Credit deflation and the reflation cycle to come.

[Noallegiance]

3 hours ago, DurhamBorn said:

Just noise and short term reaction.What Powell said was im going to tighten the US into a recession (they already have).Leads and lags say every extra bit of tightening means more loose later and gold will react upwards once the dust settles.Roadmap for me is gold to $1500 and silver $22/23.

What's the reason(s) for stopping the PM price forecast at these levels?

[Errol]

Gold will be at $10,000 plus eventually. Probably more.

[Noallegiance]

US markets are puking. 

[Lightscribe]

1 hour ago, Errol said:

Gold will be at $10,000 plus eventually. Probably more.

I've always wondered how much gold you have Errol after being on hpc for years and following the gold thread. Do you have a chair made up of gold bars? 

[leonardratso]

3 minutes ago, Sideysid said:

I've always wondered how much gold you have Errol after being on hpc for years and following the gold thread. Do you have a chair made up of gold bars? 

you know, were it not for the colour and weight thats not actually a bad place to hide it, in plain sight, howmany burglars steal chairs? who even looks twice at say a 'wooden' chair.

Plus it can be used daily, just maybe the weight and colour would give it away.

[zugzwang]

12 hours ago, Democorruptcy said:

Kier group down another 11% so far today after losing 7% yesterday. Now 343 with dividend yield showing as over 20% and PE 3%.

Peel Hunt are still mad for them, put out a price target of 900 today! I wonder what they see that nobody else can.

A huge position they'd like to get out of?

[zugzwang]

1 hour ago, Noallegiance said:

US markets are puking. 

Where's the Maestro when you need him?

 

[sancho panza]

On 19/12/2018 at 17:07, DurhamBorn said:

@sancho panza i agree Powell was put in a terrible position.Like you say inflation isnt certain at all in the next cycle yet.That will depend on the scale of the debt deflation,the scale of financial dislocation and the CB action to contain it.I think bonds might go all the way back to 1982 levels,though even if they get over a third of the way we will be looking at 8% rates and mortgages at around 9%.

If we look at profits collapsing in most sectors we see the end of this disinflation.Input costs have moved and caught companies out.Next the weak hands go under.Then the stronger hands increase their prices.That then falls on the consumer.I think in the UK its the welfare budget and housing that will suck up a lot of the pain.Houses will fall so less workers capital is needed to pay for them.For BTL they will mostly be a liability rather than an asset,and thats before you count the hugely leveraged.Welfare will be inflated away probably by 30% in real terms over the cycle.

I like Mishs take.Powell's hand was forced but I think he's showing some gumption to not keel over for Wall St like Yellen,Bernanke,Gspan

 

 

Mike Mish Shedlock @MishGEA

 

 

The Fed is so far behind the curve they are too late.

But the choices are pop the bubble sooner or later.

There is no longer a "don't pop the bubble option"

That said, the sooner the bubble breaks the better.'

 

Also worth reading WOlf's take

https://wolfstreet.com/2018/12/19/stocks-tank-3-after-fed-refuses-to-flip-flop/

The Federal Open Markets Committee (FOMC) voted to raise its target for the federal funds rate by a quarter point to a range between 2.25% and 2.5%. This was the fourth rate hike in 2018, and the ninth baby-step in this cycle that started so tentatively three years ago. It has been the slowest rate-hike cycle in history. The range is still historically low and is barely above the rate of inflation as measured by CPI (2.2%).

But from the clamoring on Wall Street and the White House, you’d think interest rates have been propelled into the stratosphere.

A piece of red meat for the crybabies

Some old language started to show up again: The Fed “will take into account a wide range of information,” including all the usual things plus: “readings on financial and international developments.”

This language is designed to show the crybabies on Wall Street, in the White House, at the IMF, etc., that the Fed is not deaf to the turmoil in the US financial markets, which are curdling, and the upheaval in emerging markets where governments and companies issued dollar-denominated debt while the getting was still good but now have trouble servicing this dollar-debt with their inflation-devalued local currencies.

The QE Unwind continues as planned

The Committee stuck to its plan to unwind QE at a rate of up to $50 billion a month, despite all the clamoring from Wall Street and the White House that don’t want the drunken party to end.

So this is not at all what the Wall Street crybabies, who’d thought wishfully that the Fed had suddenly turned super-dovish, had been dreaming about.

Powell has come under constant and withering attacks from the White House for finally doing what the Fed should have done years ago. In the press conference, he was asked if this political pressure plays a role in the Fed’s decisions. And this is how answered:

“Political considerations have played no role whatsoever in our discussions or decisions about monetary policy,” he said. “We’re always going to be focused on the mission that Congress has given us. We have the tools to carry it out, and we the independence which we think is essential to be able to do our jobs in a non-political way. And we at the Fed are absolutely committed to that mission, and nothing will deter us from doing what we think is the right thing to do.”

We’ll see. But so far, so good.

On 19/12/2018 at 19:19, onlyme said:

Jonathan Davies nailed it in today's podcast on TY - said they would still raise but lower expectations.

He reckons still chance of resumption of the rally, in fact most of podcast was bullish with the above being a trigger if rises tailing off a bit. Lots of comparisons of previous trend change points and lack of strength on govt  bonds.

My view thing is we are in uncharted waters, nothing normal about QE and ZIRP,  it pushed everything up, way into excess again so I don't think comparisons are really that relevant where we a re now, is it all sustainable or not, will everything fall with removal of QE/ZIRP, etc etc.

US markets heavily oversold,so could easily rally from ehre with shorts covering.

On 19/12/2018 at 20:00, zugzwang said:

This new guy at the Fed, Heywood Jablome. Seems to know his own mind. 

Put on your crash helmets.

He does.At the end of the day,he's stuck to his guns.We had a great discussion about Powells selection here and on ToS and he's lived up to my expectations-which were admittedly low,post Yellen and Benny.

His lack of a neo clasical degree in economics means he's nopt a necessailry a stablemate of the 0other two.

 

7 hours ago, reformed nice guy said:

Deutsche Bank hitting new all time lows.

Hoping they either go under or get bailed out massively when the next Euro collapse happens

Shaun Richards had a stat to n ote today

https://notayesmanseconomics.wordpress.com/2018/12/20/did-the-riksbank-of-sweden-just-panic/

oel @RoelD_

 

 

So, Deutsche Bank’s entire market cap is now just €2bn higher than its combined profit for 2006-2007.

9:00 AM - Dec 20, 2018

 

[sancho panza]

5 hours ago, Barnsey said:

Agreed, avoid avoid avoid until the dust settles.

https://www.bbc.co.uk/news/business-46472578

In other news, Nasdaq has entered a bear market, first time since May 2011. 2yr10yr yield curve back below 10. DB now below 7.

byMike Mish Shedlock

7 hrs-edited

 

The US Treasury 5-year yield is now inverted with 3, 2, and even the 1-year treasury yield.

The yield curve flattened across the board following the December 19 FOMC rate hike decision.

Chart Notes

• The December 18 level is from Fred, the St. Lois Fed repository.
• The "Level Today" column is a spot reading at the moment, approximately 1:00 AM central, December 20, 2018.
• The 30-year long bond yield is 2.97% after an extended fake-out trip above 3.0%.

Inversions

1. The 5-year is inverted with the 3-, 2-, and 1-year yield.
2. The 3-year is inverted with the 2- and 1-year yield.
3. The 2-year is inverted with the 1-year yield.

Don't kid yourself.

Recession is coming. This may be all the signal you get.

I don't care what the Fed does or says at this point: It's Too Late to Matter.

Mike "Mish" Shedlock

[dgul]

4 minutes ago, sancho panza said:

I like Mishs take.Powell's hand was forced but I think he's showing some gumption to not keel over for Wall St like Yellen,Bernanke,Gspan

 

 

Mike Mish Shedlock @MishGEA

 

 

The Fed is so far behind the curve they are too late.

But the choices are pop the bubble sooner or later.

There is no longer a "don't pop the bubble option"

That said, the sooner the bubble breaks the better.'

...

I think they think they can steer the economy from here, keeping it level while the 'problem' is sorted.  Now this doesn't make sense -- when you've got a bubble the market can either continue to go up, or go down -- going sideways isn't an option.  Nevertheless, I think they think they can do it.

[Or rather, they might realise they can't, but this way they can show their workings out that they intended for sideways and it unfortunately went wrong]

[TheCountOfNowhere]

7 hours ago, DurhamBorn said:

A recession is a good thing in lots of ways.However this wont be a recession.It will start as a recession,but due to the scale of the leverage turn into something much worse.The policy errors were made long ago,though they are simply part of a long cycle.This great dis-inflation that lasted nearly 40 years convinced people rates were low forever,inflation was dead etc.

My interest is where will the money be made.On a brutal side i dont care if the highly leveraged lose everything.My job is to protect and grow my families capital.

This is the wealth preservation society.

[sancho panza]

10 minutes ago, dgul said:

I think they think they can steer the economy from here, keeping it level while the 'problem' is sorted.  Now this doesn't make sense -- when you've got a bubble the market can either continue to go up, or go down -- going sideways isn't an option.  Nevertheless, I think they think they can do it.

[Or rather, they might realise they can't, but this way they can show their workings out that they intended for sideways and it unfortunately went wrong]

I'm going to be a contrarian here.I think Powell knows exactly what he's doing.Ithink he intends to sort out the real economy not Wall St.

QT and raising the fed funds is being done slowly to try nd minimise the distortions,but I suspect he's well aware of the problems that are coming.

[Thorn]

Ok so... here’s one for the group- just got mortgage approved there and thinking of a ten year fix for a place here near Belfast with 10% overpayment per year- 10% down, with Nationwide. The fixed monthly is only 40% more than our current bloody rent and should be ok to manage.

Aware NW could go bust especially with their BTL side exposure. But also aware that assuming this is The Big One, then credit might not be so available soon and rates will rise. And very very fecked off with the family regularly being evicted for no reason by Selfish Bastard Amateur Landlords. 

If we do it and NW go bust, am I right to expect that whoever gets their loan book has to respect the terms of the original mortgage? 

[sancho panza]

1 minute ago, Thorn said:

Ok so... here’s one for the group- just got mortgage approved there and thinking of a ten year fix for a place here near Belfast with 10% overpayment per year- 10% down, with Nationwide. The fixed monthly is only 40% more than our current bloody rent and should be ok to manage.

Aware NW could go bust especially with their BTL side exposure. But also aware that assuming this is The Big One, then credit might not be so available soon and rates will rise. And very very fecked off with the family regularly being evicted for no reason by Selfish Bastard Amateur Landlords. 

If we do it and NW go bust, am I right to expect that whoever gets their loan book has to respect the terms of the original mortgage? 

Im not a financial adviser and you need to see one.

having said that,the t + cs of most mortgages carry all sorts of clauses eg margin call clauses so I'd read them yourself,post them on here if you want and get the collected brains to work out how you might get shafted in a loan book sell off.

I suspect they'll have to honour the t+cs but I also suspect they'll be plenty of ways of varying the t+cs.

 

I await enlightenment

To add if I were to tkae a mortgage,ten year fix would be my choice.

[Inoperational Bumblebee]

@Thorn, we took a ten year fix when we moved a few months back.

My thoughts were how much lower can they get, and at least you know your outgoings.

If everything is cyclic, I reckon we've had a long time of relatively low inflation compared to historic highs.

[macca]

3 hours ago, Thorn said:

Ok so... here’s one for the group- just got mortgage approved there and thinking of a ten year fix for a place here near Belfast with 10% overpayment per year- 10% down, with Nationwide. The fixed monthly is only 40% more than our current bloody rent and should be ok to manage.

Just done the same thing, 10 year fixed 2.9%

my mortgage just approved  (HSBC) is £940 my rent is £1300 on a 2 bed house.. 

With 3 kids and working our arses off to keep our landlords in a lap of luxury we have had enough!

But like you I wonder if I’m making the correct choice? 

[MrXxx]

8 hours ago, sancho panza said:

Im not a financial adviser and you need to see one.

having said that,the t + cs of most mortgages carry all sorts of clauses eg margin call clauses so I'd read them yourself,post them on here if you want and get the collected brains to work out how you might get shafted in a loan book sell off.

I suspect they'll have to honour the t+cs but I also suspect they'll be plenty of ways of varying the t+cs.

 

I await enlightenment

To add if I were to tkae a mortgage,ten year fix would be my choice.

I would assume that they can `call in` the loan at any time they choose as long as they give sufficient notice...didn't the rules/T&C change after they all got stung with their x%  below base rates offers?

[Thorn]

6 hours ago, macca said:

Just done the same thing, 10 year fixed 2.9%

my mortgage just approved  (HSBC) is £940 my rent is £1300 on a 2 bed house.. 

With 3 kids and working our arses off to keep our landlords in a lap of luxury we have had enough!

But like you I wonder if I’m making the correct choice? 

There’s no way to know I think Mecca. On the one hand property prices could go down 50%or more here again. But on the other hand, credit might dry up, interest rates have to rise surely, and being regularly evicted and having to panic search for limited rentals cannot be measured in money costs but it’s a bastard thing to happen the family every time. 

I don’t see JC or anybody putting that right anytime soon. I think it’s get a place now and try and control things that way or leave it and more evictions. It’s a fecked up way to look at things but might be the best course right now.

In the Republic, failed banks have “Sold their loan books” ie passed on the mortgages to vulture Capital funds. I will do some googling to see what happens there exactly. 

[Barnsey]

I suppose a significant factor is where you buy, wouldn't dream of buying in the SE for a quite a while yet, if nothing happens then so be it, don't want such a disproportionate level of debt hanging over.

My 2 target areas (Midlands and NW) have seen prices go up around 20-25% since bottoming out post crisis, RPI up about 12% since (I know I know, dodgy comparison). Only problem is that both areas are now red hot as value to be found by priced out struggling buyers, despite everything else turning down and Brexit (which outside London seems to have next to no effect on the property market).

We're not far off recession (year tops), when it hits I'm thinking I might see 15-20% off in my target areas, so back to 2012 values, and lending to remain accomodative in the aftermath, much of it already planned for based on a disastrous Brexit outcome, most big banks are in a better place than the last downturn, I'd be wary of the smaller players though.

As for Nationwide, it actually came out top in the latest Brexit worst case scenario stress test by BOE (pinch of salt), house prices down by 1/3. Lloyds and Barclays worst (my current 2 banks).

In other matters, was handed this on the way to work:

Turns out viavan is backed by Mercedes Benz, the Germans are well ahead of the curve, accepting of their fate and the need to rapidly adapt.

[Barnsey]

*idiotic question alert*

Never bought stock ex-divi before, just to clarify, it means not entitled to next dividend, but you DO get every dividend thereafter?

[eek]

5 minutes ago, Barnsey said:

*idiotic question alert*

Never bought stock ex-divi before, just to clarify, it means not entitled to next dividend, but you DO get every dividend thereafter?

Yes - it means the previous dividend is going to the shareholder you bought from, but all subsequent ones are yours...

[A_P]

10 hours ago, Thorn said:

Ok so... here’s one for the group- just got mortgage approved there and thinking of a ten year fix for a place here near Belfast with 10% overpayment per year- 10% down, with Nationwide. The fixed monthly is only 40% more than our current bloody rent and should be ok to manage.

Aware NW could go bust especially with their BTL side exposure. But also aware that assuming this is The Big One, then credit might not be so available soon and rates will rise. And very very fecked off with the family regularly being evicted for no reason by Selfish Bastard Amateur Landlords. 

If we do it and NW go bust, am I right to expect that whoever gets their loan book has to respect the terms of the original mortgage? 

I'm looking to do exactly the same, 10 year fix just outside Belfast. Have you had an offer accepted? If so how did the negotitions go and what discount if any did you get if you dont mind me asking?

We are currently forumlating and getting ready to submit an offer but I don't think it will be very well recieved . However the house(s) we are interested in have been on the market for a long time now and sellers seem a little distressed/panicy that they've already had to reduce and still not getting many bites

[Ash4781b]

https://www.theguardian.com/business/2018/dec/21/uk-car-manufacturing-output-falls-by-a-fifth-as-demand-slumps

“UK car manufacturing output falls by a fifth as demand slumps

Production declined by 19.6% in November, which is biggest year-on-year drop since 2008”

Grim

[Band]

7 hours ago, macca said:

Just done the same thing, 10 year fixed 2.9%

my mortgage just approved  (HSBC) is £940 my rent is £1300 on a 2 bed house.. 

With 3 kids and working our arses off to keep our landlords in a lap of luxury we have had enough!

But like you I wonder if I’m making the correct choice? 

Try and hold off a little longer ... The biggest danger of not having a crash is carnage printing amd going for nirp ... But i cant see how he can do that without the USA doing it first.

 

[Democorruptcy]

How do we make money out of the Gatwick drone? Chaos is opportunity.

This attack might not be the last. Go short a drone maker, drone supplier, airline, holiday firm etc.? Go long a tech firm to combat them.