Credit deflation and the reflation cycle to come.

[Thorn]

4 hours ago, Castlevania said:

There was an article about the CEO in yesterday’s Evening Standard, which was a most enjoyable read.

https://www.google.co.uk/amp/s/www.standard.co.uk/business/business-interview-ashtead-chief-geoff-drabble-on-beating-the-odds-to-become-a-city-giant-a3858726.html%3famp

Edit: Probably a sell indicator when you have the CEO bigging himself up. Seemed like a genuine chap, though.

 

I recall similar stories about the affable David Drumm, then head of Anglo-Irish Bank... just before they led the Irish end of the disaster of the GFC. 

[Thorn]

5 hours ago, MrXxx said:

Hi All,

quick newbie question as I am reading this (and around other financial sites) in the background and want to confirm that my understanding is correct.

So with the (inevitable?) change that we are about to go into (as the world correct from the effect of massive QE) with interest rates rising, if passive investing:-

1. Would it make sense to rebalance a portfolio from a shares 'bias' to a more gilts 'bias' (i.e. decrease your % in shares whatever it is and increase your % in gilts whatever it is)...My rationale/thinking is as follows yes, I think this would be the case as 1. govts will be needing money for development (and so having to pay more for it) , and b) some shares/companies will drop as they either go bust or customers buy less....note I said passive, as active investors would manage this in a different way by trading in/out of shares I assume?.

2. If 1 above is correct, I can't get my head around when to buy gilts, as with increasing inflation every time you buy you would be better waiting until the next time (as the coupon offered would be increasing between these two time periods).

Thanks,

MrXxx

note, I would start my own post/teread for newbies like myself but then the people we need to answer the questions i.e. you folks, probably wouldn't see them as you wouldn't be visiting the post with it being so basic. 

I think there’s nothing that’s basic any more Mr Xxx the only thing that’s basic is not learning every single thing we can to get ready for the hell of a coming crash. 

I am a total beginner but learning as fast as I can. Reading everything. Not a trader. But lost trust in the shills for sure. And they are everywhere. 

Along with suspicion of salesmen and website stories and then adding as much book- reading as I can fit in, this thread and it’s sister on TOS is an education. 

Do you think QE or Chinese capital outflows to Western assets will continue is an interesting question I keep asking.

 

[eek]

19 minutes ago, Thorn said:

I think there’s nothing that’s basic any more Mr Xxx the only thing that’s basic is not learning every single thing we can to get ready for the hell of a coming crash. 

I am a total beginner but learning as fast as I can. Reading everything. Not a trader. But lost trust in the shills for sure. And they are everywhere. 

Along with suspicion of salesmen and website stories and then adding as much book- reading as I can fit in, this thread and it’s sister on TOS is an education. 

Do you think QE or Chinese capital outflows to Western assets will continue is an interesting question I keep asking.

 

China is cutting down on capital outflows that don't have a justified purpose see just this week Aston Villa and HoF .

QE is harder but I don't think it will be done the way it has been done for the last 10 years. This time it will be direct government spending...

[Thorn]

35 minutes ago, eek said:

China is cutting down on capital outflows that don't have a justified purpose see just this week Aston Villa and HoF .

QE is harder but I don't think it will be done the way it has been done for the last 10 years. This time it will be direct government spending...

I read that headline for sure. But sure aren’t there always workarounds?

But yes agreed different QE likely ahead. 

[Berk]

11 minutes ago, Thorn said:

I read that headline for sure. But sure aren’t there always workarounds?

But yes agreed different QE likely ahead. 

I’m sure there are workarounds @Thorn, although each hurdle that is added presumably requires a reasonable degree of effort to effect a workaround and so diminishes the number of willing participants, generating a degree of tapering of the target symptom. Do you think that this approach of gradually slowing things is intentional, thus avoiding any potential systemic shocks?

On the topic of different QE, it would be interesting to hear thoughts on how this might be effected. Apart from direct government spending, are there any other more ‘out there’ possibilities that anyone can think of? Nothing seems too crazy these days so a few off-the-wall thoughts would be interesting to hear!

[Thorn]

25 minutes ago, Berk said:

I’m sure there are workarounds @Thorn, although each hurdle that is added presumably requires a reasonable degree of effort to effect a workaround and so diminishes the number of willing participants, generating a degree of tapering of the target symptom. Do you think that this approach of gradually slowing things is intentional, thus avoiding any potential systemic shocks?

On the topic of different QE, it would be interesting to hear thoughts on how this might be effected. Apart from direct government spending, are there any other more ‘out there’ possibilities that anyone can think of? Nothing seems too crazy these days so a few off-the-wall thoughts would be interesting to hear!

Ok Brain dump for what its worth/ stuff that isnt shopping I can think of... please people add to this...

 

DamsWindTurbimesSchoolsFerryTerminalsRailwayAndTramNetworksAndCarriagesHospitalsUniversitiesParkingGaragesDataNetworksCarparksDroneParksElectricVehicleChargingPointsAndNetworksSolarEneryFarmsWaveTurbineEnergyFarmsNavalPortUpgradesAirforceAirwayUpgradesSpaceStuffPhoneNerworkUpgradesGrantsToUpdateExistingFactoriesGrantsTOuogradeExistinfAnalogueBusinessesToDigitalPkusLabsAnd ManufacturingFacilitiesToManufactureNew3DDesignedStuffPlusEverythingYouCanThinkOfThatMightHelpFarmersGrowFood OrEnergy-ProducingPlantsLikeRapeseed.

 

 

Ps sorry but Sod the typos it’s a Saturday night.its a start. Come on silver.

[Berk]

5 minutes ago, Thorn said:

Ok Brain dump for what its worth/ stuff that isnt shopping I can think of... please people add to this...

 

DamsWindTurbimesSchoolsFerryTerminalsRailwayAndTramNetworksAndCarriagesHospitalsUniversitiesParkingGaragesDataNetworksCarparksDroneParksElectricVehicleChargingPointsAndNetworksSolarEneryFarmsWaveTurbineEnergyFarmsNavalPortUpgradesAirforceAirwayUpgradesSpaceStuffPhoneNerworkUpgradesGrantsToUpdateExistingFactoriesGrantsTOuogradeExistinfAnalogueBusinessesToDigitalPkusLabsAnd ManufacturingFacilitiesToManufactureNew3DDesignedStuffPlusEverythingYouCanThinkOfThatMightHelpFarmersGrowFood OrEnergy-ProducingPlantsLikeRapeseed.

 

 

Ps sorry but Sod the typos it’s a Saturday night.its a start. Come on silver.

Impressive stuff Thorn! Not sure I’ll notice any typos this late on a Saturday  I’ll need to re-read that a few times to make sure I haven’t missed anything!

I’ve been thinking of adding a little more silver as you mention it...

[Berk]

14 minutes ago, Thorn said:

Ok Brain dump for what its worth/ stuff that isnt shopping I can think of... please people add to this...

 

DamsWindTurbimesSchoolsFerryTerminalsRailwayAndTramNetworksAndCarriagesHospitalsUniversitiesParkingGaragesDataNetworksCarparksDroneParksElectricVehicleChargingPointsAndNetworksSolarEneryFarmsWaveTurbineEnergyFarmsNavalPortUpgradesAirforceAirwayUpgradesSpaceStuffPhoneNerworkUpgradesGrantsToUpdateExistingFactoriesGrantsTOuogradeExistinfAnalogueBusinessesToDigitalPkusLabsAnd ManufacturingFacilitiesToManufactureNew3DDesignedStuffPlusEverythingYouCanThinkOfThatMightHelpFarmersGrowFood OrEnergy-ProducingPlantsLikeRapeseed.

 

 

Ps sorry but Sod the typos it’s a Saturday night.its a start. Come on silver.

Some adds: Energy Storage Facilities/Batteries, Carbon Capture.

[No Duff (troll)]

10 hours ago, Solzhenitsyn said:

The mother of all cup and handle pattern appears to be setting up nicely in silver prices......

Indeed, well spotted!  As you mentioned, a very very long term pattern and my research suggested over a period beyond what most text books would look at.  But still very noticeable and not easy to ignore.

[Inoperational Bumblebee]

On 07/06/2018 at 17:56, UnconventionalWisdom said:

I've dabbled a tiny bit in crypto- heard 0.5% of your wealth is a good approach- that way if it shoots up, great, but if you lose it all, it's not the end of the world. 

Not a bad idea - I initially allocated 5%, and it quickly became 50%, through gains rather than additions.

On 08/06/2018 at 10:59, Admiral Pepe said:

If one is buying IBTL shouldn't that be for the long term? In part to balance out risk and fluctuations of equities? For the time being personally I don't have any tresuries/gilts.

I view it mostly as a currency play, with the added potential of massive QE incoming.

7 hours ago, MrXxx said:

Hi All,

quick newbie question as I am reading this (and around other financial sites) in the background and want to confirm that my understanding is correct.

So with the (inevitable?) change that we are about to go into (as the world correct from the effect of massive QE) with interest rates rising, if passive investing:-

1. Would it make sense to rebalance a portfolio from a shares 'bias' to a more gilts 'bias' (i.e. decrease your % in shares whatever it is and increase your % in gilts whatever it is)...My rationale/thinking is as follows yes, I think this would be the case as 1. govts will be needing money for development (and so having to pay more for it) , and b) some shares/companies will drop as they either go bust or customers buy less....note I said passive, as active investors would manage this in a different way by trading in/out of shares I assume?.

2. If 1 above is correct, I can't get my head around when to buy gilts, as with increasing inflation every time you buy you would be better waiting until the next time (as the coupon offered would be increasing between these two time periods).

Thanks,

MrXxx

note, I would start my own post/teread for newbies like myself but then the people we need to answer the questions i.e. you folks, probably wouldn't see them as you wouldn't be visiting the post with it being so basic. 

See above. It's not "bonds" that are the point of this, it's "US bonds".

[No Duff (troll)]

3 minutes ago, Inoperational Bumblebee said:

I view it mostly as a currency play, with the added potential of massive QE incoming.

+1  Very much so.  My general rule is currencies first and the investment vehicles second.  Seen too many inverse moves between currencies and stocks/bonds to think any other way now.  Includes PMs (another currency).

[No Duff (troll)]

Interesting throw away comment from a quality contractor last week about being in a building recession.  They're used by many local smaller builders, etc for high end stuff.  Certainly could complete my jobs quickly.  Maybe a blip but the guy's been around a long time and is well connected.  Another one has just bought new vehicles with personalised number plates so that surely marks a top.  I've probably overpaid but ain't going to screw the good guys.  None of these guys are big enough to have RTB, etc friends in high places though.

[King Penda]

On 08/06/2018 at 23:05, The XYY Man said:

Selling salt for a profit is a very risky business seeing most of us can grow it for free in our belly-buttons...

 

XYY

the idea is they lick it out,very slowly with the tip of there toung

[macca]

CONservatives top 3 donors:

 

1) financial institutions 

2) property millionaires 

3) arms dealers.. 

 

Who is stupid enough to vote for these tax dodgers? 

[sancho panza]

10 hours ago, Castlevania said:

There was an article about the CEO in yesterday’s Evening Standard, which was a most enjoyable read.

https://www.google.co.uk/amp/s/www.standard.co.uk/business/business-interview-ashtead-chief-geoff-drabble-on-beating-the-odds-to-become-a-city-giant-a3858726.html%3famp

Edit: Probably a sell indicator when you have the CEO bigging himself up. Seemed like a genuine chap, though.

 

Thanks for the heads up CV,interesting piece.90% of curretnt profits from US

I just can't see anything going wrong when you have a chart like this

6 hours ago, Thorn said:

I recall similar stories about the affable David Drumm, then head of Anglo-Irish Bank... just before they led the Irish end of the disaster of the GFC. 

 

 

[ThoughtCriminal]

4 hours ago, sancho panza said:

Thanks for the heads up CV,interesting piece.90% of curretnt profits from US

I just can't see anything going wrong when you have a chart like this

 

 

That last chart should be titled "The short memory chart".

[Majorpain]

7 hours ago, No Duff said:

Interesting throw away comment from a quality contractor last week about being in a building recession.  They're used by many local smaller builders, etc for high end stuff.  Certainly could complete my jobs quickly.  Maybe a blip but the guy's been around a long time and is well connected.  Another one has just bought new vehicles with personalised number plates so that surely marks a top.  I've probably overpaid but ain't going to screw the good guys.  None of these guys are big enough to have RTB, etc friends in high places though.

Things changed when Carillion exploded, the majority of people in the sector dont use credit insurance to save money and so got malleted when the money disappeared.  The insurers at least are jumpy and now wont offer credit cover on Interserve who are financially 100x better than Carillion, though that still doesnt mean i dont think they wont eventually go bust.

Chuck in minimum wage price rises of c. 4% and imported goods from Europe going up another 3/4% and with low margins you start to have a problem.  No chance of passing those increases on to the main contractors who are trying to their keep costs down and so something somewhere has to give.

[No Duff (troll)]

1 hour ago, Majorpain said:

Things changed when Carillion exploded, the majority of people in the sector dont use credit insurance to save money and so got malleted when the money disappeared.  The insurers at least are jumpy and now wont offer credit cover on Interserve who are financially 100x better than Carillion, though that still doesnt mean i dont think they wont eventually go bust.

Chuck in minimum wage price rises of c. 4% and imported goods from Europe going up another 3/4% and with low margins you start to have a problem.  No chance of passing those increases on to the main contractors who are trying to their keep costs down and so something somewhere has to give.

Interesting insight.  These guys are doing mainly end consumer work like extensions, renovations, etc.  What was also interesting was how insensitve the quotes were between quality materials - labour certainly is even a bigger cost driver than before despite large material cost increases (which are not over yet).  Or maybe I was being rolled.  Very unlikely.  But anyway that only ever happens once!

[DurhamBorn]

11 hours ago, eek said:

China is cutting down on capital outflows that don't have a justified purpose see just this week Aston Villa and HoF .

QE is harder but I don't think it will be done the way it has been done for the last 10 years. This time it will be direct government spending...

100%.Thats exactly what we see.QE will be printed simply so governments can borrow at 30 year coupons at 0.5% (or maybe even 0.1%).Most people dont understand the role of governments in cycles,but they are a huge driver when we turn to reflation.

The deflation cycle saw consumers take more and more of the cake.Investment was simply too low.That is about to change.We are at a key inflection point.Government just needs an excuse,and when they get it they will go full guns blazing.Inflation will seem ok for a while so they will keep going.As @sancho panza always says ,look at "velocity",it will come to life.

In lots of ways a reflation is the wealth creation time of the cycles.The deflation seems like its creating wealth,but its actually simply spending it through the cloak of falling prices,cheaper debt.

 

[DurhamBorn]

10 hours ago, Berk said:

Some adds: Energy Storage Facilities/Batteries, Carbon Capture.

https://www.centrica.com/news/centricas-restore-business-launches-32-mw-virtual-power-plant-belgium

Energy use will start to go up and companies with the technology to work out where each unit comes from,is stored at and then goes to will win big.

https://www.current-news.co.uk/news/centrica-invests-in-energy-blockchain-start-up-lo3-energy

 

 

[Agent ZigZag]

Enjoying this thread in an adult manner were people have tied their opinions to the mast in an honest manner. . My question to the board is trying to establish an opinion as to when is it most probable that we will see government spending take hold that I consider will be in conjunction with the big pension providers. To establish a likely timescale may be dictated by the amount or lack of liquidity in the system. Therefore is liquidity in the uk drying up or is capital flight from say Europe still coming in that will prop up the existing system that bit longer.

[BadAlchemy]

Yes, I'm intrigued by DB's statement " Government just needs an excuse,and when they get it they will go full guns blazing " .

Any guesses what that excuse might turn out to be? Do we need a few more House of Frasers/massive job losses? Do we need civil unrest like protests and strikes against the rising cost of petrol/the devaluation of the £ by Carney. Are the government waiting for Brexit date and then they'll tie it all in with that and so cover themselves for any unpleasant consequences ? What triggered the last reflation cycle ...in the 70's I think DB said it was? - sorry I was in nappies at that time :)

[Majorpain]

1 hour ago, No Duff said:

Interesting insight.  These guys are doing mainly end consumer work like extensions, renovations, etc.  What was also interesting was how insensitve the quotes were between quality materials - labour certainly is even a bigger cost driver than before despite large material cost increases (which are not over yet).  Or maybe I was being rolled.  Very unlikely.  But anyway that only ever happens once!

I dont have much knowledge of that construction area but i would imagine its closely tied into consumer spending and house price increases.  Its not an area i would want too much exposure too, the boom has arguably been going on since 1995-7 so is due to come to a shuddering halt some time soon.  The one fly in the ointment is those pesky students, Newcastle's population is 268k, its student population is around the 45-50k mark.  Back when i was studying, everyone rented a shared house in the local area, these days apartment blocks housing 500+ have sprung up in the city center with a few more in the pipeline.  House prices leveled off last month in Newcastle, and zoopla has plenty of student houses all the way up to a portfolio of 5 as landlords try and shift the houses there is no demand for.  I think this is likely to be happening on a national scale in the university cities based on talks with a company who do the student apartment bathroom fitouts. 

https://www.zoopla.co.uk/for-sale/details/47716701?search_identifier=376b120011597088112a4e0069a9f110#t3kSCO4gBx4HcE8D.97

Pack em in tight!

[Castlevania]

25 minutes ago, Majorpain said:

I dont have much knowledge of that construction area but i would imagine its closely tied into consumer spending and house price increases.  Its not an area i would want too much exposure too, the boom has arguably been going on since 1995-7 so is due to come to a shuddering halt some time soon.  The one fly in the ointment is those pesky students, Newcastle's population is 268k, its student population is around the 45-50k mark.  Back when i was studying, everyone rented a shared house in the local area, these days apartment blocks housing 500+ have sprung up in the city center with a few more in the pipeline.  House prices leveled off last month in Newcastle, and zoopla has plenty of student houses all the way up to a portfolio of 5 as landlords try and shift the houses there is no demand for.  I think this is likely to be happening on a national scale in the university cities based on talks with a company who do the student apartment bathroom fitouts. 

https://www.zoopla.co.uk/for-sale/details/47716701?search_identifier=376b120011597088112a4e0069a9f110#t3kSCO4gBx4HcE8D.97

Pack em in tight!

I may be wrong, but I thought this was a policy response to the housing crisis? Build student flats (which can be built to a much lower standard in terms of space, build quality etc than proper flats and with no need for social housing provision, so cheap). Get all the students to move into them and free up the old student housing for actual families. It seems like a good idea to me.

My hometown is a student town, and following a big push to build more purpose built student accomodation, a lot of the housing in the town which previously had accomodated students were empty. The landlords were very vocal in lobbying for asylum seekers to move there. A few did. There’s still a lot of empty lets though.

[Inoperational Bumblebee]

I do wonder how sustainable income from these purpose-built student apartments will be if Brexit decimates the number of EU students who choose to study in the UK. It's not a gamble I'd be taking right now.