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

[Jay]

1 hour ago, M S E Refugee said:

I raised some cash this morning and got rid of some funds exposed to China,Hong Kong and Taiwan.

After the Russia debacle I'm a bit jittery about owning assets in those Countries.

Well..hong Kong has risen strongly in the last few days ..so not a bad time take profits..even my holding is now in profit after being down for a year or so..

I will hold as a play on EM plus assuming the fed is done raising for the year…Chinese data shows improvement as well but how reliable is that is debatable..

apple had good results and a big buyback announced..looks rosy for stocks for now..be lucky..

[DurhamBorn]

1 hour ago, Harley said:

I see it bounced on @wherebee tip (oh yes, holding you to that one 'cause a larf trumps fair!) and your purchase but IMO still a (slightly less) shite time to buy.  But what do I know, you can't time the markets,.....! 

Yes looks like a ladder stock,il likely add if down 7%,14%,21% etc.

[sancho panza]

1 hour ago, M S E Refugee said:

I raised some cash this morning and got rid of some funds exposed to China,Hong Kong and Taiwan.

After the Russia debacle I'm a bit jittery about owning assets in those Countries.

China looking like the trouble is brewing nicely.Hang Sneg got a bounce last night but seems more dead cat given the structural problems

intersting to see them printing into M2 but sturggling to get borrowing to lfit.this is very irving fisher debt deflation imho

as ever with these things it's more about how long they can keep the plates spinning than anything else.

https://www.forbes.com/sites/miltonezrati/2024/05/01/chinas-sorry-economy-exhibits-little-demand-for-credit/?sh=2d9c9d2c7d61

China’s Sorry Economy Exhibits Little Demand For Credit

The People’s Bank of China (PBOC), recently announced that the combination of bank and non-bank financing, what the officials at the bank refer to as “total social financing,” amounted to 12.93 trillion yuan ($1.787 trillion) in the January-March period. This figure is 1.61 trillion yuan or about 11% lower than comparable flows in the first quarter last year. Banks, almost entirely state owned, issued 9.46 trillion yuan in loans during the first three months of 2024, also down significantly from the same period in 2023. All figures came in below economists’ expectations.

 

Beijing should be troubled by this shortfall. Financing activity is what the economy needs to propel growth. The news is especially problematic because it is happening despite a generous provision of central-bank liquidity to financial markets. According to the PBOC, the broad M2 measure of money grew at a reasonably rapid 8.3% over the twelve months ended in March, down slightly from the 8.7% recorded over the twelve months ended in February but still expansive. Yet lending to businesses and households has continued to decline. Clearly, the paucity of lending and borrowing reflects a shortfall in demand not supply, and that fact points to the most fundamental of economic problems.

 

Much of this sorry news stems from the country’s property crisis. It has been festering since 2021 when the great developer, Evergrande, announced that it could not service its liabilities. Not only has the disappearance of this and other important property developers depressed construction activity—33% below year-ago levels at last count in February—but the upheaval has frightened potential homebuyers such that sales of homes in February, the most recent period for which data are available, came in some 30% below year ago levels. Standouts in this sorry picture are the millions of would-be homeowners who took on mortgage debt to prepay for apartments that because of failures among developers, may never be built.

 

Financial problems are more general still. The failures of Evergrande and a long list of other property developers, large and small, have undermined the overall effectiveness of Chinese finance. The failures of the developers has left a legacy of questionable debt throughout Chinese finance. Still more, many of those who prepaid on now unfinished apartments have refused to pay on the mortgages they took out to make their purchase, adding to the questionable debt on the books of banks and other lenders. Under this cloud, potential lenders are more than a little wary of the financial health of any potential borrower. Such doubts also create hesitation in trading and normal daily flows between financial institutions. Something similar happened in the United States during the financial crisis of 2008-09. The upshot in the United States back then and in China now is a diminished ability in financial markets to support economic growth generally.

 

Edited May 3 by sancho panza

[DurhamBorn]

56 minutes ago, Pip321 said:

Are you buying the Woodside Energy listed on LSE under the ticker WDS or another version held elsewhere….

Imagine @wherebee has the Australian listing. 

Asking for a friend 😉

I bought the LSE version,no stamp duty on it.

[DurhamBorn]

6 minutes ago, sancho panza said:

China looking like the trouble is brewing nicely.Hang Sneg got a bounce last night but seems more dead cat given the structural problems

intersting to see them printing into M2 but sturggling to get borrowing to lfit.this is very irving fisher debt deflation imho

as ever with these things it's more about how long they can keep the plates spinning than anything else.

https://www.forbes.com/sites/miltonezrati/2024/05/01/chinas-sorry-economy-exhibits-little-demand-for-credit/?sh=2d9c9d2c7d61

China’s Sorry Economy Exhibits Little Demand For Credit

The People’s Bank of China (PBOC), recently announced that the combination of bank and non-bank financing, what the officials at the bank refer to as “total social financing,” amounted to 12.93 trillion yuan ($1.787 trillion) in the January-March period. This figure is 1.61 trillion yuan or about 11% lower than comparable flows in the first quarter last year. Banks, almost entirely state owned, issued 9.46 trillion yuan in loans during the first three months of 2024, also down significantly from the same period in 2023. All figures came in below economists’ expectations.

 

Beijing should be troubled by this shortfall. Financing activity is what the economy needs to propel growth. The news is especially problematic because it is happening despite a generous provision of central-bank liquidity to financial markets. According to the PBOC, the broad M2 measure of money grew at a reasonably rapid 8.3% over the twelve months ended in March, down slightly from the 8.7% recorded over the twelve months ended in February but still expansive. Yet lending to businesses and households has continued to decline. Clearly, the paucity of lending and borrowing reflects a shortfall in demand not supply, and that fact points to the most fundamental of economic problems.

 

Much of this sorry news stems from the country’s property crisis. It has been festering since 2021 when the great developer, Evergrande, announced that it could not service its liabilities. Not only has the disappearance of this and other important property developers depressed construction activity—33% below year-ago levels at last count in February—but the upheaval has frightened potential homebuyers such that sales of homes in February, the most recent period for which data are available, came in some 30% below year ago levels. Standouts in this sorry picture are the millions of would-be homeowners who took on mortgage debt to prepay for apartments that because of failures among developers, may never be built.

 

Financial problems are more general still. The failures of Evergrande and a long list of other property developers, large and small, have undermined the overall effectiveness of Chinese finance. The failures of the developers has left a legacy of questionable debt throughout Chinese finance. Still more, many of those who prepaid on now unfinished apartments have refused to pay on the mortgages they took out to make their purchase, adding to the questionable debt on the books of banks and other lenders. Under this cloud, potential lenders are more than a little wary of the financial health of any potential borrower. Such doubts also create hesitation in trading and normal daily flows between financial institutions. Something similar happened in the United States during the financial crisis of 2008-09. The upshot in the United States back then and in China now is a diminished ability in financial markets to support economic growth generally.

 

Chinas main problem is household saving rates are way to high now they have developed.Instead of more huge capital formation,they need to get the population consuming.I think its likely Chinese consumer stocks might do very very well over the mid term.I also think China will push more for the population to invest in financial assets in a structured way,ie through advisors etc and away from property speculation.

[Long time lurking]

10 minutes ago, Jay said:

apple had good results and a big buyback announced..looks rosy for stocks for now..be lucky..

That is AKIN to private QE ,they are simply propping up their own book 

[reformed nice guy]

7 hours ago, wherebee said:

I fukcing love stories like this.  Macquarie Bank, the brains factory, reports a sharp drop in profits.  Key reason are the performance of their green investments.  The link below is quite mild on the impact of the green shite (other stories are behind paywalls so I didnt share):

"Lower asset realisations in green investments took its toll on Macquarie Group’s balance sheet, according to the company’s third quarter update to the Australian Securities Exchange.

The update also announced the exit of the company’s Head of Commodities and Global Markets, Nicholas O’Kane, after 28 years with the group. He will be succeeded by Simon Wright. The company’s update said financial year to date net profit after tax was substantially down on that for the same period last year “mainly due to lower asset realisations in green investments in Macquarie Asset Management (MAM) and margin compression along with the run off in the car loan portfolio, partially offset by volume growth across home loans and business lending”.

Not so fucking smart, eh.  Go woke... etc etc

https://uk.finance.yahoo.com/news/australias-macquarie-posts-32-fall-221806313.html

Head of HSBC has also unexpectedly retired

https://www.msn.com/en-us/money/companies/hsbc-s-ceo-has-stepped-down-the-search-is-on-for-a-successor/ar-AA1nTO4k

[ThoughtCriminal]

15 hours ago, Noallegiance said:

One man stood on the tip of the left wing, the other stood at the middle of the wing. You can be right of very left and still be left.

I'm sorry but that's utter bollocks. Do you actually read what people say and listen to them or just go off vibes? Please point to this secret store of MPs to the Right of Galloway on Trans, immigration, crime, gays etc.

It's the effect of the Overton window.

[ThoughtCriminal]

15 hours ago, Lightscribe said:

Extreme left wing isn’t far from right in the circle. Take Corbyn and his brother, anti big bank, anti big pharma, anti establishment etc etc (not too mention ‘those’ who shall not be named) 

Corbyn is pro trans, pro gay, pro mass immigration, anti locking up criminals. Nothing like Galloway.

[Noallegiance]

3 minutes ago, ThoughtCriminal said:

I'm sorry but that's utter bollocks. Do you actually read what people say and listen to them or just go off vibes? Please point to this secret store of MPs to the Right of Galloway on Trans, immigration, crime, gays etc.

It's the effect of the Overton window.

I didn't say there's a crop of politicians to the right. That's the problem.

The wings are fixed. The left one is overcrowded.

Calm down dear.

[snaga]

1 hour ago, Long time lurking said:

That is AKIN to private QE ,they are simply propping up their own book 

buy backs are more common in US, seems to be preferred over paying a divi. Shareholders like it, as their capital gains can be held and not taxable until sold, unlike a divi payment that is taxable.

[ThoughtCriminal]

2 minutes ago, Noallegiance said:

I didn't say there's a crop of politicians to the right. That's the problem.

The wings are fixed. The left one is overcrowded.

Calm down dear.

No, you're just talking nonsense.

If there are no MPs to the right of you then you are, by definition, the most Rightwing MP.

Galloway was interviewed yesterday and said being gay isn't normal, it's not equal to heterosexuality, trans isn't normal and he doesn't want his kids taught that either of them are normal. He also asked why a Muslim can be FM of Scotland but not a Christian. Not a single other MP would dare come anywhere close to saying any of that. And you think he's on the Left. You probably think Jacob Rees Mogg is Rightwing. 

No wonder we're fucked.

[Yadda yadda yadda]

1 hour ago, DurhamBorn said:

I cannot remember the last polo i heard mention people should build up capital in UK equity.Since Brown they have all slowly turned the system to direct most saved labour in pensions into gilts.It pains me how stupid most ordinary people are,but the 2nd leg of the polos actions is to get more and more on the state.They have pretty much stopped capital formation.The companies leaving earn profits abroad and pay divis here.Take BAT and me.I come from the poorest town in England.My BAT divis used to come in,made abroad,i spent some in my local pub,helping create business and jobs.

Whats happened is,government has instead taken that capital into gilts,then inflated it away to give to Abdul and fat Shazz.In the short term nothing changes,the demand remains,its just given to Shazz.However longer term the macro is very very different.Why?.Because BAT grows its business and divi,but the gilt just goes down to nothing inflated away.

Its why when i started 53% of my home town where on the state tit,one of the worst in the country then.Now its over 80%.

Imagine what this country would look like if people invested even a small sum of money each month rather than borrowed for consumption. It is easy now to use platforms like T212 to invest with very little. The young generation might make the most of that opportunity but they need house prices to crash to give them a realistic aim. Alternatively they will save with the aim of leaving the UK.

The biggest problem we have is that people have been trained to blame others for their situation and to avoid taking responsibility for themselves and, worse, for their families. The free money tap is a siphon from those that try to those that don't. It sucks money and the opportunity that brings from those that want to better themselves and gives it to hopeless consumer units. Hopeless in the sense that they don't hope for better. Many people appear to be thick but they're just unmotivated.

[Long time lurking]

9 minutes ago, snaga said:

buy backs are more common in US, seems to be preferred over paying a divi. Shareholders like it, as their capital gains can be held and not taxable until sold, unlike a divi payment that is taxable.

That sounds very much like phycological tax avoidance to me 

[feed]

17 minutes ago, ThoughtCriminal said:

No, you're just talking nonsense.

If there are no MPs to the right of you then you are, by definition, the most Rightwing MP.

Galloway was interviewed yesterday and said being gay isn't normal, it's not equal to heterosexuality, trans isn't normal and he doesn't want his kids taught that either of them are normal. He also asked why a Muslim can be FM of Scotland but not a Christian. Not a single other MP would dare come anywhere close to saying any of that. And you think he's on the Left. You probably think Jacob Rees Mogg is Rightwing. 

No wonder we're fucked.

What you're seeing with Galloway is that he's pro Islam.  Islam is a very right wing ideology.  He is still a statist globalist.  Just a right wing one.  

We have ring wing statists and left wing statists and most of them are globalists.  What we're lacking are nationalists.  And nationalism has been conflated with racism.  

The irony now being that we’re at war with nationalists (Russia), on the verge of a cold war with nationalists (China) and in direct competition for resources with nationalists (India)
 

[snaga]

45 minutes ago, Long time lurking said:

That sounds very much like phycological tax avoidance to me 

tax effeciency

Having the total number of outstanding share decrease, increases your own part ownership of the company, it achieves the same thing as if you take the dividend, and reinvest it in more shares in the same company, only now the taxman take's a slice.

Downside is that you don't get to choose how to spend your dividend.

Edited May 3 by snaga

[Long time lurking]

20 minutes ago, snaga said:

tax effeciency

Having the total number of outstanding share decrease, increases your own part ownership of the company, it achieves the same thing as if you take the dividend, and reinvest it in more shares in the same company, only now the taxman take's a slice.

Downside is that you don't get to choose how to spend your dividend.

I understand how it works ,but i can`t see the tax efficiency part as logical as all things being equal (shares maintain value ) the tax will still be due when any profit is taken upon the sale, at best you deffer the tax bill to a later date,which in certain scenarios could be beneficial  depending on earnings tax year to tax year 

Then there's another take on Appel  

 

Edited May 3 by Long time lurking

[snaga]

9 minutes ago, Long time lurking said:

I understand how it works ,but i can`t see the tax efficiency part as logical as all things being equal (shares maintain value ) the tax will still be due when any profit is taken upon the sale, at best you deffer the tax bill to a later date,which in certain scenarios could be beneficial  depending on earnings tax year to tax year 

Then there's another take on Appel  

 

yes, where Apple is concerned, there could be other factors

[Axeman123]

A headline that needs no explanation:

Traders Pull Forward First Full Fed Rate Cut to November Ahead of Jobs

Very supportive of the DH thesis if this is the start of a move down in yields. CME implied 15% probability of a cut in June now, and plenty of time for that to move up.

https://uk.finance.yahoo.com/news/traders-pull-forward-first-full-220000332.html

And another:

Glencore may trigger bidding war for mining rival Anglo American

Exactly what I want to see if the PM move is going to have legs, this simply wouldn't be happening otherwise.

https://uk.finance.yahoo.com/news/glencore-may-trigger-bidding-war-114317643.html

And finally:

London falls out of top 20 in 2024 global IPO destination rankings — tied with Kazakhstan

Hardly surprising with a Labour Govt inbound of course.

https://uk.finance.yahoo.com/news/london-falls-top-20-2024-120138804.html

[Plan-b]

Large Miss on the US non farm employment, instant rocket under the price of PMs

Edited May 3 by Plan-b

[Long time lurking]

37 minutes ago, snaga said:

yes, where Apple is concerned, there could be other factors

Apple sales are dying in China they were No1 phone sales they are now barley holding onto No3 and Huawei have only just entered the money no object price range ,with their latest phone ,which top end apple products have always dominated ,they had no real competition in that section of the market ,China are basically playing US Huawei game now  

[desertorchid]

Interesting- SEDY

 

[JMD]

On 02/05/2024 at 11:06, Axeman123 said:

Galloway is a fundamentally disagreeable personality, but when you see the horrors agreeable personality types have nodded along with in order not to rock the boat with regard to child transing etc, I say the importance of having a stubborn and argumentative minority of people in society is under-appreciated.

I agree. Society simply can't function unless all views (however wacky or disagreeable) are tolerated.

Take this financial thread community for example where all opinions are welcomed... even when some posters curiously insist on denying-the-divinity-of-the-dividend!!

[BurntBread]

41 minutes ago, Long time lurking said:

i can`t see the tax efficiency part as logical as all things being equal (shares maintain value ) the tax will still be due when any profit is taken upon the sale

Well, there is the mathematical point that in a compounding system it is better to take the tax hit at the end, as you have then got the compounding effect applied to all the tax you didn't pay up to that point.

For example, suppose you put £1000 into a share for 30 years that pays 6% dividend, but the share price stays constant (so no capital gain at the end). Compare that to an identical company that does not pay dividends, but (successfully) reinvests profits so that the share price goes up 6% a year. Let's imagine dividend tax and CGT are both 50%.

• Dividend case: You only get 3% per year, compounding (because of the divi tax), so after 30 years you have £1000 * (1.03^30) = £2427.
• Accumulation case: You end up before tax with £1000 * (1.06^30) = £5473. However, you pay CGT on £4473 of that, leaving you with £5473 - 0.5 * £4473 = £3372.

Obviously the tax rates might be different between the two in practice; also the tax-free allowances may be different.

That's just the simple maths. There are clearly other differences between dividends and accumulation:

• You may not trust the company to re-invest their profits wisely, and if the management does stupid things, retaining dividends could be capital-destructive. I guess this is a particular concern in a static or shrinking market, where management might look to invest in areas they don't know anything about. In that case I'd rather have the money and look after it myself.
• The market does not always value a company correctly. Apart from random, short-term fluctuations, some sectors remain structurally under-valued for various reasons, including politics or collective psychosis. In those cases, the cash on the book, or expanded business, might be valued by the market at less than the cold hard dividend, were it paid out. Eventually this might correct, but if you want to cash out before that happens, you would lose in the accumulation scenario. One of the (contrarian) theses of this thread is that mis-valuations of certain sectors can persist for a long time.

[SpectrumFX]

10 minutes ago, desertorchid said:

Interesting- SEDY

 

Not sure what's going on there. It's flip floping between showing me a 14% and 0.25% daily gain for me in HL.