling IMO. A rising empire can afford to be generous, whereas a declining one is closer to an aggresive panhandler.

[MrXxxx]

50 minutes ago, Axeman123 said:

Have you ever read "guns, germs, and steel"? That author makes a very good case for why the west got such a headstart on other continents. There is no inherrent superiority IMO, just the fading advantage of a headstart on industrialisation.

Yes but r.e 'Guns, germs, and steel', it's very easy to look back for correlations that fit your narrative and then use them a 'evidence' to support your argument, it's another thing to make predictions for the future...remember 'correlation is not necessarily causation'

[Animal Spirits]

22 hours ago, Axeman123 said:

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.

Valid point that the speed of the increases has had on some banks. The thread has mentioned the benefits this can bring through net interest margin but the share price is related to the book value, which these securities form part of even if they are not AFS (Available For Sale and marked to market) but HTM (Held To Maturity).

Edited March 12, 2023 by Animal Spirits

[JMD]

5 hours ago, DurhamBorn said:

https://www.telefonica.com/en/communication-room/blog/south-koreas-approach-to-the-fair-share-contribution-pioneering-model/

Telefonica really going hard now on big tech not paying its way.I have been buying telcos heavy since March 20 for several reasons,mostly inflation,but the above fact was a big reason,i think it shows a huge structural undervaluation in the sector.

I also think the sector is going to do similar to baccy.Compete,but not compete.Easy way is to make a holding company for lots of the towers and assets,several companies inject theirs into it and it charges them all higher fees that then goes back to them all as profit.I cant see how there wont be changes,55% of traffic from a few companies.Ones that dont pay their tax in Europe.

The article is said to be by their digital policy director,but this is 100% from the CEO.

We cant be sure how this plays out,but it looks almost certain big telcos are going to get a bigger slice of the pie,and its a direct to free cash bit as well.

I also started buying the telcos in 2020 - but in Oct, after my pension transfer eventually landed in my sipp. The cash wasn't there for the March lows and it was - I admit - painful to watch others on here load up in March. But luckily for me the oil/telcos did dip again in Oct. Telco market prices have gone even lower since then, but as you've reminded us on here DB, the divi payments are an important component. And so for example during last few years those divis have for me kinda made up for 'buying early'.

Anyway I mainly bought the telcos for the thread cycle inflaton thesis you describe above. But also because I hoped these companies might also become a future tech play. So was really happy to see you recently identify SK Telecom as a potential AI player.

With huge FCF and near monopoly (ciggie?) status and 'increasingly cosy' (corporatistic) government relations, many of the national telcos might become the dominant tech companies within their respective country. After all, so much of our working and civil lives, entertainment and health services, etc, will increasingly move online. I know much of this has already happened but lots more to come I think - and next time with hopefully the telcos benefitting and taking a rentier piece of the profits... I suppose the telcos are also a future infrastructure play?...  What's not to like?!

Edited March 12, 2023 by JMD

[MrXxxx]

48 minutes ago, marceau said:

It's equalitarian prog horseshit. Exactly the line of thinking that landing us in this mess in the first place.

That's not an argument, its a subjective statement....evidence for such/your argument?

[marceau]

Just now, MrXxxx said:

That's not an argument, its a subjective statement....evidence for such/your argument?

Fuck off.

[Animal Spirits]

One for @sancho panza

Silvergate Bank - a post mortem

https://www.coppolacomment.com/2023/03/silvergate-bank-post-mortem.html

And regulators need to change their practices so they are not fooled by apparently healthy capital ratios arising from zero-weighting of government securities and AOCI opt-outs. Silvergate's Tier 1 capital ratio exceeded 50% at the time of its failure - but it was nevertheless deeply insolvent.

[HousePriceMania]

4 hours ago, DurhamBorn said:

Nice to get the debt deflation part now isnt it.Companies will need to issue equity instead of debt when there is no free cash.It will mean inflation is higher for longer as well as company formation will slow right down.

Governments spent way to much thanks to massive policy errors from central banks and that allowed none profitable companies to borrow at insane low rates as well.

The economy is saying its not these tech companies the economy needs,its new coal mines etc.

Price inflation/credit deflation.

Have you see this list of companies demanding help ?

https://docs.google.com/document/d/187evUq31pDI8_vW1Mh_-WDeZRhmAmy4_zQCcTJoSbD4/edit

[Axeman123]

24 minutes ago, marceau said:

it's become part of equalitarian canon that paved the road to DEI etc.

A fair point, however co-opting unrelated things to the cause is key part of that agenda ("using the master's tools to dismantle his house"). 

[MrXxxx]

24 minutes ago, marceau said:

The simply observable truth is that peoples are genetically different and superiority absolutely exists,  both between groups and within groups, and is dependent on its fit to the environment it find itself at a particular time.

 

[Animal Spirits]

Pensions: why do those retiring face ‘massive’ losses despite FTSE highs?

Retired planner was shocked to see that his Aviva pension had dropped 20% in value last year

https://www.theguardian.com/money/2023/mar/11/pensions-retiring-losses-ftse-aviva-value

[DurhamBorn]

This i think is one of the huge bullseyes for the thread,and one of the big things my roadmap showed.I didnt see it anywhere else before on this thread.These losses are before inflation and show the huge theft from savers to bennies and public sector pensions.Its disgusting,but part of me has little sympathy.Not taking any interest in things lines you up for disaster.

Look at some of the losses in "safe" pensions.Then the excuse from the industry,well you can buy a better annuity so all is well 

 Brown’s savings were in the Aviva Pension Pre-retirement Fixed Interest FP Fund, which dropped by 24.3% in the 12 months to 2 March 2023, data from Trustnet shows

 

The scale of losses at other fund groups is even bigger. Clerical Medical (part of Lloyds Banking Group) has a Retirement Protection Pension, which has managed to lose 38.7% of its money in the past 12 months.

The Scottish Equitable Retirement Pension – with more than £500m under management by Aegon – has lost 29.2% of its money in the past year.

https://www.theguardian.com/money/2023/mar/11/pensions-retiring-losses-ftse-aviva-value

[MrXxxx]

10 minutes ago, marceau said:

Fuck off.

...and you wonder why others don't take your argument seriously?...if this is the best you can do then don't bother to post, as you will simply be a 'Dog barking at the moon!'

[marceau]

3 minutes ago, Axeman123 said:

A fair point, however co-opting unrelated things to the cause is key part of that agenda ("using the master's tools to dismantle his house"). 

Yes, and unfortunately the whole field of evolutionary psych has had subversion built in from the start. The perfect post-modern subject matter and easy pickings for the progs. 

[Animal Spirits]

‘Fitting a heat pump has been an expensive waste of time’

Until the Government stops making policies without thinking through the consequences, it is consumers who will bear the brunt

https://archive.is/nJQi4

Project managing the house development myself, as a single female, was difficult at the best of times but this man turned out to be rude, arrogant and unnecessarily obstructive.

Sounds like she might require some of @DurhamBorn's famed plumbing services, but he'd probably ask for mileage expenses afterwards.

[HousePriceMania]

 

 

[Bobthebuilder]

4 minutes ago, Animal Spirits said:

‘Fitting a heat pump has been an expensive waste of time’

Until the Government stops making policies without thinking through the consequences, it is consumers who will bear the brunt

https://archive.is/nJQi4

Project managing the house development myself, as a single female, was difficult at the best of times but this man turned out to be rude, arrogant and unnecessarily obstructive.

Sounds like she might require some of @DurhamBorn's famed plumbing services, but he'd probably ask for mileage expenses afterwards.

Heat pumps for the vast majority of UK homes are useless, might as well fart to keep warm. The industry has been saying this for ages, complete waste of money and resources.

The public are just starting to realise the lies they have been told. 

[Bilbo]

25 minutes ago, HousePriceMania said:

Have you see this list of companies demanding help ?

https://docs.google.com/document/d/187evUq31pDI8_vW1Mh_-WDeZRhmAmy4_zQCcTJoSbD4/edit

Never heard of any of them.

Expect I will survive if they go to the wall.

 

[Long time lurking]

1 hour ago, marceau said:

FFS man, I'm replying to what you're writing, not what you mean in your head.

Could you then explain how us treasuries are responsible for Chinas growth then ? 

 

Edited March 12, 2023 by Long time lurking

[honkydonkey]

7 minutes ago, Bilbo said:

Never heard of any of them.

Expect I will survive if they go to the wall.

 

They're startups, I'd be surprised if you had heard of any of them.

Maybe one of them would have created the cancer saving drug that eventually killed you?

[belfastchild]

1 minute ago, honkydonkey said:

They're startups, I'd be surprised if you had heard of any of them.

Maybe one of them would have created the cancer saving drug that eventually killed you?

Fuck sake, I dont know what to watch tonight, now. Margin Call, The Big Short, I am Legend or Terminator!

[JMD]

4 hours ago, Pip321 said:

Yep, agree.

I joined this thread to understand macros, world economics, direction of travel and build an investment strategy to avoid being a sitting duck ie even the basics such as what’s this gold thing all about? 

However what the ‘macro’ lessons have done is make me look elsewhere and learn the bigger geopolitical picture. And it ain’t pretty.

My outlook was broadly US a bit greedy but they were good, they were free and the movies were great. The rag heads, sand people, Kung foo people, South American with big hats and Ruskie Mafia were bad….life was simple.

I am now agnostic…..I see they are all ‘bad’ and have self interest. Indeed why would they be anything else.

And then you move on and go full circle…...realise rights/wrongs don’t matter….it’s just about being on the front foot with an investment strategy and in the meantime selfishly enjoying what time we have in this tiny spinning rock. 

I agree with that. Very well put I think. For me personally I've found cycles and macros quiet addictive, an epiphany almost.

However I'd humbly suggest that you have got more 'digging' to do. I agree that there is, as you comment, always the danger of going full circle. And I'd add there is also danger of detouring down the rabbit hole! It's a fine balance, but I think I've managed to navigate things successfully...   I'd pick you up on only one thing - I've discovered that we are not on a 'tiny spinning rock' as you suggest, but instead live on a super expansive flat plane supported by infinite turtles (all the way down!).         (But of course I jest. Or is this stuff super macro squared, and my macro addiction has become a destructive compulsion!!)

Edited March 12, 2023 by JMD

[marceau]

10 minutes ago, Long time lurking said:

Could you then explain how us treasuries are responsible for Chinas growth then ? 

 

They enabled productive expansion that would have been impossible through domestic means. Every T-bill that flowed into China increased govt spending capacity, credit capacity, productive capacity. The flows acted as a steroid for decades; there's nothing 'natty' about Chinese growth.

The key question for China is, can they hold on to the gainz?

Edit - I've edited your quote as I assume that's what you mean.

Edited March 12, 2023 by marceau