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

[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

[HousePriceMania]

It's not the big reset, it's the big heist.

[AWW]

27 minutes ago, ashestoashes said:

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

It can all be paid. We live in a fiat currency regime.
What happens to the currency is another matter...

[Long time lurking]

Wheres Stuey 

 

 

Edited April 18 by Long time lurking

[Long time lurking]

9 minutes ago, AWW said:

It can all be paid. We live in a fiat currency regime.
What happens to the currency is another matter...

That is exactly what the shit show of the last 4 years and continuing is all about

When demand for a currency falls ,the second sentence comes into play 

They are saying it out loud now 

 

Edited April 18 by Long time lurking

[DurhamBorn]

3 minutes ago, Long time lurking said:

Wheres Stuey 

 

 

https://www.pitchup.com/tents/England/North_East/Co_Durham/Stockton-on-Tees/

[DurhamBorn]

Where i think almost everyone gets inflation wrong is in thinking its always best to be outside the currency suffering the inflation.Its compelling of course,and right in many ways,but not always.Sometimes its better to be in areas WITHIN the inflation country/currency as long as they can price with inflation AND not see demand destruction.I have been buying ABRDn heavily in the £1.36 to £1.40 area.Why when asset managers are hated and according to the market in structural decline?.Because they have huge holdings OUTSIDE our inflation economy BUT can suck in more investments as wages grow faster so pension savings increase.Of course the first stages of a distribution cycle see asset draw down as incomes lag the inflation,but then flatline and then increase as wages increase (nominal) .Telcos should be the same once network builds top out,however they have the worry of regulators etc forcing them to hold price increases down,but even then they will struggle to argue below inflation increases.

Even baccie,it suffers during the first stages of an inflation cycle as incomes are squeezed,but then as wages start to shoot up it becomes much easier to increase prices.Someone in the UK for instance spending £50 a week on baccie might spend 10% of net income on it.If they get 17% bennie/wage increases over two years their wage/bennies go to £585 and baccie spend down to 8.5% of income.IMPs can increase baccie prices by 20% and be the same percentage spend as before .Even if you take in volume decline they can get close to that inflation with a very low cost base (almost zero capital investment)

This of course does not protect from currency collapse,only currency decline,so real assets outside of the home currency are also crucial.

[Noallegiance]

2 minutes ago, DurhamBorn said:

Where i think almost everyone gets inflation wrong is in thinking its always best to be outside the currency suffering the inflation.Its compelling of course,and right in many ways,but not always.Sometimes its better to be in areas WITHIN the inflation country/currency as long as they can price with inflation AND not see demand destruction.I have been buying ABRDn heavily in the £1.36 to £1.40 area.Why when asset managers are hated and according to the market in structural decline?.Because they have huge holdings OUTSIDE our inflation economy BUT can suck in more investments as wages grow faster so pension savings increase.Of course the first stages of a distribution cycle see asset draw down as incomes lag the inflation,but then flatline and then increase as wages increase (nominal) .Telcos should be the same once network builds top out,however they have the worry of regulators etc forcing them to hold price increases down,but even then they will struggle to argue below inflation increases.

Even baccie,it suffers during the first stages of an inflation cycle as incomes are squeezed,but then as wages start to shoot up it becomes much easier to increase prices.Someone in the UK for instance spending £50 a week on baccie might spend 10% of net income on it.If they get 17% bennie/wage increases over two years their wage/bennies go to £585 and baccie spend down to 8.5% of income.IMPs can increase baccie prices by 20% and be the same percentage spend as before .Even if you take in volume decline they can get close to that inflation with a very low cost base (almost zero capital investment)

This of course does not protect from currency collapse,only currency decline,so real assets outside of the home currency are also crucial.

With all this talk of rising rates and rate cuts being pushed out, does the situation regarding the repo account running down and a kick-start of a new US private credit cycle still hold? Are these market commentators looking the wrong way? Will the Fed go against the bond market?

[DurhamBorn]

14 minutes ago, Noallegiance said:

With all this talk of rising rates and rate cuts being pushed out, does the situation regarding the repo account running down and a kick-start of a new US private credit cycle still hold? Are these market commentators looking the wrong way? Will the Fed go against the bond market?

They will have to choose because if they dont kick in a private sector debt cycle soon governments will go bust.CBs made the mistake of monetising welfare spending for governments in the west,that is why they are trapped.For inflation and rates to fall much they need welfare spending down and investment up.The setup in the UK is the worst i have ever seen.

[Lightscribe]

20 minutes ago, Noallegiance said:

With all this talk of rising rates and rate cuts being pushed out, does the situation regarding the repo account running down and a kick-start of a new US private credit cycle still hold? Are these market commentators looking the wrong way? Will the Fed go against the bond market?

3 scenarios

1) Fed holds rates (even raises them) 2nd inflation wave takes hold. Recession, stagflation. Countries continue to shore up in gold with their falling currencies against the $. Gold goes up.

2) Fed holds. BoE, ECB and other central banks cut against the Fed because they have no choice (UKs economy is the housing market). £ and € tank against the $. 2nd inflationary is devastating to UK/EU. Gold goes up.

3) War. Escalating to a global conflict. All central banks cut rates and return to QE. Trillions printed. If the markets doesn’t shore up in USTs taking the yield from uninversion, then YCC. Gold goes through the roof.

Edited April 18 by Lightscribe

[Harley]

46 minutes ago, DurhamBorn said:

Where i think almost everyone gets inflation wrong is in thinking its always best to be outside the currency suffering the inflation.Its compelling of course,and right in many ways,but not always.Sometimes its better to be in areas WITHIN the inflation country/currency as long as they can price with inflation AND not see demand destruction.I have been buying ABRDn heavily in the £1.36 to £1.40 area.Why when asset managers are hated and according to the market in structural decline?.Because they have huge holdings OUTSIDE our inflation economy BUT can suck in more investments as wages grow faster so pension savings increase.Of course the first stages of a distribution cycle see asset draw down as incomes lag the inflation,but then flatline and then increase as wages increase (nominal) .Telcos should be the same once network builds top out,however they have the worry of regulators etc forcing them to hold price increases down,but even then they will struggle to argue below inflation increases.

Even baccie,it suffers during the first stages of an inflation cycle as incomes are squeezed,but then as wages start to shoot up it becomes much easier to increase prices.Someone in the UK for instance spending £50 a week on baccie might spend 10% of net income on it.If they get 17% bennie/wage increases over two years their wage/bennies go to £585 and baccie spend down to 8.5% of income.IMPs can increase baccie prices by 20% and be the same percentage spend as before .Even if you take in volume decline they can get close to that inflation with a very low cost base (almost zero capital investment)

This of course does not protect from currency collapse,only currency decline,so real assets outside of the home currency are also crucial.

Dumped me ABDN trade yesterday, again!  There is contention amongst the underlying techs so summing will likey happen some time but......!

[Long time lurking]

14 hours ago, Harley said:

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

 

[nirvana]

18 hours ago, DurhamBorn said:

Have you cleaned up on silver?,