Credit deflation and the reflation cycle to come.

[sancho panza]

29 minutes ago, Castlevania said:

@sancho panzaare your figures adjusted for debt? 

No,it's market cap over revenue.

 

[Ashby]

Hello everyone

I signed up and hope to post here. I enjoyed reading on the other site but never managed to post. It’s a horrible place now with all those ads!

I very much agree with the premise of this thread that we are going into debt bust then reflation cycle driven by massive qe. Although it sounds like hard times are coming, in fact it’s a beautiful ray of hope in what feels like really dark days. Not just dark but pitch black. Particularly the thought that house prices are going down violently, and (most importantly) are going to stay down.

I very much enjoyed reading other people’s experience of jobs and job applications a few months back. I have experienced exactly the same difficulties. I thought it was just me! Unbelievable how hard it is to get a career job outside sme. And the anxiety at work too!

I really feel that the excesses back in 2006 have become the norm today. I wonder if they are just a symptom of the current deflation cycle though. I’m thinking particularly the way everyone just assumes house prices are excessively high (they are the straight jacket on this country), and those really arrogant business managers. I still can’t believe carrillion managers. It was like something out of a dickens book. They run off with the money in a cloud of corruption covered by their use of migrant workers and liberalist ideology, and then just fritter their money away on houses and reputation managers. Unbelievable, one called himself a Christian capitalist as, in his great majesty and wisdom, through great pains, gave a few quid to a fun run. Well, sola fide I suppose

Not sure what I can add to this thread, but perhaps my reflections of the last crash. I remember the gold and silver price fell but the coin price did not fall much, if at all, because of supply issues. It all got really tight. I remember you could only buy at those prices the paper etf’s which everyone was sceptical of as they were backed by aig, recently deceased and resurrected. Goldmoney allowed a sale of mine through but had freeze on buying due to supply issues. So I recommend just buying now as you might not be able to buy in a crash if the markets get tight. It all sorted itself out in a few weeks but it was fustrating that goldmoney would only take my sale at spot price but coins were fetching big premiums.

For now, I very much like this idea of having a portfolio of shares generating a dividend income. I was not in a position to think of that before. For me, I have no debt, rent and have most money in metals (goldmoney) and some cash. I think I’ll build the cash and look to buy shares after Christmas or in the fall. I assume there’s no rush? I really wish rents would stop rocketing upwards. That’s the frustration. I bought some miners a while ago, but, well the account is a bit of a bloodbath. Haha they might pick up yet. The danger of shares is the company politics. I have Tahoe. They had a mine shut down due to some local dispute in Guatemala. Caused their share price to halve.

 

DB, I have some question for you which perhaps haven’t been discussed yet if that’s ok.

I wondered what you thought about universities/student loans/international student bubble. The thought of these student loans 50k at rpi, taken for imo questionable academic courses scares the life out of me. What horror show they will turn into when inflation rips. And these in debt, post 92 unis with their gentrified campuses just leeching on student debts, with their liberalist adgendas. If they go under it will be bad news as they are big employers. Don’t mention the btl.  I’m assuming they won’t receive much government bailout funds, but perhaps industrial research will receive a fair whack of money. International students? Maybe that will keep going.

But life won’t stop. I wonder what the big areas for employment will be? Perhaps I should be looking to learn some new skills. Well who knows. I am a knitter and want to learn how to spin. My next task  . Perhaps the wool industry will make a comeback. I’m amazed how shoddy the quality of clothing is nowerdays, yet people seem to have forgotten what quality is!

 

Sorry if I wrote too much text!

 

[Wheeler]

28 minutes ago, Ashby said:

Hello everyone

[...]

For now, I very much like this idea of having a portfolio of shares generating a dividend income. I was not in a position to think of that before. For me, I have no debt, rent and have most money in metals (goldmoney) and some cash. I think I’ll build the cash and look to buy shares after Christmas or in the fall. I assume there’s no rush? I really wish rents would stop rocketing upwards. That’s the frustration. I bought some miners a while ago, but, well the account is a bit of a bloodbath. Haha they might pick up yet. The danger of shares is the company politics. I have Tahoe. They had a mine shut down due to some local dispute in Guatemala. Caused their share price to halve.

[...]

wondered what you thought about universities/student loans/international student bubble. The thought of these student loans 50k at rpi, taken for imo questionable academic courses scares the life out of me. What horror show they will turn into when inflation rips. And these in debt, post 92 unis with their gentrified campuses just leeching on student debts, with their liberalist adgendas. If they go under it will be bad news as they are big employers. Don’t mention the btl.  I’m assuming they won’t receive much government bailout funds, but perhaps industrial research will receive a fair whack of money. International students? Maybe that will keep going.

But life won’t stop. I wonder what the big areas for employment will be? Perhaps I should be looking to learn some new skills. Well who knows. I am a knitter and want to learn how to spin. My next task  . Perhaps the wool industry will make a comeback. I’m amazed how shoddy the quality of clothing is nowerdays, yet people seem to have forgotten what quality is!

 

Welcome to the forum Ashby. 

I think it is difficult to give a timescale but I'm leaning towards 6 to 12 months before it gets into full swing. I'm basing this on the fact that we haven't had a yield curve inversion yet and there is a lot of offshore money flowing into US companies due to President Trump's tax changes. I think this will keep the US markets up for this year. Once it starts I can't see us getting through the deflation in less than 12 months so that should give plenty of time to pick mining shares (for example). For me it will just be a case of trying to preserve as much money/wealth as possible through the crash.

Student debt is all part of the massive credit bubble. The difference here of course is that the indebted can't escape via bankruptcy. I expect if we get large RPI in the reflation the debts won't get repaid and will have to be written off (is it after 30 years?).

Being able to make your own clothes would be a good skill to have!

All just my own thoughts and not a recommendation - DYOR and all that.

 

[No Duff (troll)]

On 19/06/2018 at 15:28, Yellow_Reduced_Sticker said:

......

Oh F*** the chart looks extremely bearish...(I was hopping for it to go back to 1.43 area!)

 

Me too.  Nip off to put in a new bathroom and it runs away from me.  Expensive bathroom!

[No Duff (troll)]

16 hours ago, darkmarket said:

https://www.theguardian.com/commentisfree/2018/jun/20/britain-investment-revolution-labour-party

John McDonnell delivers the reflation policy:

..."This country suffers the lowest rate of investment in the G7. Our infrastructure – the essential networks of transport, utilities and telecommunications – is creaking under the strain, and suffering from decades of privatised mismanagement. On technology, we are falling even further behind... Real wages remain lower than they were eight years ago. Yet amid the public squalor and worsening conditions for the many, there are huge new investments in luxury flats and, at least in parts of London, extraordinary private wealth."

..."The team’s final report is published today, and proposes fundamental shifts in how our financial system is organised. Reform of the Bank of England’s mandate is at its centre. It should retain operational independence, but – more than two decades after this was granted it is time to reassess its guiding principles. – Turner’s team have recommended that alongside the Bank’s existing inflation target it should set a 3% target for productivity growth."

Nah mate.  You want productivity growth then stop FOM and raise the minimum wage.  It's called the substitution effect.  Can't have it both ways.  Got b*gger all to do with the BoE.  Typical of all our politicians.  

[No Duff (troll)]

2 hours ago, Ashby said:

For now, I very much like this idea of having a portfolio of shares generating a dividend income. I was not in a position to think of that before. For me, I have no debt, rent and have most money in metals (goldmoney) and some cash. I think I’ll build the cash and look to buy shares after Christmas or in the fall. I assume there’s no rush? I really wish rents would stop rocketing upwards. That’s the frustration. I bought some miners a while ago, but, well the account is a bit of a bloodbath. Haha they might pick up yet. The danger of shares is the company politics. I have Tahoe. They had a mine shut down due to some local dispute in Guatemala. Caused their share price to halve.

A lot of similarities in your post with me.

I'm under-weighted in equities but am averaging in slowly over 1 to 2 years.  The mistake I made was waiting as I lost focus and forgot to buy (I have other unpredictable things going on in my life).  If I have a plan of share purchases then I will get it done.  I even bought some this week even though I expect them to go down because I needed to start.  I would prefer to use technicals (MACD cross) to decide when to buy but again this requires that elusive focus so I may just have a (say) monthly purchase plan. 

Same with miners.  A long time ago I bought a reasonably expensive research report and bought a number of miners.  Rubbish performance overall.  But this is what happens if you try to contract out your DYOR and end up buying stuff you really don't understand.  So lesson learnt, at a cost.  I traded GDX since then but did little better.  Not enough profit to get excited on a trading front (and it really is just a trading play IMO).  I now just buy the metals and move on.

Even the cheap retailers are starting to struggle with low costs versus people's ability to spend.  Maybe disposable clothing is not long for this world so buy better and make do and mend may come back into fashion through necessity.  Read the monthly expenditure thread on this board.  Many people don't have the money even now and things may get a lot worse.  Quality clothing used to be a typical gift in the old days, followed by make do and mend.  As did re purposing dresses (including wedding dresses and the like).  There you go!   

[DurhamBorn]

13 hours ago, Talking Monkey said:

Hi DB I don't get  the point about China's One Belt One Road, why will they have to rush it out, if the west are producing won't it be less necessary for China to ship goods to the west.

The One belt One road isnt about shipping goods to the west,its about opening up new markets for China (and access to new commods) like in Africa and middle Asia.It will end up getting goods into Europe,probably through Greece,but thats now what its all about.Its also about keeping Chinese factories and steel mills going.

[DurhamBorn]

13 hours ago, Talking Monkey said:

DB why does Kinross stand out to you, just trying to understand the metrics you use to assess them

Kinross made a terrible deal at the top of the last bull run in gold.Several other companies did similar.Investors hit their shares even harder than the rest of the sector due to this.Their share price to turnover is then very low,just as better production starts to come.

On gold miners i do it like this.I want miners with low share price to turnover,with a steady or growing production profile and high reserves and resources in the ground.I dont care about profits and i dont care if they have high costs.I only buy gold and PM miners when i think we are close to an inflection point.I buy because i think a gold bull is ahead,and in that scenario the higher cost high reserve miners outperform.$100 up in gold puts Harmony's profits up by 60%,for Agnico only 20%.

In a gold bull the narrative changes to gold in the ground.You start to see stories about how x and y miners have 30 million oz in the ground but only valued at $20 an oz,people start saying $150 an oz would be fair value etc.

People need to 100% understand though this space isnt about worrying about a 20%/30% loss in some of the stocks.Its about getting those assets very very cheap and waiting.I fully expect some will 5 bag,probably 10 bag and maybe more.

[DurhamBorn]

@Ashby Student debt (and higher education) is a disaster waiting to happen.However the government have pushed out more when you start paying etc so for the lower paid its not bad on a personal level.

On BTL,the government will do nothing in the next cycle to help them.Nothing.If i could pick the worst investment in the world right now,it would be buying a UK BTL on 90% leverage.

If i could pick the worst thing someone in the UK could do right now,it would be to buy a new build on a HTB loan.

[darkmarket]

24 minutes ago, DurhamBorn said:

The One belt One road isnt about shipping goods to the west,its about opening up new markets for China (and access to new commods) like in Africa and middle Asia.It will end up getting goods into Europe,probably through Greece,but thats now what its all about.Its also about keeping Chinese factories and steel mills going.

The port infrastructure in the EU has gone far beyond Greece at this point. You can keep an eye here:

https://www.merics.org/en/bri-tracker/interactive-map

I see the OBOR as being about currency and trade, diplomacy and security. Replacing the dollar and reshaping geopolitics. It's a huge gambit and it seems very unlikely it'll work in its current form. The projects just aren't viable and won't generate the Yuan demand required. Or, they may win influence over eventual debt slave nations in a neo-colonial déja-vu.

 Either way, it may very well fund much of the expected reflation, denominated in CNY.

[DurhamBorn]

1 minute ago, darkmarket said:

The port infrastructure in the EU has gone far beyond Greece at this point. You can keep an eye here:

https://www.merics.org/en/bri-tracker/interactive-map

I see the OBOR as being about currency and trade, diplomacy and security. Replacing the dollar and reshaping geopolitics. It's a huge gambit and it seems very unlikely it'll work in its current form. The projects just aren't viable and won't generate the Yuan demand required. Or, they may win influence over eventual debt slave nations in a neo-colonial déja-vu.

 Either way, it may very well fund much of the expected reflation, denominated in CNY.

I agree,and i think it will fuel a lot of the reflation.This time though the west will be investing as well.Very handy link thankyou,we can keep an eye on that as we move forward.

[Yellow_Reduced_Sticker]

11 hours ago, Ashby said:

Hello everyone

I signed up and hope to post here. I enjoyed reading on the other site but never managed to post. It’s a horrible place now with all those ads!

{etc ...etc...etc...}

 

WELCOME to the party mate!

Yep ....I checked ToS the other day AND blimey overrun with ads AND You get this annoying bloomberg video POP UP that sits in the corner of ya screen, BUT at least Michael BloomJewberg gets FOXY presenters on like Betty Liu ... UNLIKE the dreadful BBC with their DOGS! haha

Hey I bet i wouldn't of been able to post the above at ToS...the ban hammer would of come down!

Stick to this place mate its LOVELY & RELAXING!

 

[Bricks & Mortar]

In the deflation, isn't RPI likely go very negative?  On account of including housing costs.  i.e, my student loan gets smaller.

Not that I care.  They get cancelled after 25 years, and I've no intention of breaking the income threshold in that time.

[Game_of_Homes]

9 hours ago, No Duff said:

Even the cheap retailers are starting to struggle with low costs versus people's ability to spend.  Maybe disposable clothing is not long for this world so buy better and make do and mend may come back into fashion through necessity.  Read the monthly expenditure thread on this board.  Many people don't have the money even now and things may get a lot worse.  Quality clothing used to be a typical gift in the old days, followed by make do and mend.  As did re purposing dresses (including wedding dresses and the like).  There you go!   

I don't really understand this. Benefits in this country are so generous (see the UC thread I started) and there are so many shops where clothes and household goods are so cheap (Primark, Poundland, Wilko, Aldi, Lidl etc). If you have your rent paid or heavily subsidised, no council tax to pay, work part time and have lots of spare cash from tax credits/salary, there should be lots of (time and) money to spend on tat. There must be lots of families in this situation. I would have thought the cheaper retailers would have been doing really well in the current environment. What are all these households spending their excess cash on?

[sancho panza]

1 hour ago, DurhamBorn said:

Kinross made a terrible deal at the top of the last bull run in gold.Several other companies did similar.Investors hit their shares even harder than the rest of the sector due to this.Their share price to turnover is then very low,just as better production starts to come.

On gold miners i do it like this.I want miners with low share price to turnover,with a steady or growing production profile and high reserves and resources in the ground.I dont care about profits and i dont care if they have high costs.I only buy gold and PM miners when i think we are close to an inflection point.I buy because i think a gold bull is ahead,and in that scenario the higher cost high reserve miners outperform.$100 up in gold puts Harmony's profits up by 60%,for Agnico only 20%.

In a gold bull the narrative changes to gold in the ground.You start to see stories about how x and y miners have 30 million oz in the ground but only valued at $20 an oz,people start saying $150 an oz would be fair value etc.

People need to 100% understand though this space isnt about worrying about a 20%/30% loss in some of the stocks.Its about getting those assets very very cheap and waiting.I fully expect some will 5 bag,probably 10 bag and maybe more.

You got any knowledge of what moves the Royalty co's DB?

12 minutes ago, Bricks & Mortar said:

In the deflation, isn't RPI likely go very negative?  On account of including housing costs.  i.e, my student loan gets smaller.

Not that I care.  They get cancelled after 25 years, and I've no intention of breaking the income threshold in that time.

RPI only includes mortgage interest, and the things that cost owning a house eg council tax,buildings and contents insurance etc.Doesn't actually include the cost of a house.

CPI has no housing inputs.

 

CPIH has a rental equivalence which is utter bollocks and only slightly more relevant for the man on the street than CPI-which is also pretty poor.

[Ma2]

2 hours ago, DurhamBorn said:

If i could pick the worst thing someone in the UK could do right now,it would be to buy a new build on a HTB loan.

Hi all, long time lurker on ToS, happy to make first post here and not over there. Have followed over for this thread so thanks @DurhamBorn for starting and everyone’s input. It makes great reading. 

Regading the above I found the perfect job for someone on here which has just been advertised

https://www.jobsinrisk.com/job/1084758/senior-specialist-consumer-risk/?TrackID=49674&utm_medium=email&utm_campaign=RSND.JIR.Top_Jobs.WU.MGX.TH1130&utm_source=JIR.DCM.Scheduled.Updates

This is a key role working in Consumer Risk to embed a new approach to risk management in the Help to Buy and Affordable Housing Programmes at Homes England.

The Help to Buy equity loan initiative is one of the government’s top priorities, aiming to encourage home ownership and stimulate new housing supply. Launched in April 2013 with an initial budget of £3.7 billion, the total programme budget is £22bn which aims to fund 360,000 Help to Buy home purchases out to 2021.

I think whoever gets this will be busy  Doesn’t appear there’s any sign of slowing this down, just trying to mitigate the increasing risks. 

[TheCountOfNowhere]

Interest Rates unchanged, a bit of extra QE for their mates.

When will this madness end ?

[Yellow_Reduced_Sticker]

36 minutes ago, TheCountOfNowhere said:

Interest Rates unchanged, a bit of extra QE for their mates.

When will this madness end ?

YOU ...know WHEN?

WHEN the F****** canadian DUMMY   F**** OFF next year!

[Option5]

All is not well in Dubai

https://www.bloomberg.com/news/articles/2018-06-14/the-downfall-of-arif-naqvi-s-abraaj-group-dubai-s-star-investor

[No Duff (troll)]

8 hours ago, Game_of_Homes said:

I don't really understand this. Benefits in this country are so generous (see the UC thread I started) and there are so many shops where clothes and household goods are so cheap (Primark, Poundland, Wilko, Aldi, Lidl etc). If you have your rent paid or heavily subsidised, no council tax to pay, work part time and have lots of spare cash from tax credits/salary, there should be lots of (time and) money to spend on tat. There must be lots of families in this situation. I would have thought the cheaper retailers would have been doing really well in the current environment. What are all these households spending their excess cash on?

It's thge trend.  It has some worried.  The problem with some of the mentioned retailers is they are based on cheap and have been great at finding lower cost sources starting with China and now elsewhere.  But they've run out of places to go (maybe North Korea!).  And they have already designed products  to their lowest cost.  They also need volume.  Not good when a business model is predicated on cheap but starts to run out of cheap.  At the same time their customers need cheap more than ever.

[Thorn]

Scottish Mortgage Trust have been something amazing to watch. Sank a bit today. They leverage up and seem to be heavily into FAANG and Chinese Stocks.

Had thought they might be a good place to  put some. Not so sure now. Not so sure about any trackers or funds any more, full of doubt and not sure I trust any of the stories on most financial websites any more. There seem to be a lot these days advising people to Stay Invested for the Longterm to Win.

I’m wishing I had the confidence to just go for trackers but I keep on sticking with the divi defensives pms and miners for now. 

...anyway that was thought 1 today. 

Thought 2 was Where Did All The Old Cars Go because I saw none.

 

[DurhamBorn]

7 hours ago, Ma2 said:

Hi all, long time lurker on ToS, happy to make first post here and not over there. Have followed over for this thread so thanks @DurhamBorn for starting and everyone’s input. It makes great reading. 

Regading the above I found the perfect job for someone on here which has just been advertised

https://www.jobsinrisk.com/job/1084758/senior-specialist-consumer-risk/?TrackID=49674&utm_medium=email&utm_campaign=RSND.JIR.Top_Jobs.WU.MGX.TH1130&utm_source=JIR.DCM.Scheduled.Updates

This is a key role working in Consumer Risk to embed a new approach to risk management in the Help to Buy and Affordable Housing Programmes at Homes England.

The Help to Buy equity loan initiative is one of the government’s top priorities, aiming to encourage home ownership and stimulate new housing supply. Launched in April 2013 with an initial budget of £3.7 billion, the total programme budget is £22bn which aims to fund 360,000 Help to Buy home purchases out to 2021.

I think whoever gets this will be busy  Doesn’t appear there’s any sign of slowing this down, just trying to mitigate the increasing risks. 

Should i apply?.I can include some macro work and tell them why HTB houses will lose 40% and probably 60% inflation adjusted by 2025/27 and that they need to hedge the massive losses the government will be taking.

[BadAlchemy]

14 minutes ago, DurhamBorn said:

Should i apply?.I can include some macro work and tell them why HTB houses will lose 40% and probably 60% inflation adjusted by 2025/27 and that they need to hedge the massive losses the government will be taking.

Please can I come and watch when you tell them. Will bring popcorn 

[Bear Hug]

On 19/06/2018 at 22:47, DurhamBorn said:

...

IBTL has done a great job so far and exactly what it was meant to do,protect us sterling investors from losing buying power.Up 10% while Vodaphone ( im buying) is down 15%.Switch now its 25% more Vod for my money,thats what its about.

Apologies for boring questions but: I've noticed Vodafone pretty much followed FTSE100 down last month or so, but BT seems to be edging up a little.  Any views on why that would be?  "Good" CEO gone from Vodafone and "bad" CEO gone from BT?

[harp]

56 minutes ago, Thorn said:

Scottish Mortgage Trust have been something amazing to watch. Sank a bit today. They leverage up and seem to be heavily into FAANG and Chinese Stocks.

Had thought they might be a good place to  put some. Not so sure now. Not so sure about any trackers or funds any more, full of doubt and not sure I trust any of the stories on most financial websites any more. There seem to be a lot these days advising people to Stay Invested for the Longterm to Win.

I’m wishing I had the confidence to just go for trackers but I keep on sticking with the divi defensives pms and miners for now. 

...anyway that was thought 1 today. 

Thought 2 was Where Did All The Old Cars Go because I saw none.

 

Haven't you learn't anything? Forget funds and trackers. If you are worried stay in cash. Haha. I have no idea what I'm doing to be honest but I'm guilty of (way) over trading! I started with £100k in Feb/March spilt into 10 shares as I said on ToS. I made some good calls (thanks DB) and some bad (me being a dick) However, it turned out well. Sold a few and made 15/20% gains but also sold some thinking they were on the way back down, not the case, so I moved on to the next share. So far that £100k has turned into £118k. Not bad at all I reckon all things considered.

Now I'm in BT, Vodafone, Centrica, Sibanye and Harmony. I sold my IBTL at 345 but I'll get back in soon. I have no doubt these will all go down but I've decided to just hold and not keep checking my HL app every few hours like a newbie (which I am)

What will be will be.