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

[AWW]

19 minutes ago, Ash4781b said:

“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. 

"He said the rises would not be funded by borrowing more or increasing taxes."

Be interesting to see what gets cut then.

[AlfredTheLittle]

17 minutes ago, Ash4781b said:

 

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

 

I don't really buy the endlessly repeated narrative that the public sector (even the frontline) are deserving or hardworking. I do agree that the latest recruits are poorly paid, but their jobs are extremely secure and the terms are very good (e.g. take lots of sick days at full pay).

I used to work in the public sector, a good few years ago now, there were some very hardworking people, a lot of very lazy people, some completely useless people, and some capable people, the capable ones (and a lot of the incapable ones) were generally only interested in climbing the very lucrative career ladder, rather than in public service.

1 minute ago, AWW said:

"He said the rises would not be funded by borrowing more or increasing taxes."

Be interesting to see what gets cut then.

That leaves printing 

[Cattle Prod]

On 12/07/2023 at 01:34, Joxer said:

That snippet blows my mind. An extra 8 mbd is unbelievable. 

We should go for broke and put all government spending in to sending an armada to the gulf to secure a supply of oil for ourselves.

You can buy as much oil as you want on the market. The problem is with what you have to offer in exchange. As fiat currencies lose their purchasing power over time, that's a problem for countires running a deficit, like the UK. 

And I'd suggest that the Gulf has had enough of Western armadas:

World's biggest oil and gas reserves in spots 2 and 4 respectively. And in absolute terms, Saudi is the world's biggest non nuclear military spender:

The commodities will have to be paid for. Makes you wonder why they chose to steal Russia's foreign reserves, doesn't it?

[AWW]

2 minutes ago, AlfredTheLittle said:

I used to work in the public sector, a good few years ago now, there were some very hardworking people, a lot of very lazy people, some completely useless people, and some capable people, the capable ones (and a lot of the incapable ones) were generally only interested in climbing the very lucrative career ladder, rather than in public service.

Same - I worked for what is now Public Health England, building intranet apps in their IT dept. Everyone arrived around 9:30, took a half hour morning break, couple of hours for lunch, and a half hour afternoon break, then left around 4:30. Management did the same. There were a handful of good people. Most were useless, producing very little output of any value. Lots of paper-based admin and box-ticking.

I'm not naive enough to think that doesn't happen in some places in the private sector, but it was just so prevalent and seemingly sponsored by management. I think that's the difference.

[AWW]

People didn't hide from the boss. They hid with the boss.

[Axeman123]

16 minutes ago, Jay said:

you said in the past that 1.70 cable is a possibility on your roadmap a while back

(you quoting @DurhamBorn above)

I missed that prediction previously! 1.50 I could easily beleive, but 1.70? We are talking pre BK here I take it.

Just imagine buying USTs at 1.70 to the pound and selling them at near parity, I have goosebumps!

[snaga]

19 minutes ago, AWW said:

"He said the rises would not be funded by borrowing more or increasing taxes."

Be interesting to see what gets cut then.

fewer teachers, police and junior doctors then?

[Loki]

14 minutes ago, AWW said:

Everyone arrived around 9:30, took a half hour morning break, couple of hours for lunch, and a half hour afternoon break, then left around 4:30.

I can do that, gis a job

[Cattle Prod]

4 hours ago, sancho panza said:

@Cattle Prod if you've time I've a few questions ref the recent licence auctions for the nroth sea.You mentioned only 100/900 got a bid.my questions are as follows

1) whats the timing of these auctions.is it once a year?once evry two?

2) I'm presuming normally you'd expect a larger bid szie,ie 600 or 700,or would they normally all get a bid.

3) does the fact that there were so few bidders mean the rpices were dire?if so have you a rough idea of the reduction in govt incomes as a result?

No pressure.

See below the oilies getting bid over the last week strongly.I'm unsure whether this is dollar related as well as oil price benefits from weak dollar.Physical supply deficits ebcoming appraent?

 

 I think the dollar is helping, so is COT positioning, but yeah the physical market has just digested the biggest SPR drawdown in history as well as the US deciding to ignore Iran sanctions and allowing them sell al their stored oil too. It was a significant addition to world supplies. But was a one off card to play, and monumentally stupid. The downside risk is a banking crisis/BK/crash as ever as the paper market will dump, but otherwise yes I see it going higher. You'll notice as well though the oil price itself corrected around 50%, good quality equiites like BP and XOM didn't. More like 20%. Good refining margins, and the fact they still make cash above ~$40 a barrel.

I wouldn't worry about the UK licencing rounds, it's noise really. UK production is in steep terminal decline, and that's just the nature of the beast, it always follows a gaussian distribution in the end. But briefly: they're not auctions like in the US, you bid a work programme ('studies' or 'well commitments'. Not at set dates, but around every 18 mths. Different areas each time, the UK govt agencies do their own work in trying to promote the areas and do a pretty good job in fairness. Bid size these days is trending down but I was just trying to point out that 100 licences out of 900 offered is not much. Offering that many is somewhat unusual, they are usually more focussed. Smacks of desperation, I guess because new licences were going to be banned not so long ago, and probably will be by Labour. As I said I haven't seen the results yet, but I'd be surprised if there were many firm wells. Or maybe the opposite, there will be a lot of firm wells as people will now drill all the speculative junk they've been fantasising about because they will get the money they waste back from the taxpayer via the EPL (windfall tax). Either way, noise. The government doesn't make any money on licencing rounds here. They get it at the other end by taxing production. That's the number to watch, they've aleady massively undershot their projected EPL gains, well, because windfall taxes don't work.

 

[Castlevania]

1 hour ago, Harley said:

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

What do you mean by capital control issues? 

[AWW]

20 minutes ago, Loki said:

I can do that, gis a job

You have to spend 3 hours a day in the staff room discussing last night's soaps. Still want in?

[AWW]

I recently had my contract ended by an investment bank. I offered them a 3 day week, which they've actually accepted. I thought I'd better check the numbers, thinking that it would only cost me something like 20-25% of take-home. Turns out I was very wrong. Now that you can whack £60k into SIPP annually, taking those two days off per week would see my total take-home cut in half. I can't believe I'm saying this, but I'm going to look for something that's full-time. HM Treasury actually getting it right when it comes to incentives to work?

[Virgil Caine]

1 hour ago, Ash4781b said:

“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. 
 

 

Departmental budgets are apparently frozen so no extra funding from the Treasury. That rather ties in with my anecdotal upthread above about contractual renegotiations and new IT spending by the government basically being halted from this week apart from ongoing support. I assume that will eventually wind up with job cuts. These will be probably disguised via hiring freezes in the public sector and there will almost certainly be real redundancies in their IT suppliers. 

Edited July 13, 2023 by Virgil Caine

[Yadda yadda yadda]

4 minutes ago, AWW said:

I recently had my contract ended by an investment bank. I offered them a 3 day week, which they've actually accepted. I thought I'd better check the numbers, thinking that it would only cost me something like 20-25% of take-home. Turns out I was very wrong. Now that you can whack £60k into SIPP annually, taking those two days off per week would see my total take-home cut in half. I can't believe I'm saying this, but I'm going to look for something that's full-time. HM Treasury actually getting it right when it comes to incentives to work?

Only if you need to put £60k into a SIPP. You could put less in. Doesn't take many years of that sort of contribution to lead to tax problems on the way out.

[AWW]

4 minutes ago, Yadda yadda yadda said:

Only if you need to put £60k into a SIPP. You could put less in. Doesn't take many years of that sort of contribution to lead to tax problems on the way out.

Not wishing to boast - there are plenty on here with far more than me - but I'm well into the additional rate band, so the more I can shelter from that reaming, the better. I can't see me having a 45% tax problem during retirement, unless you can educate me about something I've missed?

[JoeDavola]

17 minutes ago, AWW said:

Not wishing to boast

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17 minutes ago, AWW said:

but I'm well into the additional rate band

 

 

 

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[Yadda yadda yadda]

6 minutes ago, AWW said:

Not wishing to boast - there are plenty on here with far more than me - but I'm well into the additional rate band, so the more I can shelter from that reaming, the better. I can't see me having a 45% tax problem during retirement, unless you can educate me about something I've missed?

If the additional rate band is still an issue at 60% of current salary then well done. The pensions lifetime allowance was abolished but the tax free withdrawal limit remains at £268,000 or so. That means you are probably going to be paying tax on an increasing proportion of your pension at withdrawal. Especially if this figure is frozen. Maybe not at the highest rate but the saving you are making is likely to be the highest rate now minus the second highest rate during retirement. Although this clearly depends on how much you have in your pension at this point. The tax on money you don't earn is zero. It appeared, from what you stated, that you would be maintaining the same pension contributions despite earning 40% less.

All depends on how much you value free time and how much you want to spend each month. 

[JoeDavola]

2 hours ago, Starsend said:

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.

Thanks - the choice is overwhelming, and I have to admit I don't have the depth of economic knowledge that's on show in this topic so it's hard to know where to start.

My ISA's are with HL so I'd probably just keep using them then if I was buying individual stocks.

[JoeDavola]

2 minutes ago, Yadda yadda yadda said:

If the additional rate band is still an issue at 60% of current salary then well done.

Yes I'm assuming @AWW is still in some kind ot tech job so I'd be really interested to hear about the journey that took him from a public sector skive job to investment banking and the associated large salaries. Though I get why most people wouldn't want to give all their career secrets away!

[JoeDavola]

I'd also be interested in thoughts about the UK gov cancelling a bunch of IT contracts.

So much of the IT industry over the last 15+ years here has been either consultancies ripping off the public sector (which were always seen to have bottomless wallets), and subsidized American companies setting up offices here.

If you remove public money from the UK IT industry alltogether I think it would collapse much of the 'private' industry which is really just public sector one level removed.

Thoughts?

[Starsend]

2 minutes ago, JoeDavola said:

Thanks - the choice is overwhelming, and I have to admit I don't have the depth of economic knowledge that's on show in this topic so it's hard to know where to start.

My ISA's are with HL so I'd probably just keep using them then if I was buying individual stocks.

Yes there's a lot to learn but we all have to start at the beginning.

I'd start with something simple like aiming to get 10% of your money out of GBP.

Just my suggestion, some people might be quite happy to have all their money in their home currency. 

[JoeDavola]

5 minutes ago, Starsend said:

Yes there's a lot to learn but we all have to start at the beginning.

I'd start with something simple like aiming to get 10% of your money out of GBP.

Just my suggestion, some people might be quite happy to have all their money in their home currency. 

For reasons that I don't want to go into here, I may end up with several grands worth of physical gold as a handy way to get part of my net worth out of sterling.

[AlfredTheLittle]

50 minutes ago, AWW said:

I recently had my contract ended by an investment bank. I offered them a 3 day week, which they've actually accepted. I thought I'd better check the numbers, thinking that it would only cost me something like 20-25% of take-home. Turns out I was very wrong. Now that you can whack £60k into SIPP annually, taking those two days off per week would see my total take-home cut in half. I can't believe I'm saying this, but I'm going to look for something that's full-time. HM Treasury actually getting it right when it comes to incentives to work?

Full time: Salary £150k, £60k into pension, £30k tax, £60k takehome (plus £60k in your pension = £120k)

3 days a week: Salary £90k, nothing into pension, £30k tax, £60k takehome, so half the £120k. 

I agree though with @Yadda yadda yadda - I'm not sure that pension saving isn't just storing up issues down the line, it's probably worth it if you assume the rules won't change going forward.

 

[DurhamBorn]

2 hours ago, JMD said:

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!!)?

The Brand new distribution cycle and the civil war to come

[Loki]

6 minutes ago, DurhamBorn said:

The Brand new distribution cycle and the civil war to come

 

 

(Tribute to @marceau wherever he's got to)

Edited July 13, 2023 by Loki