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Credit deflation and the reflation cycle to come.


DurhamBorn

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2 hours ago, UnconventionalWisdom said:

Hi DB, thanks for your great insights and I have learnt a lot from this thread. 

When you mention macro people, are there any recommendations? I initially watch Mike maloney on YouTube for a good foundation of what's going on/ likely to happen. Moved on to articles and big debt crises by Dalio. Do you (or anyone reading this) know anyone else worth a read? 

 

David Hunter used to work with my friend back in the day at Fidelity,they were on the pension equity team (the best there was back then) and shared most of the same tools.David tends to highlight road maps and possible extremes and is still one of the best macro contrarians there is.He doesnt offer any timing advice though really,his calls are long range macro ones,not timing/trading calls.He is a master at leads and lags.He tends to tweet for the audience,but is probably one of the best youl find.That Fidelity team were amazing.As my friend used to say Buffet got lucky with the cycle,they saw the cycles.

https://twitter.com/DaveHcontrarian?ref_src=twsrc^google|twcamp^serp|twgr^author

Another brilliant contrarian is Kaplan

https://truecontrarian-sjk.blogspot.com/

His work isnt macro based,he is a cycles guy who understands how cycles play out.He has a lot of data that other people dont use,but that has proved very good over the decades.Id urge everyone to read his articles,not to invest from them,but they help you get a feel for cycles.Kaplan doesnt do macro work,so his timing can be earyl,but he doesnt try time,he uses a ladder system i use similar myself and its a very good way to go about things.

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Talking Monkey
5 hours ago, DurhamBorn said:

Your post shows the quality of the people on this thread and why everyone is welcome here.My uncle lives just outside of London.Two daughters.Every visit the talk was how much the house was worth/gone up.Roll forward the two daughters cant buy anything,and the complaints are always about how crazy it is.Lead and lag right there.

Im nearly 48 and iv always worked in factories.Iv already had 15 years retirement and will be fully retired in 2 years max,much more likely next year though.

Whats happening now is a key inflection point in macro terms.The great dis-inflation cycle is ending and a reflation starting.Lot less for wants and more spent on needs.What worries me most id the end of the next cycle.2028 could see complete collapse with nowhere to run.Apart from this thread hopefullyxD

If we were to see complete collapse at the end of the next cycle would that be UK or global, or mainly western economies

In that scenario what kind of things would one expect, I assume it doesn't go mad max, just really bad

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2 hours ago, Talking Monkey said:

If we were to see complete collapse at the end of the next cycle would that be UK or global, or mainly western economies

In that scenario what kind of things would one expect, I assume it doesn't go mad max, just really bad

Global,and complete currency collapse probably.A lot depends how much is printed in downturn.Its looking bad,really bad.Lots can change though,we have a cycle to get through yet.

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Talking Monkey
1 minute ago, DurhamBorn said:

Global,and complete currency collapse probably.A lot depends how much is printed in downturn.Its looking bad,really bad.Lots can change though,we have a cycle to get through yet.

Cheers DB, I guess the next 5-7 years is the final bit of decent living a lot of people will see in their lifetime, with population growth, growing ageing population, technology making more and more people obsolete, some sort of huge bump was going to come

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Democorruptcy
21 hours ago, sancho panza said:

Bit in bold:Incredible isn't it?

 

Yeah a hook up shoudl eb on the cards.Wolf RIchter organised one for his readers and it'd be nice to socialise with people who don't get glass eyed when I start talking economics:).Sadly,I'll need mega notice due to kids,work etc and I'd rather wait until the dollar has started weakening............not long then.

50% return looks good from here.You'll maybe still get good value on Boris given how much the media love JC.I'd have a decent punt at that price.

I think it depends on whether there could be any collusion between Labour and the Lib Dems like in the recent by-election. Some seats are always red or blue and the election is decided by the marginal seats. Though even they tried, it could backfire, with it presumably only appealing to remainers.

19 hours ago, Harley said:

No problem at all as I didn't take it like that at all.  Apologies if my words suggested that.

No apology necessary.

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Democorruptcy
7 hours ago, DoINeedOne said:

One of the things i notice with friends and family is they are too busy working to pay for all the credit card debt, leased cars, bills and more, i have friends who are working themselves into the ground up at 6am not home till 7pm a shit microwave meal few beers then asleep on the sofa most nights

I think that when the media are on about how are we going to save the high street. It's all linked to debt and mainly house prices. At 3x income you have a disposable 2nd income and one of the couple  out spending in the high street. Joint income mortgages mean both are slaving away at work with childcare costs and struggling. JIMJAMs, Joint Income Mortgage Just About Managing.

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40 minutes ago, DurhamBorn said:

Global,and complete currency collapse probably.A lot depends how much is printed in downturn.Its looking bad,really bad.Lots can change though,we have a cycle to get through yet.

Conveniently, that's when we all get chipped with the new digital currencyxD

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UnconventionalWisdom
3 hours ago, DurhamBorn said:

David Hunter used to work with my friend back in the day at Fidelity,they were on the pension equity team (the best there was back then) and shared most of the same tools.David tends to highlight road maps and possible extremes and is still one of the best macro contrarians there is.He doesnt offer any timing advice though really,his calls are long range macro ones,not timing/trading calls.He is a master at leads and lags.He tends to tweet for the audience,but is probably one of the best youl find.That Fidelity team were amazing.As my friend used to say Buffet got lucky with the cycle,they saw the cycles.

https://twitter.com/DaveHcontrarian?ref_src=twsrc^google|twcamp^serp|twgr^author

Another brilliant contrarian is Kaplan

https://truecontrarian-sjk.blogspot.com/

His work isnt macro based,he is a cycles guy who understands how cycles play out.He has a lot of data that other people dont use,but that has proved very good over the decades.Id urge everyone to read his articles,not to invest from them,but they help you get a feel for cycles.Kaplan doesnt do macro work,so his timing can be earyl,but he doesnt try time,he uses a ladder system i use similar myself and its a very good way to go about things.

Thanks a lot DB. I appreciate the reply and will check them out. This thread has proved that noone can do timing but understanding direction is the only important thing. I have a background in physics so understanding why things work the way they do fascinates me. The macro picture says a lot not just about economics but society too. Interesting stuff.

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sancho panza

 

11 hours ago, Tdog said:

The article isn't enlightening, just says debt levels are insane ... but the fact its in the DM shows that the impending crash predictions are now mainstream.

https://www.dailymail.co.uk/debate/article-7365809/PETER-OBORNE-Red-lights-flashing-economic-hurricane-coming-scared.html

There's a definite change in narrative.People like Oborne have seen this coming for years.he wrote a book some years ago talking about how the political establishment ere going to get a kicking iirc

11 hours ago, Errol said:

I think we are quite rare, but you have probably met a few without realising it. We are a private bunch who have learnt to keep our mouths shut in public and not go around blurting out all our 'strange' ideas (which tend to shock or frighten people).

We are indeed rare Errol.One of the reasons I spend so much time on here is that I can't really talk about these things with anyone but Mama Panza (who has a good grasp of economics for a 73 year old).Mrs P is patient understanding and supportive but wishes she could understand what I was on about more.Wider acquaintances think you're loon for saying house prices will plummet,consistent fiscal deficits 3%++/ballooning studetn debt/increasing non mortgage debt etc etc  are unsustainable.

I don't blame people,if all they focus on is the last twenty years of price action,then you'll truly believe house prices wont drop and as you see your income deflate,your pension  get swapped to DC,your savings earning nothing...then it makes sense that you'll tend to focus on the one asset that has grown while all these other things have gone worng.

I don't know about you,but these days when people at works ask me what I think,I jsut tell thm I don't have a view or it could go up/down or down/up.The explanations to non believers are painful and slow on the whole and that's before you get onto fractional reserve lending and why a debt deflation is inevitable.

8 hours ago, Tdog said:

DM is in full devastation mode today, they also have a "negative equity" story and refer to Help to Buy debt junkies.

https://www.dailymail.co.uk/news/article-7365861/First-time-home-buyers-five-cent-deposit-losing-house-prices-plummet.html?ns_mchannel=rss&ico=taboola_feed_desktop_news

Fear sells....

 

'The popularity of low-deposit mortgages has soared, helping hundreds of thousands buy their first home, but prices have now fallen in more than 50 regions across England since 2017.

Almost one in five mortgages issued in the first three months of 2019 – some 38,000 loans – were to borrowers with less than a 10 per cent deposit. This is the highest level since before the financial crisis struck at the end of 2007.

The cheapest two-year 95 per cent fixed rate on the market is currently 2.59 pc from Newcastle Building Society. 

Many will have taken advantage of the Government’s Help to Buy scheme, which lets home buyers borrow 20 per cent of the purchase price interest-free if they can put down a 5 per cent deposit.

But house price growth has slowed, with prices now falling in many parts of the country. London and the South East have been worst hit but other regions have also been affected.

The average price of a house in Barnet has fallen 11.6 per cent from £544,994 to £481,824 in two years, according to the Office for National Statistics. 

In Harrow, house prices have fallen by almost 8 per cent, and on a low-deposit mortgage homeowners here would now have just 0.6 per cent of equity in their homes.

Jane King, a mortgage adviser at Ash-Ridge Private Finance who helps families buy homes in Surrey, Berkshire, Hampshire and Central London, said she sees eight to ten examples a month where families who bought homes with a 5 per cent deposit two years ago now have around 2 per cent of their equity left.

She added: ‘I try to encourage buyers who have only saved a 5 per cent deposit to save more if they can. A 95 per cent mortgage should be an absolute last resort.’

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sancho panza
7 hours ago, UnconventionalWisdom said:

Hi DB, thanks for your great insights and I have learnt a lot from this thread. 

When you mention macro people, are there any recommendations? I initially watch Mike maloney on YouTube for a good foundation of what's going on/ likely to happen. Moved on to articles and big debt crises by Dalio. Do you (or anyone reading this) know anyone else worth a read? 

 

I happened upon this guy a while back.Tavi Costa

https://twitter.com/tavicosta?lang=en

10 hours ago, DurhamBorn said:

Those are the leads and lags of liquidity.They are certain,its just time.Like it was certain the affects would be felt 18 months after the Fed tightened.Thats the lag.The cross market work is what did the farmer have in his field.He had lettuce,the price of lettuce will go up first,but then it will go down as he floods the market because the price has gone up.The fishing shop will lose money as less people buy bait to fish,the car wash will close in the town.Those are all cross market affects of the lead and lag.

There are very very few macro people these days who look at things that way.However that river provides a road map and once you understand that you start to understand the order things happen,and why.A market economy is huge and we miss some things,we wont and cant get everything right,but if we are the basics,understand the road map ahead then we will do well,or we will do very very well.

 

Thanks for the explanation.I've always wondered what you meant by cross market work.Now I understand.

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sancho panza
10 hours ago, DurhamBorn said:

However my friend told me long ago that western market economies dont collapse,that is hyperbole,they do however swing from deflation pressures to inflation ones.The rich and government cant afford to let things go to bad,so they react.Their job is to make the vast majority of the people comfortable,not rich,not too poor.They need the carrot just out of rich,but where they get a nibble.HTB is a classic example.Make young people think they are getting something,when really all they are getting is to work until 65 and pay tax to pay the mortgage.Once you learn the leads and lags to indicators you start to see how things work.

 

 

HTB really was nothing but a transfer between taxpayers and future taxpayers to the housebuilding shareholders.

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sancho panza
4 hours ago, Talking Monkey said:

If we were to see complete collapse at the end of the next cycle would that be UK or global, or mainly western economies

In that scenario what kind of things would one expect, I assume it doesn't go mad max, just really bad

The last great debt deflation was the Great Depression.

I think we'll end up with a swathe of defaulting debt,both private and governmental.Asset prices,in themain,significantly lower.Banking system in gridlock.

History also says some proxy wars are likely.

History also says there'll be a paradigm shift in politics to extremes reversing the establishments grip and by establishment I mean the OxBridge one both Labour and Tory and all the other Western World establishments).this is obviously already happening so no prizes here but for all the Merkel and Boris fans who think Brexit will end it,they may need to think again.For all the people who think Trump has npo chance in 2020,same.

1 hour ago, Democorruptcy said:

I think that when the media are on about how are we going to save the high street. It's all linked to debt and mainly house prices. At 3x income you have a disposable 2nd income and one of the couple  out spending in the high street. Joint income mortgages mean both are slaving away at work with childcare costs and struggling. JIMJAMs, Joint Income Mortgage Just About Managing.

Love that Jimjams phrase ,haven't heard it before.

 

On a separate matter,would you partake of a separate political betting thread.Like you,I punt.I think there's cash to be made on the next GE and as ever,a few minds are better than one.

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sancho panza

Some steady flow from Wolf Richter

https://wolfstreet.com/2019/08/16/us-freight-shipments-steepest-drops-since-financial-crisis-overcapacity/

Freight shipments within the US by all modes of transportation – truck, rail, air, and barge – fell 5.9% in July 2019, compared to July 2018, the eighth month in a row of year-over-year declines, according to the Cass Freight Index for Shipments, which tracks shipments of consumer and industrial goods but not of bulk commodities such as grains. This decline along with the 6.0% drop in May were the steepest year-over-year declines in freight shipments since the Financial Crisis:

US-Cass-freight-index-shipments-yoy-2019

https://wolfstreet.com/2019/08/15/housing-bubble-2-in-san-francisco-bay-area-silicon-valley-is-cooked/

image.png.0a7e250a962721d0a8cb3b8e310e1ddd.png

 

https://wolfstreet.com/2019/08/13/auto-loan-subprime-delinquencies-at-2009-level-biggest-12-month-surge-since-2010/

Serious auto-loan delinquencies – 90 days or more past due – in the second quarter, 2019, jumped 47 basis points year-over-year to 4.64% of all outstanding auto loans and leases, according to New York Fed data released today. This is about the same delinquency rate as in Q3 2009, just months after GM and Chrysler had filed for bankruptcy. The 47-basis-point jump in the delinquency rate was the largest year-over-year jump since Q1 2010:

US-auto-loan-deliquencies-2019-Q2-.png

But this time there is no economic crisis. The unemployment rate and unemployment claims are hovering near multi-decade lows, and employers are griping about how hard it is to hire qualified workers without having to raise wages. . unlike during the Financial Crisis, this surge in the delinquency rate has not been caused by millions of people having lost their jobs. It’s not the economy that did it. It’s the industry.

 

What the lenders are sitting on.

Total outstanding balances of auto loans and leases in Q2 jumped by 4.8%, or by $59 billion, from a year ago to $1.3 trillion, according to the New York Fed’s data (which is slightly higher and more inclusive than the amount reported by the Federal Reserve Board of Governors in its consumer credit data). Over the past decade, since Q2 2009, total auto loans and leases outstanding have surged by 76%:

US-auto-loan-balance-v-number-2019-Q2.pn

Of those $1.3 trillion in auto loans, 4.64%, or a record of $60.2 billion, are 90+ days delinquent, which gives the chart below quite an amazing trajectory. But this is not an employment crisis, when millions of people lose their jobs and cannot make the payments on their auto loans. What will this chart look like when the economy turns, and unemployment surges again, and people cannot make their car payments? No one has an appetite for making projections here.

US-auto-loan-deliquencies-dollars-2019-Q

Who ends up holding the bag?

Subprime auto loans will not cause the large banks to get in trouble. Large banks have been fairly conservative in writing subprime auto loans. Captive lenders, such as Ford Credit, are more aggressive because part of their job is to promote the company’s new vehicle sales.

The most aggressive have been specialized lenders, including small shops backed by private equity firms, and larger lenders such as Santander Consumer USA. But they’re spreading the risks to investors by packaging their loans into subprime auto-loan backed securities, of which the highest-rated tranches have AA or even AAA ratings.  And these securities are everywhere, from bond funds in the US to some pension fund in a Scandinavian city.

For investors and lenders, these delinquent loans don’t represent total losses. If the default cannot be cured and the lender decides to repossess the collateral – which is easy to do with modern tracking technologies – the lender obtains a used vehicle for which there is a liquid auction market (unlike housing) with wholesale auctions around the country, and finding a buyer is generally not the problem.

The problem is the difference between the price at auction and the outstanding loan amount. The difference plus expenses is the loss that the lender and investors take. This loss might be 50% of loan value.

Automakers are not amused.

As these soured loans have been piling up over the past two years, lenders became more circumspect and tightened up lending standards. In Q2 2015, at the peak of the subprime auto-loan craziness, 25.4% of all loan originations were subprime. For GM, Ford, Fiat-Chrysler, and some import brands, 2015 was also the peak year in auto sales, driven by aggressive subprime lending.

In Q2 2019, subprime originations had fallen to 21% of total auto-loan originations, the lowest portion for any second quarter since 2011. It was down over 1.5 percentage points from Q2 2016, and down 4.4 percentage points from the reckless subprime-lending days of Q2 2015.

As lenders tighten up their lending standards, auto makers lose the sale. Subprime-rated customers, when they get rejected for a new-vehicle loan, are routinely switched to a much cheaper used vehicle that is easier to finance, and where the risks for the lender are smaller. This usually happens at the same dealer.

The customer is happy because they drive off in a nice-looking car. The dealer is happy because they likely made more money on the used car than they could have on a new car. The lender is happy because it made a ton on the subprime loan, likely charging a double-digit interest rate. And the automaker lost a sale.

In this manner, the crisis-level delinquencies are impacting new vehicle sales, with deliveries by GM, Ford, Fiat-Chrysler, and some import brands down for the fourth year in a row, and for the industry as a whole down for the third year in a row. And yet, these are the good times.

https://wolfstreet.com/2019/08/10/why-have-global-semiconductor-sales-plunged-gotten-stuck-at-these-levels-for-5-months-now/

Semiconductor sales have plunged about 22% from the peak last October. That peak was the end of a long spike that started in 2017. When you look at the chart, you see the surge in semiconductor sales that lasted for a year and a half. And then it’s just a straight line down essentially, back to July 2017 levels. And semiconductor sales have been stuck at these levels now for five months. Compare that to the 39% plunge during the financial crisis.

But this time around, there is no sign of a V-shaped recovery. This time around, it has been five months in a row at these low levels, after plunging this far and very suddenly. So it’s a very different scenario. This is not a confidence-type scenario. There are some real issues there. GLobal-semiconductor-sales-2019-06.png

Now, car sales are a big part of global business, and they have plunged in China, the largest market. They’re down 12% in China year-over-year. They’re down in the US for the third year in a row, not by much, by a couple of percentage points a year, but it’s the third year of declines.

In India, the fifth largest market, vehicle sales have plunged by 25% because they have a shadow-banking financial crisis going on. The shadow banks are heavy into financing vehicles, and that system is now very vulnerable. So auto sales just collapsed in India.

And in Europe, auto sales are down about 3% year over year. In Canada, auto sales are down 5.5% year over year. So it’s global.

And this has an impact on component makers and on everybody in the industry and therefore on semiconductors

 

Another place where chips are used heavily, and there are a lot of products out there: smartphones. Smartphone sales globally are now on the decline. Last year, they were stagnating. It’s a maturing business. This year, they’re in decline. In the EU by 5%, in North America by 4%, in Japan by over 6%. These are pretty big declines.

https://wolfstreet.com/2019/08/09/ugly-week-in-record-ugly-year-for-brick-mortar-retail-meltdown/

The phenomenon of the Brick-and-Mortar Meltdown is proceeding with relentless momentum, trailing in its wake store closings, job losses, bankruptcies, and liquidations.

image.png.abd2bf712c43b264fa7d2b659518d217.png

2019 has been record-setting brutal already

This year through July, about 7,500 store closings have been announced, up 20% from the full-year total in 2018 (5,864), according to estimates by Coresight Research, cited by Trepp, which provides analysis on Commercial Mortgage Backed Securities, such as those backed by mall properties.

The full-year total in 2019 is on track to reach 12,000, which would blow past by 50% the record established in 2017, the terrible brick-and-mortar-meltdown year when 8,139 stores were scheduled for liquidations,

In terms of the square-footage of liquidated stores, the record was set in 2018, the year of big-box store liquidations. This included Sears, Kmart, Bon-Ton, and Toys “R” Us stores, resulting in 155 million square feet of retail space that had been vacated by liquidations, according to estimates by Costar, cited by Trepp.

This year so far, a lot more stores are being liquidated, but mostly smaller stores, such as the 2,700 Payless Shoesource stores, with less square footage per store. So in terms of square-footage, the 2018 record will hard to beat.

 

image.png

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sancho panza

To be fair,I disagree with Mish on the basis that history doesn't always replicate itself exactly and at times there is an uncanny relationship between gold(and other commodities,and the dollar).

Where I totally agree on Mish's thesis and that is that gold is inextricably linked to faith in CB's.He's been writing this line of thought for years and as time passes,it grows more and more persuasive

Aslo agree that CB's haven't got a clue how to measure inflation

https://moneymaven.io/mishtalk/economics/gold-is-not-a-function-of-the-us-dollar-nor-is-gold-an-inflation-hedge-2mIh3JA-xUO0WJrDPy-tzA/

 

Swings in the US dollar have no long-term impact in the price of gold. Nor is gold an inflation hedge.

Three Points

  • December 2004: US Dollar Index 108, Gold $435
  • April 2009: US Dollar Index 108, Gold $883
  • November 2014: US Dollar Index 108, Gold $1182

Gold vs Trade-Weighted Dollar Index 1973-Present

 

https%3A%2F%2Fs3-us-west-2.amazonaws.com

image.png.66a505c04c9932c65c739882185acafd.png

While gold generally moves opposite the dollar in day-to-day fluctuations, long term impacts are nonexistent.

Here is the chart with the index of gold and the dollar set to the same base year, 1997.

Gold vs Trade-Weighted Dollar Index

 

https%3A%2F%2Fs3-us-west-2.amazonaws.com

image.png.d1f72f9bcef8256fc702d284a092d56c.png

Gold vs the CPI

 

https%3A%2F%2Fs3-us-west-2.amazonaws.com

image.png.e218c5927885b2e774ce6ce980f10af4.png

Gold fell from $850 to $250 from 1980 to 2000 with inflation every step of the way.

What happened?

People had faith in the great "Maestro", Alan Greenspan.

But, But, But

But Mish, inflation is understated.

Indeed it is. Central banks are clueless regarding how to measure inflation. Bubbles are a direct consequence of inflation.

Note the implication: Because inflation is higher than reported, gold is even less of an inflation hedge!

One Exception

There is one exception to the rule gold is not an inflation hedge.

The exception is extremely high rates of inflation, especially hyperinflation.

In case of hyperinflation, nearly any storable physical asset is a hedge: cheese, cigarettes, gasoline, etc.

There is nothing unique about gold as an inflation hedge in case of hyperinflation.

Three Things Gold Isn't

  1. A function of the US dollar in any meaningful way
  2. A measure of inflation
  3. A good hedge against inflation, except extreme inflation and hyperinflation where any storable asset is a hedge.

So What Is It?

 

https%3A%2F%2Fs3-us-west-2.amazonaws.com

image.png.6ab27f15cbfc56bd2a4f645e16879c54.png

Measure of Faith in Central Banks

In addition to being money for thousands of years, the price of gold is primarily a measure of faith in central banks.

If you believe central banks have everything under control, don't buy gold.

But Why Have Faith?

  1. "Zero Has No Meaning" Says Greenspan: I Disagree, So Does Gold
  2. 30-Year Long Bond Yield Crashes Through 2% Mark to Record Low 1.98%
  3. More Currency Wars: Swiss Central Bank Poised to Cut Interest Rate to -1.0%
  4. Inverted Negative Yields in Germany and Negative Rate Mortgages.
  5. Fed Trapped in a Rate-Cutting Box: It's the Debt Stupid

If you believe monetary madness, negative interest rates, and negative rate mortgages prove central banks do not have things under control, then you know what to do.

Buy Gold.

image.png

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sancho panza

Funny how the Germans don't like a fiscal deficit unless it's someone elses.....

https://www.bloomberg.com/news/articles/2019-08-16/germany-ready-to-raise-debt-if-recession-hits-spiegel-reports

Germany’s government is ready to run a budget deficit if Europe’s largest economy collapses, magazine Der Spiegel reported.

 
 

Chancellor Angela Merkel and Finance Minister Olaf Scholz would be willing to increase debt in order to offset a tax revenue shortfall due to an economic slump, the magazine said, citing sources in the chancellery and the finance ministry that it did not identify by name.

 

Under the German constitution, net federal debt can increase by only 0.35% of output if there is GDP growth. Rules are relaxed during a recession, allowing a slightly larger increase of debt.

Europe’s largest economy contracted in the second quarter and is forecast to grow 0.6% this year, down from over 2% growth in 2016 and 2017.

 
 

Business leaders and candidates to lead the Social Democratic party, Merkel’s junior coalition partner, have been leading calls for the government to loosen its purse strings and abandon the zero-deficit policy.

 

 

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Going to blow my own trumpet here.

When this thread started one of the key themes was how well US treasuries would do,especially for sterling investors.I didnt see any other calls out there for that to be part of someones portfolio.

We have spent a lot of time on gold and the miners lately,rightly so as they have made fantastic profits,and a lot of work was put into that.

However

https://www.hl.co.uk/shares/shares-search-results/i/ishares-iv-plc-usd-treasury-bond-20-year

Thats a fantastic return.Remember when the call to buy was made almost everyone was saying the bond bull was over and and they would collapse.

 

Now so far we have done very well,profits have far exceeded losses as we slowly enter inflation shares.BUT the next year is going to be very very dangerous,.The job now is to ensure families wealth isnt wiped out.There is nothing clever about losing our money last,that just means we join the end of the queue at the soup kitchen.

A key question i see now is this.When we get the hit and the likes of Experian shares go down 75%+,Burberry 80%+ etc as mentioned in the thread,do the likes of BT and VOD,Imperial and BAT,SSE etc also go down another 50% or do they turn?.When the builders collapse do people rush to buy utility like companies on PEs of 7 or do they sell them as well?

With sterling turning will UK cyclicals also turn,even in the teeth of a US market going down the pan? (US will likely see a last big jump as the Fed starts to ease,but too late to stop the debt deflation).

So far we have done a good job and earned ourselves a Nana nap on the sofa,but we cant sleep easily at all.

 

 

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A sobering post DB with some very important observations. Struggling to sleep tonight and have ended up on the forum and reading up on other sites as well. I didn't get my act together with the PM stocks so missed out on most of the potential gains although have managed to acquire a decent amount of physical gold and silver. I will be buying quite a few stocks as soon as my SIPP has been transferred and also have an HL isa recently set up. Still deliberating which shares to go for though!

In terms of the wider marketplace, I work in the construction industry (professional consultancy - own business husband and wife) and we have been called by two builders we know in the last week looking for tendering opportunities. This is a canary for us and suggests that work is beginning to dry up. Our particular bit of the industry is quite niche and this is the first sign to us of a slowdown (and perhaps is beginning to replicate the pattern we experienced in 2007/2008). Things can change very quickly once investors/companies lose confidence and either postpone or cancel projects. I expect the next 6 months or so will be very 'interesting'.

Our biggest dilemma is our house. We moved last year from a rural area , have refurbished the new house but not really liking it or the city location. We are about 3 or so years away from our planned retirement date and will move out of the area and more than likely head north to Yorkshire or Cumbria. We are now seriously contemplating sticking the house on the market soon and renting locally until we retire. There is a lot of capital in the house and whilst it's in a highly desirable area, it's current value feels very tenuous, only affordable to a small portion of the local population and likely to only go in one direction in the relatively near future! Getting the timing decision right for the move could hugely affect our finances going forward. 

Life is a real rollercoaster at times and big decisions that have to be made and the timing of them can have profound consequences!

I've been visiting and contributing to many online forums over the last 20 years and I have to say that this particular thread is perhaps the most informative, well mannered and rewarding one of all. Congratulations to all who have contributed over the last year and a bit. I would have liked to have been more involved but work takes up most of my time (and fortunately pays well!). Hopefully I'll have more spare time before too long and I can chip in with more comments, however inane they might be!

 

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4 hours ago, DurhamBorn said:

BUT the next year is going to be very very dangerous,......

Here's an analogy:  Advice on how to avoid an ambush, given to me from a seemingly knowledgeable trading friend....

.........

Sounded like: put the effort in up front, be cautious about the crowded and obvious trades, stay diversified, visualise scenarios and reactions, plan ahead, look ahead, use leading indicators you can trust, don't get panicked, stay focused, have an identified safe area, be prepared for lossess, seize opportunities if competent, don't think it's over, and stay ahead.

Or maybe just stay at home, but is doing nothing or relying on others always safer?

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Democorruptcy
9 hours ago, sancho panza said:

Love that Jimjams phrase ,haven't heard it before.

 

On a separate matter,would you partake of a separate political betting thread.Like you,I punt.I think there's cash to be made on the next GE and as ever,a few minds are better than one.

Treesa May started going on about helping those 'Just About Managing'. On ToS I came up with JIMJAMS at the same time as my explanation as to why they were struggling.

I'll always partake in a betting thread.  Although to be honest I haven't actually had a bet since the Grand National in April.

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19 hours ago, Tdog said:

DM is in full devastation mode today, they also have a "negative equity" story and refer to Help to Buy debt junkies.

https://www.dailymail.co.uk/news/article-7365861/First-time-home-buyers-five-cent-deposit-losing-house-prices-plummet.html?ns_mchannel=rss&ico=taboola_feed_desktop_news

One thing to consider with this article is it has a major flaw.

HTB purchasers don't get a mortgage at 95% LTV. Government loans them 20% (40% in London) so they get a 75% LTV mortgage. After the five years when they remortgage most are, or are planning to roll the HTB element into the new mortgage. Lower home prices help them to some degree as their 20% equity loan is now smaller.

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6 hours ago, Sasquatch said:

A sobering post DB with some very important observations. Struggling to sleep tonight and have ended up on the forum and reading up on other sites as well. I didn't get my act together with the PM stocks so missed out on most of the potential gains although have managed to acquire a decent amount of physical gold and silver. I will be buying quite a few stocks as soon as my SIPP has been transferred and also have an HL isa recently set up. Still deliberating which shares to go for though!

In terms of the wider marketplace, I work in the construction industry (professional consultancy - own business husband and wife) and we have been called by two builders we know in the last week looking for tendering opportunities. This is a canary for us and suggests that work is beginning to dry up. Our particular bit of the industry is quite niche and this is the first sign to us of a slowdown (and perhaps is beginning to replicate the pattern we experienced in 2007/2008). Things can change very quickly once investors/companies lose confidence and either postpone or cancel projects. I expect the next 6 months or so will be very 'interesting'.

Our biggest dilemma is our house. We moved last year from a rural area , have refurbished the new house but not really liking it or the city location. We are about 3 or so years away from our planned retirement date and will move out of the area and more than likely head north to Yorkshire or Cumbria. We are now seriously contemplating sticking the house on the market soon and renting locally until we retire. There is a lot of capital in the house and whilst it's in a highly desirable area, it's current value feels very tenuous, only affordable to a small portion of the local population and likely to only go in one direction in the relatively near future! Getting the timing decision right for the move could hugely affect our finances going forward. 

Life is a real rollercoaster at times and big decisions that have to be made and the timing of them can have profound consequences!

I've been visiting and contributing to many online forums over the last 20 years and I have to say that this particular thread is perhaps the most informative, well mannered and rewarding one of all. Congratulations to all who have contributed over the last year and a bit. I would have liked to have been more involved but work takes up most of my time (and fortunately pays well!). Hopefully I'll have more spare time before too long and I can chip in with more comments, however inane they might be!

 

Dont forget Durham,we have some fantastic places just avoid the small ex pit villages.Im 25 minutes from the coast,1hr30 from the Lake District,1hr30 from Scotland,Whitby etc 1hr20 ,east coast mainline in Darlington or Durham 20 mins can get London in 2hr10mins and we are the cheapest place in the country mostly for houses.

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We said it first didnt we?.Who else at the time,everyone was talking about cutting spending etc,here it is in black and white.

https://www.bbc.co.uk/news/uk-49377490

"It is obvious to me that when you've got some of the lowest rates on government debt this country has ever seen, I wouldn't be doing my job if I wasn't thinking seriously about how do we use [that opportunity]," he said.

Mr Johnson said the chancellor could take advantage of "extremely low interest rates" and begin "borrowing more to pay for more infrastructure".

Didnt i say they would borrow at long terms under 1%?

https://uk.reuters.com/article/uk-britain-bonds/uk-30-year-yields-fall-below-1-for-first-time-on-record-idUKKCN1V50Y6

Money supply is and has been far too low since 2010,hence why no real recovery.

https://uk.investing.com/economic-calendar/m4-money-supply-199

https://www.fxstreet.com/economic-calendar/event/dbf058b3-5de5-4be4-bbc1-ca6db55a2e15

Those numbers will start to move higher i expect in around 12 months as the government starts to inject direct into the economy.Could be 18 months if it takes a while to get projects going.

All of the above needs doing and quickly to avoid a depression.Debt deflation followed by reflation.

 

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Looking at how over-budget HS2 has gone - and the usual level of government incompetence on big projects - is your main concern the tangible results at the end of this cycle, or simply 'the numbers' working in our favour? 

 

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Talking Monkey
10 hours ago, DurhamBorn said:

Going to blow my own trumpet here.

When this thread started one of the key themes was how well US treasuries would do,especially for sterling investors.I didnt see any other calls out there for that to be part of someones portfolio.

We have spent a lot of time on gold and the miners lately,rightly so as they have made fantastic profits,and a lot of work was put into that.

However

https://www.hl.co.uk/shares/shares-search-results/i/ishares-iv-plc-usd-treasury-bond-20-year

Thats a fantastic return.Remember when the call to buy was made almost everyone was saying the bond bull was over and and they would collapse.

 

Now so far we have done very well,profits have far exceeded losses as we slowly enter inflation shares.BUT the next year is going to be very very dangerous,.The job now is to ensure families wealth isnt wiped out.There is nothing clever about losing our money last,that just means we join the end of the queue at the soup kitchen.

A key question i see now is this.When we get the hit and the likes of Experian shares go down 75%+,Burberry 80%+ etc as mentioned in the thread,do the likes of BT and VOD,Imperial and BAT,SSE etc also go down another 50% or do they turn?.When the builders collapse do people rush to buy utility like companies on PEs of 7 or do they sell them as well?

With sterling turning will UK cyclicals also turn,even in the teeth of a US market going down the pan? (US will likely see a last big jump as the Fed starts to ease,but too late to stop the debt deflation).

So far we have done a good job and earned ourselves a Nana nap on the sofa,but we cant sleep easily at all.

 

 

Very interesting question DB, I'm of the opinion they will go down somewhat in the huge downdraft but they've been so battered I cant see how they could halve from here

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