Credit deflation and the reflation cycle to come (part 6)

[Harley]

14 hours ago, honkydonkey said:

It's often ADR or nothing. I don't know why we don't get access to emerging market stock exchanges. Even South Korea or Japan? 

If I want to buy Nintendo I can't buy it on the Nikkei or wherever it is but OTC which is basically buying it off a broker who has access and only in usd not jpy. Why? 

Get a better broker, but places like Korea and India have restrictions so ADRs, DRs, etc even with them.  Also ISA rules impose exchange limits but then I doubt ADRs would work if the broker is being 100% compliant.

Edited July 13, 2023 by Harley

[JMD]

39 minutes ago, reformed nice guy said:

For a Brazil stock to do a dividend it has to first make a sacrifice to the appropriate gods. For example telecoms are made to the parrot headed god of communication.

The blood from the sacrifice flows down from the top a small stepped pyramid that the offering is made on and the time taken for the flow to step down each step determines when part of the dividend is paid out over the coming months. When it stops flowing the final dividend for the year is paid.

That is why Brazilian dividends are unpredictable - only the gods know the payment dates

Yes that's obviously 100% correct.  Also, I believe there is a montage scene in the Mel Gibson film Apocalypto that explains this (not really!!... but I use any excuse to mention that great film).

[Harley]

11 hours ago, sancho panza said:

 

It urged utility firms and supermarkets to work harder to support customers as pressures build on household finances.

But failed to urge HMG to cut green tariffs.  A lot less hard work and illerate financials in doing that.

[Harley]

11 hours ago, sancho panza said:

ANother down day in DXY,presumably due to US CPI

POtentially setting up the weak doallr phase of BK legend.

https://wolfstreet.com/2023/07/12/core-services-cpi-cools-to-still-red-hot-6-2-core-cpi-to-4-8-plunge-in-energy-prices-pulls-down-overall-cpi-to-3-0-food-prices-stabilize-at-very-high-levels/

Core CPI to 4.8%. Plunge in Energy Prices Pulls Down Overall CPI to 3.0%. Food Prices Stabilize at Very High Levels

by Wolf Richter • Jul 12, 2023 • 90 Comments

We already know the factors that will make this much tougher going forward.

By Wolf Richter for WOLF STREET.

The “Core” Consumer Price Index rose by a still hot 4.8% in June compared to a year ago, but that was down from an increase of 5.3% in May, according to data by the Bureau of Labor Statistics today. June was the smallest increase since October 2021. As a measure of underlying inflation, core CPI excludes the prices of food and energy products that tend to move wildly in either direction.

Overall CPI rose by 3.0% in June year-over-year, the lowest since March 2021.

The chart shows core CPI (red) and overall CPI (green). The year-over-year plunge in energy prices (-16.7%!) pushed the overall CPI increases below those of core CPI. When energy prices stop plunging on a year-over-year basis, overall CPI will once again be above core CPI.

Just moved back to support.  IMO not a time to do anything.  Let's see.

[Harley]

11 hours ago, Sugarlips said:

What so everyone paid their tv license  🤪 

Apparently 500k less did last year.  Presumably it'll be funded out of tax soon.  They should just be open and make it a govt dept with a minister in charge.

[Axeman123]

Slightly on a tangent, interesting twitter thread and replies about the cost of tech in many poorer countries:

Actually pertinent to one possible future for the UK, if we see a return of punitive taxation of imported luxury goods. Some really eye opening numbers.

Another thing, watched this earlier. Young chinese people are starting to commute to work on motorised wheelchairs. Apparently some chinese districts are so hard up that 30% of their budget is raised by collecting penalties, and e-bike users are targetted for this. Currently however there are no comparable rules for motorised wheelchairs!

Another possible future for the UK, a penalty economy.

[Loki]

1 minute ago, Axeman123 said:

Slightly on a tangent, interesting twitter thread and replies about the cost of tech in many poorer countries:

Actually pertinent to one possible future for the UK, if we see a return of punitive taxation of imported luxury goods. Some really eye opening numbers.

Another thing, watched this earlier. Young chinese people are starting to commute to work on motorised wheelchairs. Apparently some chinese districts are so hard up that 30% of their budget is raised by collecting penalties, and e-bike users are targetted for this. Currently however there are no comparable rules for motorised wheelchairs!

Another possible future for the UK, a penalty economy.

Like something out of Wall-E, just walk you idle sods

[Starsend]

17 hours ago, JoeDavola said:

I wasn't aware that there was much reliable stuff that does in terms of divi's. I know equities return that over the long term.

As for what I'm in, I haven't added it all up recently, but its:

- Help to buy ISA maxxed out so will get an extra 25% (3K) on that when I buy a house

- Premium bonds maxxed out - not getting a great return so should really move them elsewhere

- Invested £9K in a share scheme which paid me back £23K last week good return for only 3 years, now need to move that into something else. Only good investment decision I've ever made!

- £30K in Vanguard FTSE trackers - of course the year I put £20K in was the year it fucking dropped 2%. 20K in an ISA and 10K in two of those lifetime isa things which in retrospect was probably a mistake.

- a load of cash sitting in a couple of savings accounts getting about 4%

EDIT: And another 20K cash in a cash isa from the last financial year that ive yet to move into stocks

What service do most of you lot use to buy and sell shares?

There's plenty of stuff yielding high dividends, much mentioned on this thread. Always some risk with shares but then also a risk keeping it in cash at the moment, even getting 4% you're losing money against REAL inflation.

My main concern, if I were you, would be the high amount you appear to have in GBP. Might be worth diversifying some of your savings into a few other currencies, perhaps put a little into gold.

 Couple of examples:

SEDY Emerging markets fund, dead easy to buy, yields over 9%.

Peyto Canadian Oil Junior, currently yielding over 11%, have held for a couple of years, gets you exposure to Canadian dollars.

Omega Healthcare, Real Estate Investment Trust (Healthcare facilities), USD, currently yielding about 9%.

B2Gold, gold mining, USD, 4.5% dividend.

Zillions out there, sure other people can weigh in if you want some suggestions. I hold all the above via HL. I've been diversifying away from GBP for a year or two now as I think there is a very real risk that it could fall heavily, even against the other shit show currencies.

[Alifelessbinary]

1 hour ago, WICAO said:

Thanks for the hat-tip @Bornagain.  I largely did it to keep myself accountable as running against the herd for so long can take quite a bit of determination.

The other hope was that I might just be able to help some others figure it out as well.  Over the years I've had some really great feedback from people who while not having done the same exactly have shaped their lives into something that better works for them.

Oh, and it's also been a bit Marmite with plenty of people being pretty negative and insulting but hey ho...

Like Bornagain I’m also a big fan. Before stumbling upon your blog, I think through Monevator, I was fully locked into the London rat race.

Over the last 10 years I’ve become mortgage free, rather than moving to a bigger house I didn’t need, and managed to sort my finance out so while not totally financially free I have a lot more scope to focus on things I enjoy.

It’s amazing how many great opportunities appear when your soul focus isn’t monetary. Strangely they often tend to be financially lucrative, as I only accept things that I’m interested in and therefore tend to perform well.

[Funn3r]

3 minutes ago, Axeman123 said:

Slightly on a tangent, interesting twitter thread and replies about the cost of tech in many poorer countries:

 

Suspect that is not new. 40 years ago I was a 35mm film hobby photographer with a couple of Olympus cameras. The cameras themselves and any kind of accessory such as lenses were half the price in New York. I never had the balls to try and sneak stuff past the customs though.

[Virgil Caine]

5 minutes ago, Axeman123 said:

Slightly on a tangent, interesting twitter thread and replies about the cost of tech in many poorer countries:

Actually pertinent to one possible future for the UK, if we see a return of punitive taxation of imported luxury goods. Some really eye opening numbers.

Another thing, watched this earlier. Young chinese people are starting to commute to work on motorised wheelchairs. Apparently some chinese districts are so hard up that 30% of their budget is raised by collecting penalties, and e-bike users are targetted for this. Currently however there are no comparable rules for motorised wheelchairs!

Another possible future for the UK, a penalty economy.

Purchase tax on imported cars to the U.K. in 1947 was 66%. 

[Harley]

3 hours ago, JoeDavola said:

Quite possible, but the question is how big a cut.

Surely a cut to a level that's still very high by the standards of the last 15 years?

Not really.  I can't think of any investment, housing included, I would base on such gyrations in rates, and certainly not rates alone.

Edited July 13, 2023 by Harley

[Funn3r]

3 minutes ago, Starsend said:

Peyto Canadian Oil Junior, currently yielding over 11%, have held for a couple of years, gets you exposure to Canadian dollars.

You might even be allowed to keep the dollars so long as you don't do anything naughty like supporting trucker protests or taking the piss out of a certain Monsieur Castreau.

[Harley]

2 hours ago, Castlevania said:

That’s what I have. Brazilian stocks are a bit weird in that many companies including Telefonica Brasil go ex dividend for a stream of dividends over a future period of up to 12 months. Basically, you get nothing for ages and even if you’ve long since sold you still receive dividends based on your holding at an ex dividend date months ago.

Capital control issues.  Been posted in the past.  Stuff on the net, maybe broker faqs too.

[Yadda yadda yadda]

16 minutes ago, Axeman123 said:

Slightly on a tangent, interesting twitter thread and replies about the cost of tech in many poorer countries:

Actually pertinent to one possible future for the UK, if we see a return of punitive taxation of imported luxury goods. Some really eye opening numbers.

Another thing, watched this earlier. Young chinese people are starting to commute to work on motorised wheelchairs. Apparently some chinese districts are so hard up that 30% of their budget is raised by collecting penalties, and e-bike users are targetted for this. Currently however there are no comparable rules for motorised wheelchairs!

Another possible future for the UK, a penalty economy.

The UK exports luxury goods. Not sure we would be looking to put trade barriers in place that could be copied to our detriment.

I don't trust videos out of China. Could be anything happening including out of context promotional videos.

[JMD]

1 hour ago, DurhamBorn said:

66% total inflation over the cycle,rates 32% over the cycle,real loss of money 34%,we have had over a third of the inflation now,rates are lagging.So if the cycle is 8 years they should average just under 4%pa so we are above average on the rates now.I much prefer cycle numbers rather than short term as its much better for investing big portfolios.

The question is how much damage the initial high rates stage does,i suspect it will destroy a lot of BTLs,zombie companies etc that will then feed a 2nd wave inflation after we dip much lower first.

I believe this 'reflation cycle' began 2020 - so if it potentially last 8 years, this cycle would be 2020-2028? 

DB, if we are approaching half way through this reflation cycle, have you any thoughts on the main economic drivers or big trends for the next cycle? Have you perhaps a 'working title' for it (hopefully it's not Fiscally Fubar'd!!)?

Edited July 13, 2023 by JMD

[wherebee]

2 hours ago, DurhamBorn said:

You need to hold shares before they go ex divi to get the divi.A great example is BAT,they went ex div this morning,so those who owned up until then,including those who bought at 4.29pm yesterday get the divi,those who bought this morning dont,but the shares are marked down to reflect they dont.I suspect you owned Telefonica B after it was already ex dividend,dont even try to work how its divis work,just let them arrive when they do.Most shares on HL show when their divis are paid.

Also if you click into Account settings,then Withdrawels,Income and Loyalty Bonus,check where it says Income Instructions it says Held on account,if not change it.

The income goes into your income account and needs moving to capital account,click on cash then income and loyalty bonus then on the right Transfer your income balance to your capital account.Also if you click on income it shows you all divis that have landed.

dividendmax.com is pretty useful for explaining, and predicting, divvies.  it also shows history of divvies, so you can see how it has changed in the past.  Doesn't cover all stocks, very UK focused, but good for a play to put in your stock holdings to see whats likely to happen

[Transistor Man]

49 minutes ago, JMD said:

I accept that exposure to copper is a good thing - for balanced portfolio, etc. But I am hearing more and more comment that aluminium will replace a lot of current and future copper use/demand. Some say upto 40% of copper product could ultimately be replaced by aluminium product, especially when copper supply is squeezed and prices rocket.

 

In datacentres/ cloud computing/ IoT, there's a continuous push to replace copper with sand (glass -- fibre optics).

It's been very successful. Data-rate goes up, power consumption down. They're on these 400Gb/s networks now. The rate of progress has been astounding. 

 

With regard to copper - Aluminium use, I just buy Glencore and let them worry about it. 

  

 

 

[Cattle Prod]

Ok this may be a bit off thread, but some of the interview on the UK is appropriate to our discussion here I think. There is something very weird going on in general, and I think it's all rooted in the left wing march through the institutions. Who else would want to "neuter the native population while importing high testosterone men"? 

Watch from 41.05 to 47.10 or so for this segment.

I do like "a sick country adopts laws like a dying man tries medicine", I have to say.

I have no strong views on Tate, I don't like he makes his money, I generally don't like poseurs, I do like him telling young men to go to the gym and be masculine, and the kinds of people who have the self discipline to be a kickboxing world champion are worth listening to IMO.

But here is what is really interesting to me, and the reason I'm posting this: I noticed that this video has had 66 million views since Tuesday, that's unbelievable. Compare that number to a TV interview, of anyone, ever. Things are maybe starting to change.

Ok I just googled that out of interest, yes it has more views than the most watched TV interviews in history:

Interesting.

[Ash4781b]

3 hours ago, AWW said:

BoE independence from politicians is a myth. They are going to raise interest rates too far just so they can cut them a few times between now and the election, then the Tories can point at that and say "don't risk interest rate rises by voting Labour".

“Millions of public sector workers, including teachers, police and junior doctors are to get pay rises between 5%-7%, the government says”

https://www.bbc.co.uk/news/uk-politics-66188500

Below inflation and I’m sure deserving but sets a benchmark. 
 

 

[belfastchild]

42 minutes ago, Axeman123 said:

Slightly on a tangent, interesting twitter thread and replies about the cost of tech in many poorer countries:

Actually pertinent to one possible future for the UK, if we see a return of punitive taxation of imported luxury goods. Some really eye opening.

I took proof of ownership of laptop, camera, video camera, phone etc into Argentina/Brazil/Chile a pseudo carnet if you will. Heard something like 300% import tax on foreign tech. I bought a used camera and lens here and brought them over there for a friend, I reported it stolen... believable in BA.

[Cattle Prod]

On 11/07/2023 at 22:01, sancho panza said:

I expect another large energy bull market within the middle of this decade, driven by tight supply. We’ll likely need another big capex cycle to fill that gap.

Thanks for that info Sancho, she has a big audience so good that this message is getting out there.

But she missed the kicker, and i'll say it again: the lag time to new production. You can't translate capex spend into barrels for YEARS after spending the money. Usually, the capex cycle front runs future tight supply and gets barrels on production more or less on time, it's a pretty efficent capitalist machine. I think that this is the first time that it hasn't, both for political climate and lack of opportunity reasons. Have a think about this Lyn, there is no production sitting on the shelf for want of capital.

[Jay]

1 hour ago, DurhamBorn said:

66% total inflation over the cycle,rates 32% over the cycle,real loss of money 34%,we have had over a third of the inflation now,rates are lagging.So if the cycle is 8 years they should average just under 4%pa so we are above average on the rates now.I much prefer cycle numbers rather than short term as its much better for investing big portfolios.

The question is how much damage the initial high rates stage does,i suspect it will destroy a lot of BTLs,zombie companies etc that will then feed a 2nd wave inflation after we dip much lower first.

Excellent post…thanks for breakdown..I think average inflation from here on until will be more than 7% per year for the next say 4 years..next year imo is where there is the possibility of cuts happen..as for the initial high rates, imo there will be higher rates as stagflation kicks in.. as you say end of the cycle is a nightmare..

also just a hat tip..you said in the past that 1.70 cable is a possibility on your roadmap a while back…I dismissed it as news and events were negative sterling and cable was a lot lower..doesn’t seem so crazy now..your roadmap is better than tea leaves..

[belfastchild]

48 minutes ago, Funn3r said:

Suspect that is not new. 40 years ago I was a 35mm film hobby photographer with a couple of Olympus cameras. The cameras themselves and any kind of accessory such as lenses were half the price in New York. I never had the balls to try and sneak stuff past the customs though.

Not any more. I remember buying laptops, tablets, wee waterproof video camera, audio recorder, boxed software, boat parts in the US for a fraction of the price here.

Last time I was there was 4 years ago, most things were the same or cheaper here.

Usually fly into Dublin from the US, would say I'd declare in the UK when I get up the road as that's my final destination.

Part of my reason for buying a shitload of stuff this sumer, outboards, car etc. If it does go tits up for sterling/import duties then at least I have everything to hand.

[JoeDavola]

3 hours ago, Stuey said:

Slowly at first then all at once 

The debt load is too high for interest rates to stay above around 2% in the medium term. 

Its certainly a possibility.