Credit deflation and the reflation cycle to come.

[Queasing]

8 hours ago, Thorn said:

Too early to say!😎

Just been over at ToS and given up because it looks crap now.

... so...can anybody remind me of that website- mentioned before on the earlier thread- for that lad who reports of macro trends in chemical supply and demand worldwide? 

I fancy having a look at what he is seeing...? 

Paul Hodges

https://www.icis.com/blogs/chemicals-and-the-economy/

 

[Castlevania]

SSE & Npower’s merger of their respective retail divisions has been binned

http://www.cityam.com/270649/sse-abandons-takeover-rival-energy-firm-npower

[sancho panza]

On 15/12/2018 at 18:49, UnconventionalWisdom said:

I'll be watching the SPX movement closely over the next few days. 50 day average moved below the 200 one. Bit of a head and shoulders pattern and lower than the start of the year. 

 

Yeah,been working all weekend.S&P futures were points down all from Fri.Can't believe the fall out today.

On 15/12/2018 at 19:39, Sideysid said:

Santa Rally cancelled methinks. Fed move on the 19th already factored in.

Yeah,Santa rally cancelled.If it couldn't rally here then New Year seems doubtful.But then I was wrong about teyh  santa rally.

On 15/12/2018 at 21:09, dgul said:

Quite.  I've always been interested in engine design flow.  An interesting example is the Austin seven engine, which was developed by Austin from 1922, developed for years (albeit with some serious development, like changing from 3- to 5-bearing for the crankshaft), then taken over by Reliant, given an ohv conversion in the 60's, then stayed in production (by Reliant) until 2002 or so -- 80 years of production of what was essentially the same fundamental engine design.

That's what I love about thsi thread -some of the insights that get thrown in reveal gems as above.I genuinely had no idea of that.

On 16/12/2018 at 01:43, Thorn said:

Aye - the INDU, SPX, VUSA, VUKE, VFEM and when you look at the DOW components, Verizon, Boeing... all look to be starting to roll over the top of their hills...

I'm out of all of them and expecting a massive drop now. Pretty much just IBTL, GDX look attractive at the moment, as well as some of the pm miners that might just get greener and greener.

Just watched The Big Short again, this time was the first time though with my better half. She suddenly isn't looking at me with that sort of look she had before. 

I'm off to adjust the chinstraps on my tinfoil helmet. 

And build a tinfoil hut for the whole family now under the table. 

 

Lots rolling over longer term indicators as we've been dsiiucssing for some time.I was wrong earlier this year saying pek was behind us but it nows seems like 99% that it is.

 

US stocks much more highly overvalued than UK stocks.

[Democorruptcy]

6 hours ago, Castlevania said:

SSE & Npower’s merger of their respective retail divisions has been binned

http://www.cityam.com/270649/sse-abandons-takeover-rival-energy-firm-npower

I thought SSE might pay less for it due to the price cap. My initial reaction is that it's bad news for my already underwater SSE. Share price currently down 2% but it's a red day.

[Majorpain]

38 minutes ago, sancho panza said:

Yeah,been working all weekend.S&P futures were points down all from Fri.Can't believe the fall out today.

Yeah,Santa rally cancelled.If it couldn't rally here then New Year seems doubtful.But then I was wrong about teyh  santa rally.

Lots rolling over longer term indicators as we've been dsiiucssing for some time.I was wrong earlier this year saying pek was behind us but it nows seems like 99% that it is.

US stocks much more highly overvalued than UK stocks.

The long term charts for the bubble stocks (AAPL/AMZN) show a very very steep decline from the peak, its very bitcoin-esk in its violence.  The everything bubble is showing signs of busting unless it gets some cash pumped back into it, Fed to hold on Wed?  They want to reduce financial risk taking but not at the expense of blowing up the economy.

Trump is getting his excuses in early....

[kibuc]

5 minutes ago, Majorpain said:

They want to reduce financial risk taking but not at the expense of blowing up the economy.

Stock market is NOT the economy, though, no matter how hard that narrative is pushed.

When a tech company has to settle for a single-digit growth YoY, its stock price gets decimated but it's still a successful, growing company. Current stock prices are a reflection of unrealistic expectations, not an actual health of a company (which might be absolutely fine).

[zugzwang]

Bad Santa rally.

[Thorn]

11 hours ago, Queasing said:

Paul Hodges

https://www.icis.com/blogs/chemicals-and-the-economy/

 

That’s the one- thanks a million Queasing.

He definitely seems to be saying demand for chemicals for making stuff is declining out there in general- forewarning of a crash.

 

[Majorpain]

5 hours ago, kibuc said:

Stock market is NOT the economy, though, no matter how hard that narrative is pushed.

I agree, however a lot of US pensions are built upon expecting growth in stocks every year.  If they cant get growth from stocks, cash pays peanuts and government bond yields are in the toilet from QE, where are they going to get their income?  CALPERS springs to mind.

Then you have the companies who have gorged on cheap debt and need to refinance at a higher rate if they can refiance at all. People have forgotten that turnover is vanity and profit is sanity.

It really doesnt look good.

[sancho panza]

https://moneymaven.io/mishtalk/economics/credit-spreads-signal-recession-PTKU_Qkk0UiDz19DqM88zg/

'First Time Since Lehman

The Financial Times reports US Credit Markets Dry Up as Volatility Rattles Investors.

Not a single company has borrowed money through the $1.2tn US high-yield corporate bond market this month. If that drought persists, it would be the first month since November 2008 that not a single high-yield bond priced in the market, according to data providers Informa and Dealogic.'

 

 

[zugzwang]

On 16/12/2018 at 16:40, DurhamBorn said:

Their big problem is the west will be putting them back into their box in the next cycle.Lots of manufacturing coming back.Without western tech they will be back to making plastic toys and xmas decorations.They are in a very difficult place.Most wealthy Chinese are and have been trying to get as much money as they can out of China.Its likely the Fed is tightening the world into a debt deflation so that there is massive demand for treasury notes,just as China will need to sell a lot.The only way to stop a dollar collapse is to make sure the biggest forced seller is selling into massive demand.I see the dollar going to 86 then 107 on the dollar index.Slight chance it undershoots to 76 first.

UK domestic stocks without exposure to the Chinese credit cycle have been smashed down to multi decade lows in some cases.Its ironic that a lot of these stocks will actually be facing into a much better macro picture than the stocks who need China to keep doing well and growing credit.The UK is lucky in lots of ways that the only real bubble it has is in house prices.Due to the structure of the mortgage market its likely only around 10% to 20% of mortgages will struggle in a house price crash.BTL of course will suffer the most pain,but their equity and their own home can go under.The other big problem the UK has is welfare spending and public pensions.Likely inflation will do the job of cutting those.

Hi, DB. Great to catch up with you again. I hope I don't put too many noses out of joint by letting on that this thread is principle reason I'm here.

Always interested in your calls and the rationale behind them.

As far as we know neither economics or finance can be mathematised. The only two falsifiable models that the economists managed to create - 1. Neoclassical rational expectations theory 2. Black-Scholes option pricing theory - have both been falsified. Thus, the tools of science appear to have limited applicability in the study of economics and we must instead complete our analyses in the manner of natural historians: mapping, classifying and constructing narratives of events. At the very least by doing so we are wrangling with empirical reality rather than thickets of abstraction.

[Barnsey]

Well, so far the S&P 500 is having it's worst December since the great depression 

Everyone thinking this is the big one but let's not give up on the Fed tomorrow to maybe, just maybe, spark that elusive Santa rally.

 

[King Penda]

21 minutes ago, Barnsey said:

Well, so far the S&P 500 is having it's worst December since the great depression 

Everyone thinking this is the big one but let's not give up on the Fed tomorrow to maybe, just maybe, spark that elusive Santa rally.

 

Bring it I want fucking chaos and house prices to get slaughtered I’ve just remortgaged and if interest rates hit 8.8 percent my mortgage will hit 135 quid a month I’m bricking it mind I am a selfish cunt used car prices might plummet to if the pcp brigade hand the keys back en mass

[DurhamBorn]

1 minute ago, stokiescum said:

Bring it I want fucking chaos and house prices to get slaughtered I’ve just remortgaged and if interest rates hit 8.8 percent my mortgage will hit 135 quid a month I’m bricking it mind I am a selfish cunt used car prices might plummet to if the pcp brigade hand the keys back en mass

My 13 year old car is still going strong,but i will buy something once the above happens.I tend to buy a 4 year old car every 10 years ish.I might change the van as well.Its into year 4 now and it cost me £900 with £250 spent on it so far.Part of me wants to keep my 2.0l diesel Pug going forever though and the bodywork probs has another 10 years in it.I could always Sorn it if i get a newer car later and do a bit of work on it like belts etc.Newer cars have far too much electrical on them that can go wrong.

[King Penda]

True the electrics are a weak point I’m tempted to get a Lexus ch they seem good for 150k plus just don’t fancy paying 10k for a 12 plate with around 40k

[Talking Monkey]

On ‎16‎/‎12‎/‎2018 at 16:40, DurhamBorn said:

Their big problem is the west will be putting them back into their box in the next cycle.Lots of manufacturing coming back.Without western tech they will be back to making plastic toys and xmas decorations.They are in a very difficult place.Most wealthy Chinese are and have been trying to get as much money as they can out of China.Its likely the Fed is tightening the world into a debt deflation so that there is massive demand for treasury notes,just as China will need to sell a lot.The only way to stop a dollar collapse is to make sure the biggest forced seller is selling into massive demand.I see the dollar going to 86 then 107 on the dollar index.Slight chance it undershoots to 76 first.

UK domestic stocks without exposure to the Chinese credit cycle have been smashed down to multi decade lows in some cases.Its ironic that a lot of these stocks will actually be facing into a much better macro picture than the stocks who need China to keep doing well and growing credit.The UK is lucky in lots of ways that the only real bubble it has is in house prices.Due to the structure of the mortgage market its likely only around 10% to 20% of mortgages will struggle in a house price crash.BTL of course will suffer the most pain,but their equity and their own home can go under.The other big problem the UK has is welfare spending and public pensions.Likely inflation will do the job of cutting those.

DB  is the drop to 86 when the market realises the Fed is done tightening, then a period of the DOW rallying etc after which the reality of the debt deflation kicks in so the dollar soars to over 100. Although a Christmas rally looks unlikely now in the Dow, so it probably come when Powell indicates he is done

[MrXxx]

Question for those that understand economic theory better than I do...

Is the incident yesterday (ASOS drop creating falls in others who seemed fine [contagion?]), a predictable sign of forthcoming recessions/stock market crashes I.e has it always preceeded previous crashes?

[leonardratso]

certainly a predictable sign of a tapped out consumer, or at least a consumer who decided to forgo that particular piece of junk.

[Harley]

42 minutes ago, MrXxx said:

Question for those that understand economic theory better than I do...

Is the incident yesterday (ASOS drop creating falls in others who seemed fine [contagion?]), a predictable sign of forthcoming recessions/stock market crashes I.e has it always preceeded previous crashes?

IMO, not economics, just the market.  But increased volatility, ideally on lower volume, can signal a downer.  Not that a fall always means a recession.  For retail, wonder who's shorting what?  Anything discretionary (consumer or business) is probably bad when the money has run out (maxed on debt, essentials taking all disposable).  But companies have record margins due to cheap labour, etc.  Expect that to change, maybe divs too.  Time to review 1929.

[kibuc]

1 hour ago, Harley said:

IMO, not economics, just the market.  But increased volatility, ideally on lower volume, can signal a downer.  Not that a fall always means a recession.  For retail, wonder who's shorting what?  Anything discretionary (consumer or business) is probably bad when the money has run out (maxed on debt, essentials taking all disposable).  But companies have record margins due to cheap labour, etc.  Expect that to change, maybe divs too.  Time to review 1929.

In IT, the labour market seems hotter than ever. I can only assume that some of the professionals are leaving for pastures new, which atm creates a bit of wage pressure. Could be a problem for online retailers in particular.

Having said that, there's a significant workforce tied up in all those sexy fintech startups that are bound to be swept away in the downturn, and all those specialists will be looking for a job so wages could really go either way.

[Barnsey]

Romanian taxi driver just telling me about how he was working for Carillion on £22 p/h, got a mortgage and 1 yr old kid, wife earning decent money as a teacher, really doesn't want to be driving for 30k a year blah blah blah.

Don't want to come across as "gammon" but you can see why so many voted the way they did. Even the Poles, Romanians and Lithuanians have quit my other half's workplace as £25k not enough???

This recession is going to hit them hard I'm afraid, and people think things are heated now, wait until the unemployment rate rockets...

[sancho panza]

Interesting to see HUI/XAU rallying hard yesterday.

 

Big thanks to all who helped with advice on my PM miner purchases Fri last week @DurhamBorn @kibuc @Majorpain-Tranche 2.1(2.2 is inbound soon).For once,I've had a green day.Tranche 1 brought across 2017 is still deep underwater thanks mainly to Newgold,,Goldcorpse and Eldorado.

'Spray n pray'

 

 

[sancho panza]

6 hours ago, Barnsey said:

Well, so far the S&P 500 is having it's worst December since the great depression 

Everyone thinking this is the big one but let's not give up on the Fed tomorrow to maybe, just maybe, spark that elusive Santa rally.

 

As you know I short a fair bity these days barnsey,but there's a lot of oversold stuff in the FTSE/US markets.Snap back short covering rally more than possible.I'm totally laying of UK builders/retailers-closed Dunelm yesterday.Waiting for a rally.

Like you I think 2019 will see us deep into the big kahuna.Personally,I think we'll dribble down and back up and then down again throughout the year.No big wave.

 

Do you have a view on the big wave or not?Slwo drowning? a la Mike Ashley lol

'I want to make it crystal clear,the mainstream High st as we thinik about it today-not teh oxford sts,not the Westfields,,the mainstream High sts are already dead........dead.They can't survive.Their patient has died.Now,mainstream ,that we're talking about the majority.Now what we're going to talk about is could we save teh vast minority.What can we do for them?'

 

6 hours ago, DurhamBorn said:

My 13 year old car is still going strong,but i will buy something once the above happens.I tend to buy a 4 year old car every 10 years ish.I might change the van as well.Its into year 4 now and it cost me £900 with £250 spent on it so far.Part of me wants to keep my 2.0l diesel Pug going forever though and the bodywork probs has another 10 years in it.I could always Sorn it if i get a newer car later and do a bit of work on it like belts etc.Newer cars have far too much electrical on them that can go wrong.

Ditto.Picked up a 4 year old Saab for £5k in 2015 that someone paid £30k for in 2011.I had to invest a little in a Turbo and clutch but it's done 3.5 years for me already .mrs P sometimes says 'why not treat yourself' but it's not in my nature to buy assets that I think will depreciate heavily.I'd rather own some utility stocks or PM miners to ease our early retirement some more or use the income to work less.

3 to 4 years seems to me the optimum point on the depreciation curve on almost all cars but particularly more expesnsive ones.Samllers cars I think there could even be a case for buying nearly new at 6 mopnths the depreciation curve is relativelty flat.

I think running cars to ten years makes sense,hereafter,the repair bills seem to creep up to me.

 

11 hours ago, zugzwang said:

Hi, DB. Great to catch up with you again. I hope I don't put too many noses out of joint by letting on that this thread is principle reason I'm here.

Always interested in your calls and the rationale behind them.

As far as we know neither economics or finance can be mathematised. The only two falsifiable models that the economists managed to create - 1. Neoclassical rational expectations theory 2. Black-Scholes option pricing theory - have both been falsified. Thus, the tools of science appear to have limited applicability in the study of economics and we must instead complete our analyses in the manner of natural historians: mapping, classifying and constructing narratives of events. At the very least by doing so we are wrangling with empirical reality rather than thickets of abstraction.

I always enjoyed your commentary/insights on ToS especially from the point of view of referencing Neo Classical economics and it's complete/utter failure to model or solve any of our problems.

[sancho panza]

4 hours ago, MrXxx said:

Question for those that understand economic theory better than I do...

Is the incident yesterday (ASOS drop creating falls in others who seemed fine [contagion?]), a predictable sign of forthcoming recessions/stock market crashes I.e has it always preceeded previous crashes?

It depends on the make up of the market concerned.FTSE 100 is far more exposed to world commodity prices than UK retail.

UK is going into a hosuing/FRB/leveraged loan recession(debt deflation),retial is Fubar as it grew way beyond where it should have done.

1 hour ago, Barnsey said:

Romanian taxi driver just telling me about how he was working for Carillion on £22 p/h, got a mortgage and 1 yr old kid, wife earning decent money as a teacher, really doesn't want to be driving for 30k a year blah blah blah.

Don't want to come across as "gammon" but you can see why so many voted the way they did. Even the Poles, Romanians and Lithuanians have quit my other half's workplace as £25k not enough???

This recession is going to hit them hard I'm afraid, and people think things are heated now, wait until the unemployment rate rockets...

Lot of EE's will head home,probably never to pay back their student loans.

What's a 'gammon'?Sounds intruging

 

Edit to add:thick?

Edit 2:Sorry to do politicvs but::::Brexit was about rising rents and declining real wages imho.I tried telling my remainer family members but they're too busy calling people bigots,racists and facists.(I'm second gen,Mrs P first gen).They honestly believe(because they're highly educated,that everyone watched the TV debates and was taken in by the £350mn bus).They also believe property goes only one way.

As wages decline some EE's will head home I suspect.

[Castlevania]

25 minutes ago, sancho panza said:

What's a 'gammon'?Sounds intruging

A derogatory term used by the SJW brigade to describe old white middle class men.