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

[M S E Refugee]

54 minutes ago, Castlevania said:

I studied at the business school as opposed to the economics department and they absolutely loved both the Austrian and Chicago school. I learnt a lot about Friedman, Schumpeter, Hayek etc. Not much on Keynes or monetarism.

 

[marceau]

1 hour ago, Castlevania said:

I studied at the business school as opposed to the economics department and they absolutely loved both the Austrian and Chicago school. I learnt a lot about Friedman, Schumpeter, Hayek etc. Not much on Keynes or monetarism.

They are covered at pretty much every decent university economic department as well (maybe not at the ex-polys but let's face it, who cares about them). The idea that Friedman, Chicago, even fringe stuff like Kondratieff, are getting blanked-out is weird. Even the polo's choice Oxford PPE covers it, in between the mandatory diversity floggings of course.

The narrowing of opinion takes place once the 'real world' is entered and the system as it is, along with the people who staff it, must be dealt with. Everyone sings from the same songsheet because everyone does that everywhere, from your local football team right up to the BOE. Dissenters being marginalised is hardly unique to UK gov.

[Errol]

 

[Harley]

DYOR.

Might be seeing an uptick in commodities.  Early days and maybe any move just a USD thing but always a chance this is the foothills of the more sustained bounce that's been talked about for a while now.  As usual, a mixed bag of what's up and what's not so I'm likely to go (if confirmed) with broad ETFs supplemented with niche trades (e.g. copper?).  If so a nice leisurely play of the asset class cycles for the patient investor.  Something to watch.

PS:  I'm referring to the actual commodities but some equities might be beginning to get close to my cross hairs.

Edited April 30, 2023 by Harley

[Harley]

1 hour ago, marceau said:

They are covered at pretty much every decent university economic department as well (maybe not at the ex-polys but let's face it, who cares about them). The idea that Friedman, Chicago, even fringe stuff like Kondratieff, are getting blanked-out is weird. Even the polo's choice Oxford PPE covers it, in between the mandatory diversity floggings of course.

The narrowing of opinion takes place once the 'real world' is entered and the system as it is, along with the people who staff it, must be dealt with. Everyone sings from the same songsheet because everyone does that everywhere, from your local football team right up to the BOE. Dissenters being marginalised is hardly unique to UK gov.

I studied at a rather good faculty and it was mostly Keynesianism for the macro.  The "nice" thing about Keynesianism is you can more easily play with it in the computer lab (mainframe back then), modelling away to your hearts content.  Your BLUEs, your R bar squared, your differentials, and all the rest.

IMO, all valid stuff this modelling.  The problem is idiots taking it too seriously and out of context.  They seem to throw away the warning/dosage/side effects leaflet that comes with it.  Of course they do, as they head from the world of economics into politics.

The gun never killed anyone.  The person pulling the trigger did.

Edited April 30, 2023 by Harley

[NogintheNog]

18 hours ago, Pip321 said:

I think increasingly Gold is no longer an asset to make a few pound on…..but literally a 10% total asset hold to ensure should things get really bad at least we still have something in my pockets left.

You need to be positioned before 'Jonny come lately public' joins the party!

When a few of the peeps I know start talking about buying Gold, I'll start diversifying. Especially the miners, NEM, PAAS, WPM etc.

There are some brilliant quotes in this video, especially these!

Quote

In 2008 there was a chance to address and put right the fundamental flaws in the system. It was not taken. Bail-outs brushed the problems under the carpet, and left them for another day.
The free market meanwhile came out with an alternative, bitcoin. It is now a trillion-dollar economy, and there are no bailouts. With each collapse - there have been plenty and there will be plenty more - the system gets stronger.

But with traditional banking, however, the more you bail out the system, the more precarious it becomes. You can’t take the risk out of a market. Without risk, you have no market. With risk comes responsibility.

Don’t blame the players. It’s the game that’s at fault.

 

Edited April 30, 2023 by NogintheNog
update

[NogintheNog]

Gold at $3000 an ounce....

Bitcoin???

In that scenario I'd say $100,000 per Bitcoin. Thoughts???

[ThoughtCriminal]

Not so much a clown show as the whole fucking circus.

[ThoughtCriminal]

MINIMUM of 55% reduction in co2 by 2030.

Europe is committing slow motion suicide.

[marceau]

25 minutes ago, Harley said:

I studied at a rather good faculty and it was mostly Keynesianism for the macro.  The "nice" thing about Keynesianism is you can more easily play with it in the computer lab (mainframe back then), modelling away to your hearts content.  Your BLUEs, your R bar squared, your differentials, and all the rest.

IMO, all valid stuff this modelling.  The problem is idiots taking it too seriously and out of context.  They seem to throw away the warning/dosage/side effects leaflet that comes with it.  Of course they do, as they head from the world of economics into politics.

The gun never killed anyone.  The person pulling the trigger did.

As I said in the inflation thread the system is a slave to self-referencing. It's reasonable for unis to focus on the models that are in practical use above competing ones that mostly sit in theory, but as you say they take it too far. Sharp minds have learned to manipulate that - why cut the knot, when you can cynically grow it and pretend the part you added is essential.

[Lightly Toasted]

6 hours ago, Harley said:

It was like that decades ago.  Mostly Keynes, a bit of monetarism, no Austrian. 

Indeed. I'm old enough to remember the "364 rebel economists/professors" whose statement was published in The Times in 1981. Caused a major splash at the time.

https://assets.cambridge.org/97811070/42933/excerpt/9781107042933_excerpt.pdf

The excerpt above is a very interesting snippet from an expensive book published in 2014, the writer (Robert Neild, Cambridge Economics Professor) being one of two originators of the famous statement. He seemed to think that his side had won:

...The monetarist doctrine of Friedman has now been abandoned in
favour of trying to use interest rates to control inflation, not the money
supply. It seems to be recognised, implicitly at least, that the money
supply is endogenous, not exogenous; a passive indicator of how the
demand for loans is going, not a policy instrument. This is a view for
which there is ample backing....

...which is utter bollocks, using loans to stroke New Labour's economic miracle was a policy instrument; it was what they used to finance (leverage) everything else until it blew up in their faces. Professor Neild shows above that he had no inkling of what had actually gone wrong, a few years before.

 

[Castlevania]

12 hours ago, sancho panza said:

I'm not so sure.Here's their balance sheet from the 22 full years and you'll see they're sat on £3.5bn in inventory.I think there are issues with this in that they're not that liquid and they will liiekly already have booked substantial costs in building that inventroy(could aslo be building land but iirc building land moves at 3x the rate of change ot hosue prices).

ALso shifting it on at booked price coudl be difficult without the UK govt running its various stimulus packages

https://www.persimmonhomes.com/corporate/media/wiydfzzr/persimmon-annual-report-2022.pdf

They have cash on the balance sheet vs a lot of debt last time around.

[marceau]

26 minutes ago, Lightly Toasted said:

Indeed. I'm old enough to remember the "364 rebel economists/professors" whose statement was published in The Times in 1981. Caused a major splash at the time.

https://assets.cambridge.org/97811070/42933/excerpt/9781107042933_excerpt.pdf

The excerpt above is a very interesting snippet from an expensive book published in 2014, the writer (Robert Neild, Cambridge Economics Professor) being one of two originators of the famous statement. He seemed to think that his side had won:

...The monetarist doctrine of Friedman has now been abandoned in
favour of trying to use interest rates to control inflation, not the money
supply. It seems to be recognised, implicitly at least, that the money
supply is endogenous, not exogenous; a passive indicator of how the
demand for loans is going, not a policy instrument. This is a view for
which there is ample backing....

...which is utter bollocks, using loans to stroke New Labour's economic miracle was a policy instrument; it was what they used to finance (leverage) everything else until it blew up in their faces. Professor Neild shows above that he had no inkling of what had actually gone wrong, a few years before.

 

It's so clueless it can only be self-deceit. Also a good example of the 'not me guv' approach to power that so many of these types have. As if Uk gov was a passive observer of its own economy, what a joke.

[Animal Spirits]

Swedish Fish

Are cheap Scandinavian valuations a sweet red herring?

 

A new report from quantitative research firm Research Affiliates identifies Sweden as the developed market with the highest 10-year expected returns. And while the Swedish market is small, our internal valuation screens are also finding disproportionate opportunities in the land of lingonberries.

 

https://us13.campaign-archive.com/?u=6dc62f307511d466ff78a94fe&id=bc35d7dcf6

[Animal Spirits]

Why wealth manager fees could be costing you a fortune

An investor who 10 years ago bought £10,000 worth of shares in Britain’s biggest wealth manager – St James’s Place (SJP) – would have built a pot worth £34,205 today, whereas the same sum invested in its UK equity fund would be worth just £15,839, analysis reveals.

https://archive.is/3idNo

[sancho panza]

3 hours ago, Castlevania said:

They have cash on the balance sheet vs a lot of debt last time around.

 

Here's Persimmon 2022 blance sheet and 2006 balnce sheet.There's a bit of variation as but even in 2006 they only had £600mn in laons.Net payable is looking bulky at year end 22 compared to previuous years at £949mn.Inventories very similar but currently they're sat on £500mn more assets and £500mns less debt which accoutns for two thrids of the difference.

Strangely they had £2910mn in invetory back at end 06.Histroy doesnt reapeart etc.

I'll keep an eye out for theri traing update which msut be due may time.

https://www.investing.com/equities/persimmon-balance-sheet

 2006 Persimmon

https://www.investegate.co.uk/article.aspx?id=200702260700458250R

[Jay]

4 hours ago, NogintheNog said:

Gold at $3000 an ounce....

Bitcoin???

In that scenario I'd say $100,000 per Bitcoin. Thoughts???

As a holder of both…hope so…but I can’t see gold moving 50% without some issue or event..so bitcoin as a risky asset maybe lower..it has already nearly doubled this year..next week May provide a clearer picture from the fed..I am speculating that bitcoin performs better over the next 12 months..maybe oil and silver do even better..be lucky..

[Castlevania]

1 hour ago, Animal Spirits said:

Why wealth manager fees could be costing you a fortune

An investor who 10 years ago bought £10,000 worth of shares in Britain’s biggest wealth manager – St James’s Place (SJP) – would have built a pot worth £34,205 today, whereas the same sum invested in its UK equity fund would be worth just £15,839, analysis reveals.

https://archive.is/3idNo

Where are the customers yachts? 

[Harley]

6 hours ago, marceau said:

As I said in the inflation thread the system is a slave to self-referencing. It's reasonable for unis to focus on the models that are in practical use above competing ones that mostly sit in theory, but as you say they take it too far. Sharp minds have learned to manipulate that - why cut the knot, when you can cynically grow it and pretend the part you added is essential.

Another point I missed....

Take the great economist Gordon.  Keynes made an important caveat saying you needed equilibrium over the long term and that got tagged as "no more booms and bust" but that withered in the realpolitik of the political world.  Similar with a form of monetarism in South America, as brought by the Chicago School et al.  Cherry picking.

Edited April 30, 2023 by Harley

[Ash4781b]

Anecdotally Wow those supermarket prices were high this week and over the weekend. No surprise though demand strong with bank holiday weekend and the gov’ sending those cost of living payments out. Blimey would not surprised to see a high reading on the inflation. They’ll probably say it’s the royal bounce glossing over the stimulus cheques sent out.

[Axeman123]

Neat little graphic showing historical equity performance after the last fed rate hike in a cycle:

(Article itself is blah tbh)

https://uk.finance.yahoo.com/news/equity-bulls-count-fed-cycle-160000330.html

[MrXxxx]

8 hours ago, ThoughtCriminal said:

MINIMUM of 55% reduction in co2 by 2030.

Europe is committing slow motion suicide.

55% reduction by 2030...they shouldn't be worried about what's causing the 'smoking' pollution, but what they are smoking themselves!

[MrXxxx]

4 hours ago, Animal Spirits said:

Why wealth manager fees could be costing you a fortune

An investor who 10 years ago bought £10,000 worth of shares in Britain’s biggest wealth manager – St James’s Place (SJP) – would have built a pot worth £34,205 today, whereas the same sum invested in its UK equity fund would be worth just £15,839, analysis reveals.

https://archive.is/3idNo

For confirmation of a similar scenario just look at managed funds courtesy of the latest SPIVA results...a few snippets based on what is usually the recommended minimum investment period i.e. 5 yrs:

SOURCE: https://www.spglobal.com/spdji/en/research-insights/spiva/#europe

 

[MightyTharg]

2 hours ago, MrXxxx said:

For confirmation of a similar scenario just look at managed funds courtesy of the latest SPIVA results...a few snippets based on what is usually the recommended minimum investment period i.e. 5 yrs:

The funds own nearly all of the equities, so by definition they can collectively only earn the same as the indices. Since they all have expenses it is inevitable that they will mostly underperform the indices (which a largely just a measure of what they could have earned if they didn’t have any expenses).

At least I think so. I don’t have any actual figures proving any of this.

[Axeman123]

3 minutes ago, MightyTharg said:

The funds own nearly all of the equities, so by definition they can collectively only earn the same as the indices. Since they all have expenses it is inevitable that they will mostly underperform the indices (which a largely just a measure of what they could have earned if they didn’t have any expenses).

At least I think so. I don’t have any actual figures proving any of this.

The key difference is that they are supposed to pick and choose winners to outperform passive indexes, rather than replicating them. In practice most indexes are highly concentrated in a few big names though, and these names are often a big part of active funds' holdings.