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

[DurhamBorn]

2 minutes ago, JoeDavola said:

I don't follow this econcomic stuff to the detail you lot do but I enjoyed listening to this; the comments suggested that some sectors have just hit a limit in terms of how much they can raise their prices and are losing customers at those prices as people just say "nope" to that product or service.

Dunno if this is genuine but reminded me ot a clothes shop I went into in Belfast recently and near had a heart attack when I saw the prices:

"The Midwest here! I went to the local mall and the parking lot was packed but I don't see anyone buying anything. I looked at a short-sleeved shirt at Nordstrom - $354.00. Jeans are $360.00 at Macy’s. Those prices seem out of reach for average Americans."

 

 

Thats where we are.In the UK the productive will be losing up to 65% of their spending power on present policies.The country has an under production of around 35%,but by inflation protecting bennies and retired public sector etc the productive must lose their share as well.Its happening because of policy errors.

What you will see now is the huge pain on lower paid working that then slowly moves up the income scale.The higher paid who have high costs will also suffer.In simple terms the UK economic pie is slowly shrinking and that smaller pie is being given more and more to the none producing.Its speeding up.

Olive oil was £2.39 in Lidl when i stocked up in Feb 20.Yesterday it increased to £4.79.

The government bumped up NMW rather than cut bennies,but that will just feed more inflation,and see a wave of job losses.It looks like tipping point for lots of companies.

More and more sharing  will be next.Sharing cars,houses etc more and more.

[Harley]

8 hours ago, RJT1979 said:

Gold falling. I reckon that is the top. Down to 1800 now. Dyor

You got a rationale for that?

[JoeDavola]

4 minutes ago, DurhamBorn said:

Thats where we are.In the UK the productive will be losing up to 65% of their spending power on present policies.The country has an under production of around 35%,but by inflation protecting bennies and retired public sector etc the productive must lose their share as well.Its happening because of policy errors.

What you will see now is the huge pain on lower paid working that then slowly moves up the income scale.The higher paid who have high costs will also suffer.In simple terms the UK economic pie is slowly shrinking and that smaller pie is being given more and more to the none producing.Its speeding up.

Olive oil was £2.39 in Lidl when i stocked up in Feb 20.Yesterday it increased to £4.79.

The government bumped up NMW rather than cut bennies,but that will just feed more inflation,and see a wave of job losses.It looks like tipping point for lots of companies.

More and more sharing  will be next.Sharing cars,houses etc more and more.

Surely all this leads to a major fall in the wider stock market at some point then - how can it be reaching new highs if more and more people can't afford more and more of what's being produced?

There surely has to be a contraction of demand over time especially as boomers and their money die off?

[Harley]

2 hours ago, Pip321 said:

So fiat is strengthening? All time highs on the US stock market….

Must mean the world has never been safer, the economy never stronger and fair values everywhere. Bloomberg & Co leading the usual charge….nice melt up as predicted.

Thise jib numbers etc just keep coming…it’s all good  

It’s like when my iPhone says it’s sunny but I look out of the window and it’s pouring down.

I am waiting for a dip in gold or miners (hopefully to those Sept 2020 levels) to place one of my house sales into gold and miners…..because (long term) I believe it will be a great hedge against printing. 

A couple of miners have come up on my radar.  Not there yet but one down day has changed nothing, indeed that has strengthed things.  But not there yet.  Good to see some needed action though.  A chance the pullbacks are setting support/base build.  Something to watch.

Edited February 5 by Harley

[Democorruptcy]

Uncle Jay suggests 3 rate cuts this year

Quote

 

The Federal Reserve’s rate-setters still expect to make around three quarter-point rate cuts this year, its chair Jay Powell said in an interview that aired on Sunday.

Powell told CBS’s 60 Minutes show that “almost all” of the membership of the Federal Open Market Committee think the US central bank will cut rates from their current 23-year high of 5.25-5.5 per cent at some point over the course of 2024.

Rate-setters, on average, expected to make 75 basis points of cuts back in December. Powell said in an interview recorded on Thursday that, while new projections were not due out until March 20, “nothing has happened in the meantime that would lead me to think that people would dramatically change their forecasts.”

Powell says Fed expects to make three rate cuts this year

 

 

[SpectrumFX]

4 minutes ago, JoeDavola said:

Surely all this leads to a major fall in the wider stock market at some point then - how can it be reaching new highs if more and more people can't afford more and more of what's being produced?

There surely has to be a contraction of demand over time especially as boomers and their money die off?

The number goes up, and the number goes down, but it's important to keep in the back of your mind that the units that it's all being measured in aren't fixed.

It's like having a ruler that keeps shrinking a little bit every day. The measurements that you take today can't be directly compared with the ones you took last month or last year.

[JoeDavola]

I just see signs of decline all over - for example I have no water in my flat this morning for the third time in 3 months. This didn't used to happen even once a year. Whoever is fixing this is making a balls of it. Tried phoning the managment company and at 9am they've still not turned their phones on I'm straight to answering machine.

Edited February 5 by JoeDavola

[Harley]

I moan about the myopic uselessness of many (US) commentators but Tom Loungo delivers a nice exception (when talking about German politics, and the rest is top). 

https://sites.libsyn.com/19046/kunstlercast-394-tom-luongo-on-the-federal-reserve-versus-the-world-and-other-current-events

I smiled at his use of "fake and gay" data, hi Tom!  Good explanations for other stuff, although I do wish he would go one more round and treat me like the dunce I am....."and that means this"!

Not a particularly finance focussed podcast, more pollyecon which is centre stage atm.  Not to everyone's taste but I run a broad church.

Edited February 5 by Harley

[DurhamBorn]

15 minutes ago, JoeDavola said:

Surely all this leads to a major fall in the wider stock market at some point then - how can it be reaching new highs if more and more people can't afford more and more of what's being produced?

There surely has to be a contraction of demand over time especially as boomers and their money die off?

Some companies make more.10% price increases if only 2% customer losses etc.Baccie companies have done it for decades.

Markets go up on liquidity,and worldwide there is now record liquidity.Massive demand destruction in some areas as boomers die off,including for government gilts as pension schemes wind down.

[Harley]

11 minutes ago, SpectrumFX said:

The number goes up, and the number goes down, but it's important to keep in the back of your mind that the units that it's all being measured in aren't fixed.

It's like having a ruler that keeps shrinking a little bit every day. The measurements that you take today can't be directly compared with the ones you took last month or last year.

I heard a great quote yesterday about fiat:  being paid in ice cubes!

[DurhamBorn]

11 minutes ago, SpectrumFX said:

The number goes up, and the number goes down, but it's important to keep in the back of your mind that the units that it's all being measured in aren't fixed.

It's like having a ruler that keeps shrinking a little bit every day. The measurements that you take today can't be directly compared with the ones you took last month or last year.

Thats right,liquidity.10% price increases against 2% to 4% customers losses can be great for some companies,at least for a decade or so.Record liquidity in the world right now.For many others its a death sentence.

[Axeman123]

I am not saying that gold can't go lower, but at some point everyone will be calling for that one last dip to buy and it will leave them behind.

[Lightscribe]

21 minutes ago, JoeDavola said:

Surely all this leads to a major fall in the wider stock market at some point then - how can it be reaching new highs if more and more people can't afford more and more of what's being produced?

There surely has to be a contraction of demand over time especially as boomers and their money die off?

It’s not the plebs that are buying the stocks. 

Basically the flow of wealth to the big funds and 1%ers means the chasm ever more wider as the foundation fails at the bottom.

Lower paid workers and PAYE middle class go bust as ever more rely on government support.

People could be destitute and businesses and services collapsed but the stock market could be at ATHs. (This is the David Hunter melt up analogy)

More QE please vicar. 

[Loki]

22 minutes ago, JoeDavola said:

I just see signs of decline all over - for example I have no water in my flat this morning for the third time in 3 months. This didn't used to happen even once a year. Whoever is fixing this is making a balls of it. Tried phoning the managment company and at 9am they've still not turned their phones on I'm straight to answering machine.

The number has nothing to do with quality of life, and only a touch more to do with the actual economy 

[Harley]

17 minutes ago, Axeman123 said:

I am not saying that gold can't go lower, but at some point everyone will be calling for that one last dip to buy and it will leave them behind.

The thing people miss is trends don't just change, they build.  Look at the data, get a bit familiar with the dynamics, see the wood through the trees, and you can front run it.  For example, capitulation events banging out a solid base.  Although there is a risk:reward in that the earlier you go the higher the reward and risk (of being wrong).  For example, that capitulation event may include a gap down and any bounce is just filling the gap before more falls.

[Sidd]

https://www.cnbc.com/2024/02/05/gold-prices-to-hit-2200-and-outperformance-awaits-silver-says-ubs.html

 

[Harley]

20 minutes ago, Lightscribe said:

It’s not the plebs that are buying the stocks. 

Basically the flow of wealth to the big funds and 1%ers means the chasm ever more wider as the foundation fails at the bottom.

Lower paid workers and PAYE middle class go bust as ever more rely on government support.

People could be destitute and businesses and services collapsed but the stock market could be at ATHs. (This is the David Hunter melt up analogy)

More QE please vicar. 

Absolutely right.  Anything else is undergrad economics.  Look at the Weimar crack up boom.  Stocks outran inflation, until they eventually didn't.  I posted before, maybe we are at the foothills of something similar, whether overt or not.

[Harley]

3 minutes ago, Sidd said:

https://www.cnbc.com/2024/02/05/gold-prices-to-hit-2200-and-outperformance-awaits-silver-says-ubs.html

 

Blah, blah, blah.  God free me of this tinnitus!

[JoeDavola]

3 minutes ago, Harley said:

Look at the Weimar crack up boom.  Stocks outran inflation, until they eventually didn't.

I see the local housing market here as a kind of crack up boom too; with certain areas higher than ever and nobody I know even 'high earners' being able to afford them.

I get that it's not the plebs putting money into the market and it needs to be measured against a devaluing currency but it's the "until they didn't" moment that interests me - either a huge shift in sentiment or just a load of investors needing to cash out for various reasons - you'd assume that lots of the boomers with money in the market actually want or will need to spend it before they die.

Mind you even the boomers I know don't put money into the stock market as such as they dont trust it; their wealth is all HPI and public sector pensions.

[No One]

 

[wherebee]

38 minutes ago, Harley said:

Absolutely right.  Anything else is undergrad economics.  Look at the Weimar crack up boom.  Stocks outran inflation, until they eventually didn't.  I posted before, maybe we are at the foothills of something similar, whether overt or not.

and one reason is that as the value of money in your pocket erodes faster and faster, people throw it into anything available, which includes stocks and shares.  So they go up.  Until they don't.

If you look at who made it big in Weimar, it was those that rode the shares and debt market but cashed out before the collapse to buy real assets like farms and houses with no debt attached.

Of course, ten years later the russians took everything anyway and raped their daughters, but you can't win em all.

[Harley]

1 hour ago, JoeDavola said:

I see the local housing market here as a kind of crack up boom too; with certain areas higher than ever and nobody I know even 'high earners' being able to afford them.

I get that it's not the plebs putting money into the market and it needs to be measured against a devaluing currency but it's the "until they didn't" moment that interests me - either a huge shift in sentiment or just a load of investors needing to cash out for various reasons - you'd assume that lots of the boomers with money in the market actually want or will need to spend it before they die.

Mind you even the boomers I know don't put money into the stock market as such as they dont trust it; their wealth is all HPI and public sector pensions.

I appreciate you're not particularly ragging on boomers here (but are only calling them out) but plenty do here and beyond.  I think people will struggle to see much and make a difference to their lives talking about boomers and all that shite.  But then that's the intent.  Stick to banging one out on the alledged sources of the problems (right or wrong being academic) rather than constructively dealing with consequences.  Doom loops are for losers.  Again, I appreciate where you're coming from this time, just clearing the air.

Bubbles take on a life of their own and become increasingly irrational and prey to all sorts of weirdness.  After all they are inherently unstable systems.  It's part of It is their nature.  Of course they can remain longer than the sane minds can stay solvent (another academic exercise on what then is sanity!).  Those of us who naively, misleadingly, or arrogantly, feel we can divine the future other than letting the data primarily lead us are destined to go mad.

Weimar is a large topic.  Many threads.  One thing about such things though is you had two competing exponential bubbles.  The unconstrained (inflation) functions will always outrun the constrained ones (such as personal wealth).

You can't outrun a ponzi...

Edited February 5 by Harley

[JoeDavola]

1 minute ago, Harley said:

I appreciate you're not particularly ragging on boomers here (but are only calling them out) but plenty do here and beyond.  I think people will struggle to see much and make a difference to their lives talking about boomers and all that shite.  But then that's the intent.  Stick to banging one out on the alledged sources of the problems (right or wrong being academic) rather than constructively dealing with consequences.  Doom loops are for losers.  Again, I appreciate where you're coming from this time, just clearing the air.

Bubbles take on a life of their own and become increasingly irrational and prey to all sorts of weirdness.  After all they are inherently unstable systems.  It's part of their nature.  Of course they can remain longer than the sane minds can stay solvent (another academic exercise on what then is sanity!).  Those of us who naively, misleadingly, or arrogantly, feel we can divine the future other than letting the data primarily lead us are destined to go mad.

Weimar is a large topic.  Many threads.  One thing about such things though is you had two competing exponential bubbles.  The unconstrained (inflation) functions will always outrun the constrained ones (such as personal wealth).

To be clear I don't think the majority of boomers went out of their way to cause this. They just were in a position to benefit from HPI and generous public sector pensions both of the type that hadn't been seen before and probably won't be seen after.

[Harley]

45 minutes ago, wherebee said:

......

Of course, ten years later the russians took everything anyway and raped their daughters, but you can't win em all.

Sadly so.  My Russian doll similie!  And today.......?  For battle they teach you, after all the pain and elation(?) of seizing the ground, you need to do it all over again, dig in and wait the counter attack.  Nothing is over, follow, hopefully partially control, the momentum.

Edited February 5 by Harley

[DurhamBorn]

4 minutes ago, Harley said:

I appreciate you're not particularly ragging on boomers here (but are only calling them out) but plenty do here and beyond.  I think people will struggle to see much and make a difference to their lives talking about boomers and all that shite.  But then that's the intent.  Stick to banging one out on the alledged sources of the problems (right or wrong being academic) rather than constructively dealing with consequences.  Doom loops are for losers.  Again, I appreciate where you're coming from this time, just clearing the air.

Bubbles take on a life of their own and become increasingly irrational and prey to all sorts of weirdness.  After all they are inherently unstable systems.  It's part of their nature.  Of course they can remain longer than the sane minds can stay solvent (another academic exercise on what then is sanity!).  Those of us who naively, misleadingly, or arrogantly, feel we can divine the future other than letting the data primarily lead us are destined to go mad.

Weimar is a large topic.  Many threads.  One thing about such things though is you had two competing exponential bubbles.  The unconstrained (inflation) functions will always outrun the constrained ones (such as personal wealth).

I think you are right that we could be at the start of similar.I dont think Weimar style,not as extreme,but 12% to 25% inflation is still a huge risk.If government broke inflation linking i think we would maybe get away with another 35% to 50% inflation,but if they dont almost complete UK wealth destruction (or really consumption).Im positioned that we dont get that far,just a long way towards it,but im watching and hedged with lots of EM exposure,outside of sterling etc.The huge problem is so many takers now,they wont stop until there is nothing left.