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Credit deflation and the reflation cycle to come.


DurhamBorn

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On 27/12/2018 at 14:58, Barnsey said:

This chart from the always excellent Sven Henrich (@northmantrader on Twitter), says it all really...

IMG_20181227_145623.thumb.jpg.5dedd4791ad1d688fdc68571fb0c1a15.jpg

Loads more of same thing today https://www.zerohedge.com/news/2019-01-02/shattered-trends

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17 minutes ago, reformed nice guy said:

https://www.apple.com/newsroom/2019/01/letter-from-tim-cook-to-apple-investors/

Apple are having a wobble, down about 7% after hours and hitting lows not seen for a few years.

Interestingly, they blame Chinese consumer slow down...

image.jpeg.a554310eb4fb288c9aa64edb6d0aadd6.jpeg

Shits getting real, google wont update the chart till tommorow so it actually is even worse than it looks.

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8 hours ago, reformed nice guy said:

https://www.apple.com/newsroom/2019/01/letter-from-tim-cook-to-apple-investors/

Apple are having a wobble, down about 7% after hours and hitting lows not seen for a few years.

Interestingly, they blame Chinese consumer slow down...

I heard that this morning too. Given the "Chinese consumer slowdown", and the recent PMI numbers, would it be fair to conclude (official stats notwithstanding) that China is now in recession?

I seem to remember, years ago, people looking at electricity usage as a less manipulable figure, and someone recently posted a Paul Hodges article on chemical usage (but that wasn't specific to China).

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Apple computers. Yesterday's technology at last year's prices.

Clearly, the boys from Cupertino need a new overpriced gadget to pull in the masses and get the 'creatives' waxing locquacious about our shared utopian future.

 

Bv3_IEsIYAAyfs8.jpg:large&f=1

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The Apple news caused a big flash crash for the Aussie Dollar this morning, it dropped fron 70USc to 66.5USc in 7 mins. Very unusual.

Its all good tho, the battler is back to 69c now...

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1 hour ago, Sugarlips said:

The Apple news caused a big flash crash for the Aussie Dollar this morning, it dropped fron 70USc to 66.5USc in 7 mins. Very unusual.

Its all good tho, the battler is back to 69c now...

I was going to buy in to swap some currency into AUD but the buggers didn't move the rates for us plebs quick enough...

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Hi all

Have lurked for a wee while here, having come from the 'other' site. Find things much more reasonable and realistic here. My position is mortgage free with 20k savings. Now in early forties have one other small flat mortgage free too. It's long term for my son. Rental income is small. 

I am now looking to make small investments but more in silver. Physical that I can hold. Can see some modest gains in silver recently. Not sure to buy now or see if it goes lower. Any other areas of investment or a punt anyone would recommend a chance with?

Cheers

 

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1 minute ago, DurhamBorn said:

Lovely seeing the DOW smashed down again nearly 3% and GDXJ +3.7% .Dollar back down near 96 now as well.

Panic buying govt bond funds. Back to ZIRP?

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1 minute ago, zugzwang said:

Panic buying govt bond funds. Back to ZIRP?

Not yet.The Fed will tighten until a debt deflation hits and then their policy u turn will be too slow to stop whats upon us.

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1 minute ago, zugzwang said:

Panic buying govt bond funds. Back to ZIRP?

I am wondering what are they going to thrown this time to keep this false/dysfunctional market ... Super QE Phase XI?  Adamantium platted ZIRP? Any other crazy monetary experiment from the so called "people from academia"?

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2 minutes ago, DurhamBorn said:

Not yet.The Fed will tighten until a debt deflation hits and then their policy u turn will be too slow to stop whats upon us.

I hope so DB - your knowledge and source of info are much greater than mine :)
(well, mine are nonexistent so... xD)

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sancho panza
26 minutes ago, DurhamBorn said:

Lovely seeing the DOW smashed down again nearly 3% and GDXJ +3.7% .Dollar back down near 96 now as well.

 it's a pleasant change from the 'it only gos up' mode.S&P 500 only back to mid 2017....lots further south to go.

Lots further north for the gold miners.Have to say I'm running ye olde slide rule over some more that will help me diversify a little more-Alamos,IAMGold,Newmont,PAAS,possibly a little average down action in New Gold.

Personally -and Im happy to be taught here-but it seems significant to me that these deep red days are seeing the yellow stuff either glimmer or shine.Compared to 08 when these shares were held broadly,they're now beaten up and unpopular.I'm beginnign to think we may have seen the GDX lows for the next five years.

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sancho panza

This full psot is going over to the Oz thread but the key take home is that you don't need high rates to pop a bubble and create carnage

https://wolfstreet.com/2019/01/02/housing-bust-in-sydney-melbourne-gains-momentum/

The increasingly steep price declines in Sydney and Melbourne can be blamed on the confluence of factors:

Prices are too darn high: After years of steamy price gains, unaffordability for many potential buyers who’d actually live in the homes they’d buy reached crisis levels.

The construction boom is dousing the market with record new supply.

Exposure of the banks’ mortgage shenanigans, first in the media and eventually by the Royal Commission investigation, is putting a damper on said shenanigans, thus crimping mortgage lending.

Generally tighter credit availability, according to CoreLogic’s report:

Interest-only lending has tracked well below the recently discarded 30% limit, credit growth for investment purposes is virtually flat-lining and owner occupier credit growth slowed sharply over the second half of the year. Lenders are generally seeking out larger deposits from borrowers and have become much more forensic in detailing borrower expense profiles and servicing capacity.

“Lenders are understandably risk averse against a backdrop of falling dwelling values, high household debt, rising supply and heightened regulatory focus following the banking royal commission,” said CoreLogic’s Lawless.

Consumer sentiment has soured on real estate, not surprisingly, given the well-publicized drop in prices, after the years of you-cannot-lose-money-in-real-estate hype. CoreLogic cites the Westpac/Melbourne Institute Consumer Sentiment survey which showed that measures of housing sentiment were “pessimistic.”

Chinese investors got cold feet, after seeing prices drop. CoreLogic explained that “the substantial reduction in foreign buyer activity” and “a reduction in overseas migration” were among the factors “dragging market conditions down even further over the year.” And this in a housing market that has become desperately dependent on both – as many locals can no longer afford to buy at these prices.

Interestingly, all this is occurring as mortgage interest rates remain near historic lows, and as the policy rate (cash rate) of the Reserve Bank of Australia remains at its all-time low of 1.5%, where it has been since the last rate cut in August 2016. In other words, it’s not the central bank that has pricked this bubble.

In Seattle, house prices dropped 4.4% in four months, the biggest four-month drop since Housing Bust 1, according to the Case-Shiller Home Price Index. Prices also deflated in the San Francisco Bay Area, San Diego, Denver, and Portland. ReadThe Most Splendid Housing Bubbles in America Decline  

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2 hours ago, M.C. UK said:

I am wondering what are they going to thrown this time to keep this false/dysfunctional market ... Super QE Phase XI?  Adamantium platted ZIRP? Any other crazy monetary experiment from the so called "people from academia"?

The Fed?.My liquidity road map says the damage they have already done and the lag says they will need to print $12+ trillion to turn the biggest deflationary collapse since the war.Of course that will cause an inflation cycle like the world hasnt seen since the 70s,or even ever.We are talking about a free falling financial system so the liquidity they introduce wont scare treasuries at first.There will be a window.Gold will turn first,my road map is up to $1500 down to $700 (or even $500 for a very small window) then up to $10,000,silver up to $22/23 down to $8 (maybe even $5) then up to $250,maybe $300.Highly indebted companies with strong cash flow will have around 6 years to eat into those debts before rates go over 10%.Companies who have borrowed and can increase prices with inflation with debts locked at low rates will do well (their bond holders creamed).You dont want to be re-financing billions in 2025 though.

Thats the good part,after that cycle we will get a global depression on a scale never before seen.We could be at $400 trillion debt and $2 quadrillion derivatives and the full unwind of that will probably cause world war,collapse of western society etc,or at the least all western social systems,pensions,currency and access to capital markets.Pretty much all wealth will be destroyed.My friend keeps telling me we will consider it once we get into the reflation cycle,but i keep telling him you might be dead by then (hes nearly 80) id like a loose roadmap now :ph34r:

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Solzhenitsyn
13 hours ago, Long-game said:

Hi all

Have lurked for a wee while here, having come from the 'other' site. Find things much more reasonable and realistic here. My position is mortgage free with 20k savings. Now in early forties have one other small flat mortgage free too. It's long term for my son. Rental income is small. 

I am now looking to make small investments but more in silver. Physical that I can hold. Can see some modest gains in silver recently. Not sure to buy now or see if it goes lower. Any other areas of investment or a punt anyone would recommend a chance with?

Cheers

 

Here’s a tip. Sell your BTL property.

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Nationwide: House price growth slows to just 0.5% in 2018, down from 2.6% in 2017.

• Annual house price growth slows to its weakest pace since February 2013

• Prices fell 0.7% in the month of December, after taking account of seasonal factors

• Outer Metropolitan and London regions both recorded small house price declines in 2018

https://www.nationwide.co.uk/-/media/MainSite/documents/about/house-price-index/2018/Dec_Q4_2018.pdf

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Talking Monkey
7 hours ago, DurhamBorn said:

The Fed?.My liquidity road map says the damage they have already done and the lag says they will need to print $12+ trillion to turn the biggest deflationary collapse since the war.Of course that will cause an inflation cycle like the world hasnt seen since the 70s,or even ever.We are talking about a free falling financial system so the liquidity they introduce wont scare treasuries at first.There will be a window.Gold will turn first,my road map is up to $1500 down to $700 (or even $500 for a very small window) then up to $10,000,silver up to $22/23 down to $8 (maybe even $5) then up to $250,maybe $300.Highly indebted companies with strong cash flow will have around 6 years to eat into those debts before rates go over 10%.Companies who have borrowed and can increase prices with inflation with debts locked at low rates will do well (their bond holders creamed).You dont want to be re-financing billions in 2025 though.

Thats the good part,after that cycle we will get a global depression on a scale never before seen.We could be at $400 trillion debt and $2 quadrillion derivatives and the full unwind of that will probably cause world war,collapse of western society etc,or at the least all western social systems,pensions,currency and access to capital markets.Pretty much all wealth will be destroyed.My friend keeps telling me we will consider it once we get into the reflation cycle,but i keep telling him you might be dead by then (hes nearly 80) id like a loose roadmap now :ph34r:

DB if western society collapses what happens to China, India and other EMs, would they get just as battered

What would be interesting is how to protect wealth/income, I guess a portfolio of high dividend shares wouldn't be it if everything collapses

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15 minutes ago, BearyBear said:

Nationwide: House price growth slows to just 0.5% in 2018, down from 2.6% in 2017.

• Annual house price growth slows to its weakest pace since February 2013

• Prices fell 0.7% in the month of December, after taking account of seasonal factors

• Outer Metropolitan and London regions both recorded small house price declines in 2018

https://www.nationwide.co.uk/-/media/MainSite/documents/about/house-price-index/2018/Dec_Q4_2018.pdf

NW is a funny one.

NW has away been mainly a London/Se lender.

Now its the last idiot ;large lender standing.

Its book is made up of IO BTL and London/Se HTB.

NW *is* the London/SE market now.  No ther lenders really that active.

Here's how itll pan out -

NW stops lending, London/Se prices fall, which causes NW to cut back lending more, which causes London/Se prices to fall.

 

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9 hours ago, sancho panza said:

This full psot is going over to the Oz thread but the key take home is that you don't need high rates to pop a bubble and create carnage

https://wolfstreet.com/2019/01/02/housing-bust-in-sydney-melbourne-gains-momentum/

The increasingly steep price declines in Sydney and Melbourne can be blamed on the confluence of factors:

Prices are too darn high: After years of steamy price gains, unaffordability for many potential buyers who’d actually live in the homes they’d buy reached crisis levels.

The construction boom is dousing the market with record new supply.

Exposure of the banks’ mortgage shenanigans, first in the media and eventually by the Royal Commission investigation, is putting a damper on said shenanigans, thus crimping mortgage lending.

Generally tighter credit availability, according to CoreLogic’s report:

Interest-only lending has tracked well below the recently discarded 30% limit, credit growth for investment purposes is virtually flat-lining and owner occupier credit growth slowed sharply over the second half of the year. Lenders are generally seeking out larger deposits from borrowers and have become much more forensic in detailing borrower expense profiles and servicing capacity.

“Lenders are understandably risk averse against a backdrop of falling dwelling values, high household debt, rising supply and heightened regulatory focus following the banking royal commission,” said CoreLogic’s Lawless.

Consumer sentiment has soured on real estate, not surprisingly, given the well-publicized drop in prices, after the years of you-cannot-lose-money-in-real-estate hype. CoreLogic cites the Westpac/Melbourne Institute Consumer Sentiment survey which showed that measures of housing sentiment were “pessimistic.”

Chinese investors got cold feet, after seeing prices drop. CoreLogic explained that “the substantial reduction in foreign buyer activity” and “a reduction in overseas migration” were among the factors “dragging market conditions down even further over the year.” And this in a housing market that has become desperately dependent on both – as many locals can no longer afford to buy at these prices.

Interestingly, all this is occurring as mortgage interest rates remain near historic lows, and as the policy rate (cash rate) of the Reserve Bank of Australia remains at its all-time low of 1.5%, where it has been since the last rate cut in August 2016. In other words, it’s not the central bank that has pricked this bubble.

In Seattle, house prices dropped 4.4% in four months, the biggest four-month drop since Housing Bust 1, according to the Case-Shiller Home Price Index. Prices also deflated in the San Francisco Bay Area, San Diego, Denver, and Portland. ReadThe Most Splendid Housing Bubbles in America Decline  

Sounds very similar to all of the skittles currently being set in line in the UK I.e Chinese investors getting cold feet due to dropping prices, reduced immigration due to Brexit implications etc...let's get some popcorn, sit back, and watch the `housing as an investment` scenario unfold.

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7 hours ago, DurhamBorn said:

The Fed?.My liquidity road map says the damage they have already done and the lag says they will need to print $12+ trillion to turn the biggest deflationary collapse since the war.Of course that will cause an inflation cycle like the world hasnt seen since the 70s,or even ever.We are talking about a free falling financial system so the liquidity they introduce wont scare treasuries at first.There will be a window.Gold will turn first,my road map is up to $1500 down to $700 (or even $500 for a very small window) then up to $10,000,silver up to $22/23 down to $8 (maybe even $5) then up to $250,maybe $300.Highly indebted companies with strong cash flow will have around 6 years to eat into those debts before rates go over 10%.Companies who have borrowed and can increase prices with inflation with debts locked at low rates will do well (their bond holders creamed).You dont want to be re-financing billions in 2025 though.

Thats the good part,after that cycle we will get a global depression on a scale never before seen.We could be at $400 trillion debt and $2 quadrillion derivatives and the full unwind of that will probably cause world war,collapse of western society etc,or at the least all western social systems,pensions,currency and access to capital markets.Pretty much all wealth will be destroyed.My friend keeps telling me we will consider it once we get into the reflation cycle,but i keep telling him you might be dead by then (hes nearly 80) id like a loose roadmap now :ph34r:

Well on that bright note perhaps I should take my pension early and find some prostitutes....a) whilst I can still get the money, and b) whilst I can still remember what to do with it! :-)

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UnconventionalWisdom
9 hours ago, sancho panza said:

Personally -and Im happy to be taught here-but it seems significant to me that these deep red days are seeing the yellow stuff either glimmer or shine.Compared to 08 when these shares were held broadly,they're now beaten up and unpopular.I'm beginnign to think we may have seen the GDX lows for the next five years.

It's interesting. Liquidity is reducing due to the Fed's QT. I would expect the miners to also be hit a bit as liquidity reduces. There's been quite a few days where it's doing the opposite to that of the dow. 

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