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

[Jesus Wept]

35 minutes ago, sancho panza said:

whats intersting is how little the 2 yr gilt rate dropped back when inflation pulled back from 10% last year.

which hints the bond market never quite beleived that inflation fairies were gone even tho the bank of england said they were.

below below is inflation chart back to 2014 as per the 2 yr chart.

even if the fed cuts,Im not sure we could follow.$ is the workd reserve still...for now.£ is tmrws toilet paper the way the govt are behaivng on borrowing for bennies and NHS spendo.

wahts fascinating is the scale of the fincaical rape of the middle classes needed to keep the plates spinning let alone clearing some of the debt

see we're fgoing form 3mn 40% taxpayers in 2010 to 5.6mn in 2024 to 7.8mn in 2027...........................................it's no wonder people give up.

ref the second point,I think if people checked their pension statments as often as they checked their bank statement they'd be raging.

the hosing from bond yield going from 2% to 4.5% has yet to be felt by the DC mananged pension schemes imho

https://www.telegraph.co.uk/money/tax/income/one-in-five-now-paying-higher-rate-tax-under-the-tories/

In 2023/24, 18pc of income taxpayers are projected to pay either the higher or additional rate, according to Office for Budget Responsibility (OBR) figures. This is up from 10.4pc when the Conservatives came to power in 2010.

Income tax thresholds are set to stay frozen until 2027/28 thanks to the Chancellor, dragging millions of taxpayers into higher brackets.

There were 3.03m higher rate taxpayers and 236,000 additional rate taxpayers in 2010/11, representing 9.6pc and 0.8pc of the total number of income tax-payers respectively.

These numbers are projected to rise to 5.6m (15.6pc) and 862,000 (2.4pc) in 2023/24, according to OBR figures.

 

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? 

 

 

 

Edited April 11 by Jesus Wept

[M S E Refugee]

13 minutes 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 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.

[Lightscribe]

3 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.

https://archive.ph/Ao7vu

 

The second wave is only just beginning 

[montecristo]

17 minutes 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

Yes, looking back i'm kicking myself for not doing it earlier.  Wasting money leasing cars, credit cards etc  etc.  Could have made the move years ago. Now I have no credit cards or even direct debits.

[Castlevania]

7 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.

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 doing the same here ATH share price 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? 

 

 

 

Shelter is rent. Mortgage rates aren’t included. It’s a lagging measure. Inflation was much higher than reported a year ago and is lower now because of the way they measure rents.

[Jesus Wept]

5 minutes ago, Castlevania said:

Shelter is rent. Mortgage rates aren’t included. It’s a lagging measure. Inflation was much higher than reported a year ago and is lower now because of the way they measure rents.

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? 

Edited April 11 by Jesus Wept

[Axeman123]

@Jesus Wept The insurance thing is perplexing, by all accounts falling repair and replacement costs should be feeding in by now. 

Electricity isn't necessarily about profiteering, so much as idiocy like net zero and sanctions.

I think the Fed will cut, perhaps as soon as May but more likely June. They will want to manage messaging around this carefully though. The last thing they want is to be seen as blowing a stock market bubble in an election year, having worked hard on "credibility" (ie convincing markets they will do whatever they say) they won't want to be seen as backing down to market expectations etc.

DDMB thinks they will end QT first, which would obviously help with debt costs.

https://twitter.com/DiMartinoBooth/status/1778126422394949644

 

[Axeman123]

8 minutes ago, Castlevania said:

Shelter is rent. Mortgage rates aren’t included. It’s a lagging measure. Inflation was much higher than reported a year ago and is lower now because of the way they measure rents.

Lots of lags seem set to move reported inflation lower in the near term even if nothing else actually changes.

[Axeman123]

5 minutes ago, Jesus Wept said:

Surely rent is also linked to mortgage rates. As rates go up the landlords have to pass on this cost to their tenants? 

Many places rents are falling.

[snaga]

25 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? 

 

 

 

you are Sasha?

 

[Castlevania]

14 minutes 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? 

No. There’s rent for renters and imputed rent for owner occupiers. 

[Pip321]

3 hours ago, Axeman123 said:

Swap rates are anticipating future inflation and showing that rates SHOULD rise.

Gold is rallying because rates will be cut instead, simply down to the cost of govt borrowing.

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.

Stagflation explains all three.

Agree...my statement was rhetorical to illustrate the bewilderment of the 'Bloomberg trader' rather than those on this thread looking beyond the 'current data'. 

Main thrust now I see is that the central banks are less able to control things, fiscal dominance starting.....

I see a small drop in rates in the next few months (elections are here, so entirely political) but the market (driven by traders and non macro investors) massively over reacting and Dave Hunters melt up.....then the election happens, the party stops and reality starts to hit. That's the next great big buying opportunity if the US haven't started WW3 to avoid civil riots.

I think we are moving through the phases now.... length of each phase, polo actions to extend things.... so as ever though is almost an impossibility to predict real timings. 

[One percent]

39 minutes 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? 

I don’t understand a word of that bollox, it’s all made up shit full of ‘ifs’. In other words, it’s an attempt to deceive. 

[One percent]

25 minutes ago, Castlevania said:

No. There’s rent for renters and imputed rent for owner occupiers. 

Made up bollox for the purpose to deceive 

[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.