Credit deflation and the reflation cycle to come.

[Barnsey]

44 minutes ago, sancho panza said:

It depends on the make up of the market concerned.FTSE 100 is far more exposed to world commodity prices than UK retail.

UK is going into a hosuing/FRB/leveraged loan recession(debt deflation),retial is Fubar as it grew way beyond where it should have done.

Lot of EE's will head home,probably never to pay back their student loans.

What's a 'gammon'?Sounds intruging

 

Edit to add:thick?

Edit 2:Sorry to do politicvs but::::Brexit was about rising rents and declining real wages imho.I tried telling my remainer family members but they're too busy calling people bigots,racists and facists.(I'm second gen,Mrs P first gen).They honestly believe(because they're highly educated,that everyone watched the TV debates and was taken in by the £350mn bus).They also believe property goes only one way.

As wages decline some EE's will head home I suspect.

https://www.google.com/amp/s/www.urbandictionary.com/define.php%3fterm=Gammon&amp=true

As for your previous post Sancho, re: big wave - I see either a colossal melt up into early 2019 and then a deflationary bust OR we continue down from here, Fed driven bounce next summer then continue down over another year or 2. So basically 2000 or 2008 redux. EDIT: Tomorrow Fed FOMC meeting HUGELY important!

Re: cars - just got myself a basic pre-reg VW Up, saved almost 1/3 off new, liberating to have something simple again. What's been fascinating is the critisism from the PCP crowd, "oh that's a small car", "what happened". Likewise everyone trying to get around me on the roads despite doing well to keep up. It seems cars really do define the owners these days, hilarious!

[kibuc]

Infrastrata quietly going vertical again, great call by @Solzhenitsyn

[Barnsey]

[Barnsey]

22 hours ago, kibuc said:

Stock market is NOT the economy, though, no matter how hard that narrative is pushed.

Not so sure Kibuc, depends on locale, in U.S. people have been spending their mad gains in real economy, sentiment also cannot be underestimated, surely not overly simplistic to point out media obsession (heck, even the President) on stock market, as it turns down sharply do people still go out and spend as normal or start reigning things in?

[janch]

1 hour ago, Barnsey said:

Re: cars - just got myself a basic pre-reg VW Up, saved almost 1/3 off new, liberating to have something simple again. What's been fascinating is the critisism from the PCP crowd, "oh that's a small car", "what happened". Likewise everyone trying to get around me on the roads despite doing well to keep up. It seems cars really do define the owners these days, hilarious!

I just donated my 1994 Vauxhall Corsa to Oxfam and I think it got crushed even though it still had some life left in it.  It was so simple it didn't even have central locking just a key.  If people laughed I told them it was a design classic.  I'd had it from new and was a bit sad when it went to he honest and it never let me down in all the time I had it. So now it's public transport, taxi or on foot for me as I wasn't using a car enough to justify the cost of running it.

[Barnsey]

Just one more thing regarding tomorrow's Fed rate hike, interestingly the S&P 500 is recovering today, looking at the implied probabilities as of today, tomorrow's chances stand at 67.5%.

They haven't hiked when prob <70% since mid 90's!

[zugzwang]

3 hours ago, sancho panza said:

I always enjoyed your commentary/insights on ToS especially from the point of view of referencing Neo Classical economics and it's complete/utter failure to model or solve any of our problems.

Thanks, Sancho. The economists and central bankers imagine they are doing science but they're not. My perspective is that this grotesque conceit can be exploited for fun and profit.

Case in point: At the beginning of the year I thought the IMF had wildly exaggerated the strength of the global economy and that the softening London housing market would leave the UK sucking wind no matter what the outcome of the Brexit negotiations. So, I sold off most of my equity picks (bar a handful of divi payers) with the FTSE circa 7600. Here we are six months later and the FTSE's 900 points lower, US markets are 20% off their highs and there are signs of acute economic distress everywhere.

[sancho panza]

3 hours ago, Barnsey said:

Not so sure Kibuc, depends on locale, in U.S. people have been spending their mad gains in real economy, sentiment also cannot be underestimated, surely not overly simplistic to point out media obsession (heck, even the President) on stock market, as it turns down sharply do people still go out and spend as normal or start reigning things in?

A lot more yanks own stocks.In the UK,most own but only through pensions funds

[sancho panza]

9 minutes ago, zugzwang said:

Thanks, Sancho. The economists and central bankers imagine they are doing science but they're not. My perspective is that this grotesque conceit can be exploited for fun and profit.

Case in point: At the beginning of the year I thought the IMF had wildly exaggerated the strength of the global economy and that the softening London housing market would leave the UK sucking wind no matter what the outcome of the Brexit negotiations. So, I sold off most of my equity picks (bar a handful of divi payers) with the FTSE circa 7600. Here we are six months later and the FTSE's 900 points lower, US markets are 20% off their highs and there are signs of acute economic distress everywhere.

What appals me personally,amongst many is the compelte failure of QE/Banking bailouts/HTB1+2,FLS/Zirp etc etc to achieve anything but an even bigger asset price bubble.

The whole basis of their theroies ie people act independtly and rationally, and markets tend to eqiuilibrium appear to me to be disproven by empirical evidence and yet from amongst the ivory towers we pick these loons to screw our economies

I welcome Powell's arrival.I may not agree with what he does but at least he doesn't conform to the same mistake ridden dogma as the main CB overlords

[sancho panza]

4 hours ago, Barnsey said:

https://www.google.com/amp/s/www.urbandictionary.com/define.php%3fterm=Gammon&amp;amp=true

As for your previous post Sancho, re: big wave - I see either a colossal melt up into early 2019 and then a deflationary bust OR we continue down from here, Fed driven bounce next summer then continue down over another year or 2. So basically 2000 or 2008 redux. EDIT: Tomorrow Fed FOMC meeting HUGELY important!

 

I think we'll see little rallies but the trends now down.I can't how we'll melt up without AMZN hitting 2000 again.

Having said that I'm toying with going long on that.Seems oversold.

4 hours ago, Castlevania said:

A derogatory term used by the SJW brigade to describe old white middle class men. 

Thanks CV,I had no idea.

[MrXxx]

5 hours ago, Barnsey said:

https://www.google.com/amp/s/www.urbandictionary.com/define.php%3fterm=Gammon&amp;amp=true

As for your previous post Sancho, re: big wave - I see either a colossal melt up into early 2019 and then a deflationary bust OR we continue down from here, Fed driven bounce next summer then continue down over another year or 2. So basically 2000 or 2008 redux. EDIT: Tomorrow Fed FOMC meeting HUGELY important!

Re: cars - just got myself a basic pre-reg VW Up, saved almost 1/3 off new, liberating to have something simple again. What's been fascinating is the critisism from the PCP crowd, "oh that's a small car", "what happened". Likewise everyone trying to get around me on the roads despite doing well to keep up. It seems cars really do define the owners these days, hilarious!

You know what they say Barnsey "Big car, small willie!":-)

[spygirl]

8 hours ago, Barnsey said:

Romanian taxi driver just telling me about how he was working for Carillion on £22 p/h, got a mortgage and 1 yr old kid, wife earning decent money as a teacher, really doesn't want to be driving for 30k a year blah blah blah.

Don't want to come across as "gammon" but you can see why so many voted the way they did. Even the Poles, Romanians and Lithuanians have quit my other half's workplace as £25k not enough???

This recession is going to hit them hard I'm afraid, and people think things are heated now, wait until the unemployment rate rockets...

Theyll be hit hard as they are not earning enough to remain in the uk.

The driver and other face either staying uk and working themsflves into tge gtound. Or going hone whikst kids are young enough to adaot.

The flood if EE was why brexit happened.

Whoever gave them a mortgage needs their head examining.

[spygirl]

2 hours ago, zugzwang said:

Thanks, Sancho. The economists and central bankers imagine they are doing science but they're not. My perspective is that this grotesque conceit can be exploited for fun and profit.

Case in point: At the beginning of the year I thought the IMF had wildly exaggerated the strength of the global economy and that the softening London housing market would leave the UK sucking wind no matter what the outcome of the Brexit negotiations. So, I sold off most of my equity picks (bar a handful of divi payers) with the FTSE circa 7600. Here we are six months later and the FTSE's 900 points lower, US markets are 20% off their highs and there are signs of acute economic distress everywhere.

A good central banker is a good trader.

Having the useless turds tgat make up macro enonmics is a one way to 2008.

Economic stats are a good thing.

Macro economists are useless.

[AWW]

11 hours ago, kibuc said:

In IT, the labour market seems hotter than ever.

This. London banking sector are paying higher day rates than ever before. There are a few factors at play; lots of regulatory change happening, Brexit on the horizon, GBP weakness (project costs tend to be EUR or USD based) and skilled EE going home to take up work that has been outsourced to Poland, Latvia, Bulgaria.

[Barnsey]

Happy Fed hike day everyone 

[Majorpain]

43 minutes ago, Barnsey said:

Happy Fed hike day everyone 

Time for a "will they raise" Poll?

Im going for no raise - sticking at 2-2.25%.  Oil price declining gives them a fig leaf of inflation pressures are reducing, and not the world economy is coming apart at the seams!

[Barnsey]

21 minutes ago, Majorpain said:

Time for a "will they raise" Poll?

Im going for no raise - sticking at 2-2.25%.  Oil price declining gives them a fig leaf of inflation pressures are reducing, and not the world economy is coming apart at the seams!

Consensus still expecting a raise but more dovish outlook, would be quite something to see a pause today but not impossible of course.

[Castlevania]

Dovish hike. BoE will be a hawkish hold.

[Thorn]

Dovish hike to placate the Big Pension Funds like Calpers which seem to be going bust. 

[DurhamBorn]

Powell is hellbent to "normalize" rates but is not paying attention to early signals that suggest the Fed has already gone to far. Look at housing and cars. They are rolling over. Look at lumber prices. Powell is a lawyer and does not understand leads & lags & seems to think he's smarter than the market. 

My Macs indicator is flashing in the range for the first time since 2007 for December and is very good at calling recession turns.

Gold has breakout set ups now in almost all major currencies.This last happened around 2005 just before a very nice run up.The set up is starting to look very nice.We also have sentiment on the floor in the PM and miner space.That is good.Nobody trusts the sector will ever go higher.

The Fed has already locked in recession and Powell might give lip service to a pause in tightening,but its likely he will keep reducing the balance sheet or/and tighten until the worst bear market since the war is unleashed in the US and the fact we are in an end of 40 year cycle debt deflation shows itself.

The UK has already seen huge falls in a very large percentage of stocks.I have almost all my ladders in place now to be buying the portfolio i want for the next cycle.An inflationary one with bells on.Sectors that can follow their pricing higher with the inflation,not lag it.Sectors that are hated now.Sectors that will see shift in consumer habits as prices increase and cut out lots of things like car ownership around the margins.Bond holders will be bending over and taking it in the next cycle.Long term debt will be inflated away.Any companies who havent got their balance sheets in order (or have not invested and secured at very low rates) will not be able to re-finance below 5%,and soon 10%.Consumers who are over leveraged have a few years to pay down debts before rates begin a long shocking increase.

These turns and times need a focus on whats ahead.The next cycle will deliver big gains in lots of inflation loving sectors.Picking bottoms is not the order of the day.Laddering in to areas already beaten down is the best solution.For myself il be very happy if my portfolio ends up fully invested and shows -15%/20% at any bottom.If its to be better than that it will depend on if and how high the PM miners run.

My road maps are pretty much where they were with a few slight changes.

Gold to $1500,

Silver $22/23

Oil down to $20,maybe even $15 

Copper down to $1.20

Dollar Index 86 (maybe 75) then a turn

GDX $38 area.GDXJ $63+ area.

I think the Fed has already done the damage,but i also think this Fed meeting is very important indeed.

The UK needs to get out of the EU as quickly as it can.Its ironic,but sterling falling so hard already has already priced in a lot of of the damage and will shield some of the affects.Housing should be the big loser in the UK.

 

[kibuc]

I think today we'll see the last IR rise for quite some time.

Gold is creeping up. I've re-considered and changed my 100% Wesdome allocation to a 20/10/10/10 spread between WDO/NGD/HMY/INFA. I still see great things ahead of WDO and maintain it as my largest holding, but as I mentioned before in a gold bull it's larger & higher-AISC companies that should overperform, hence HMY. NGD is there so I don't bang my head against my desk again as I did with Tahoe takeover. Both are short-to-medium-term plays with an intention of rolling them back into WDO at some point in 2019. Infa is a lottery bet, probably 6 month too late but whatev, at least it provides proper diversification out of gold

[zugzwang]

20 hours ago, spygirl said:

A good central banker is a good trader.

Having the useless turds tgat make up macro enonmics is a one way to 2008.

Economic stats are a good thing.

Macro economists are useless.

No skin in the game. Rates up, rates down, economy on its knees or in a runaway bubble Carney, Broadbent & Haldane get to back up the truck.

Mervo the Clown got an oil painting of himself, a Knighthood and a taxpayer-funded £6.3 million pension when he left the Bank in 2011.

[sancho panza]

3 hours ago, DurhamBorn said:

Powell is hellbent to "normalize" rates but is not paying attention to early signals that suggest the Fed has already gone to far. Look at housing and cars. They are rolling over. Look at lumber prices. Powell is a lawyer and does not understand leads & lags & seems to think he's smarter than the market. 

My Macs indicator is flashing in the range for the first time since 2007 for December and is very good at calling recession turns.

Gold has breakout set ups now in almost all major currencies.This last happened around 2005 just before a very nice run up.The set up is starting to look very nice.We also have sentiment on the floor in the PM and miner space.That is good.Nobody trusts the sector will ever go higher.

The Fed has already locked in recession and Powell might give lip service to a pause in tightening,but its likely he will keep reducing the balance sheet or/and tighten until the worst bear market since the war is unleashed in the US and the fact we are in an end of 40 year cycle debt deflation shows itself.

The UK has already seen huge falls in a very large percentage of stocks.I have almost all my ladders in place now to be buying the portfolio i want for the next cycle.An inflationary one with bells on.Sectors that can follow their pricing higher with the inflation,not lag it.Sectors that are hated now.Sectors that will see shift in consumer habits as prices increase and cut out lots of things like car ownership around the margins.Bond holders will be bending over and taking it in the next cycle.Long term debt will be inflated away.Any companies who havent got their balance sheets in order (or have not invested and secured at very low rates) will not be able to re-finance below 5%,and soon 10%.Consumers who are over leveraged have a few years to pay down debts before rates begin a long shocking increase.

These turns and times need a focus on whats ahead.The next cycle will deliver big gains in lots of inflation loving sectors.Picking bottoms is not the order of the day.Laddering in to areas already beaten down is the best solution.For myself il be very happy if my portfolio ends up fully invested and shows -15%/20% at any bottom.If its to be better than that it will depend on if and how high the PM miners run.

My road maps are pretty much where they were with a few slight changes.

Gold to $1500,

Silver $22/23

Oil down to $20,maybe even $15 

Copper down to $1.20

Dollar Index 86 (maybe 75) then a turn

GDX $38 area.GDXJ $63+ area.

I think the Fed has already done the damage,but i also think this Fed meeting is very important indeed.

The UK needs to get out of the EU as quickly as it can.Its ironic,but sterling falling so hard already has already priced in a lot of of the damage and will shield some of the affects.Housing should be the big loser in the UK.

 

Dare I defend Powell,but there was little he could do with the dog poo sandwich the previous incumbents left him-if it looks like a dog poo sandwich and smells liek a dog poo sandwich,it's a dog poo sandwich.

 

A debt deflation is baked in.Whether we get price inflation running alongside and the scale of said inflation is the issue for me.

I've highlighed lots in your post because I agree with a lot of it.But the bit underlined is a succinct  approximation of whre you don't want to be in the next cycle ie holding dirt low fixed rate bonds escpecially those running for ten years plus.

2 minutes ago, zugzwang said:

No skin in the game. Rates up, rates down, economy on its knees or in a runaway bubble Carney, Broadbent & Haldane get to back up the truck.

Mervo the Clown got an oil painting of himself, a Knighthood and a taxpayer-funded £6.3 million pension when he left the Bank in 2011.

Bit harsh on clowns.

[spygirl]

3 hours ago, DurhamBorn said:

Powell is hellbent to "normalize" rates but is not paying attention to early signals that suggest the Fed has already gone to far. Look at housing and cars. They are rolling over. Look at lumber prices. Powell is a lawyer and does not understand leads & lags & seems to think he's smarter than the market. 

My Macs indicator is flashing in the range for the first time since 2007 for December and is very good at calling recession turns.

Gold has breakout set ups now in almost all major currencies.This last happened around 2005 just before a very nice run up.The set up is starting to look very nice.We also have sentiment on the floor in the PM and miner space.That is good.Nobody trusts the sector will ever go higher.

The Fed has already locked in recession and Powell might give lip service to a pause in tightening,but its likely he will keep reducing the balance sheet or/and tighten until the worst bear market since the war is unleashed in the US and the fact we are in an end of 40 year cycle debt deflation shows itself.

The UK has already seen huge falls in a very large percentage of stocks.I have almost all my ladders in place now to be buying the portfolio i want for the next cycle.An inflationary one with bells on.Sectors that can follow their pricing higher with the inflation,not lag it.Sectors that are hated now.Sectors that will see shift in consumer habits as prices increase and cut out lots of things like car ownership around the margins.Bond holders will be bending over and taking it in the next cycle.Long term debt will be inflated away.Any companies who havent got their balance sheets in order (or have not invested and secured at very low rates) will not be able to re-finance below 5%,and soon 10%.Consumers who are over leveraged have a few years to pay down debts before rates begin a long shocking increase.

These turns and times need a focus on whats ahead.The next cycle will deliver big gains in lots of inflation loving sectors.Picking bottoms is not the order of the day.Laddering in to areas already beaten down is the best solution.For myself il be very happy if my portfolio ends up fully invested and shows -15%/20% at any bottom.If its to be better than that it will depend on if and how high the PM miners run.

My road maps are pretty much where they were with a few slight changes.

Gold to $1500,

Silver $22/23

Oil down to $20,maybe even $15 

Copper down to $1.20

Dollar Index 86 (maybe 75) then a turn

GDX $38 area.GDXJ $63+ area.

I think the Fed has already done the damage,but i also think this Fed meeting is very important indeed.

The UK needs to get out of the EU as quickly as it can.Its ironic,but sterling falling so hard already has already priced in a lot of of the damage and will shield some of the affects.Housing should be the big loser in the UK.

 

I read it differently.

The FED is made up of a number of regional chairmen.

In normally times, the Fed operates more like a democracy, with the NY Fed chairman having a lead, wall street n all.

There have been two abnormal times.

One when Volker came it to beat down inflation. By rising rates he was going against macro-economic 'science' Volker was operatign on his gut/good sense.

The other with Greenspan in charge, a dorky twat who enjoyed his power. The fallout from Greenspan 2008, followed by Bernake and Yellan, were a couple of clueless fucks trying t mop up afterwards.

Powells is charge as macro eocnomics has been entirely discredited. There are a number of Fed charman pushing for higher rates - they see the how fast the economy is coming back, and want to lean into it. I see Powels roles a general counsel, talking to Fed charimen and going for a middle course.

I guess there'l be one more IR rise - just to be seen to ignore Trump.

Then they'll sit on their hands for a good 6 months to see how it goes.

 

 

 

 

[onlyme]

Never mind the Fed, FedEx might the the one to take note of.

Down over 9% at the moment.

 

https://www.zerohedge.com/news/2018-12-19/jarring-fedex-outlook-cut-suggests-severe-global-recession

FedEx shares are plunging after what Morgan Stanley called a "jarring" cut to its annual forecasts, suggesting global growth is slowing far more than most expect - in fact, the bank hinted at the possibility of a "severe recession" unfolding - and prompting expectations of an "uber-dovish hike" by the Fed.