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

[Petatep]

1 minute ago, JohnnyB said:

https://www.thebureauinvestigates.com/stories/2023-03-20/predatory-businesses-profit-off-personal-debts

 

So there's now a whole industry of shady "debt support" companies that manage to extract even more £££ from people in debt and put them on unsuitable IVAs.

Must be near the end game now

I did laugh at the radio a few weeks ago when there was an advert to claim for compo on "mis-sold" personal loans if you thought you should never have been lent the money. I guess having a self - selected group of people who are shit with money is a tempting prospect for lots of companies 

There's another one that explains if you have paid £3000 for something and not received the goods you may have been scammed. Well no shit Sherlock.

[MrXxxx]

There is so much to think about in this article in a macro context and so I thought I would share it to consolidate my own understanding/thoughts:

[https://www.ft.com/content/ea066246-98de-41c6-b1aa-0259744a6120]

NOTE, I am not an economist and have a limited understanding so what is written below could be nonsense [please feel free to tell me so if you agree or disagree and why, so that I can develop my learning/understanding further]. As a result this is not financial advice and you should ‘Do your own research [DYOR]’!

See original for figures.

 

1. Sunak’s inflation pledge

QUOTE: “New projections on Wednesday from both Capital Economics, the consultancy, and Citigroup, the investment bank, respectively put the rate for December 2023 at 3.7 per cent and 3 per cent, easily meeting the prime minister’s target.

In the Treasury’s monthly round-up of economic forecasts, also published on Wednesday, only four of 27 UK forecasters predicted that CPI inflation would exceed the government’s pledge and be above 5.4 per cent by the fourth quarter of this year.

The reason behind the rapid fall in the inflation rate is that by this summer, gas and electricity prices are set to be lower than last year, with wholesale gas prices falling almost 85 per cent since their peak last August"

So what does this mean going forward [and what is the government hoping/potentially ‘pushing’ for]?

If the war in Ukraine can be resolved in the next six months this could make the difference between a ‘soft’ landing and inflation targets being met [and remaining lower over a longer period] OR a double dip recession caused by fuel price inflation [and its impact on other inflation factors such a food etc], where it drops in the summer potentially meeting the target only to shoot back up come the winter; remember the impact of this may be seen as a lag due to forward purchasing of fuel/severity of winter etc

 

2. Why is the UK the ‘poor man’ of Europe [inflation wise]?

QUOTE: “Comparing inflation in the UK with rates in other countries has been complicated over the past year by different the energy subsidy regimes across Europe…..This has meant inflation in the eurozone has been highest in the Baltic states — Estonia, Latvia and Lithuania — and Slovakia, with rates significantly higher than in the UK. The more rapid drop in wholesale energy prices in other countries, especially Spain and Germany, has helped reduce the overall eurozone rate more quickly than that in the UK. ….However, the eurozone still does not have inflation under control and its core rate — excluding energy, food, alcohol and tobacco — was steady at 5.7 per cent in March, similar to the UK’s core rate of 6.2 per cent. The US core rate rose from 5.5 per cent in February to 5.6 per cent per cent in March.”

 

This ties in and supports a point I made previously above [yesterday]:

and my reply to @Chewing Grass reply:

 

...as we can see though, the ‘Devil is in the Detail’, and we may not actually be any/much worse than the rest of Europe.

 

3. UK wage inflation, ‘The Elephant in the room’

QUOTE: “...But economists are more concerned about the UK labour market and wages, which continue to worry the Bank of England. Although definitions and time periods differ a little, the UK’s 6.9 per cent annual growth in private sector pay is higher than the eurozone’s business sector wage increase of 5.2 per cent and the 4.2 per cent seen in the US.

Andrew Bailey, the BoE governor, has repeatedly pointed out that wages are a key concern of the bank’s rate-setting Monetary Policy Committee, and that the UK’s labour market performance is in some areas “unique”, particularly because of the number of older people who have left the labour market since the pandemic.

Dales said that with labour force participation problems related to ill health and problems in the NHS, “we feel these [unique UK] problems will stick around longer” [Bull$hit]. My BOLD.

 

Wonder why the BoE have put out two recent media narratives on UK employment, namely 1) getting the over 50’s back into the workplace, and 2) people can’t expect with inflation wage rises/have to accept being poorer?...if the former was achieved this would have had an impact on number of applicants for a post and so the ability to offer lower salaries [reduce wage inflation], the latter shows the first ‘press release’ hasn’t worked and so engendering a narrative/expectation of ‘below inflation’ rises needs to be addressed, otherwise when inflation drops below the current wage growth level [6.9%] it will send inflation shooting up again.
 

4. High inflation..a meaningless average? Pt1 [wage rises]

QUOTE: “Economists also point out that even though UK inflation will fall and its core rate is not much higher than in the eurozone or US, the BoE should be concerned because inflation falling to around 4 per cent is not the same as durably returning price increases to the BoE’s 2 per cent target.

There are nearly 270 individual items included in the UK’s inflation calculation; the proportion of those with inflation rates over 5 per cent has risen in recent months from 28.6 per cent to more than 35 per cent, indicating a broadening of price pressures.”

The erosion effect of inflation is something all on here are concerned with, but with a little thought it may not be as bad [or it could be worse] depending on your personal spending. If you take a look at the 270 individual items in the government inflation basket [see below] and can modify your spending [or lessen it] on those items that have a higher effect [i.e. currently >5% inflation], then your 6.9% wage rise [assumption made from 2 above] will actually be positive, and so lessen the impact of the inflationary effect on your take home income. This assumes that the government inflation figures are honest/accurate [yes, I know!]

[https://www.ons.gov.uk/economy/inflationandpriceindices/articles/ukconsumerpriceinflationbasketofgoodsandservices/2023#overview-of-basket-update]

[https://www.ons.gov.uk/economy/inflationandpriceindices/datasets/consumerpriceinflationbasketofgoodsandservices]

 

5. High inflation..a meaningless average? Pt2 [‘Sitting in cash’]

QUOTE: “Although most forecasts believe UK inflation will fall below 2 per cent during 2024, economists also think the central bank will need to raise interest rates above the current 4.25 per cent rate to achieve this......Financial markets have priced in a quarter-point rate rise for May and further rises to bring the rate up to 5 per cent by the end of the year.”

 

I know several on here are concerned about sitting in cash due to the erosion effect of inflation. Once again, if you follow the approach suggested in 4. above AND place your cash in a savings vehicle the erosion may not be as dramatic as it first appears [i.e. Cash Isa’s/savers currently offering ~ 3-4%, Short Term Money Market Fund ~4-5%].

 

 

Edited April 28, 2023 by MrXxxx

[Castlevania]

4 hours ago, Alifelessbinary said:

A lot of the volume house builders are consolidating and reducing overheads at the moment. Those with high debt are going to be in real trouble soon ,especially if interest rates remain high. I think everyone agrees that house prices are unsustainable, it's just whether they can keep the price drops in real terms only, as most people only really seem to care about nominal figures (which for now are holding up because of high inflation!).

The companies that are better capitalised are waiting in the wings to try and gain some prime assets at fire sale values. The other reasons that house builders are struggling is that the Conservatives have withdrawn support for planning applications. In the current market house builders can't risk spending millions on planning applications without political support. This  combined with the upcoming potential change in government, means that  many house builders are adopting a wait and see approach, as they don't know yet whether they'll want to developer under a Labour regime.

This will just compound the already chronic supply of new homes. The joys of the property cycle.

I think the listed house builders learnt their lesson from the GFC. They have minimal debt nowadays. I think the margins will be crushed - a few years ago Persimmon were making 30% gross margins which is ridiculous.

I always find it amusing that of the listed house builders the one that built the nicest houses and operationally seemed to be the best run was Berkeley a company set up by a gypsy.

[PETR4]

Here's a controversial economics video, as we're mostly contrarians.

TLDR: Russian and Soviet economy largely pioneered and supported by Western immigrants and techonology.

[A tremendous # on the lung]

4 hours ago, ThoughtCriminal said:

 

Imagine our surprise.........

What's that disabled juice they are selling?

[Don Coglione]

1 hour ago, One percent said:

there’s no I in team.   

But there's a "U" in "cunt"...

[One percent]

Just now, Don Coglione said:

But there's a "U" in "cunt"...

Good comeback.  

[Castlevania]

How much is the Petroleo Brasileiro dividend?

[Bobthebuilder]

10 minutes ago, Castlevania said:

How much is the Petroleo Brasileiro dividend?

No idea.

When is TEF Brazil going to pay a dividend?

[M S E Refugee]

9 minutes ago, Bobthebuilder said:

No idea.

When is TEF Brazil going to pay a dividend?

I just got one from them today on Freetrade.

[M S E Refugee]

23 minutes ago, Castlevania said:

How much is the Petroleo Brasileiro dividend?

https://www.dividendmax.com/united-states/nyse/energy/petroleo-brasileiro-sa-petrobras-adr/dividends

[Bobthebuilder]

4 minutes ago, M S E Refugee said:

I just got one from them today on Freetrade.

Nothing on H&L today.

[Don Coglione]

1 hour ago, One percent said:

Good comeback.  

I once used it in a team meeting.

I left the company shortly thereafter...

[One percent]

5 minutes ago, Don Coglione said:

I once used it in a team meeting.

I left the company shortly thereafter...

Left of your own free will?  Superbly played though.  

[Don Coglione]

8 minutes ago, One percent said:

Left of your own free will?  Superbly played though.  

Oh yes!

[Calcutta]

54 minutes ago, M S E Refugee said:

https://www.dividendmax.com/united-states/nyse/energy/petroleo-brasileiro-sa-petrobras-adr/dividends

Petrobras looks like an absolute banker at $10 a pop, so much so I can't shake the feeling there just be something fundamentally fucked about it.

[King Penda]

10 hours ago, Long time lurking said:

That`s what RTI was all about

Was actually a funny conversation I did not know that you can lose it one week and keep it the next . It’s called intermittent .im like the 275 is what I e earnt this month she said it says paid weekly . Im like I’ve no idea I’ve not had a payslip but that’s what I’ve earnt this month .I’m like can’t I earn 520 ish before it stops she says yes over a month . Im like 275 is less than 520,she is it says weekly so you lose a week I’m like but it’s still less than 520 over a month . Anyway we got onto dbs checks she had to wait 8 weeks she is taking a second job (some form of chaperone)I’m like I bet you’re working from home. Yep lol, gave her some advice about registering her dbs online . She says I’m on your case now I won’t take a week off you has your right 270 is less than 520.   Im like will I get this backdated to feb 14th she is like yes.so that’s 700 they owe me and if I go full time somewhere before it’s sorted I still get it .

[King Penda]

1 hour ago, Calcutta said:

Petrobras looks like an absolute banker at $10 a pop, so much so I can't shake the feeling there just be something fundamentally fucked about it.

Any chance it can be nationalised  ?

[desertorchid]

6 hours ago, spygirl said:

Bank of England forecasts £100bn payment from Treasury by 2033 over QE losses

Central bank stresses figures relating to bond-buying programme are estimates

https://www.ft.com/content/e61664cd-1cb6-4e0e-a8e5-2c5fb57ae935

The Bank of England has estimated that it will require the UK Treasury to transfer a total of £100bn by 2033 to cover expected losses on its bond-buying quantitative easing programme.

When funny money no longer is fun.

 

Don't fall for this one chaps.

This all reeks to me of managing inflationary expectations. Along with the "you are all poorer, get used to it article" a few days ago they are presently in the business of spreading doom and gloom as they realise their moronic fucking fan charts are once again completely wrong.

Edited April 28, 2023 by desertorchid

[Loki]

4 minutes ago, desertorchid said:

Don't fall for this one chaps.

This all reeks to me of managing inflationary expectations. Along with the "you are all poorer, get used to it article" a few days ago they are presently in the business of spreading doom and gloom as they realise their moronic fucking fan charts are once again completely wrong.

The charts are correct, reality failed to match expectations 

[wherebee]

Some interesting news from down under; I think BP's talk about green has been playing both sides of the fence.  That WA project is a real hot potato politically, and the Greens have a lot of power in the new government.  I don't think BP would have increased their stake unless they know that they can follow through.
 

BP will acquire fellow global energy major Shell’s stake in the $30 billion Browse LNG project in Western Australia hot on the heels of Woodside Energy boss Meg O’Neill issuing a warning about the mounting regulatory hurdles and policy changes facing the project’s backers.

The deal boosts BP stake in the Browse project, led by Woodside, to 44 per cent. PetroChina and Japanese heavyweights Mitsubishi and Mitsui also have stakes in what is touted as Australia’s largest untapped conventional gas resource.

[Alifelessbinary]

13 hours ago, Castlevania said:

I think the listed house builders learnt their lesson from the GFC. They have minimal debt nowadays. I think the margins will be crushed - a few years ago Persimmon were making 30% gross margins which is ridiculous.

I always find it amusing that of the listed house builders the one that built the nicest houses and operationally seemed to be the best run was Berkeley a company set up by a gypsy.

I used to own Berkeley shares as they were incredibly run company and Tony Pidley was one of the best deal makers in the country. Since he’s died though I worry that the company is now run by accountants rather than deal makers. I’ve sold my shares a few years ago, as their previous model of selling 50% stock off to foreign investors was looking shaky. They’ve still got a good land bank, but recently made redundant quite a few could development managers which is always a risk, as it takes time to attract and cultivate people.

[marceau]

https://dailysceptic.org/2023/04/26/populism-is-political-opposition-to-a-rapid-decline-in-living-standards/

Insightful article doing the rounds. 2nd good piece I've seen from this guy in the last few weeks.

Edited April 29, 2023 by marceau

[marceau]

9 hours ago, Loki said:

The charts are correct, reality failed to match expectations 

100% - this is the mindset.

[Red Debt Redemption]

On 27/04/2023 at 16:50, Bobthebuilder said:

There was a positive that I took away from the course. Boiler manufactures saying there new boilers will work perfectly well at 5 millibar (a quarter of current domestic 20 millibar pressure), shows the advancement of efficiency they are managing to achieve. Of course you cant run older boilers or gas hobs at 5 millibar, but its a glimpse of the future.

Another interesting change was working pressure at a domestic gas meter. For decades that has been a minimum of 20 millibar with a maximum drop of 1 millibar at the appliance burner, that has now been dropped to 18 millibar at the meter for the first time ever.

Noticed that looking at frost free fridge freezers seen as low as 104kwh per year. Unless VW done the labelling.