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

[DurhamBorn]

12 minutes ago, sancho panza said:

I think this is something the thread has been a head on in terms of price inflation higher for longer.(myself as more of a convert but owning mistakes is a key part of making good returns)

Labour markets in the west are only goingto get tighter and tighter.less working age people and a growing proportion of them are claiming long term sick.

Govt bringing in some fighting age males but the reality is that unskilled labour is easy to import but costsly to hosue and feed further reinfocring upward pressures in trerms of retns.

it's worht noting that the fund manager is quoting timeframes very similar to @DurhamBorn 

https://www.telegraph.co.uk/business/2024/04/15/ageing-population-keep-interest-rates-high-years-to-come/

Ageing population to keep interest rates high for years to come

Money managers are bracing for a world with structurally higher inflation

Ageing demographics and rising protectionism will keep inflation high for years to come, fund managers have warned. 

Money managers are bracing for a world with structurally higher inflation, marking a permanent departure from the years of ultra-low rates after the financial crisis. 

This will have profound implications for governments that have vastly increased their debt levels in the wake of the pandemic and the energy crisis, they said.

Frédéric Leroux, a fund manager at French asset management firm Carmignac, said it was already clear that ageing populations were pushing up inflation in rich countries. 

Mr Leroux said: “Demographics has been very disinflationary for 30 to 40 years. Now it is turning inflationary and that is an important message.” 

 

 

As the number of old people relative to those of working age rises this will worsen labour shortages and push up wages, Mr Leroux said. 

Greyer workforces are also more vulnerable to shocks, he added, highlighting the drop off in labour force participation in the UK and US after the pandemic amid a rise in early retirement.

Mr Leroux said: “When you are close to retirement, the participation rate of this age cohort can come down very quickly.”

Ihab Salib, head of international fixed income at $758bn asset manager Federated Hermes, said his working assumption was also that inflation and rates will stay higher than in recent years. 

Mr Salib said: “There are longer-term factors which have brought inflation down since the 80s and rates with it – technology, China, whatever you want to highlight – some of these factors are shifting. So [consumer price rises are] going down, but not to the cycle that was in place prior to the recent bout of inflation, I don’t see us going to that level again.” 

 

 

He warned many debt-bloated governments would face tough choices as a result.

Mr Salib said: “They’re in trouble. Most government debt has risen so much because financing levels were so low for so long. In practically any economy or any part of the world, the ability for governments to maintain their debt at this higher funding level is going to be very difficult.” 

The worst part is the inflation linking of bennies and public sector pensions,because it ensures everyone else gets poorer.The amount who will be able to match inflation in the privte sector will be tiny.As you know its something i have tracked very very deeply because i see it as the biggest bomb under the UK economy.My roadmap on it pointed vertical just before the PIP/ESA numbers rocketed up.The macro spotted there were going to be millions more claiming sick bennies because its nothing to do with health all to do with money.There is almost no way now ordinary working people can keep up with bennies or retired public sector.My roadmap shows its over 50% where they should not work (i use multipliers as always on these things) annd it will be over 70% in a few years.Unless they remove sickness bennies from 80% of those who get them,or include them in the bennie cap they will continue up.Brown put may bombs in the system,the Tories tried to remove some and did (two child bennie limit),but gave up.The UK is not a serious country anymore,its a joke.It why companies are leaving the London stock marker,too much savings going into gilts then stolen.

[crashmonitor]

45 minutes ago, sancho panza said:

I think this is something the thread has been a head on in terms of price inflation higher for longer.(myself as more of a convert but owning mistakes is a key part of making good returns)

Labour markets in the west are only goingto get tighter and tighter.less working age people and a growing proportion of them are claiming long term sick.

Govt bringing in some fighting age males but the reality is that unskilled labour is easy to import but costsly to hosue and feed further reinfocring upward pressures in trerms of retns.

it's worht noting that the fund manager is quoting timeframes very similar to @DurhamBorn 

https://www.telegraph.co.uk/business/2024/04/15/ageing-population-keep-interest-rates-high-years-to-come/

Ageing population to keep interest rates high for years to come

Money managers are bracing for a world with structurally higher inflation

Ageing demographics and rising protectionism will keep inflation high for years to come, fund managers have warned. 

Money managers are bracing for a world with structurally higher inflation, marking a permanent departure from the years of ultra-low rates after the financial crisis. 

This will have profound implications for governments that have vastly increased their debt levels in the wake of the pandemic and the energy crisis, they said.

Frédéric Leroux, a fund manager at French asset management firm Carmignac, said it was already clear that ageing populations were pushing up inflation in rich countries. 

Mr Leroux said: “Demographics has been very disinflationary for 30 to 40 years. Now it is turning inflationary and that is an important message.” 

 

 

As the number of old people relative to those of working age rises this will worsen labour shortages and push up wages, Mr Leroux said. 

Greyer workforces are also more vulnerable to shocks, he added, highlighting the drop off in labour force participation in the UK and US after the pandemic amid a rise in early retirement.

Mr Leroux said: “When you are close to retirement, the participation rate of this age cohort can come down very quickly.”

Ihab Salib, head of international fixed income at $758bn asset manager Federated Hermes, said his working assumption was also that inflation and rates will stay higher than in recent years. 

Mr Salib said: “There are longer-term factors which have brought inflation down since the 80s and rates with it – technology, China, whatever you want to highlight – some of these factors are shifting. So [consumer price rises are] going down, but not to the cycle that was in place prior to the recent bout of inflation, I don’t see us going to that level again.” 

 

 

He warned many debt-bloated governments would face tough choices as a result.

Mr Salib said: “They’re in trouble. Most government debt has risen so much because financing levels were so low for so long. In practically any economy or any part of the world, the ability for governments to maintain their debt at this higher funding level is going to be very difficult.” 

Not the narrative most in the Media want to hear with the perennial bias to loose Monetary policy that has seen CPI 3 % over target for the last 4 years and 1% over target for a generation now.

The days of borrowing on assets and seeing those assets rise faster than the interest paid may be over, which will be a bitter blow especially to the Media Commentariat. They got used to free money at the expense of savers,  but making money too cheap  causes massive inflation a' la' the post Covid era. And wishing and predicting inflation to come down so free money resumes doesn't mean it will ( Core inflation is unlikely to drop below 2%, even if headline does spectacularly in the coming months). The Commentariat were predicting deflation by now in the Spring of 2023 whilst throwing their toys out of the pram because interest rates had hit 4% ( still off the high we eventually saw of 5.25%). What happened to that?

Thank God the Bank did continue to raise last year and didn't give way to journos pressure to stop at 4% because the pound would be toilet paper by now.

Edited April 15 by crashmonitor

[HousePriceMania]

58 minutes ago, Alifelessbinary said:

Fair enough. I hope it plays out for you. 

For anyone with a 20 year timeframe the maths backs time in the market. 

 

 

Given the crashes come along every 8 or so years, it'll only be another 4/5 years to wait  

Meanwhile, I'll enjoy the 5% interest rates.

[AWW]

3 hours ago, Mandalorian said:

See also gold britannias.  And I trust those.

I also buy those on dips, usually whichever "special" is current as they end up being worth more than a plain vanilla one at resale but only have a few quid premium when current.

Edited April 15 by AWW

[Onsamui]

3 hours ago, Pip321 said:

I prefer champagne socialist. 😂

'Humorously' known by my right wing leaning capitalist friends as the least woke, least environmental, least virtue signalling in fact least leftie...leftie that they know. 

Thinking of setting up a new political party. The Islington Hypocrites....only I am from Yorkshire so not sure I would be allowed to join. Although Sunak is apparently a proper flat cap wearing Yorkshire lad....so maybe I could get away with it. 

Yep, I think I like to think of myself as a leftie....but I think in fairness I like to think of myself (at 55 years old) as a great football player.😂. Is denial the first stage...that's where I am.

Get back to your dividend thesis....😉🍻

Everyone starts as a leftie and then wakes up at some point after you start making money, working, trying to run a business, trying to buy a home and realises all the ideas are crap.

[DurhamBorn]

Interesting today BAT have launched a £1bill tender offer for bonds mostly ending in 2040s and 50s,with very low coupons some 2.25%.You would think they would let these bonds run and redeem bonds with a much closer maturity .However given its a tender BAT will likely be able to redeem them below Par so although the net interest saving will be small,it will lower net debt by more than the cost (or lower debt close to the same but cancel out interest).

BAT also has $3.6 bill of bonds ending this year and roughly $3.6 spare free cash so you would think they would of simply redeemed those, though i suspect they will redeem half and issue some at 10 year.

[Yadda yadda yadda]

5 minutes ago, Onsamui said:

Everyone starts as a leftie and then wakes up at some point after you start making money, working, trying to run a business, trying to buy a home and realises all the ideas are crap.

That only applies in the home owning era. As we move further and further away from that the long term prosperity effect of a diminishing real terms mortgage payment is removed. If you're not getting wealthier as you age then why not take your disappointment out on others?

They don't wake up if they never start working, their work is subsidised by tax credits or they work in the public sector. 

[Axeman123]

58 minutes ago, crashmonitor said:

Thank God the Bank did continue to raise last year and didn't give way to journos pressure to stop at 4% because the pound would be toilet paper by now.

Controversial take: Bailey has been reasonably competent, at following the fed which is really his only job, once he took them seriously about raising rates. The entire world didn't take them seriously at the start of the hikig cycle tbf, so I can't even blame Bailey too much for thinking Powell was bluffing. The real blame lies with Powell's predecessors who cucked and loosened financial conditions at the slightest downturn, training everyone to expect the same.

Oddly it looks like Bailey isn't going to last much longer anyway, with Liz Truss seemingly attempting to blame him for everything:

Quote

“They're trying to smear me with economic results that I'm clearly not responsible for,” she said of critics who accuse her of sabotaging the economy, having previously blamed a mysterious “deep state” and “anti-growth” activists for thwarting her policies.

Asked whether Andrew Bailey should still be Governor of the Bank of England, she said: “No… I do think that democratically elected ministers should be responsible for managing fiscal and monetary policy.” She also said she wanted “to see the back of the OBR (Office for Budget Responsibility)”.

Under the most incredible headline in the world

'National embarrassment' Liz Truss hints at new bid for Tory leadership

https://ca.news.yahoo.com/liz-truss-warns-she-unfinished-111729784.html

[Long time lurking]

And it continues 

It looks like rates are only going one way for a while yet 

[Long time lurking]

I always wondered where all the people from the Welsh Development agency went when they shut up shop 

 

[Lightscribe]

1 hour ago, Long time lurking said:

And it continues 

It looks like rates are only going one way for a while yet 

Stueys got this all under control…

[Lightscribe]

 

https://www.ft.com/content/bdcb7d8a-e958-4910-9d1b-a6a519812503

Bullish FT article on gold not paywalled - time to sell 

[DurhamBorn]

33 minutes ago, Lightscribe said:

 

https://www.ft.com/content/bdcb7d8a-e958-4910-9d1b-a6a519812503

Bullish FT article on gold not paywalled - time to sell 

I think for everything that is going on,the real message,and the outcome is simply that the EMs want paying for their production in something that cannot be inflated away.That is the cycle in a nutshell .Lots of talk of war etc,but its noise,because it does not suit the US or China for all out war and without their blessing it wont happen.The BRICs are not setting up to destroy the west etc,they simply want paying in currency that is not monetised away.They would of accepted 2% a year monetisation ,it suited their society and they like days at Ascot etc,but they wont accept 5%+ that the west needs now to keep welfare going.

Gold and all the metals will keep going up in trend until the west produces enough again so it can consume less from the EMs (so their own consumers can consume more) annd we can sell more to them so trade is more balanced.The western media and polos dont want to accept this reality,so they keep taking saved labour through monetising,its just since March 20 they are now monetising their own peoples savings instead of EM workers savings.Huge difference.Fat Shaz was funded by 5 Chinese workers since Blair got in.Now she is funded by private sector Money Purchase pensions being stolen.

The macro is 100% clear.Re-tool and start producing more and cut welfare and freeloaders and have 5% inflation for a cycle or two,or dont and have 5% inflation,then 6%,then 8%,then 12% etc etc.

The state machine is trying to avoid facing the above,mostly because they are inflation linked too,but they will have to at some point.

By tilting our wealth on here to the EMs and metals etc,we are simply joining the billions of people on that side of the trade who wont allow their savings to be stolen anymore.Gold is the bridge linking this new reality.

[Lightscribe]

1 hour ago, Long time lurking said:

I always wondered where all the people from the Welsh Development agency went when they shut up shop 

 

They can chuck all the money they want at it, but just like EVs China are masters of copying and reinventing manufacturing processes at scale. They will eventually crack  it.

US won’t ever be able to reduce costs to match so will ban Chinese chips just the same as they’re proposing with EVs.

Problem is developing countries with massive populations like India/Asia don’t give a shit just like with oil.

The west will continue to ban and sanction at their own detriment.

 

Edited April 15 by Lightscribe

[Lightscribe]

invest in a 60/40 innnit fam.

[leonardratso]

11 minutes ago, Lightscribe said:

invest in a 60/40 innnit fam.

60% gold  / 40% silver

[Lightscribe]

2 hours ago, DurhamBorn said:

I think for everything that is going on,the real message,and the outcome is simply that the EMs want paying for their production in something that cannot be inflated away.That is the cycle in a nutshell .Lots of talk of war etc,but its noise,because it does not suit the US or China for all out war and without their blessing it wont happen.The BRICs are not setting up to destroy the west etc,they simply want paying in currency that is not monetised away.They would of accepted 2% a year monetisation ,it suited their society and they like days at Ascot etc,but they wont accept 5%+ that the west needs now to keep welfare going.

Gold and all the metals will keep going up in trend until the west produces enough again so it can consume less from the EMs (so their own consumers can consume more) annd we can sell more to them so trade is more balanced.The western media and polos dont want to accept this reality,so they keep taking saved labour through monetising,its just since March 20 they are now monetising their own peoples savings instead of EM workers savings.Huge difference.Fat Shaz was funded by 5 Chinese workers since Blair got in.Now she is funded by private sector Money Purchase pensions being stolen.

The macro is 100% clear.Re-tool and start producing more and cut welfare and freeloaders and have 5% inflation for a cycle or two,or dont and have 5% inflation,then 6%,then 8%,then 12% etc etc.

The state machine is trying to avoid facing the above,mostly because they are inflation linked too,but they will have to at some point.

By tilting our wealth on here to the EMs and metals etc,we are simply joining the billions of people on that side of the trade who wont allow their savings to be stolen anymore.Gold is the bridge linking this new reality.

I agree. But we have to get through the bad until we can get to the good. I don’t have as much faith in the western establishment as you do to recognise that.

Edited April 15 by Lightscribe

[Errol]

Gold going mental again.

[Lightscribe]

2 minutes ago, Errol said:

Gold going mental again.

Here we go again

[Starsend]

18 minutes ago, Errol said:

Gold going mental again.

[leonardratso]

  

good larf

[StrugglingMillennial]

3 hours ago, DurhamBorn said:

I think for everything that is going on,the real message,and the outcome is simply that the EMs want paying for their production in something that cannot be inflated away.That is the cycle in a nutshell .Lots of talk of war etc,but its noise,because it does not suit the US or China for all out war and without their blessing it wont happen.The BRICs are not setting up to destroy the west etc,they simply want paying in currency that is not monetised away.They would of accepted 2% a year monetisation ,it suited their society and they like days at Ascot etc,but they wont accept 5%+ that the west needs now to keep welfare going.

Gold and all the metals will keep going up in trend until the west produces enough again so it can consume less from the EMs (so their own consumers can consume more) annd we can sell more to them so trade is more balanced.The western media and polos dont want to accept this reality,so they keep taking saved labour through monetising,its just since March 20 they are now monetising their own peoples savings instead of EM workers savings.Huge difference.Fat Shaz was funded by 5 Chinese workers since Blair got in.Now she is funded by private sector Money Purchase pensions being stolen.

The macro is 100% clear.Re-tool and start producing more and cut welfare and freeloaders and have 5% inflation for a cycle or two,or dont and have 5% inflation,then 6%,then 8%,then 12% etc etc.

The state machine is trying to avoid facing the above,mostly because they are inflation linked too,but they will have to at some point.

By tilting our wealth on here to the EMs and metals etc,we are simply joining the billions of people on that side of the trade who wont allow their savings to be stolen anymore.Gold is the bridge linking this new reality.

I'm interested to know whether you think Britannias or gold mining shares are the better buy at this moment in time?

I was surprised to see a drop on the oil & gold shares today with the weekends events in the middle east.

[ThoughtCriminal]

Imagine going to the bank for 3 grand and they refuse to give you it unless you show them an invoice for your purchase to prove what you're doing with the cash.

He did well to keep calm. I'd have pulled her over the fucking desk.

This is what worries me about sitting with cash in the bank, it's only yours until they decide it isn't.

 

 

[Harley]

1 hour ago, Starsend said:

Some of the techs are warning to be cautious.  I'd explain but.....!

1 hour ago, Errol said:

Gold going mental again.

Surely ya mean silver!

[DurhamBorn]

29 minutes ago, StrugglingMillennial said:

I'm interested to know whether you think Britannias or gold mining shares are the better buy at this moment in time?

I was surprised to see a drop on the oil & gold shares today with the weekends events in the middle east.

Gold mining shares to grow capital with the risk you lose capital,gold to keep spending power over the long term.The market will always shake out weak hands before its off to the races again.Gold miners i find should only be owned around 3 years every 10.