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

[JMD]

13 hours ago, sancho panza said:

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.

I can't help think there is a covert agenda behind the total ambivalence shown by Western governments toward getting people back to work post-p(l)andemic.

Maybe it's because UBI implementation (followed closely by a CBDC, initially just for the benefit crowd) is much nearer than we think and so government sees little point in pretending to 'get Britain back to work'. And on a darker note perhaps the social security experiment could also be to identify the workshy/bennie types within our community, and where ultimately for them, CBDC will tragically mean Central Bank Debt Culling!!   ...After all, anything and everything really does seem possible these days. May you live in zero-interest'ing times! (Chinese curse, sort of)

Edited April 18 by JMD

[honkydonkey]

1 hour ago, ashestoashes said:

looks a bit sick, you think it'll do well in the future ?

Emerging market, big brics member, etf quite heavy commodity and energy. Yes. 

[Noallegiance]

Oh look!

[Long time lurking]

10 minutes ago, JMD said:

I can't help think there is a covert agenda behind the total ambivalence shown by Western governments toward getting people back to work post-p(l)andemic.

Maybe it's because UBI implementation (followed closely by a CBDC, initially just for the benefit crowd) is much nearer than we think and so government sees little point in pretending to 'get Britain back to work'. And on a darker note perhaps the social security experiment could also be to identify the workshy/bennie types within our community, and where ultimately for them, CBDC will tragically mean Central Bank Debt Culling!!   ...After all, anything and everything really does seem possible these days. May you live in zero-interest'ing times! (Chinese curse, sort of)

Zimbabwe tried it ,although it was not digital the end result will be the same 

The position we are in now is due to other countries seeing us "just printing" money to buy their labour ,you just have to stop and think what the consequence would be if it went full on UBI ? 

International trade cant be based on who`s got the biggest printer wins,this is what the rest of the world are telling the west now,currently IMO we are at the beginning of the end of that game   

[Loki]

1 minute ago, Noallegiance said:

Oh look!

While The Science still believes that CO2 can influence the climate in any meaningful way, and people are happy to be fed the absolute intellectual slop, this sort of newsbite doesn't really mean anything

[sancho panza]

7 hours ago, DurhamBorn said:

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.

How funny is this? 2016 or whenver the first thread startted on ToS you called it Reflation.Early 24 Lyn Alden starts calling it Fiscal dominance(an entirely understandable term) and then April 24 George Gammon call its......errr....Reflation.

This is a recent vid of his on why gold is rocketing uses the reflation thesis predicting an infaltionary wave with it

When I joined the thread I was an outfighr deflationist like steve van metre/rosie.then the logic you spleled out made me realsie that credit deflation and price deflation didnt necessarily follow and that credit and price could move in opposite directiosn ie credit deflting with prices inflating.it was a key moment in my investing career and luckily for us I chose to lsiten to an ex factory worker/16yo school leaver rather than the BoE and the assorted neo classicals at teh major banks.the logixc was compelling to be fair

Besdies yoursefl and the assmebled basment dwellers,this is lyn alden/george gammon/luke gromen/david hunter to name but a few all singing from the same hymn sheet.that s some f**king team.

he discusses gold rising at the same time as dollar ref real rates,saying it doesnt make sense until you look at it through bank credit(which is what I think you were referring to previosuly before DB,alongside lYn adlen from yesterday)

his conclsuion is that gold is confimring we are in a logn term commodity super cycle,peak is after 2030 with ltos of volatitilyyu

 

Edited April 18 by sancho panza

[Mandalorian]

2 hours ago, ashestoashes said:

who are the fools ?

https://www.fool.co.uk/2024/04/17/heres-why-the-vodafone-share-price-could-be-a-big-ftse-100-winner-in-2024/

The Vodafone (LSE: VOD) share price has been one of the growth winners of the past few years… oh, hang on, I’ve got the chart the wrong way up!

Vodafone shares have actually lost more than 50% of their value in the past five years. They bottomed out in February at 52-week low of under 63p.

At 66p as I write, the price hasn’t regained a lot. But I can’t help thinking the second half of 2024 might bring a change.

Jam tomorrow.

Is VOD another one of DB's "growth* shares" like he said BATs was?

 

*Growth can be negative I suppose

[Loki]

2 minutes ago, Mandalorian said:

Jam tomorrow.

Is VOD another one of DB's "growth* shares" like he said BATs was?

 

*Growth can be negative I suppose

No need to be a dick about it

[DurhamBorn]

2 hours ago, Jay said:

Dxy going to 113 from here is real possibility…euro parity and 160 plus yen..a lot of pain in em plus yields will be higher…most likely the fed cuts before that scenario..I hope..if not then be lucky…

Yes,there is a chance pain could go on longer yet,but i like these kind of extreme rubber band set ups,they always snap back and provide big profits.The key really is not to avoid being in the red,its to try to get in and by down 15% or less when things turn.Its one of the things with contrarian investing,you tend to get the biggest profits from the things you sometimes wish you had bought 6 months later than you did.

[DurhamBorn]

28 minutes ago, Mandalorian said:

Jam tomorrow.

Is VOD another one of DB's "growth* shares" like he said BATs was?

 

*Growth can be negative I suppose

I bought £20k of BATs and sold that holding for £350k+ at £52.Lots of those profits went into Harmony at $1.90,Mosaic at $12 ,Sib around $3.8 ,then of course they were all sold and buying into new areas.The initial £20k in BAT has probably made me close to £600k (plus it bought my house by paying the mortgage off with those divis you hate,and helped fund my 5 years off work from 30 to 35 on top)

Iv bought £75k of BAT back at average of £24.687 and had £6 of divis since i started buying it back.Very happy so far,those divs finding their way into other investments,the last few into Sibanye.

VOD is my worst investment of the last 5 years it think,Tef Brazil on its own made me back the losses on VOD.Turkcell made me more than the VOD losses.Its annoying that the managers made mistakes but comes with investing.

BATs cash earnings are increasing every year.Thats a growth company.The market is choosing to value those cash earnings lower at the moment.Im very thankful as it meant i could buy back a big holding.

Your right index tracking the S&P is a good way for most to invest,or at least has been,but the market might be setting those people up for massive pain.Im not most people though.

 

 

 

Edited April 18 by DurhamBorn

[JMD]

33 minutes ago, Noallegiance said:

Oh look!

Surely the SNP will damn and condemn her for being a Climate denying heretic and for committing foul crimes against Scientism? ...Then again perhaps not, after all the SNP have got an election to win later this year!

[spygirl]

Just perfect  -

The great bet on rate cuts is off

We are trapped in old ways of thinking about inflation

https://www.ft.com/content/d998d679-7d83-4e47-910e-b49370e0318b

Welcome to what Goldman Sachs is calling “reflation desperation”. For policymakers and investors, this will be a nauseating and probably lengthy ride.

The embarrassing reset has come about because it turns out the inflation dragon had not been slain after all, despite markets in effect calling victory over it late last year. 

.....

The great bet on rate cuts — and it was enormous — is dead. At the start of 2024, the expectation was for six, maybe seven, US rate cuts this year. That felt silly even then, but it is unravelling in humbling fashion. Today markets are pencilling in one, maybe two. 

[Mandalorian]

6 minutes ago, DurhamBorn said:

I bought £20k of BATs and sold that holding for £350k+ at £52.Lots of those profits went into Harmony at $1.90,Mosaic at $12 ,Sib around $3.8 ,then of course they were all sold and buying into new areas.The initial £20k in BAT has probably made me close to £600k (plus it bought my house by paying the mortgage off with those divis you hate,and helped fund my 5 years off work from 30 to 35 on top)

Iv bought £75k of BAT back at average of £24.687 and had £6 of divis since i started buying it back.Very happy so far,those divs finding their way into other investments,the last few into Sibanye.

VOD is my worst investment of the last 5 years it think,Tef Brazil on its own made me back the losses on VOD.Turkcell made me more than the VOD losses.Its annoying that the managers made mistakes but comes with investing.

BATs cash earnings are increasing every year.Thats a growth company.The market is choosing to value those cash earnings lower at the moment.Im very thankful as it meant i could buy back a big holding.

Your right index tracking the S&P is a good way for most to invest,or at least has been,but the market might be setting those people up for massive pain.Im not most people though.

 

 

 

And do you honestly think, hand on heart, that the future for tobacco and telecoms is rosy?

Tobacco - Western governments are making it slowly impossible for people to buy cigarettes.  You say growth will come from elsewhere in the world, but given EVERYBODY now knows smoking will kill them, do you really think non-western governments won't follow suit?

Telecoms - highly regulated, utility like companies with the dead hand of the state acting as a strangle hold over them.  Again, you see that growing?  Get too big for their boots and HMG will just windfall tax them.

[spygirl]

11 minutes ago, spygirl said:

Just perfect  -

The great bet on rate cuts is off

We are trapped in old ways of thinking about inflation

https://www.ft.com/content/d998d679-7d83-4e47-910e-b49370e0318b

Welcome to what Goldman Sachs is calling “reflation desperation”. For policymakers and investors, this will be a nauseating and probably lengthy ride.

The embarrassing reset has come about because it turns out the inflation dragon had not been slain after all, despite markets in effect calling victory over it late last year. 

.....

The great bet on rate cuts — and it was enormous — is dead. At the start of 2024, the expectation was for six, maybe seven, US rate cuts this year. That felt silly even then, but it is unravelling in humbling fashion. Today markets are pencilling in one, maybe two. 

Which begs the question - 

Is everyone confusign a rate pause as a peak?

Its possible that IR will be climbing a bit higher.

And that we learn that the UK - and EU - is even less 'independent' of h Fed then they claimed ~20y ago.

Me n mrs psy walk by a probate house on our way to her school.

Big but knackered.

It was bought ~2 maybe 3y ago.

Last 2 years have seen the odd tradey parked outside as they slowly refurb it.

I dont think anyone is inside - its still dark.

Lat month its stepped up - jungle garden cut down, new windows, drive put over garden, etc etc.

One, I guess thye can get tradeys now.

Two, its two late - they must be running out of money.

Theyve missed the spring bounce, that never was.

They wont be the only one.

HTB flats in London are brutal now.

[Alifelessbinary]

45 minutes ago, Mandalorian said:

Jam tomorrow.

Is VOD another one of DB's "growth* shares" like he said BATs was?

 

*Growth can be negative I suppose

You bring a nice counter balance to this thread, but there’s never been a trader who is right 100% of the time.

DB has made some incredible contrarian calls over the years, so he’s allowed the odd duff one! His 

The real judgement is how VOD performs over the next few years. While I’ve now sold most of my position I made about 65% on centrica which is amazing because it was absolutely hated at the time. I also need to wade through a long period of a heavy loss to get there. 

The one thing I’ve learnt on this thread is that if you want to be an active trader you need to hold your nose and buy stocks which are solid but hated.

[Mandalorian]

8 hours ago, DurhamBorn said:

The next Labour government will be a shit show.

The number of people who believe 'things can only get better' once rid of the Tories* is astounding.

*Nothing Tory about this shower - they have out New Laboured New Labour.

[Axeman123]

13 minutes ago, Mandalorian said:

Tobacco - Western governments are making it slowly impossible for people to buy cigarettes.  You say growth will come from elsewhere in the world, but given EVERYBODY now knows smoking will kill them, do you really think non-western governments won't follow suit?

India is still...trying to master the basics

Banning tobacco there (or Indians voluntarily foregoing it) is a long way off.

[AlfredTheLittle]

19 minutes ago, spygirl said:

Just perfect  -

The great bet on rate cuts is off

We are trapped in old ways of thinking about inflation

https://www.ft.com/content/d998d679-7d83-4e47-910e-b49370e0318b

Welcome to what Goldman Sachs is calling “reflation desperation”. For policymakers and investors, this will be a nauseating and probably lengthy ride.

The embarrassing reset has come about because it turns out the inflation dragon had not been slain after all, despite markets in effect calling victory over it late last year. 

.....

The great bet on rate cuts — and it was enormous — is dead. At the start of 2024, the expectation was for six, maybe seven, US rate cuts this year. That felt silly even then, but it is unravelling in humbling fashion. Today markets are pencilling in one, maybe two. 

It was the same when rates went to zero - we were the people saying surely they have to go up soon, and they didn't. Now everyone is saying surely they have to go down soon, and they won't.

[spygirl]

8 hours ago, DurhamBorn said:

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.

Labour in 94 had a fantastic economy to forward to with growing tax revenue and a huge number of Pols that have had the daft Marxism knocked out of them over ~15y in opposition.

Unfortunately Smith dropped dead and the Cunt brothers entered.

Labour in 2014 have an economy where 10% of workers pay 80%+ of revenue.

40% are sat around doing fuck all bar drawing revenue.

Labours front bench is Stamer, Streeting and Reeves.

Thats it. They have to cycle the same three on telly as theres noone else they can trust.

3/4 of Labour are basically cretinous Marxist selected by Momentum.

I cant see how Labour will last.

 

[Mandalorian]

Just now, Alifelessbinary said:

 

The one thing I’ve learnt on this thread is that if you want to be an active trader you need to hold your nose and buy stocks which are solid but hated.

But remember.  The overwhelming majority of active traders fail to beat a global tracker over the longer term.  Mostly because the vast majority of stock market returns come from a small number of companies* (typically 1.3% of companies.)  And as an active stockpicker, what are the odds of you having those specific companies consistently in your portfolio?

 

What's your objective?  To make money or to have a mental exercise aiming to beat the market?  This is why I have an 80/20 serious money/fun money allocation.

 

I just sometimes get the idea what you have on this thread is a bit cult like where:

- some people making gloomy predictions about the future (some of whom have arguably been successful as active investors  - but again, compared to a global tracker, how successful?) making out that certain individual companies are likely to be good investments (- who knows?)

- other people who, perhaps, aren't as well off / aren't as sophisticated an investor / don't have a large capital base "tuning in" and then actively trading with money that has a higher chance of doing well when placed in cheap tracker funds or a higher chance of "doing a VOD" than a tracker.

 

Having money in carefully selected pots is fine as long as you have plenty pots containing plenty money. 

This is why I favour trackers.  Your money is automatically diversified across thousands of companies.  Imagine having the bulk of your cash in BATS and VOD over the last 5 years because some bloke on the internet says they are growth shares. 

 

The fact that some on here genuinely think dividends are free extra money like bank interest was the first thing that made me pause for thought**.  They don't actually understand something as basic as that, so are they really in a good position to be making punts on which individual companies are likely to beat the market?  Though ultimately, grown adults can do what they like with their money.  I'm just trying to put across the alternative.

 

* Studies of 'asymmetry' by Hendrik Bessembinder – which looked at global stock market returns between 1990 and 2018 – established that just 1.3 per cent of stocks contributed all of the net gain when compared to the performance of US Treasury bills. https://magazinebailliegifford.com/lessons-from-bessembinder/

** I'm not strictly speaking against dividends as such. I just think they are an irrelevant distraction.  And I certainly don't see them as akin to interest.

[Mandalorian]

19 minutes ago, spygirl said:

Labours front bench is Stamer, Streeting and Reeves.

 

 

You forgot Rayner....

[Funn3r]

Just now, Mandalorian said:

You forgot Rayner....

Oh is she still a thing now?

[Mandalorian]

Just now, Funn3r said:

Oh is she still a thing now?

Probably not for long.  Though if she goes, you'll probably get some Momentum nutter installed as deputy leader because the membership get that vote.

[DurhamBorn]

29 minutes ago, Mandalorian said:

And do you honestly think, hand on heart, that the future for tobacco and telecoms is rosy?

Tobacco - Western governments are making it slowly impossible for people to buy cigarettes.  You say growth will come from elsewhere in the world, but given EVERYBODY now knows smoking will kill them, do you really think non-western governments won't follow suit?

Telecoms - highly regulated, utility like companies with the dead hand of the state acting as a strangle hold over them.  Again, you see that growing?  Get too big for their boots and HMG will just windfall tax them.

Do i think BAT will return much capital growth?.No i do not.However when i first bought them i read the same thing a thousand times,baccie was finished.Iv bought BAT back thinking almost all of the return will come from the divi ie 10%pa.They should also buy back 2% to 3% of their stock once debt is lower.I expect earnings will grow 2%ish a year so operating cashflow flatline to small growth.Their new products are also growing very very fast though.VELO oral nicotine for instance went to 30 million pouches a month in Pakistan from a standing start.BATs ITC holding in India is also worth almost half their debt.If they can get oral nicotine into the big EMs they could prove hugely profitable.Once debt is down they also might have £2bill spare a year they could invest into new areas.

Telcos are suffering for the reasons you state and i agree the bear case is the government picking them out for more tax.However what if thats all priced in and something changes?.What if government thinks we need these telcos,we will let them charge big tech more?/.Telco bills are tiny now in the monthly household spend.Lots of room to move higher.

They also dont need to do much to be hugely under valued.Pay down debt,then slowly increase the divi would do it.I expected PEs to contract in many areas to the 5s to 9s areas once the markets woke up to the fact inflation was going nowhere.Telcos have done that and im up on the sector,just up,but up.I love setups where rubber bands are pulled right back because it only takes "something" to change for big profits.

Im also at the stage where if BAT just returned me that divi the rest of my life id be very happy.Tracking the S&P is no good to me seeing as i have retired,if it tanks 35%+ and im drawing down 4% a year,then it flat lines for a few years half your retirement savings are gone.Gilt holders in the UK found that out over the last few years.So yes over the long term the S&P might outperform BAT etc,but the risk it much greater for the stage of my life.

I have never had any interest in tracking an index.Its just not for me.

 

[leonardratso]

bad news here;

https://www.etfstream.com/articles/hsbc-am-to-close-four-emerging-market-etfs