Credit deflation and the reflation cycle to come (part 9)

[Mandalorian]

2 hours ago, DurhamBorn said:

BAT is a growth company.

 

It's got a funny way of showing it....

[Mandalorian]

1 hour ago, Jesus Wept said:

 

Not for me.

Mind Burry should have waited until I made my call…. he called it far too early. 

Come on..  Own up.  Which one of you gloomy, Chicken Little, cellar dwellers is Michael Burry?

[Jay]

1 hour ago, Jesus Wept said:

The Stockmarket loves low inflation, high profit and steady growth (not too high or low).

We now have persistent ‘spiky’ inflation, profit margins are being squeezed and growth looks very shaky. We have zombie companies with massive debts and limited earnings. 

The Mag 7 are the last to go down and are going to be the final signal - “the pin that pops the whole market”. 

S&P has had a 70%  better return than the global stock market for the last 10-12 years. That’s unprecedented.

Mag7 are monopolies - and that’s coming to an end globally.

The mania has come out in the last 3 years - meme stocks, bitcoin, shorting the hedge funds, everyone ‘investing’ and making millions, housing markets. The “everything bubble”.

Only thing that hasn’t properly risen in the last few year is the emerging markets? Strange? 

Global bust on the cards - long recession / depression coming. Heralded by the stock market collapse.

 

 

Growth and relative low inflation in U.S..strong dollar is reason why em are flying..mag7 monopoly ain’t ending that soon..

fiscal policy is the problem in the us..still believe that the U.S. markets rises another 10%-20%.. then a slow decline of around 30% with a chance of that in a bk..

so even if that scenario plays out, then we end up at oct 23..

the fly in the ointment is a slow multi decade fall in markets as America is no longer great..imo that is unlikely at least for another decade..

so as that mad orange says just regular drip save into an index fund..

sitting in cash waiting for blood on the streets is how Buffett made billions..so your potential strategy does work…slowly..

[Bobthebuilder]

19 minutes ago, Mandalorian said:

Chicken Little

That's not a great one to use, as chicken little turned out to be correct in the end, and save the town from aliens.

[Harley]

1 hour ago, Jesus Wept said:

The Stockmarket loves low inflation, high profit and steady growth (not too high or low).

We now have persistent ‘spiky’ inflation, profit margins are being squeezed and growth looks very shaky. We have zombie companies with massive debts and limited earnings. 

The Mag 7 are the last to go down and are going to be the final signal - “the pin that pops the whole market”. 

S&P has had a 70%  better return than the global stock market for the last 10-12 years. That’s unprecedented.

Mag7 are monopolies - and that’s coming to an end globally.

The mania has come out in the last 3 years - meme stocks, bitcoin, shorting the hedge funds, everyone ‘investing’ and making millions, housing markets. The “everything bubble”.

Only thing that hasn’t properly risen in the last few year is the emerging markets? Strange? 

Global bust on the cards - long recession / depression coming. Heralded by the stock market collapse.

 

 

Maybe the EMs are waiting for the "Year of the Tortoise"?

[CannonFodder]

12 minutes ago, Harley said:

Maybe the EMs are waiting for the "Year of the Tortoise"?

2024 has a different more militaristic tortoise.

[Plan-b]

3 hours ago, Harley said:

Bugger, could have bought the bigger quad bike! 

.....slap, but this is DOSBODS! 

 

[Lightscribe]

2 hours ago, Mandalorian said:

Come on..  Own up.  Which one of you gloomy, Chicken Little, cellar dwellers is Michael Burry?

You’re right it’s up from here, blue skies abound. 

I can only see the US going alone in a ESG utopia and stonks to the moon whilst the rest of the G7 implodes through monetary collapses.

 

Edited April 17 by Lightscribe

[DurhamBorn]

2 hours ago, Mandalorian said:

It's got a funny way of showing it....

 

[leonardratso]

That young guy shouldnt smoke at his age.

Unless its a bats fag.

Edited April 17 by leonardratso

[Bien Pensant]

22 hours ago, wherebee said:

Been that way for a long time; it's designed to let the authorities get criminals on tax evasion charges, which have long jail times PLUS big financial fines, without all the trouble of a criminal trial about who sold what to whom.

Tax trial: you had 2 million dollars in the Banks and a house worth 5 million, and didn't work.  What was it from?  "er....."

Nice, you owe us 20 million and 12 years in jail.  NEXT!

Certainly has always been the case in the UK - 'trade is trade, no moral test', https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim22008

Is the story that the IRS has put a separate box for it on the form now, or something?

Edited April 17 by Bien Pensant

[leonardratso]

1 minute ago, Jesus Wept said:

That’s a bloke. 

he shure got a purdy mouth tho.

[sancho panza]

11 hours ago, AWW said:

We've quite a few what could be called contrarians on the various FICC desks at work. In reality, they've just experienced a wider range of economic conditions than your average Brit, being Russian, Polish, Iranian plus a few others. None of them expect a rate cut from the BoE this year and all expect the BoE's next move to be an increase, potentially as early as Q4 this year.

whats ficc?

fascianting insight thank you.

I think it also reflects more broadly on the basement dwellers who are appear older than your average punter.lot of us remember the late 80's/early 90's when rates hit 13% and findign a job was hard.

these days with sickenss bennies ,whilst the unemployed rate is high if you include the anxiety claimantst,the reality is tehre's loads of josb.

as for inflation,the most indebted mortgage holders out there are too yuong to remmerb the last time rates hit 20 year highs.the net few years going to brutal to their expectations

11 hours ago, Yadda yadda yadda said:

We talk about the inflationary effect of wage and benefits increases. The increase in retirees is also inflationary. More Government spending, fewer workers and less saving. As an example I know someone who retired a few years ago. He reached State Pension age at the weekend and will soon receive his first payment. This will double his income. Good for him.

There is so much inflationary pressure that it cannot be brought down without increasing domestic production massively or cutting state spending. Probably both. It just isn't happening.

lyn alden was making a point about higher IRs excaerbating inflation.

worth noting as well that she talks again about fiscal dominance,which to be fair to @DurhamBorn he was talking about as the 'reflation' part of the discussion some 6 years ago.............kudos,I was fu**ing miles away from that when I began my basement journey.you can split hairs on defintions but that wasa  great call.

also she alludes to the point @AWW was making about how his colleageus who come from EMs have a differnet take on the future path of UK IRs to thsoe who raised here

lyn alden

'One of the major themes I have been presenting is that when the public debt/GDP ratio is over 100% and annual fiscal deficits are becoming structurally larger than the combined sum of annual net bank loan creation and corporate bond issuance, interest rates start to work differently when it comes to controlling inflation.

When public debt and deficits are that high, interest rates become less effective at suppressing inflation, and in some cases can even exacerbate inflation, which is unintuitive. This is because the economy is in “fiscal dominance” mode rather than “monetary dominance” mode, and it’s unlike anything that most developed markets have experienced in the past 40 years. Most developed markets experienced it back in the 1940s, and many emerging markets experience it regularly, but those are not commonly studied by investors in developed markets today. And so it is has been an unintuitive and out-of-consensus view for a while but is starting to be more widely understood.

But by early 2023, the data started to suggest otherwise, and the bank liquidity bailouts in March 2023 really sealed the deal. The federal government’s debt is shorter term than a lot of the private market’s debt and gets refinanced at higher rates more rapidly, and so higher rates are becoming somewhat stimulatory for some sectors of the economy that are directly or indirectly on the receiving side of those deficits. And so I pivoted my view based on the data in a direction that deviated from consensus, and the data continue to suggest that this is what is happening.

Specifically, if the government runs very large deficits and has high debt/GDP, and the central bank operates at high interest rates, but then also the government and central bank shield the private sector from much of the harm of those policies (for example, by making sure uninsured depositors don’t lose money from bank failures like in March 2023), then those high rates have a stimulatory effect for many parts of the economy that equals or possibly outweighs their slowdown effect. This is because there are many entities in the private sector that are on the receiving side of those fiscal deficits and interest expense (which is interest income for those entities). The exceptions to this are the sectors that have weak fundamentals and a lot of short-duration debt with high leverage ratios, such as office commercial real estate. Those sectors don’t really benefit from fiscal dominance.

However, if the Fed does cut rates, then there would be a risk of materially higher oil prices, which are also inflationary. So I lean toward an inflationary outlook either way, which is a hallmark of fiscal dominance.'

 

 

[sancho panza]

Nothing new to us but a lot of info in one place

https://www.dailymail.co.uk/news/article-13315727/sicknote-Briton-refusing-job-shocking-insight-lives-economically-inactive.html

'I get £1,300 a month and all my housing costs paid. Why would I need the hassle of work?'

•  Britain is once again being labelled 'the sick man of Europe' with 2.8m people on long term sick leave.
• 4,000 applications for sickness benefits were being made every single day

On the nearby seafront, four men in their 20s and early 30s can be seen laughing as they stroll along the pier. In contrast to James, who did have a job until he suffered an injury and subsequently developed tinnitus and mental health problems, none of this quartet has ever been employed or had any ambitions to take an occupation or career.

All are on benefits and living with their parents. 'I don't feel ready; I just couldn't work,' says one. 'I can't handle the pressure. I find it overwhelming,' says another.

What is particularly striking is that all four now claim disability payments because of poor mental health, citing problems such as depression and anxiety.

A total of 9.4 million people of working age are now economically inactive, meaning they are neither employed nor looking for work.

Of this huge group, around 5.5 million are claiming benefits.

And yesterday it was revealed that more than 2.8 million of these are on long-term sick leave — the highest figure ever.

Currently standing at £297 billion, the overall welfare bill is projected to climb to £360 billion over the next five years — the equivalent of 11 per cent of Britain's entire economic output. Over the same period, spending on sickness benefits is expected to rise from £66 billion to more than £90 billion.

One major international investor, Neeraj Kanwar of India-based Apollo Tyres, has said that he would not open a factory in Britain because the welfare state has bred a spirit of idleness here. 'British workers hardly work — they go down to the pub,' he complained.

The introduction of the £97 billion furlough scheme, under which millions were effectively paid to stay at home, broke down the stigma of claiming something for nothing. The whole nation was doing it with the express approval of the Government, and that spirit still lingers.

A single adult aged over 25, deemed fit for work, will receive £393.45 a month in Universal Credit. But if they are found by a Work Capability Assessment to be unfit for work, they could be entitled to an extra £416 on top of this standard rate.

And this payment does not even include additional subsidies for housing, travel, child support and council tax discounts.

Once in place, the money from PIP keeps flowing. Since April 2019, out of 2.4 million Work Capability Assessments conducted, no fewer than 65 per cent of them concluded that the claimant would never have to work again.

The second consequence of the current neurosis about mental health is it has robbed too many young people of their resilience. With all the emphasis on 'trigger warnings', 'victimhood' and 'safe spaces', they inevitably feel daunted by challenges rather than determined to overcome them, particularly in the wake of the disruptions and isolation they had to endure during the pandemic.

[wherebee]

The pressure in the education system to label every minor stress a big issue is a large part of the damage.  I see it in schools here in Oz - for all the talk about resilience, self confidence, all the professional advice makes things worse.  It's normal to feel stressed.  It shouldn't be seen as a disability.

One of the parents of a kid at one of my children's schools died suddenly recently (jab, in my view) and the school offered all pupils counselling.  WTF.  They didn't even know him.  The knock on impact is my daughter got really worried for a few weeks that I was going to die.  Thanks, school.

[sleepwello'nights]

11 hours ago, afly said:

https://archive.ph/BC8FP

Where do you get the characters for the last section?   BC8FP

[Onsamui]


The Great Dispossession: A Massive Financial Crisis Is Pending. The WEF's "Great Reset" Means "The Re-institutionalization of Feudalism" - Global ResearchGlobal Research - Centre for Research on Globalization 

Whether Webb is correct that the regulatory regime that has been put in place amounts to a deliberate restoration of feudalism under high tech management or whether the new rules are the unintended consequence of the rulers’ drive for security is not important. The relevant point is that the next financial crisis will dispossess us not only of our pensions and financial assets but also of our freedom and independence. If the past is a guide, the next financial crisis is close at hand.

If the mega-rich and the large financial intermediaries can be made aware of the situation, it is in their own self-interest to convince Congress to use its law-making power to unwind the regulatory system of dispossession that has been created. But the hour grows late.

Ordinary people are dismissive of the World Economic Forum and its agenda of “you will own nothing and be happy,” but this is a mistake.

[AWW]

7 hours ago, sancho panza said:

whats ficc?

Fixed income, currencies and commodities.

[Heart's Ease]

7 hours ago, sancho panza said:

whats ficc?

fascianting insight thank you.

I think it also reflects more broadly on the basement dwellers who are appear older than your average punter.lot of us remember the late 80's/early 90's when rates hit 13% and findign a job was hard.

these days with sickenss bennies ,whilst the unemployed rate is high if you include the anxiety claimantst,the reality is tehre's loads of josb.

as for inflation,the most indebted mortgage holders out there are too yuong to remmerb the last time rates hit 20 year highs.the net few years going to brutal to their expectations

lyn alden was making a point about higher IRs excaerbating inflation.

worth noting as well that she talks again about fiscal dominance,which to be fair to @DurhamBorn he was talking about as the 'reflation' part of the discussion some 6 years ago.............kudos,I was fu**ing miles away from that when I began my basement journey.you can split hairs on defintions but that wasa  great call.

also she alludes to the point @AWW was making about how his colleageus who come from EMs have a differnet take on the future path of UK IRs to thsoe who raised here

lyn alden

'One of the major themes I have been presenting is that when the public debt/GDP ratio is over 100% and annual fiscal deficits are becoming structurally larger than the combined sum of annual net bank loan creation and corporate bond issuance, interest rates start to work differently when it comes to controlling inflation.

When public debt and deficits are that high, interest rates become less effective at suppressing inflation, and in some cases can even exacerbate inflation, which is unintuitive. This is because the economy is in “fiscal dominance” mode rather than “monetary dominance” mode, and it’s unlike anything that most developed markets have experienced in the past 40 years. Most developed markets experienced it back in the 1940s, and many emerging markets experience it regularly, but those are not commonly studied by investors in developed markets today. And so it is has been an unintuitive and out-of-consensus view for a while but is starting to be more widely understood.

But by early 2023, the data started to suggest otherwise, and the bank liquidity bailouts in March 2023 really sealed the deal. The federal government’s debt is shorter term than a lot of the private market’s debt and gets refinanced at higher rates more rapidly, and so higher rates are becoming somewhat stimulatory for some sectors of the economy that are directly or indirectly on the receiving side of those deficits. And so I pivoted my view based on the data in a direction that deviated from consensus, and the data continue to suggest that this is what is happening.

Specifically, if the government runs very large deficits and has high debt/GDP, and the central bank operates at high interest rates, but then also the government and central bank shield the private sector from much of the harm of those policies (for example, by making sure uninsured depositors don’t lose money from bank failures like in March 2023), then those high rates have a stimulatory effect for many parts of the economy that equals or possibly outweighs their slowdown effect. This is because there are many entities in the private sector that are on the receiving side of those fiscal deficits and interest expense (which is interest income for those entities). The exceptions to this are the sectors that have weak fundamentals and a lot of short-duration debt with high leverage ratios, such as office commercial real estate. Those sectors don’t really benefit from fiscal dominance.

However, if the Fed does cut rates, then there would be a risk of materially higher oil prices, which are also inflationary. So I lean toward an inflationary outlook either way, which is a hallmark of fiscal dominance.'

 

 

@Frank Hovis I mentioned a couple  of months ago that Lyn Alden had posited we were facing a situation more akin to 1940's than 1970's. This helpful snippet posted by @sancho panza succinctly describes the distinction.  

https://www.lynalden.com/fiscal-and-monetary-policy/

She gives a good run through of the 2020's/1940's comparison in the blog post pasted above.

[Pip321]

7 hours ago, sancho panza said:

whats ficc?

fascianting insight thank you.

I think it also reflects more broadly on the basement dwellers who are appear older than your average punter.lot of us remember the late 80's/early 90's when rates hit 13% and findign a job was hard.

these days with sickenss bennies ,whilst the unemployed rate is high if you include the anxiety claimantst,the reality is tehre's loads of josb.

as for inflation,the most indebted mortgage holders out there are too yuong to remmerb the last time rates hit 20 year highs.the net few years going to brutal to their expectations

lyn alden was making a point about higher IRs excaerbating inflation.

worth noting as well that she talks again about fiscal dominance,which to be fair to @DurhamBorn he was talking about as the 'reflation' part of the discussion some 6 years ago.............kudos,I was fu**ing miles away from that when I began my basement journey.you can split hairs on defintions but that wasa  great call.

also she alludes to the point @AWW was making about how his colleageus who come from EMs have a differnet take on the future path of UK IRs to thsoe who raised here

lyn alden

'One of the major themes I have been presenting is that when the public debt/GDP ratio is over 100% and annual fiscal deficits are becoming structurally larger than the combined sum of annual net bank loan creation and corporate bond issuance, interest rates start to work differently when it comes to controlling inflation.

When public debt and deficits are that high, interest rates become less effective at suppressing inflation, and in some cases can even exacerbate inflation, which is unintuitive. This is because the economy is in “fiscal dominance” mode rather than “monetary dominance” mode, and it’s unlike anything that most developed markets have experienced in the past 40 years. Most developed markets experienced it back in the 1940s, and many emerging markets experience it regularly, but those are not commonly studied by investors in developed markets today. And so it is has been an unintuitive and out-of-consensus view for a while but is starting to be more widely understood.

But by early 2023, the data started to suggest otherwise, and the bank liquidity bailouts in March 2023 really sealed the deal. The federal government’s debt is shorter term than a lot of the private market’s debt and gets refinanced at higher rates more rapidly, and so higher rates are becoming somewhat stimulatory for some sectors of the economy that are directly or indirectly on the receiving side of those deficits. And so I pivoted my view based on the data in a direction that deviated from consensus, and the data continue to suggest that this is what is happening.

Specifically, if the government runs very large deficits and has high debt/GDP, and the central bank operates at high interest rates, but then also the government and central bank shield the private sector from much of the harm of those policies (for example, by making sure uninsured depositors don’t lose money from bank failures like in March 2023), then those high rates have a stimulatory effect for many parts of the economy that equals or possibly outweighs their slowdown effect. This is because there are many entities in the private sector that are on the receiving side of those fiscal deficits and interest expense (which is interest income for those entities). The exceptions to this are the sectors that have weak fundamentals and a lot of short-duration debt with high leverage ratios, such as office commercial real estate. Those sectors don’t really benefit from fiscal dominance.

However, if the Fed does cut rates, then there would be a risk of materially higher oil prices, which are also inflationary. So I lean toward an inflationary outlook either way, which is a hallmark of fiscal dominance.'

 

Thanks for posting. 

I mentioned a week or so ago (with oil prices, gold prices, growth numbers)  that the levers pulled by government don’t seem to work anymore. That due to deficits and debt we have moved from ignoring what they say…..to now ignoring what they do.

Now if Lyn Alden (top bloke) wants to put more words around that and give it fancy economic terms I am all for that. 😂

I think Lyn offers really critical views and found her and Luke Gromen really informative these past 18 months. They think in terms of economics and use language to appear apolitical whilst somehow explaining TPTB are all shite. 

[DurhamBorn]

8 hours ago, sancho panza said:

whats ficc?

fascianting insight thank you.

I think it also reflects more broadly on the basement dwellers who are appear older than your average punter.lot of us remember the late 80's/early 90's when rates hit 13% and findign a job was hard.

these days with sickenss bennies ,whilst the unemployed rate is high if you include the anxiety claimantst,the reality is tehre's loads of josb.

as for inflation,the most indebted mortgage holders out there are too yuong to remmerb the last time rates hit 20 year highs.the net few years going to brutal to their expectations

lyn alden was making a point about higher IRs excaerbating inflation.

worth noting as well that she talks again about fiscal dominance,which to be fair to @DurhamBorn he was talking about as the 'reflation' part of the discussion some 6 years ago.............kudos,I was fu**ing miles away from that when I began my basement journey.you can split hairs on defintions but that wasa  great call.

also she alludes to the point @AWW was making about how his colleageus who come from EMs have a differnet take on the future path of UK IRs to thsoe who raised here

lyn alden

'One of the major themes I have been presenting is that when the public debt/GDP ratio is over 100% and annual fiscal deficits are becoming structurally larger than the combined sum of annual net bank loan creation and corporate bond issuance, interest rates start to work differently when it comes to controlling inflation.

When public debt and deficits are that high, interest rates become less effective at suppressing inflation, and in some cases can even exacerbate inflation, which is unintuitive. This is because the economy is in “fiscal dominance” mode rather than “monetary dominance” mode, and it’s unlike anything that most developed markets have experienced in the past 40 years. Most developed markets experienced it back in the 1940s, and many emerging markets experience it regularly, but those are not commonly studied by investors in developed markets today. And so it is has been an unintuitive and out-of-consensus view for a while but is starting to be more widely understood.

But by early 2023, the data started to suggest otherwise, and the bank liquidity bailouts in March 2023 really sealed the deal. The federal government’s debt is shorter term than a lot of the private market’s debt and gets refinanced at higher rates more rapidly, and so higher rates are becoming somewhat stimulatory for some sectors of the economy that are directly or indirectly on the receiving side of those deficits. And so I pivoted my view based on the data in a direction that deviated from consensus, and the data continue to suggest that this is what is happening.

Specifically, if the government runs very large deficits and has high debt/GDP, and the central bank operates at high interest rates, but then also the government and central bank shield the private sector from much of the harm of those policies (for example, by making sure uninsured depositors don’t lose money from bank failures like in March 2023), then those high rates have a stimulatory effect for many parts of the economy that equals or possibly outweighs their slowdown effect. This is because there are many entities in the private sector that are on the receiving side of those fiscal deficits and interest expense (which is interest income for those entities). The exceptions to this are the sectors that have weak fundamentals and a lot of short-duration debt with high leverage ratios, such as office commercial real estate. Those sectors don’t really benefit from fiscal dominance.

However, if the Fed does cut rates, then there would be a risk of materially higher oil prices, which are also inflationary. So I lean toward an inflationary outlook either way, which is a hallmark of fiscal dominance.'

 

 

Glad to others i respect come onto the roadmap 6 years later,the numbers were showing it back then,but of course a long way off in time,but it was underway.You would expect some policy changes by now,but nothing,they doubled down.So bennies and inflation linked none producing are driving the economy.Incredible,but true.I think when i look back at life i will remember i told Catherine Mann the above face to face.Someone who left school at 16 from the shittest of shit comps,in one of the poorest towns in the country right,the entire BOE rate setting board wrong.

The situation in the UK could not be worse.Reeves has just got herself a board of advisors,and they all think there should be NI on pension income,pensions should come under IHT,IHT is a very good thing etc.So there is a very good chance Labour simple keep allowances frozen and tax away all saved labour under we run out of savings.When John Major left office,the UK was in an incredible position.Labour destroyed it,the Tories decided to give up.The next Labour government will be a shit show.

Edited April 18 by DurhamBorn

[ashestoashes]

maybe the plan is to crash it all and start again

 

[AWW]

19 minutes ago, ashestoashes said:

maybe the plan is to crash it all and start again

Bit of a fallacy that one. It's not like a building where you might be better if razing it to the ground and building from scratch. When you want to turn a developed economy round, you need to start doing it ASAP, not waiting until you're in a worse position, with fewer options.
 
What they're actually going to do is preside over a long period of decline in living standards. Which is what they've been doing since the early 2000s.

[SpectrumFX]

23 minutes ago, ashestoashes said:

maybe the plan is to crash it all and start again

 

That's likely the outcome.

I think their plan though is to bumble along and feather their own nests. The people in charge aren't big picture thinkers.

[ashestoashes]

1 minute ago, AWW said:

Bit of a fallacy that one. It's not like a building where you might be better if razing it to the ground and building from scratch. When you want to turn a developed economy round, you need to start doing it ASAP, not waiting until you're in a worse position, with fewer options.
 
What they're actually going to do is preside over a long period of decline in living standards. Which is what they've been doing since the early 2000s.

aren't there trillions in obligations that can't be paid, banks about to go bust, inflation etc plus there's a declared desire by tptb for a great reset