Credit deflation and the reflation cycle to come.

[Majorpain]

17 minutes ago, leonardratso said:

im afraid this is it with the naysayers, ive been reading zero hedge for years, its real doom porn, and as such its huge flags to failure are like reading the daily mail, just a bit of a laugh. It cries wolf, but when it finally happens, because of all the wolf crying, it will be completely missed.

Also with italy, are they the trigger to start the big infrastructure spending reflation? You know how other goverments just blindly follow each other rather than waiting to see the results of the others doing it. 

Zerohedge's record is 1000 to 0 of the last recessions   There is some good stuff on there, but it needs filtering out from the garbage.

Where is Italy (or the world for that matter) going to get the money from?  The ECB is already having kittens with the idea that the Populist parties can sell Euro debt to fund their welfare plans, when they are already in the shit to begin with.  The QE binge is effectively bringing forward demand from the future and spending it today, when the BOE deploys its £500bn slush fund i wouldnt want to be a fixed income pensioner.  The Inflation genie is not going to stay in the bottle forever.

[Funn3r]

3 hours ago, Cattle Prod said:

The investment was from when the industry was making pots of money up to 2015. Investment decisions were taken that are giving a fillip to production now. The govt does a pretty good job of trying to get us to collaborate and get more out, but as I keep saying we won't spend money on uncommercial projects. And the North Sea is following natural laws of decline. It'll continue declining, with a downtick coming from the lack of investment over the last 3 years.

Peak oil? As I said, much of the production plateau has been masked by shale and oil sand as the graph shows. What would have happened without that? They should have called it peak conventional (regular, flows easily) oil.

I think you can also see on that graph the rest of the world opening the spigots as prices crashed, to try and get cash in the door. I hope they didnt damage their reservoirs too badly (Mexico did)!

 

3 hours ago, DurhamBorn said:

From what im seeing in the macro picture i dont think il ever see these prices in houses again in my lifetime (southern/boom areas).Inflation adjusted,or maybe even nominal.The new build estates have been pumped on HTB and flogging 20% to corrupt social housing providers.Those people buying those are making a life changing mistake.I have friends whos daughters/sons have or are buying through HTB and it pains me,but i cant say anything because housing is a very emotional business and it might come across as finger wagging.

 

It's bloody horrible when you see nice young couples who just want somewhere stable to live so they buy a house. Especially if it is an HTB debtbox. You can actually see them likely writing off the rest of their lives in front of your eyes. If Venger were here he would say meh they made their informed choice but I disagree, the poor kids have been brainwashed by the MSM 

As you say though you can't mention any of this to them as it just looks like pissing on their picnic. 

[invalid]

5 minutes ago, Majorpain said:

Zerohedge's record is 1000 to 0 of the last recessions   There is some good stuff on there, but it needs filtering out from the garbage.

Where is Italy (or the world for that matter) going to get the money from?  The ECB is already having kittens with the idea that the Populist parties can sell Euro debt to fund their welfare plans, when they are already in the shit to begin with.  The QE binge is effectively bringing forward demand from the future and spending it today, when the BOE deploys its £500bn slush fund i wouldnt want to be a fixed income pensioner.  The Inflation genie is not going to stay in the bottle forever.

We/they can get the money simply by printing - but without the underlying fundamental of true wealth, resources and (topically) energy its not going to end well.

[sleepwello'nights]

40 minutes ago, null; said:

We/they can get the money simply by printing - but without the underlying fundamental of true wealth, resources and (topically) energy its not going to end well.

Exactly, that's why spending on infrastructure is a better use of the human capital of a country. If the resources are used for increases in consumption then they're gone with nothing to show. I'm definitely Keynsian on this topic, provided the infrastructure project is useful into the future then it gives longer benefit. 

[DurhamBorn]

4 hours ago, sleepwello'nights said:

Whilst I don't have enough knowledge or understanding of economic cycles and investment strategies to disagree with your analysis I cant help but wonder if your predictions will come about. I've followed numerous threads on TOS about the economy yet the doomsayers forecasts haven't come about.

In particular the handling of the US economy has changed under Trump. I watched the discussion posted on Thursday? in this thread with the economist worrying about US debt levels. With the US economy generating more employment will this mean that even with interest increases borrowers will still be able to service their debt. The debt burden will only become a crisis when unemployment rises and borrowers have to default. 

Most posters on here are debt averse and I wonder if that causes strong confirmation bias on how the economy will play out? 

I've just read the post above about Italy's infrastructure crumbling. Isn't that a golden opportunity for Keynsian economics to fill the hole caused by a reduction in consumer spending.  Better to rebuild some bridges than pay to have holes dug and filled in.

 

Very true,and nothing is ever certain,however macro and cycle work all point to a top,or very close to a top in UK housing.Government do everything to stop it now of course,housing benefit and HTB being the big ones,but as ever the market prices things to the max due to that.I would be very surprised if house prices didnt fall around 30% nominal minimum.The reflation ahead wont help house prices at all as it will be driving up long rates.There is an argument still that rising inflation and wages might help the indebted,but they are going to have a very difficult time at first given they have priced to the max on rates at around 2% on their mortgages.

[DurhamBorn]

2 hours ago, Majorpain said:

Zerohedge's record is 1000 to 0 of the last recessions   There is some good stuff on there, but it needs filtering out from the garbage.

Where is Italy (or the world for that matter) going to get the money from?  The ECB is already having kittens with the idea that the Populist parties can sell Euro debt to fund their welfare plans, when they are already in the shit to begin with.  The QE binge is effectively bringing forward demand from the future and spending it today, when the BOE deploys its £500bn slush fund i wouldnt want to be a fixed income pensioner.  The Inflation genie is not going to stay in the bottle forever.

They will print it,but passed direct to government i expect as they issue 50 year gilts with 0.1% coupons or similar.Inflation is certain the next cycle because the only way out of this dis-inflation cycle deflation will be government action direct into the economy.The seeds are already sown.The companies with massive capital invested in fixed assets are hated by the markets right now,they very companies who will see inflation flowing direct to their free cash flow.

[Democorruptcy]

44 minutes ago, DurhamBorn said:

They will print it,but passed direct to government i expect as they issue 50 year gilts with 0.1% coupons or similar.Inflation is certain the next cycle because the only way out of this dis-inflation cycle deflation will be government action direct into the economy.The seeds are already sown.The companies with massive capital invested in fixed assets are hated by the markets right now,they very companies who will see inflation flowing direct to their free cash flow.

Do you (or anyone else) have an opinion on Wind power? It seems to fit the bill re investing in fixed assets for future energy.

[DurhamBorn]

8 minutes ago, Democorruptcy said:

Do you (or anyone else) have an opinion on Wind power? It seems to fit the bill re investing in fixed assets for future energy.

I think it will do very well going forward.Solar will likely be the main focus,but wind has a big place.SSE might bring forward plans to use energy from wind at night to pump water into their hydro dams like huge batteries.Lots of distributed energy with gas likely the main  emergency load.Big oil will likely start to buy much more into the sector and probably not to far into the future.

[dgul]

On 31/08/2018 at 15:14, Eventually Right said:

A guy I follow on twitter made a case for gold not plunging during a stock market crash in the last few days.  His rationale was that whereas in 2008 the large spec positions were long, and gold was in a bull market, at the moment specs are short, and gold seems to be in a bear market.

Therefore in 2008, when the spec longs had to close their positions to meet margin calls, they sold, and gold sank.  If the same were to happen today, the specs would have to close their short positions by buying, which would have a positive effect on the price of gold and the miners.

It makes rational sense to me, although I'd have no clue what the spec position on gold was in 2008, so couldn't confirm whether it was net long, and by how much.

It may just mean that the PM miners wouldn't get to quite so crazy a bargain price, compared to other sectors, in the event of a crash.

I'd throw in a note of caution on this.

IMO the big central banks (US particularly) have a (unstated) mandate to stop gold getting out of control*.  They hold lots of gold, and can sell into the market to stabilise the price.  They can even sell gold they don't actually have (well, I'm sure they'll sell gold certificates for more gold than they've got, happy in the knowledge that as they own the currency they can solve any problems that emerge with that policy).  I don't think they'll do much with normal movements, but will sell if there was a short squeeze.  

I don't think there is a flip-side, particularly -- they don't buy to support when prices are low (except incidentally, to get out of short positions that they've put themselves into).

So, I don't think there's a big probability of a short squeeze spike in gold prices.  But I do think they'll go up a bit (this time) in the event of a general market crash.

Not sure about miners.  They should move with gold, but market crashes are irrational.

[* because increased confidence in gold == decreased confidence in their currencies]

[Bricks & Mortar]

Can anyone confirm if GDX can be traded on HL?  Considering opening an account for a small punt.

This would be my first foray into stocks, shares & financial products.  Not planning to stake anything I'm not prepared to lose.

[Thorn]

8 minutes ago, Bricks & Mortar said:

Can anyone confirm if GDX can be traded on HL?  Considering opening an account for a small punt.

This would be my first foray into stocks, shares & financial products.  Not planning to stake anything I'm not prepared to lose.

Not any more since they closed the window/ they say they are awaiting a KID document for it. As far as I know you can sell it if you’ve already got some on HL but you can’t get it there eg for SIPP.

[Thorn]

11 minutes ago, Thorn said:

Not any more since they closed the window/ they say they are awaiting a KID document for it. As far as I know you can sell it if you’ve already got some on HL but you can’t get it there eg for SIPP.

And if you do get some I would invest in  a couple of those big handles you get for disabled bathrooms. Just for holding on to while you watch the little fecker.

[dgul]

24 minutes ago, Bricks & Mortar said:

Can anyone confirm if GDX can be traded on HL?  Considering opening an account for a small punt.

This would be my first foray into stocks, shares & financial products.  Not planning to stake anything I'm not prepared to lose.

You could get AUCO -- which invests in the same market -- it doesn't actually  track GDX, but is pretty close.  UK etf so should be tradeable.

[AUCP is similar, but £ not $ based.  I've no idea about the relative merits.]

[I've no idea about the counterparty risks, liquidity, etc -- so don't blame me...]

[leonardratso]

theres physical as in SSLV / SGLD in £ from investco. Ive got some SSLV, slight loss on it so far, have had it before and have found it easy to buy/sell so must be liquid at least.

[Bricks & Mortar]

Thanks to all who replied.

I'll look into AUCO and AUCP.   Might just go there.

Looked at SSLV before - About a month ago, when I was doing a wee test on Royal Mint signature silver - I think it was you who pointed the direction.  Have since gone for more of the signature, although I do recognise SSLV could be had with lower fees.  The main reason is I intend to hold as a hedge against financial collapse - and value Royal Mint being state owned.

I was sort of expecting that about the KID.  Had noted this on the VanEck website, but see there's nothing on HL.  This might not even be the doc in question:
https://www.vaneck.com/etf-europe/library/regulatory-documents/kiid-gdx-en/

 

[Lavalas]

9 hours ago, Gordie Lastchance said:

This also jumped out at me. Late last December, we had a gas engineer (domestic/boiler) at the house. Interesting guy. Said how Britain had been hours away from running out of gas that month. I can't remember what was going on at the time to put supplies on such a critical footing, but mention was made of not having storage in the country with Rough being closed. Durhamborn has spoken often about infrastructure being at the leading edge of investment when the turn comes - so I wonder if gas storage will be at the head of the list, especially if we get a cold winter and people talking about it this year?

This was broadly the thinking behind @Solzhenitsyn Infrastrata tip...

http://www.infrastrata.co.uk/

Up +100% since then. Not sure if there are any other companies to look at.

[macca]

On 31/08/2018 at 10:05, null; said:

Really appreciate your input, great to have someone from the industry sharing their knowledge.

I'm probably a bit more optomistic on EVs and battery storage. Lots of political pressue for EVs for clean air.

All our company cars will be EV from now on with tax on diesel cars being so high a 50k C300h merc cost the same as a diesel VW golf by the time you have added emissions tax.

[King Penda]

10 hours ago, Cattle Prod said:

As I said I didn't bring up oil here for investment reasons, more for the importance to the economy. In short: knowing how predrill volumes are calculated, how easy they are to tweak, pushed to the high side etc I would never ever invest in small oil and gas. Stick with the majors is my advice. 

I'll just comment on Hurricane and leave it at that. They're doing a great job, trying something new, potentially big. But the whole thing is hanging on an extended well test. I can assure you that no one in the company, let alone the financial markets, knows if it will perform to expectations. If the pressure drops off too quickly, it's worthless. I hope they do it, but its just a bet, and I don't invest in that.

i was told that ,but i still bought 400 quids worth of the falklands 4 its 5 now i think,my entire thought was to buy rkh ie rockhopper because it had the best logo.they cost around 40p sold em for 180-i was fking lucky.mind i did it again with gkp wish i had kept them they are 267 now but i had 5000 at one time for 3.5k.but you can often get a 10% rise before spudding but i was a hit and run guy on the aim market.i managed to clear 12.5 k of debt and raise a 10k deposit on a house within 30 months and i invested maybe 300 a month in my share dealing acount.ive still got a 1000 tw. shares to sell.

[macca]

5 hours ago, Democorruptcy said:

Do you (or anyone else) have an opinion on Wind power? It seems to fit the bill re investing in fixed assets for future energy.

I worked on wind farms at sea for a while.. we had a problem with pirates.. 😂

someone was stealing the winches off the top of the platforms that were used to get spares up from the boat.. 

Who would have use for a big marine grade winch? 

Bet those winches have caught allot of fish.. 😂

anyways they have cctv on them now to catch any drunken sailors who pass by.. 

Think there will be big money in this industry.. 

although solar is the cheapest now and getting cheaper every year with production cost falling and technology improving.. 

[sancho panza]

On 31/08/2018 at 22:59, Cattle Prod said:

 

A comment on the least experienced. I once had an after dinner talk by an F1 team manager. After the saucy anecdotes and bravado, he told a story of burst tires. The driver was blowing out all round the track. Into the pits, raging. Mechanics, puzzled. Cursing Pirelli. Temperature is very important fir those tires, they wrap them in space blankets. Long story short: the most junior guy in the pit saw that the stacked tyres were touching (hot) concrete wall. Blistering them. Lesson? Listen to the most inexperienced guy - he has a unique view 

 

Great story.I work in a clinical environment and I always say to the people i work with at the start of the shift,

'Don't be afraid to insult my intelligence if you think I've missed anything because I probably have.'

You're only as good as your last job and I've had people with zero experience point out really pertinent issues that I'd missed.

That's why I've enjoyed this thread,novices and non novices sharing what they know and trying to educate each other.

Praise be to Spunko for creating this oasis of free speech.

19 hours ago, RickyBacker said:

 

Ricky,thanks for that.Super watch .I'd never really thought about these things before.

 

13 hours ago, DurhamBorn said:

From what im seeing in the macro picture i dont think il ever see these prices in houses again in my lifetime (southern/boom areas).Inflation adjusted,or maybe even nominal.The new build estates have been pumped on HTB and flogging 20% to corrupt social housing providers.Those people buying those are making a life changing mistake.I have friends whos daughters/sons have or are buying through HTB and it pains me,but i cant say anything because housing is a very emotional business and it might come across as finger wagging.

 

I think once house prices start dropping,the credit deflation will force the banks to pull lending which will prices down more.Wolf Richter had a piece on falling rents in the USA the other day which if replicated in the uk will see LL's living off 5% gross yields getting mullered.

13 hours ago, Cattle Prod said:

 

Agree housing is emotional. I begged a good friend to sell his apartment in 2007, he wouldn't hear of it. Hes still in it. I never said I told you so, or even mentioned it again, but I guess I represented 'I told you so' to him, and he shut himself off from me. Housing market crashes are painful horrible things, because they are personal.

A while back,you said housing in the UK peaked 6 months ago.Was that based on data or your experience of your locality.

AS per your friend,thos situations are very difficult to handle.I have a lot of friends balls deep in BTL.Some don't even know what S24 is or that their family home is in the credit chain.

10 hours ago, Majorpain said:

Zerohedge's record is 1000 to 0 of the last recessions   There is some good stuff on there, but it needs filtering out from the garbage.

Where is Italy (or the world for that matter) going to get the money from?  The ECB is already having kittens with the idea that the Populist parties can sell Euro debt to fund their welfare plans, when they are already in the shit to begin with.  The QE binge is effectively bringing forward demand from the future and spending it today, when the BOE deploys its £500bn slush fund i wouldnt want to be a fixed income pensioner.  The Inflation genie is not going to stay in the bottle forever.

Agree as per ZH,you really have to sift the wheat from the chaff

[UnconventionalWisdom]

8 hours ago, sancho panza said:

AS per your friend,thos situations are very difficult to handle.I have a lot of friends balls deep in BTL.Some don't even know what S24 is or that their family home is in the credit chain.

This is exactly how the housing crisis got to this point, people reading rich dad, poor dad and thinking it's easy and just about taking chances. When they see HPI it's conformation bias and they go further. School should have taught us to do our homework but these guys just think it's about good debt, bad debt. As DB says, it hurts the most people when market conditions change. 

[DurhamBorn]

26 minutes ago, UnconventionalWisdom said:

This is exactly how the housing crisis got to this point, people reading rich dad, poor dad and thinking it's easy and just about taking chances. When they see HPI it's conformation bias and they go further. School should have taught us to do our homework but these guys just think it's about good debt, bad debt. As DB says, it hurts the most people when market conditions change. 

Its something most people dont understand,but its a law that repeats itself in every cycle.Housing in the UK is a prime example.The sad part is the young buying right now on HTB are the ones who are going to take the most pain.Up here 3 beds on those estates are going on HTB at around £140k (most couples will be on around £40k/£33k after tax,£27k after tax and 2 car lease).I fully expect those prices to be cut in half,but at least 40% down.Not only that those estates will look and be terrible in ten years.The lack of any green space,tiny roads,no parking and 20% social housing ensure it.That means most wont be able to sell because they will be in negative equity and way underwater.The best they can hope for is struggle through with a big mortgage and live forever in a shit house on a shit estate,never be able to save,never be able to retire before ill health or state retirement age.They are locking that in.

 

[Mere mortal]

51 minutes ago, DurhamBorn said:

Its something most people dont understand,but its a law that repeats itself in every cycle.Housing in the UK is a prime example.The sad part is the young buying right now on HTB are the ones who are going to take the most pain.Up here 3 beds on those estates are going on HTB at around £140k (most couples will be on around £40k/£33k after tax,£27k after tax and 2 car lease).I fully expect those prices to be cut in half,but at least 40% down.Not only that those estates will look and be terrible in ten years.The lack of any green space,tiny roads,no parking and 20% social housing ensure it.That means most wont be able to sell because they will be in negative equity and way underwater.The best they can hope for is struggle through with a big mortgage and live forever in a shit house on a shit estate,never be able to save,never be able to retire before ill health or state retirement age.They are locking that in.

 

Hi,

When do you think we will see prices really start to tumble ? I've not long moved back from OZ to UK. Want to buy somewhere to live (currently staying with parents), but nervous to put my cash into the property market right now. So tired of estate agents round here saying " oh we won't be affected by any price crash, it won't happen here blah blah .... then they add another house for sale for 20 grand more than an identical one that's been on the market a year and not sold...

[UnconventionalWisdom]

1 hour ago, Mere mortal said:

Hi,

When do you think we will see prices really start to tumble ? I've not long moved back from OZ to UK. Want to buy somewhere to live (currently staying with parents), but nervous to put my cash into the property market right now. So tired of estate agents round here saying " oh we won't be affected by any price crash, it won't happen here blah blah .... then they add another house for sale for 20 grand more than an identical one that's been on the market a year and not sold...

Timing is difficult to achieve. As WICAO said on the other side, you could miss out by following one path waiting for the crash. It's important to look at the figures and facts and make a decision you are happy with. October is crash season but who knows, I wouldn't be surprised if any downturn is blamed on brexit next spring. 

[Band]

15 minutes ago, UnconventionalWisdom said:

Timing is difficult to achieve. As WICAO said on the other side, you could miss out by following one path waiting for the crash. It's important to look at the figures and facts and make a decision you are happy with. October is crash season but who knows, I wouldn't be surprised if any downturn is blamed on brexit next spring. 

Didnt Buffet once say stock markets are where the patient take money from the impatient or words to that affect.