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Credit deflation and the reflation cycle to come.


DurhamBorn

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9 hours ago, Agent ZigZag said:

For a young person with the right skill set from welder, to crane driver to logistics their future looks potentially bright

What?!.. do a greasy, manual job?...No thank you!...it's a Media studies degree for me then.

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9 hours ago, leonardratso said:

i meant to start a new tracking spreadsheet for those, ive got a few others, but ive been having a hard time since 1st january, im getting old and my health is starting to catch up on me, so ive not done a lot lately, need to give up everything basically and lose weight to boot, hard going while still having to go to work, no matter, just carry on.

That's the problem with life, you can have all of your vices at once and then have to give them up at some stage, or partake in moderation and spread them throughout your lifetime :-(..sex is the only exception to this rule, so `go there` stud! :-)..the latter would be good for your weight loss too ;-), and far more fun than going to the gym!

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Napoleon Dynamite
11 hours ago, Thorn said:

Carry on always Sir. Here- don’t know if this would help but I lost 2 stone by fasting from 8pm til 12 noon the next day and not eating too much then from 12 til 8... not medical advice, but was do-able while still working etc .. coffees and teas grand in the morning then sort of had breakfast -muesli- at 12... just saying- hope that helps!

Agree.  I've been thinking of starting an intermittent fasting thread on here. It's been touched upon in other threads.  I did similar, fasting from 6pm -> 10am and the weight dropped off. 

You don't have to start off with the full fast, or be strict every day.  You can build up, say 8pm -> 8am then add on an hour every few days.

I was very surprised by the results.  I don't think it's a magic bullet, and if you google it you'll see a lot of pseudoscience, but it worked for me in terms of controlling my calories whilst not feeling hungry.

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Lovely summary of Steve Keen's work here by the great man himself.

Why economists have to embrace complexity to avoid disaster

Quote

Neoclassical macroeconomists have tried to derive macroeconomics from the wrong end—that of the individual rather than the economy—and have done so in a way that glossed over the aggregation problems that entails by pretending that an isolated individual can be scaled up to the aggregate level. It is certainly sounder—and may well be easier—to proceed in the reverse direction, by starting from aggregate statements that are true by definition, and then by disaggregating those when more detail is required. In other words, a “core” exists in the very definitions of macroeconomics.

Using these definitions, it is possible to develop, from first principles that no macroeconomist can dispute, a model that does four things that no DSGE model can do: it generates endogenous cycles; it reproduces the tendency to crisis that Minsky argued was endemic to capitalism; it explains the growth of inequality over the last 50 years; and it implies that the crisis will be preceded, as it indeed was, by a “Great Moderation” in employment and inflation.

fig5.png

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leonardratso
1 hour ago, Napoleon Dynamite said:

Agree.  I've been thinking of starting an intermittent fasting thread on here. It's been touched upon in other threads.  I did similar, fasting from 6pm -> 10am and the weight dropped off. 

You don't have to start off with the full fast, or be strict every day.  You can build up, say 8pm -> 8am then add on an hour every few days.

I was very surprised by the results.  I don't think it's a magic bullet, and if you google it you'll see a lot of pseudoscience, but it worked for me in terms of controlling my calories whilst not feeling hungry.

i am actually losing weight, but ill give this fasting a go, im practically almost doing it anyway, but boredom usually drives me to bread, which is my nemesis, if i can beat the bread into submission i know ill easily kill the 3 stone.

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2 hours ago, zugzwang said:

Lovely summary of Steve Keen's work here by the great man himself.

Why economists have to embrace complexity to avoid disaster

fig5.png

Like that chart, you can see it in action at this very moment.

Company with £4.5m turnover which lost £100k last year "buying" £500k of machinery leased through Lloyds bank. (6-7% interest rate if your lucky)

Its moronic and only the bankers will win in that scenario as they suck up the interest.  (Till the real economy buckles from the leeching and then they really wont)

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On 01/02/2019 at 01:26, Eventually Right said:

Have you read Luke Gromen’s book, The Mr X interviews?

https://www.amazon.co.uk/Mr-Interviews-Fictional-Sovereign-Creditor-ebook/dp/B07M93N7MJ/ref=sr_1_1?ie=UTF8&qid=1548983899&sr=8-1&keywords=mr+x+interviews

I’d recommend it-relatively quick/easy read about how he sees the dollar declining as the worlds sole reserve currency. Good book on what might well be a dry subject in other authors hands!

Had a quick read of this today another interesting recommendation, actually ordered the paperback copy to re-read and highlight parts 

 

The screen shot below true or not made me laugh

327023518_2019-03-0601_15_05pm.thumb.png.e940419d058fa3b73e0a6fc106e7d4cd.png

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19 hours ago, Thorn said:

Carry on always Sir. Here- don’t know if this would help but I lost 2 stone by fasting from 8pm til 12 noon the next day and not eating too much then from 12 til 8... not medical advice, but was do-able while still working etc .. coffees and teas grand in the morning then sort of had breakfast -muesli- at 12... just saying- hope that helps!

Intermittent fasting like this is a great way to keep your appetite subdued - I do a 40-hour fast once a week on top of what you describe and it helps keep me in decent shape. Lifting weights and intermittent fasting have done wonders for my health where many other diet and exercise regimes have failed miserably.

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On 04/03/2019 at 20:21, Barnsey said:

Apologies for not contributing much lately, not making any criticisms whatsoever but the thread has focused greatly on gold stocks of late, not something I dare dabble in until we enter a clear uptrend and I don't think we're there yet as see it's liquidity as key in the deflationary bust as folks find their ETFs enter a coordinated algo driven death spiral.

As for where I think we are right now (ALWAYS focused on U.S.), well we've clearly seen the melt up in US stocks take place (and is as of today creaking), almost unprecedented in it's pace of recovery. We're just 3 months away now from seeing the longest growth cycle in recorded history. Recession probability for 2019 now stands at 80% (Ned Davis at 96%). Strangely, despite the incredible dovishness from the Fed which largely served to spur the rally, we're now hearing commentary suggesting we may NOT have seen the last Fed hike, well done @spygirl 🏆 for predicting this.  What's crucial to think about is that unemployment turned upwards in Sept, so must pay close attention going forward. DXY likely to strengthen given relative strength of U.S. vs rest of the world, acting as temporary safe haven status, but this could/will turn on a dime once CLOs explode. Narrative already priming a swift return to QE.

So if things snap prior then it's a severe 180, otherwise 1 more hike quite possible, TLT has pulled back from 121 to 119. Pay little attention to the trade war progress as has very little to do with global synchronised downturn now underway, despite the rhetoric. In the UK, manufacturing PMI was positive at 52.0, but don't be misled by this apparent strength vs EU manufacturing PMI in contraction as this is due to historically/RIDICULOUSLY high stockpiling in UK. £ little too optimistic at moment, don't think there's much headroom unless May's vote goes through next week, anything else and I think we're heading back down.

I could go on for hours, but to summarise, we are seriously f*****g close now, so position defensively (I'm a coward so all in premium bonds, waiting patiently) :Old:

US trade deficit hits 10 year high, making Trump look dumb.

EU cannot afford to let Euto fall against dollar. German car makers will be going nuts.

Martin Wolfdid an article saying ECB should not tighten too early. Fucking nuts. Its not cost of money thats europes problem , its ecb imposed austerity, falling population, too high regulation, too many migrants making tax payer avoid work as they dont want it pissed away.

 

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1 hour ago, harp said:

SSE will gain a lot from owning most of the cables in Scotland to carry the power to the grid.The big utilities will also gain as they get to balance the power etc.Most of the wind power will be coming on middle to late cycle.The main gains in energy will be EV related.The question is will big oil take out some utilities to access that market quicker.

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21 minutes ago, DurhamBorn said:

SSE will gain a lot from owning most of the cables in Scotland to carry the power to the grid.The big utilities will also gain as they get to balance the power etc.Most of the wind power will be coming on middle to late cycle.The main gains in energy will be EV related.The question is will big oil take out some utilities to access that market quicker.

EVs are without a doubt going to be a huge growth area, not just the cars but the charging infrastructure as well. Now could a good time to invest while no one is talking about it. I expect there will be some bubbles and a few busts along the way, so keep in mind the risks.

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sancho panza
On 05/03/2019 at 08:52, Barnsey said:

Your post Sancho perfectly highlights the short term flight to $, we're in a ridiculous phase now where everyone's convinced we can have a global recession which excludes USA, when of course those of us paying attention recognise that whilst it may be one of the last to fall, it'll be catastrophic given it's current height off the ground.

Interesting to read that credit card interest rates over there are now the highest they've been in over 20 years!

Trying to connect the dots.Are people borrowing to live????

https://www.bloombergquint.com/onweb/u-s-credit-card-debt-closed-2018-at-a-record-870-billion#gs.N0qBOF44

'U.S. credit card debt hit $870 billion -- the largest amount ever -- as of December 2018, according to the data from the Federal Reserve. Credit card balances rose by $26 billion from the prior quarter.

"The increase in credit card balances is consistent with seasonal patterns but marks the first time credit card balances re-touched the 2008 nominal peak," according to the report.
Nearly 480 million credit cards are now in circulation -- up by more than 100 million since hitting bottom after the recession a decade ago.
 
At the end of last year, credit cards were the fourth-largest portion of consumer debt in the U.S. after mortgage, student loan and auto debt. But the quarterly increase in credit card debt was faster than the other categories. Overall debt reached a record $13.5 trillion.
image.png.e5017be09bed9f1eb024a30dd85c758b.png
 

About 37 million credit card accounts had a 90+ days delinquent mark added to their credit report last quarter, an increase of about two million from the fourth quarter of 2017. These 37 million accounts hold roughly $68 billion in debt that is 90-plus days delinquent.

In aggregate, credit card limits rose for the 24th consecutive quarter, with a 1.5% increase in the fourth quarter of 2018.
 
Older Americans are holding a significant portion of credit card debt, with those over age 60 accounting for about 30 percent of the total.

Americans in their 70s hold more than one in nine dollars of credit card debt

One possible trouble spot is that, by age group, older Americans are seeing their credit card debt transition into the delinquency category at an increasing pace. In particular, those in their 50s have seen the most rapid change and could be considered the most vulnerable should a change occur in their employment.

An analysis of data compiled by Bloomberg on credit card asset-backed securities based on the cash flow stream of pooled credit card accounts found the block issued in Aug. 2015 has the highest delinquency rate -- exceeding 6 percent.

 
One possible trouble spot is that, by age group, older Americans are seeing their credit card debt transition into the delinquency category at an increasing pace. In particular, those in their 50s have seen the most rapid change and could be considered the most vulnerable should a change occur in their employment. An analysis of data compiled by Bloomberg on credit card asset-backed securities

Read more at: https://www.bloombergquint.com/onweb/u-s-credit-card-debt-closed-2018-at-a-record-870-billion
Copyright © BloombergQuint
(Bloomberg) -- U.S. credit card debt hit $870 billion -- the largest amount ever -- as of December 2018, according to the data from the Federal Reserve. Credit card balances rose by $26 billion from the prior quarter. "The increase in credit card balances is consistent with seasonal patterns but marks the first time credit card balances re-touched the 2008 nominal peak," according to the report

Read more at: https://www.bloombergquint.com/onweb/u-s-credit-card-debt-closed-2018-at-a-record-870-billion
Copyright © BloombergQuint
(Bloomberg) -- U.S. credit card debt hit $870 billion -- the largest amount ever -- as of December 2018, according to the data from the Federal Reserve. Credit card balances rose by $26 billion from the prior quarter. "The increase in credit card balances is consistent with seasonal patterns but marks the first time credit card balances re-touched the 2008 nominal peak," according to the report

Read more at: https://www.bloombergquint.com/onweb/u-s-credit-card-debt-closed-2018-at-a-record-870-billion
Copyright © BloombergQuin

 

On 05/03/2019 at 08:42, Barnsey said:

Most folks would scream STAGFLATION but I take it we're still expecting a deflationary bust and then reflationary policy? And just to clarify, are you thinking we're now looking at a slightly postponed deflationary bust toward year end?

Thwe key thing is that credit deflates for a debt deflation.What happens with consumer pricing can make things worse or better.If we credit a credit deflation running alongside price inflation,then it will be the return of stagflation.

On 05/03/2019 at 20:26, spygirl 🏆 said:

They are fucking careless innumerate.

And theyve spent a fortune rolling out very e pensive branches.

Doubt theyll last 12 months.

The bigger issue is the smaller older banks have been doing similar and riskier loans.

BoE looking to chuck a bank under the wheels.

 

I've been saying for a while.Cov BS and Hinkley & Rugby BS ,along with a host of others,have got involved in areas of the market they shoudln;t have,both on a moral level and in terms of risk.Just my personal view.

On 05/03/2019 at 21:23, Barnsey said:

Smart money flow vs S&P 500 showing quite the divergence, possibly signalling crash no 2 approaching...(of which there may be a few)

Any link for that Barnsey?.I play some individual stocks as you know and the momo appears to have left them over the last few days but what a ride up it's been.

2 hours ago, harp said:

I think the time to buy wind producers is when they've ten year histroy of paying a dividend.Till then,I'll either trade the shovel makers or the people selling the leccy on.

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Democorruptcy
sancho panza

Hodges,oil as a %age of GDP.Current level indicates recession.

https://www.icis.com/chemicals-and-the-economy/2019/03/deja-vu-all-over-again-for-oil-markets-as-recession-risks-rise/

image.png.cf03f87a13c9722a48d81ab083273e2b.png

Back in 2015, veteran Saudi Oil Minister Ali  Naimi was very clear about Saudi’s need to adopt a market share-based pricing policy:

“Saudi Arabia cut output in 1980s to support prices. I was responsible for production at Aramco at that time, and I saw how prices fell, so we lost on output and on prices at the same time. We learned from that mistake.

As Naimi recognised, high oil prices created a short-term win for Saudi’s budget between 2011-4.  But they also allowed US frackers to enter the market – posing a major threat to Saudi’s control – whilst also reducing overall demand.  And his “boss”, Crown Prince Mohammed bin Salman (MbS) agreed with him, saying:

“Within 20 years, we will be an economy that doesn’t depend mainly on oil. We don’t care about oil prices—$30 or $70, they are all the same to us. This battle is not my battle.”

Today, however, Saudi oil policy has reversed course, with MbS now trying to push prices towards the $80/bbl level assumed in this year’s Budget.

Saudi’s dilemma is that its growing population, and its need to diversify the economy away from oil, requires increases in public spending. As a result, it has conflicting objectives:

  • Its long-term need is to defend its market share, to guarantee its ability to monetise its vast oil reserves
  • But its short-term need is to support prices by cutting production, in order to fund its spending priorities

The result, as the chart above confirms, is that prices are now at levels which have almost always led to recession in the past.  It compares the total cost of oil* as a percentage of global GDP with IMF data for the economy, with the shaded areas showing US recessions. The tipping point is when the total cost reaches 3% of global GDP. And this is where we are today.

The reason is that high oil prices reduce discretionary spending.  Consumers have to drive to work and keep their homes warm (and cool in the summer).  So if oil prices are high, they have to cut back in other areas, slowing the economy.

CENTRAL BANK STIMULUS MADE OIL PRICES “AFFORDABLE” IN 2011-2014

debt.png

There has only been one occasion in the past 50 years when this level failed to trigger a recession. That was in 2011-14, when all the major central bank stimulus programmes were in full flow, as the left-hand chart shows.

They were creating tens of $tns of free cash to support consumer spending.  But at the same time, of course, they were creating record levels of consumer debt, as the right-hand chart shows from the latest New York Federal Reserve’s Household Debt Report.  It shows US household debt is now at a record $13.54tn. And it confirms that consumers have reached the end of the road in terms of borrowing:

“The number of credit inquiries within the past six months – an indicator of consumer credit demand – declined to the lowest level seen in the history of the data.

SAUDI ARABIA IS NO LONGER THE SWING SUPPLIER IN OIL MARKETS

Oil.png

Oil prices are therefore now on a roller-coaster ride:

  • Saudi tried to push them up last year, but this meant demand growth slowed and Russian/US output rose
  • The rally ran out of steam in September and Brent collapsed from $85/bbl to $50/bbl in December

Now Saudi is trying again. It agreed with OPEC and Russia in December to cut production by 1.2mbd – with reductions to be shared between OPEC (0.8 million bpd) and its Russia-led allies (0.4 million bpd).  But as always, its “allies” have let it down.  So Saudi has been forced to make up the difference. Its production has fallen from over 11mbd to a forecast 9.8mbd in March.

Critically however, as the WSJ chart shows, it has lost its role as the world’s swing supplier:

Of course, geo-politics around Iran or Venezuela or N Korea could always intervene to support prices. But for the moment, the main support for rising prices is coming from the hedge funds.  As Reuters reports, their ratio of long to short positions in Brent has more than doubled since mid-December in line with rising stock markets.

But the hedge funds did very badly in Q4 last year when prices collapsed. And so it seems unlikely they will be too bold with their buying, whilst the pain of lost bonuses is so recent.

Companies and investors therefore need to be very cautious.  Saudi’s current success in boosting oil prices is very fragile, as markets are relying on more central bank stimulus to offset the recession risk. If market sentiment turns negative, today’s roller-coaster could become a very bumpy ride.

Given that Saudi has decided to ignore al-Naimi’s warning, the 2014-15 experience shows there is a real possibility of oil prices returning to $30/bbl later this year.'

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16 minutes ago, Barnsey said:

How's this for a laugh?

IMG_20190307_093853.jpg.ffca429af7332c9f35161569e06feef4.jpg

You'll be reassured that all the economists thinks it's utter bull this morning on the Twittersphere 

Do you know if they measure like for like?  If the lower end is dropping off and multi-million pound homes are not then the average will be skewed upwards.

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sancho panza
1 hour ago, Majorpain said:

Do you know if they measure like for like?  If the lower end is dropping off and multi-million pound homes are not then the average will be skewed upwards.

It's based on the Halifaxs mortgage approvals and is prone to sample bias.

 

LCP and LSL acadata,present a far more reliable picture.My only worry is that LCP -as a business-may cut costs inlc their monthly report.Which would be a shame,as I greatly appreciate it especailly for it's analysis of new builds and new build preimum.

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Yellow_Reduced_Sticker

"John Lewis staff bonuses fall as profit crashes by 45%!"

https://uk.finance.yahoo.com/news/john-lewis-staff-bonuses-fall-profit-crashes-45-095038209.html

Another fine example of how cash strapped joe public is ...what chance do the big ticket items such as houses have? NO feffing chance!

AND what the fook is the Halifax chart above on about ??? the end is HERE for proweetty!

NEXT yahoo headline on march 29th 2019 -> Property crashes by 13% in only 1 month!:o....sheeple are shocked...BUT dosbods folks rejoice :D xD

 

Halifax...fOOKIN Pricks!

https://uk.finance.yahoo.com/news/uk-house-prices-rose-sharply-101800963.html

Meanwhile, Samuel Tombs at Pantheon Macroeconomics said the volatility shown in the latest figures provoked “little confidence in Halifax’s index :wanker:as a reliable indicator of the housing market”.xD

“Its extreme volatility… undermines its validity,” he added. “Like others, the index is seasonally adjusted, but it uses an outdated methodology which potentially is contributing to its excessive volatility. All other indicators suggest that house prices essentially are on a flat trend.”

FOLKS here stick with @DurhamBorn prediction on house prices ->  minus - 50% to 60% in the SE ...Yahoo! :Jumping:

 

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https://www.ft.com/content/4df91c1a-40b6-11e9-9bee-efab61506f44

UK productivity growth is accelerating, says BoE policymaker

Silvana Tenreyro says rate is likely to be faster than official data suggest

UK private sector, FT productivity is fucking phenomnal. It has to be to carry the 20% of pubsector workers and ~30% of tax credit money sinks. And all the migrants on benefits.

Silvana Tenreyro, an external member of the Bank of England’s monetary policy committee, said analysis of the data suggested productivity growth had picked up since 2014, potentially leaving the UK economy with excess capacity.

Of course ,try recruitign for any skilled beynd a a plate washer and youll see how much excess capacity there is.

 

 

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sancho panza
1 hour ago, Yellow_Reduced_Sticker said:

"John Lewis staff bonuses fall as profit crashes by 45%!"

https://uk.finance.yahoo.com/news/john-lewis-staff-bonuses-fall-profit-crashes-45-095038209.html

Another fine example of how cash strapped joe public is ...what chance do the big ticket items such as houses have? NO feffing chance!

AND what the fook is the Halifax chart above on about ??? the end is HERE for proweetty!

NEXT yahoo headline on march 29th 2019 -> Property crashes by 13% in only 1 month!:o....sheeple are shocked...BUT dosbods folks rejoice :D xD

 

Halifax...fOOKIN Pricks!

https://uk.finance.yahoo.com/news/uk-house-prices-rose-sharply-101800963.html

Meanwhile, Samuel Tombs at Pantheon Macroeconomics said the volatility shown in the latest figures provoked “little confidence in Halifax’s index :wanker:as a reliable indicator of the housing market”.xD

“Its extreme volatility… undermines its validity,” he added. “Like others, the index is seasonally adjusted, but it uses an outdated methodology which potentially is contributing to its excessive volatility. All other indicators suggest that house prices essentially are on a flat trend.”

FOLKS here stick with @DurhamBorn prediction on house prices ->  minus - 50% to 60% in the SE ...Yahoo! :Jumping:

 

JL like for like down 1.4%....incl inflation however you measure it,they're losing a significant chunk of their top line.

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