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Credit deflation and the reflation cycle to come.


DurhamBorn

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UnconventionalWisdom
2 hours ago, sancho panza said:

The denial in the High St mob is intriguing

Spot on. I can't believe there is this thought that it would go on forever. Once accepted they can move on, stubbornly hold on to original beliefs... Prob get very hurt. 

They just need to look at the countrywide share price to see things have changed. 

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7 minutes ago, sancho panza said:

China been buying a lot of UST's.Whilst I take your general point,China has been a force for disinlfation so any downturn there could see inflationary p[ressures rise here.There's a lot on here talking deflation(me included) but it could be we get credit deflation alongside price inflation.This isn't a straight rerun on the great Depr 

This, all that manufacturing capacity was built up using cheap credit with cheap credit buying the finished goods, now credit is no longer cheap what is china going to do with the spare capacity and unemployed?  Im thinking that a Chinese credit collapse will send an inflationary shockwave through the world economy, it will help get the economy back to the usual not enough supply for demand rather than the current QE fuelled not enough demand for supply in EVERYTHING.

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5 minutes ago, Majorpain said:

This, all that manufacturing capacity was built up using cheap credit with cheap credit buying the finished goods, now credit is no longer cheap what is china going to do with the spare capacity and unemployed?  Im thinking that a Chinese credit collapse will send an inflationary shockwave through the world economy, it will help get the economy back to the usual not enough supply for demand rather than the current QE fuelled not enough demand for supply in EVERYTHING.

China's demographic bonus is shrinking.

Ive been telling clients to get their software people now, urgently.

A good 50% of CHinese trade  is coming back, for various reasons inc. China is too expensive, too untrustworthy, too risky at getting caught up in US v China trade wars and tariffs.

 

 

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30 minutes ago, spygirl said:

A good 50% of CHinese trade  is coming back, for various reasons inc. China is too expensive, too untrustworthy, too risky at getting caught up in US v China trade wars and tariffs.

I'm not surprised to be honest!  The only unknown is when the credit bubble bursts, I think its a given that's its too big for Xi to keep a lid on.

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Royal Mail may get relegated to FTSE250. Any views on the share price following such an event?

 

BT seems to have moved higher on bad pension news.  I did expect the downside to be immaterial compared to their overall pension liabilities but did not expect a move up.

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55 minutes ago, spygirl said:

China's demographic bonus is shrinking.

Ive been telling clients to get their software people now, urgently.

A good 50% of CHinese trade  is coming back, for various reasons inc. China is too expensive, too untrustworthy, too risky at getting caught up in US v China trade wars and tariffs.

 

 

When European unemployment rises even higher than it is now (or probably more likely starts affecting the Germans who effectively seem to control all policy) an easy way to pull up the drawbridge and generate some local jobs again would be non-compliance with safety certification regs, bet there has been wide scale gaming of this for years/decades now.

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Democorruptcy
3 hours ago, dgul said:

Of course, England and Wales would be better off with a less laborious system (sealed bid would be fine), but we are where we are.

No thanks.

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Appears to be some energy behind the miners at the moment. Is this a false move or is there firm momentum? If momentum is in place what are your opinions as to which miners which are best placed as I would like to add further money to my holdings already in place

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17 hours ago, Talking Monkey said:

Would those stunning individual moves be in the miners DB

Yes,and maybe some industrials.Im really hoping the mines can run though.The market is waking up to the fact debt and falling earnings isnt a good mix.Noticed Mcolls down 70% from highs,again margins squeezed and debt of £100 million.Companies have over borrowed because rates were so low,but falling earnings means they are really struggling to re-finance.The debt deflation is happening.The amount of stocks down over 50% and up to 70% from highs grows every day.The averages are doing badly,but the are masking a savage bear market  underneath.Its not possible to time entering investments,but side stepping 50% to 70% down isnt a bad place,especially if those miners can run.

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Just going to say this, worrying factors are escalating much faster than I could have anticipated, be careful everyone, i'm going to keep banging on about the 10yr/2yr yield curve which has just hit 0.11, this is violent.

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59 minutes ago, Barnsey said:

Just going to say this, worrying factors are escalating much faster than I could have anticipated, be careful everyone, i'm going to keep banging on about the 10yr/2yr yield curve which has just hit 0.11, this is violent.

1

Well as someone totally new to all this in Feb/March time this year, what a fucking year to get started! Talk about a baptism of fire...

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Democorruptcy
1 hour ago, Barnsey said:

Just going to say this, worrying factors are escalating much faster than I could have anticipated, be careful everyone, i'm going to keep banging on about the 10yr/2yr yield curve which has just hit 0.11, this is violent.

Well done, it's nice to hear that.

What with DB's 3,500 S&P and truecontrarian closing all his shorts, there just hasn't been enough near term doom and gloom for my tastes.

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13 minutes ago, Democorruptcy said:

Well done, it's nice to hear that.

What with DB's 3,500 S&P and truecontrarian closing all his shorts, there just hasn't been enough near term doom and gloom for my tastes.

10yr/2yr now 0.098...

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Alifelessbinary

I thought this was quite an interesting article, as it's a forthright call for the CIO of an investment platform to go against the perceived bedrock of historic portfolio risk management. Even cost averaging into this market is testing my nerves.

https://www.trustnet.com/news/6242/aj-bells-cio-im-begging-you-not-to-invest-in-government-bond

AJ Bell’s Kevin Doran is “begging” financial advisers not to put cautious clients in government bonds, saying the UK and most other developed nations will “absolutely” default on their debt.

While a government default calls to mind memories of Greece or Argentina telling their creditors they won’t get their money back, Doran said this is one of only three ways this process can happen – and the UK is likely to follow one of the two other “slightly more cunning” options.

“You can devalue your currency,” he added, “which is effectively a default on all of your foreign creditors.

“Alternatively, you can allow inflation, which is a default on your domestic creditors.”

 

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4 hours ago, Barnsey said:

10yr/2yr now 0.098...

Thanks but what does this mean (other than the Fed will likely hold off on raising rates after the one priced in for 19th December)?

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17 minutes ago, Sugarlips said:

Thanks but what does this mean (other than the Fed will likely hold off on raising rates after the one priced in for 19th December)?

Ask yourself why the Dec hike might be the last...;)

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21 minutes ago, Barnsey said:

Ask yourself why the Dec hike might be the last...;)

Well the MSM narrative is the end of the rate rises for now coincides with the Trump tax cut sugar rush wearing off and China slowing, but with near full employment in the west surely that just means this is all just a speedbump as we continue to have cheap credit so people will keep spending, its not like the credit taps have been turned off in the west.. or have they?

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6 hours ago, Democorruptcy said:

Well done, it's nice to hear that.

What with DB's 3,500 S&P and truecontrarian closing all his shorts, there just hasn't been enough near term doom and gloom for my tastes.

What will be interesting is when the Fed indicates tightening is over (or might be close to over) everyone might think its party time and send the markets up one last time.My hope is the miners run hard though.Call me greedy,but id like some extra capital to deploy into certain shares as they are beaten down.I still think we will see gold around $1500,silver $23 area GDX $38 etc and the dollar at 86.Then oil to $18,copper $1,silve $8,gold $800 TLT to $150/160 area.

 

1 hour ago, Sugarlips said:

Thanks but what does this mean (other than the Fed will likely hold off on raising rates after the one priced in for 19th December)?

It means the Fed has tightened the world into a debt deflation.

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5 hours ago, DurhamBorn said:

What will be interesting is when the Fed indicates tightening is over (or might be close to over) everyone might think its party time and send the markets up one last time.My hope is the miners run hard though.Call me greedy,but id like some extra capital to deploy into certain shares as they are beaten down.I still think we will see gold around $1500,silver $23 area GDX $38 etc and the dollar at 86.Then oil to $18,copper $1,silve $8,gold $800 TLT to $150/160 area.

 

It means the Fed has tightened the world into a debt deflation.

Not quite.

BY following the FED - because they have to or are using it for cover - non US central banks and governemnts have dug themselves into a hole.

When will countries learn:The dollar - our currency, your problem.

The US HAS *NO* INTEREST IN ACCOMMODATING THE UK OZ OR ECB BANKING/ DEBT FUCKUPS.

You either regulate your banks and wrong a small deficit. Or you climb on the FED influenced roller-coaster and take your chances.

Stop debt and banking problems from occuring. Failing that, fix them when they occur.

 

 

 

 

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From Stagecoach results.These are the sort of things that will be huge growth areas in the next cycle.

"We are delighted that our proposal for a self-driving passenger bus trial is set to go ahead in Scotland and take passengers across the Forth Road Bridge.  The UK Government-funded trial will see five autonomous single-deck vehicles running between Edinburgh and Fife but regulations mean a driver will remain on board during all journeys.  Work on the project is expected to get underway during the second quarter of 2019, with services operating from 2020."

"Working with Prospective Labs (an organisation founded by researchers from University College London, Cambridge University and the Alan Turing Institute), we have identified four locations in our English bus networks where we see opportunities for commercially viable demand responsive transport"

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Democorruptcy
8 hours ago, DurhamBorn said:

It means the Fed has tightened the world into a debt deflation.

Meanwhile in the UK first time buyer mortgage rates have hit an all time low

https://www.hl.co.uk/news/2018/12/5/first-time-buyer-mortgage-rates-fall-to-record-low

So much for the end of the Term Funding Scheme raising rates. I still cannot believe that Mansion House giving the BoE up to £5bn to leverage up to £750bn. The initial £1.2bn gives them £180bn straight away. The mechanism is then in place to keep adding to the £5bn for more 150x leverage. The only thing that used to keep one central bank in check was the others but since the financial crisis when a lot cut rates on the same day, anything goes. 

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10 hours ago, Sugarlips said:

Thanks but what does this mean (other than the Fed will likely hold off on raising rates after the one priced in for 19th December)?

It means we're getting to that phase of the cycle where people are more worried about the return of the money than the return on it.I'm not sure whether it was a reliable indicator during the Bretton Woods era.Sign of banking weakness/weak consumer demand etc etc

8 hours ago, DurhamBorn said:

What will be interesting is when the Fed indicates tightening is over (or might be close to over) everyone might think its party time and send the markets up one last time.My hope is the miners run hard though.Call me greedy,but id like some extra capital to deploy into certain shares as they are beaten down.I still think we will see gold around $1500,silver $23 area GDX $38 etc and the dollar at 86.Then oil to $18,copper $1,silve $8,gold $800 TLT to $150/160 area.

 

It means the Fed has tightened the world into a debt deflation.

Very interested to see your later calls DB.I'm struggling to see how gold won't keep running once it gets going? ie why would it stop and reverse to $800(which is roughly the cost of production)?

11 minutes ago, DurhamBorn said:

From Stagecoach results.These are the sort of things that will be huge growth areas in the next cycle.

"We are delighted that our proposal for a self-driving passenger bus trial is set to go ahead in Scotland and take passengers across the Forth Road Bridge.  The UK Government-funded trial will see five autonomous single-deck vehicles running between Edinburgh and Fife but regulations mean a driver will remain on board during all journeys.  Work on the project is expected to get underway during the second quarter of 2019, with services operating from 2020."

"Working with Prospective Labs (an organisation founded by researchers from University College London, Cambridge University and the Alan Turing Institute), we have identified four locations in our English bus networks where we see opportunities for commercially viable demand responsive transport"

Bad news for drivers wages....

3 minutes ago, Democorruptcy said:

Meanwhile in the UK first time buyer mortgage rates have hit an all time low

https://www.hl.co.uk/news/2018/12/5/first-time-buyer-mortgage-rates-fall-to-record-low

So much for the end of the Term Funding Scheme raising rates. I still cannot believe that Mansion House giving the BoE up to £5bn to leverage up to £750bn. The initial £1.2bn gives them £180bn straight away. The mechanism is then in place to keep adding to the £5bn for more 150x leverage. The only thing that used to keep one central bank in check was the others but since the financial crisis when a lot cut rates on the same day, anything goes. 

I'm not sure they'll leverage that money in the manner asserted.As quitye simply they'll be kept in check by being liable for the losses on it.

Flip side of the FTB rates is that margins must be getting crushed....................

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9 hours ago, Sugarlips said:

Well the MSM narrative is the end of the rate rises for now coincides with the Trump tax cut sugar rush wearing off and China slowing, but with near full employment in the west surely that just means this is all just a speedbump as we continue to have cheap credit so people will keep spending, its not like the credit taps have been turned off in the west.. or have they?

Big miss from Toll Brothers yesterday. Evidence that the wheels have come off US housing demand even in California.

https://mobile.reuters.com/article/amp/idUSKBN1O3106

Quote

(Reuters) - U.S. luxury home builder Toll Brothers Inc (TOL.N) on Tuesday reported its first fall in quarterly orders in more than four years as rising mortgage rates and higher home prices hit demand, sending its shares down as much as 10 percent.

Toll's results are the latest evidence of slowing housing demand after years of steady recovery following the housing crash of 2007-2008.

The housing market has been a weak spot in a robust U.S. economy, with economists blaming the sluggish trend on rising mortgage rates, which have combined with higher prices to make home purchase less affordable for potential buyers.

Sales of new U.S. single-family homes plunged to a more than 2-1/2-year low in October, with sharp declines across regions.

Toll, whose homes can cost upwards of $2 million, said orders, a key indicator of future revenue, dropped 13.3 percent to 1,715 units in the quarter ended Oct. 31, against the 6.5 percent rise expected by analysts.

Those numbers also weighed on shares of other homebuilders, with D.R. Horton Inc (DHI.N), Lennar Corp (LEN.N) and PulteGroup Inc (PHM.N) all down 3-6 percent.

Orders fell the most in California, Toll's biggest market by revenue, declining 39.4 percent to 226 units in the quarter, the company said.

 

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Dow down 800(nearly last night)

Death cross inbound.

The talking head on CNBC tries to big up the santa rally.He reccomends buying the dip lol.

Worth watching the intervbiew for why people will be dip buying.The professionals are incredible salesmen.

 

https://www.cnbc.com/2018/12/04/stock-market-dow-futures-fall-amid-us-china-trade-deal-skepticism.html

Stocks fell sharply on Tuesday in the biggest decline since the October rout as investors worried about a bond-market phenomenon signaling a possible economic slowdown. Lingering worries around U.S.-China trade also added to jitters on Wall Street.

The Dow Jones Industrial Average fell 799.36 points, or 3.1 percent, to close at 25,027.07 and posted its worst day since Oct. 10. At its low of the day, the Dow had fallen more than 800 points.

The S&P 500 declined 3.2 percent to close at 2,700.06. The benchmark fell below its 200-day moving average, which triggered more selling from algorithmic funds. Financials were the worst performers in the S&P 500, plunging 4.4 percent. Utilities was the only positive sector in the S&P 500, rising 0.16 percent.

 

The Nasdaq Composite dropped 3.8 percent to close back in correction territory at 7,158.43. The Russell 2000, which tracks small-cap stocks, dropped 4.4 percent to 1,480.75, marking its worst day since 2011. Trading volume in U.S. stocks was also higher than usual on Wall Street.

The yield on the three-year Treasury note surpassed its five-year counterpart on Monday. When a so-called yield curve inversion happens — short-term yields trading above longer-term rates — a recession could follow, though it is often years away after the signal triggers. Still, many traders believe the inversion won't be official until the 2-year yield rises above the 10-year yield, which has not happened yet.

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24 minutes ago, zugzwang said:

Big miss from Toll Brothers yesterday. Evidence that the wheels have come off US housing demand even in California.

https://mobile.reuters.com/article/amp/idUSKBN1O3106

 

Funnily enough,I went to short some US hosuebuilders yesterday after reading Wolf Richter Monday and looking at their charts and seeing a short term opportunity.Toll were down 7% at the open iirc.The dip buyers are out in force I believe.

As i was just saying  we may get a santa rally but looking more asnd more like a Santa dead cat bounce.

 

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