Credit deflation and the reflation cycle to come (part 8)

[sancho panza]

45 minutes ago, Jesus Wept said:

OK - I am going to be contrarian here….. bear with me. 

Below is yesterdays US inflation data of 3.5% drilled down into its components.

(Nearly all the others are far below or just above the 3.5%). 

Have a detailed look.

A big part of the 3.5% appears to be made up of:

1. Transportation services (car Insurance): 10.7%

2. Electricity: 5.0%

3. Shelter (mortgage rates): 5.7%

The first two Car insurance and electricity can in the main be explained by profiteering by car insurance companies and energy companies. (E.g. Aviva and Centrica are examples of UK companies doing the same here. They have ATH share prices recently - as profits so large). When their costs are pretty low. 

The third one Shelter is ironically caused by high interest rates causing mortgage rates to be high. Reducing IRs would reduce shelter and lower inflation. 

So without these THREE above ‘real inflation’ is pretty low (that’s if we believe the figures of course).

So what I cannot understand is given the reverse repo concerns by the US government, and that they really actually need to lower IRs to reduce their debt burden - why don’t they explain the above to the general public -  and just go ahead and lower IR’s ? 

Am I being naive / dumb here? Thoughts? 

 

 

 

no offence meant but US CPI doesnt include mrotgage rates.It's sues a rental equcvalcne measure and therefore imputes rents paid to homowners that tehy may not actually pay ie even if you own outright,they impute a rent you pay to yourself.it also includes rents that are paid.

curcially,genreally the data they use to imoute homeowner retns is based on the retns paid data for rents that are paid.so as you llude it could be msileading.

owners occupier hosuing csots measuredt too.hence the weighting of hosuing is substantial in the index.

its also worht noting the the GDP deflator used isnt' necesaarily based on the same inflation data as CPI uses.

 

as for transportation services I think you're making too many assumptions again .the link below explains in detail but

https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm

https://data.bts.gov/stories/s/Transportation-Economic-Trends-Transportation-Cost/5h3f-jnbe

[DurhamBorn]

1 hour ago, JoeDavola said:

Retiring in your 60s is becoming an impossible goal. Is 75 the new 65?

https://www.bbc.com/worklife/article/20240404-global-retirement-increase-65-to-75

Seems the best place to post this - beeb seeking to normalize the wealth transfer taking place. Work till ya die, or until just before you die.

And no, 75 is not the new 65.

I took a walk around the docks area of Belfast the other day and passed a few modern open plan offices, was reminded how awful most open plan offices are now and the idea that you'd spend 50 years in one is just horrific.

@montecristo has the right idea, make some money and then move somewhere cheap and sunny

I retired in my 40s (ok 49) ,and took 6 years off from 29 to 35.I have never been a 40% taxpayer.Anyone can do it,but you need to understand the system early,dont chase cars,holidays etc and have the right mindset.If i was starting now i would buy a 3 bed after saving like crazy at parents and rent two rooms out to lodgers.That would cover bills and a third to half the morgage.Then id save while still enjoying life into blue chip divi payers and compound.

Then again im crazy.In my 6 year sabbatical i used to nail single mothers off Plentyoffish to get my tax back they were getting in bennies  .I even kept a list of council tax i had paid and intended to rob the council somehow to get it back.I cracked that though with my lass having a council pension.

You need to go to Thailand Joe,get yourself a month there in September to Pattaya,it will be the best thing you ever do.

Edited April 11 by DurhamBorn

[One percent]

8 minutes ago, sancho panza said:

no offence meant but US CPI doesnt include mrotgage rates.It's sues a rental equcvalcne measure and therefore imputes rents paid to homowners that tehy may not actually pay ie even if you own outright,they impute a rent you pay to yourself.it also includes rents that are paid.

curcially,genreally the data they use to imoute homeowner retns is based on the retns paid data for rents that are paid.so as you llude it could be msileading.

owners occupier hosuing csots measuredt too.hence the weighting of hosuing is substantial in the index.

its also worht noting the the GDP deflator used isnt' necesaarily based on the same inflation data as CPI uses.

 

as for transportation services I think you're making too many assumptions again .the link below explains in detail but

https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm

https://data.bts.gov/stories/s/Transportation-Economic-Trends-Transportation-Cost/5h3f-jnbe

@spygirl is this you?   

[Noallegiance]

I wondered a few times whether Mr Hunter intentionally used the word 'pause' instead of 'pullback' for the current PM rally.

I know over the years that it has stair-stepped, but noticeable and immediately obvious pullbacks have occurred up to now.

This is the first time for me since watching it closely that it has appeared to pause and not sharply drop.

If it's only a pause, perhaps the next legs up will be more frequent in rapid in succession. Of course, that's measured against prior multi-year sideways patterns.

Just me musing.

[sancho panza]

1 hour ago, Jesus Wept said:

A more detailed drill down into SHELTER component. What is is…

@Castlevania - is “SHELTER” not BOTH rent and what one pays in mortgage costs? See definition above. Surely rent is also linked to mortgage rates. As rates go up the landlords have to pass on this cost to their tenants?

@Castlevania is correct.I shoudl have read down before replying.what the infaltion figures should measure and what they actually measure are two different things. as CV says.

Same with GDP using imputed rents.

even rpi doesn't actually measure the cost of buying a hosue really.

50 minutes ago, snaga said:

you are Sasha?

 

whats sasha doesnt appear to appreciate(and I love the guys work) is that that leccy suppliers merely add a margin to what they're paying in the futures marekts for supply.hence during the peaks it can take sometime before drops in spot prices are reflected in the prices consumers pay.

so if the enrgy companies buy oct 2026 calls then they wont roll off unless traded until....oct 26.

he does make a good point that car isnurance is a larger part of the inflation data than electricity.

at 10 minutes he assesses shelter,says its lagging indicator,which it is.but Im not sure he's got that good a graspm on how the shelter compnent is measured.I'd compeltely disagree with his assessment that shelter should eb 0 at the mintue

he uses this contorted assessment to say rates could be lower.I'd disagree.

I think there's a whole debate to be had about inflation gets measured and whtehr we shoudl measure it by incoem deceile.reality being that food and fuel rises affect bottom thrid of income deceils mroe than top thrid.

Shaun Ricahrds is the best read on infaltion data/measurements imho .also wolf st and mish shedlock.

Edited April 11 by sancho panza

[WICAO]

1 hour ago, JoeDavola said:

Retiring in your 60s is becoming an impossible goal. Is 75 the new 65?

https://www.bbc.com/worklife/article/20240404-global-retirement-increase-65-to-75

Seems the best place to post this - beeb seeking to normalize the wealth transfer taking place. Work till ya die, or until just before you die.

And no, 75 is not the new 65.

I took a walk around the docks area of Belfast the other day and passed a few modern open plan offices, was reminded how awful most open plan offices are now and the idea that you'd spend 50 years in one is just horrific.

@montecristo has the right idea, make some money and then move somewhere cheap and sunny

I just went with sunny and 40s being the new 60s.

[sancho panza]

talkign of beautfiil things

Obviously all the NEST pension holders are looking forlornly on as their betters decided to offload at £10 in 2020 to help the drive to net zero.

if they move to the US it'll be £40 I suspect and therfore a tripple bagger for the basement dwelling community

[feed]

6 minutes ago, sancho panza said:

he does make a good point that car isnurance is a larger part of the inflation data than electricity.

Anecdotal and UK not US.  I was talking with a few acquaintances i have in the insurance industry over the Easter holiday.  And they were saying that the theft component for car cover isn't even close to high enough.  The 10% premium and 10% theft excess that an average £100k ungaraged vehicle in a city costs, is coming for more mundane vehicles.   

Or the companies are going to stop offering basic car insurance as a single product altogether.  It'll get bundled into profitable products.  Think complete cover house/life/car/accident bundles. 
 

[Transistor Man]

4 hours ago, Axeman123 said:

Oil production keeps being cut due to falling demand, but even this can't get the price back to where it was not that long ago. Allegedly (iirc) Saudi had its budget balanced based on a $95/barrel average oil price, and hence is now cutting big projects it had previously started.

CP will know more.

From what I’ve read, oil production is currently at a post-covid high. ( all time global production Peak was November 2018).

as of end 2023, There’s no more growth in the Permian. 

Therefore, for the first time in a long time, OPEC are back in charge of price. 

[Lightscribe]

How is stuey nowadays?

[Plan-b]

2 hours ago, JoeDavola said:

make some money and then move somewhere cheap and sunny

And away from the woke west.

[spygirl]

56 minutes ago, One percent said:

@spygirl is this you?   

Nah, just my influence.....

iirc sanco is a paramedic. he may be typing this out as hes got one hand pumping an OAP.

 

[DurhamBorn]

1 hour ago, M S E Refugee said:

I think anyone who doesn't access their Pension at 55 and soon to be 57, is taking a massive gamble.

You could see the Government harmonising the age you can take your work/private pension with the old age pension.

I dont think they will,but they might reduce it to 8 years before.They need to keep the carrots in place so workers keep buying gilts for them to inflate away.They have always given 10 years notice they are increasing it.HL etc could of wrote into their SIPPs small print that means you had protected rights and could still access at 55,but for some reason they dont,likely because it suits them to have higher balances for longer.

I worked it out a few years ago workers could retire on a full state pension at 54 if they scrapped working age welfare,51 if they scrapped the public sector pension sub.

The problem in this country is people retiring on bennies in their 20s,but as usual they wont tackle it.I can access my SIPP in 2 years and will,but for lump sums,not full drawdown.With eyes on every budget like a hawk.

Incredible once again the theft going on from private to public sector.

[Long time lurking]

5 hours ago, headrow said:

Bailed on Fres this morning , a month ago I was £2.5k down on them , I've got out this morning with £600 profit.

 

I also tagged the 3 top fallers in the ftse100 , Phoenix , Aviva and Lloyds as they all went ex div. The next 2 months are my best months of the year for divis coming through.

Lloyds are sacking their risk management team as it`s reckoned they are holding the company back 

 

[JoeDavola]

53 minutes ago, DurhamBorn said:

I retired in my 40s (ok 49) ,and took 6 years off from 29 to 35.I have never been a 40% taxpayer.Anyone can do it,but you need to understand the system early,dont chase cars,holidays etc and have the right mindset.If i was starting now i would buy a 3 bed after saving like crazy at parents and rent two rooms out to lodgers.That would cover bills and a third to half the morgage.Then id save while still enjoying life into blue chip divi payers and compound.

Then again im crazy.In my 6 year sabbatical i used to nail single mothers off Plentyoffish to get my tax back they were getting in bennies  .I even kept a list of council tax i had paid and intended to rob the council somehow to get it back.I cracked that though with my lass having a council pension.

You need to go to Thailand Joe,get yourself a month there in September to Pattaya,it will be the best thing you ever do.

I actually like to work, just not in the conditions of most modern workplaces amd full time employment.

Eight hours in an office plus a 45 min commute at either end 5 days a week for 40+ years is no way to live if you can avoid it - especially since offices seem less fun than they used to be, less banter and socialising … HR types have too much power everyone’s too paranoid to say anything that might offend.

About 15-20 hours a week of actual get-yer-head-down proper hard work feels about right to me.

In this respect I guess I’ve been semi retired since my late 20’s but yeah I should have been wiser with my money in case I lose this job and have to get a real one again.

And your right I need to get my arse over to Thailand - will make for a few interesting posts here if nowt else.

[crashmonitor]

ECB have held," if current trends continue it will be appropriate to ease". No date specified.

[Sasquatch]

2 hours ago, M S E Refugee said:

I think anyone who doesn't access their Pension at 55 and soon to be 57, is taking a massive gamble.

You could see the Government harmonising the age you can take your work/private pension with the old age pension.

Will be taking my 25% lump sum next April or perhaps 12 months later at the very latest.

I concur with your concerns. I think we will see a government in a panic in the reasonably near future. Anyone with private 'wealth' will be a target, however unfair it may seem.

[Long time lurking]

4 hours ago, Axeman123 said:

The US needs a weaker dollar IMO, so will want to go first (and force everyone else to wait)

The jaw-boneing by the Fed etc getting cuts priced out by markets makes total sense as a tactic to pressure other CBs to hold. The Fed will want shock and awe on their side when they do cut, rather than it having been priced in ahead of time.

Interesting related tweet:

 

Bond markets are setting rates now not the FED ,but it`s not out of the question they can`t be influenced ,but it took 24% prime dealer bids to keep the lid on yesterdays 10y 

Things are getting harder by the month as demand decreases 

If they cut it will be September and November purely for political reasons ,but my tinfoil hat is saying the OMG expose video released yesterday was all about trying to stop that happening 

As the year drags on interest rates become politically motivated ,nothing from a fiscal point of view will matter  

[spygirl]

6 minutes ago, Sasquatch said:

Will be taking my 25% lump sum next April or perhaps 12 months later at the very latest.

I concur with your concerns. I think we will see a government in a panic in the reasonably near future. Anyone with private 'wealth' will be a target, however unfair it may seem.

I think theres some level of panic in  the Treasury at the mo.

See take this job and shove it thread.

Since ~2005ish youve seen the number of people making up the top ~25% of tax payers shrink at a rapid rate.

The rate at which the productive/tax paying people have andremain taking early is getting eye brow raising.

Unless UKGOV broadens tax take then theres a risk that a large number of workers could just fuck off.

 

 

[One percent]

14 minutes ago, JoeDavola said:

I actually like to work, just not in the conditions of most modern workplaces amd full time employment.

Eight hours in an office plus a 45 min commute at either end 5 days a week for 40+ years is no way to live if you can avoid it - especially since offices seem less fun than they used to be, less banter and socialising … HR types have too much power everyone’s too paranoid to say anything that might offend.

About 15-20 hours a week of actual get-yer-head-down proper hard work feels about right to me.

In this respect I guess I’ve been semi retired since my late 20’s but yeah I should have been wiser with my money in case I lose this job and have to get a real one again.

And your right I need to get my arse over to Thailand - will make for a few interesting posts here if nowt else.

You are very well positioned Joe. Moving forward, I would suggest buying somewhere and paying the mortgage down asap.  Then, it doesn’t matter if your job goes, you will only need to earn enough to pay utilities and food.  
 

anyhow, this is not financial advice as I don’t really have a clue.  

[One percent]

Just now, spygirl said:

I think theres some level of panic in  the Treasury at the mo.

See take this job and shove it thread.

Since ~2005ish youve seen the number of people making up the top ~25% of tax payers shrink at a rapid rate.

The rate at which the productive/tax paying people have andremain taking early is getting eye brow raising.

Unless UKGOV broadens tax take then theres a risk that a large number of workers could just fuck off.

 

 

Well, it’s a problem of government own making. You can’t suppress wages for 30 years and expect to still have a significant rump of well paid people to pay significant taxes.  They are complete and utter fools. 

[Joncrete Cungle]

15 minutes ago, DurhamBorn said:

I dont think they will,but they might reduce it to 8 years before.They need to keep the carrots in place so workers keep buying gilts for them to inflate away.They have always given 10 years notice they are increasing it.HL etc could of wrote into their SIPPs small print that means you had protected rights and could still access at 55,but for some reason they dont,likely because it suits them to have higher balances for longer.

I worked it out a few years ago workers could retire on a full state pension at 54 if they scrapped working age welfare,51 if they scrapped the public sector pension sub.

The problem in this country is people retiring on bennies in their 20s,but as usual they wont tackle it.I can access my SIPP in 2 years and will,but for lump sums,not full drawdown.With eyes on every budget like a hawk.

Incredible once again the theft going on from private to public sector.

We are planning on using ISAS and LISAS to try and mitigate more SIPP moving of the goalposts. I guess the LISA penalty free access age will remain at 60 even when SIPP is older than 60.

Use the s&s ISAS divvies to coast in late 40's early 50's and SIPP everything above the tax free allowance / cut back on hours worked.

Pack up at 60 when LISA can be accessed and take tax free divvies from both ISAS and LISA. Take SIPP whenever access age is upto tax free allowance each year and forget state pension.

No doubt the bastards in Westminster will try and put a stop to it over the next couple of decades plus.c

 

[CannonFodder]

11 minutes ago, Joncrete Cungle said:

We are planning on using ISAS and LISAS to try and mitigate more SIPP moving of the goalposts. I guess the LISA penalty free access age will remain at 60 even when SIPP is older than 60.

Use the s&s ISAS divvies to coast in late 40's early 50's and SIPP everything above the tax free allowance / cut back on hours worked.

Pack up at 60 when LISA can be accessed and take tax free divvies from both ISAS and LISA. Take SIPP whenever access age is upto tax free allowance each year and forget state pension.

No doubt the bastards in Westminster will try and put a stop to it over the next couple of decades plus.c

 

They will stop most but not all 

There will always be routes left open for themselves, they just will be less visible to the masses

[onlyme]

2 hours ago, snaga said:

you are Sasha?

 

Was scratching my head for a while working out how energy prices were so cool in the data.

 

[Loki]

Just now, onlyme said:

Was scratching my head for a while working out how energy prices were so cool in the data.

 

I wonder if the big trading houses just have to show they've acted in the approved manner with the given data...hear no evil, see no evil, speak no evil, on with the melt up