durhamborn

Deflationary collapse and the Reflation Cycle to Come.

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2 hours ago, durhamborn said:

I think we should make clear for any new readers that when we talk about a massive deflation we are talking a debt deflation and a huge downturn mostly driven by balance sheets both company and private.The demand drop will be quick and very sharp.I do think we might see price deflation running at -2% in the US,but the key isnt headline numbers.Its the fact balance sheets have so much leverage that very low inflation or falling margins will blow them up.Its about wealth destruction and financial dislocation on a massive scale and a following distribution cycle.

I still think we might see a sharp 25% sell off at some point followed by a small recovery, only for the bear to take things down again 60%+ peak to trough.

Im starting to see oil going to $15 in the bust.Hope the transports lock in those prices.Hedging at the right time could be crucial.

Chinese 10yr broke 4% for the first time since 2014 today.

Starting to look a little uncomfortable.

https://www.bloomberg.com/news/articles/2017-11-14/more-pain-ahead-for-china-bonds-after-10-year-yield-breaches-4

-1x-1.png

Edited by zugzwang

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3 hours ago, nome said:

I feel so reassured after consuming my latest piece of spoon fed propaganda courtesy of our State Controlled Broadcaster.... apparently inflation has DEFINITELY peaked and there DEFINITELY won't be any further IR rises until the end of next year at the earliest.

 

In fact I now feel so chipper about things I'm going to go out and buy myself a house first thing in the morning.

That's your decision, good for you, hope it works out for you.

Just please don't be one of these ***** who comes back here everyday wasting my time with your reasons and/excuses and trying to troll the residents.

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9 hours ago, durhamborn said:

I would avoid shorting individual companies as there is always the risk of a takeover etc and it involves leverage and that is best avoided.However il pick 3 just for fun including the S+P itself.

Amazon AMZN $1129

NVIDIA Corp NVDA $212.63

SPY (s+p tracker) $258.05

 

NVDA is a steep chart! Up over 100% in a year.

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11 hours ago, Sancho Panza said:

Having said that,my dad has been over from abroad and has picked up my habit of looking at shops and watching the footfall as he browses.He said he couldn't believe how many barber shops he was seeing,that were all mostly empty.Also remarked on the increasing tide of charity shops and empties in Leicester city centre.

Funnily enough, I found myself counting barber shops and tattoo parlours today. Loads of them, and so many close to each other too.

Edited by Eddie_George

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7 hours ago, Calcutta said:

That's your decision, good for you, hope it works out for you.

Just please don't be one of these ***** who comes back here everyday wasting my time with your reasons and/excuses and trying to troll the residents.

 

I'm guessing you haven't been around here long enough to appreciate when someones being sarcastic/ironic!

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Crushing your currency when we have very little manufacturing to substitute to might not be such a good idea.

http://www.independent.co.uk/news/business/news/uk-average-wage-growth-rate-inflation-real-incomes-fall-ons-a8055706.html

"real wages are still falling and showing the pick-up in earnings expected by the Bank of England has still not materialised."

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12 hours ago, Eddie_George said:

Funnily enough, I found myself counting barber shops and tattoo parlours today. Loads of them, and so many close to each other too.

What about car washing.......once not that long ago very many petrol stations had car washing machines, big blue brushes that washed rinsed and waxed a car automatically from basic wash to super wash, just enter appropriate token.....then what happened?  ;)

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3 hours ago, winkie said:

What about car washing.......once not that long ago very many petrol stations had car washing machines, big blue brushes that washed rinsed and waxed a car automatically from basic wash to super wash, just enter appropriate token.....then what happened?  ;)

UK productivity down (sure went up in last quarter, but overall).  Maybe car washes are the exemplar.  Less machine and more cheap (usually overseas?) labour.

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15 hours ago, Eddie_George said:

Funnily enough, I found myself counting barber shops and tattoo parlours today. Loads of them, and so many close to each other too.

Anything to do with benefits such as tax credits?  Isn't that sometimes the deal with selling the "Big Issue"?

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Giving people tax credits is not the answer, giving people a job that pays is.....only problem there are not the jobs that pay because the inflation target has become more of a priority than people, the numbers of people and what they can earn....growth only grows when firms are willing to invest in people.....when they are enabled not to they won't.;)

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9 hours ago, UnconventionalWisdom said:

Massive increase from 3 years ago. Proof AI is becoming more widespread? 

Just had a presentation at work ; can't do AI properly without dedicated hardware. Nobody likes Nvidia however so a rush to build alternatives. Nvidia not seen therefore as a sure bet longterm. 

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On 03/11/2017 at 11:45 AM, Option5 said:

Venezuela restructuring debts, how will this affect the rest of the world economies?

Venezuelan President Nicolas Maduro finally admitted his government can't afford to pay all of its mounting bills.

Maduro said in a televised speech Thursday that Venezuela and its state-run oil company, PDVSA, will seek to restructure their debt payments.

The oil company made a $1.1 billion payment on Thursday, he said, a sizable amount for a country with only $10 billion left in the bank. "But after this payment, starting today, I decree a refinancing and a restructuring of the external debt," Maduro told the country.

Venezuela is already deep into a humanitarian crisis, with people suffering from food and medical shortages. Many can't afford to buy basic items because prices are skyrocketing faster than wages. The country's currency, the bolivar, is worth less than a tenth of a U.S. penny.

Related: Venezuela blames Trump for missed debt payments

If Maduro's government can't reach a new agreement with bondholders over the debt restructuring -- which often means trying to pay less money -- it will end up defaulting.

That would trigger a potentially ugly series of events.

http://money.cnn.com/2017/11/02/news/economy/venezuela-debt-restructuring/index.html

 

Venezuela Signs $3.2 Billion Debt Restructuring Deal With Russia

As Venezuela teeters right on the brink of complete financial collapse, Bloomberg reports that Russia has agreed to restructure roughly $3.2 billion in outstanding obligations.  While details of the restructuring agreement are scarce, both sides reported that the deal spreads payments out over 10 years with minimal cash service required over the next six years.

http://www.zerohedge.com/news/2017-11-15/venezuela-signs-32-billion-debt-restructuring-deal-russia

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AI requires a mobile phone reliable connection and fibre broadband direct to places of work and homes.....some people have neither......very many do not own or have access to a smart phone or a computer.....let's do away with cash and cheques.....when the system crashes let's see how they will cope.;)

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On 14/11/2017 at 4:27 PM, durhamborn said:

I think we should make clear for any new readers that when we talk about a massive deflation we are talking a debt deflation and a huge downturn mostly driven by balance sheets both company and private.The demand drop will be quick and very sharp.I do think we might see price deflation running at -2% in the US,but the key isnt headline numbers.Its the fact balance sheets have so much leverage that very low inflation or falling margins will blow them up.Its about wealth destruction and financial dislocation on a massive scale and a following distribution cycle.

I still think we might see a sharp 25% sell off at some point followed by a small recovery, only for the bear to take things down again 60%+ peak to trough.

Im starting to see oil going to $15 in the bust.Hope the transports lock in those prices.Hedging at the right time could be crucial.

Question for durhamborn - I have not looked through all 96 pages of this topic but what do you think will happen to house prices in the north of England if/when the deflation/reflation cycle kicks in?? Do you have any idea where house prices in the north would be 5 or 10 years after the cycle turns?

I, for one, have been amazed at the level of HPI in the past 10 years in the south of England.  All my common sense instincts tell me that this enormous global debt bubble must burst, but I thought it would have burst a few years ago. 

TIA

 

 

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18 minutes ago, ukmark62 said:

Question for durhamborn - I have not looked through all 96 pages of this topic but what do you think will happen to house prices in the north of England if/when the deflation/reflation cycle kicks in?? Do you have any idea where house prices in the north would be 5 or 10 years after the cycle turns?

I, for one, have been amazed at the level of HPI in the past 10 years in the south of England.  All my common sense instincts tell me that this enormous global debt bubble must burst, but I thought it would have burst a few years ago. 

TIA

 

 

I would think they will go down a lot,though some are already at 1993 prices (lower end terrace houses).The big hits will likely be on the new build help to buy houses.Those will likely go from £130k/£150k to £50k or less.The south will likely see 70%+ falls.The best buys will be in market towns as you dont want to be in a city at the end of a reflation cycle.The end of the inflation cycle will probably bring in a massive collapse on a scale never seen before for the UK.The US will be as bad as will most of the west.For now though we have the biggest ponzi in history built on sand.The unwind is going to be epic,but even that will seem small compared to the end of the reflation.The next 8 years will be remembered for 1000 i think.

 

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4 minutes ago, durhamborn said:

I would think they will go down a lot,though some are already at 1993 prices (lower end terrace houses).The big hits will likely be on the new build help to buy houses.Those will likely go from £130k/£150k to £50k or less.The south will likely see 70%+ falls.The best buys will be in market towns as you dont want to be in a city at the end of a reflation cycle.The end of the inflation cycle will probably bring in a massive collapse on a scale never seen before for the UK.The US will be as bad as will most of the west.For now though we have the biggest ponzi in history built on sand.The unwind is going to be epic,but even that will seem small compared to the end of the reflation.The next 8 years will be remembered for 1000 i think.

 

Thanks for the reply!

Wow - you're not pulling any punches!!

I'm planning on relocating to the North East (County Durham or Northumberland) in the next 5-10 years and I'm budgeting on house prices there going up 50%!! (Plan for the worst etc ....  just to be on the safe side).

What you are describing is armageddon. I honestly believe that this SHOULD happen - but I have a nasty sneaking feeling that somehow the powers that be will desperately find a way to keep this going for a lot longer than I can imagine ( I don't know how but lies go a long way..............)  I honestly believe the crash of '08-09 was largely engineered by the Fed and other corrupt institutions, so that they could justify this enormous debt binge that makes the already obscenely wealthy, exponentially wealthier!!

Do you see any way that the deflationary collapse can be avoided?  Imagining house price falls of such magnitude would make 95% of the population laugh - maybe that is why it will happen.  Just to confirm that you think the worst will probably arrive in about 8-10 years?  That would be your best estimate? Will make for very interesting times.

 

 

 

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9 minutes ago, ukmark62 said:

Thanks for the reply!

Wow - you're not pulling any punches!!

I'm planning on relocating to the North East (County Durham or Northumberland) in the next 5-10 years and I'm budgeting on house prices there going up 50%!! (Plan for the worst etc ....  just to be on the safe side).

What you are describing is armageddon. I honestly believe that this SHOULD happen - but I have a nasty sneaking feeling that somehow the powers that be will desperately find a way to keep this going for a lot longer than I can imagine ( I don't know how but lies go a long way..............)  I honestly believe the crash of '08-09 was largely engineered by the Fed and other corrupt institutions, so that they could justify this enormous debt binge that makes the already obscenely wealthy, exponentially wealthier!!

Do you see any way that the deflationary collapse can be avoided?  Imagining house price falls of such magnitude would make 95% of the population laugh - maybe that is why it will happen.  Just to confirm that you think the worst will probably arrive in about 8-10 years?  That would be your best estimate? Will make for very interesting times.

 

 

 

Don't feed the trolls :lol:

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2 minutes ago, ukmark62 said:

Thanks for the reply!

Wow - you're not pulling any punches!!

I'm planning on relocating to the North East (County Durham or Northumberland) in the next 5-10 years and I'm budgeting on house prices there going up 50%!! (Plan for the worst etc ....  just to be on the safe side).

What you are describing is armageddon. I honestly believe that this SHOULD happen - but I have a nasty sneaking feeling that somehow the powers that be will desperately find a way to keep this going for a lot longer than I can imagine ( I don't know how but lies go a long way..............)  I honestly believe the crash of '08-09 was largely engineered by the Fed and other corrupt institutions, so that they could justify this enormous debt binge that makes the already obscenely wealthy, exponentially wealthier!!

Do you see any way that the deflationary collapse can be avoided?  Imagining house price falls of such magnitude would make 95% of the population laugh - maybe that is why it will happen.  Just to confirm that you think the worst will probably arrive in about 8-10 years?  That would be your best estimate? Will make for very interesting times.

 

 

 

I dont see any way the collapse can be avoided no.There could always be something of course,but i think its certain.The end of the reflation cycle will see systemic collapse i think and the biggest depression in our history.No government dare even cut a benefit or pension in fear of not being elected.The whole of society has decided we can borrow more and more forever.Government,public,institutions,everyone.This folly is what will see a situation where government cant pay for much at all.The collapse at the end of the reflation will see governments reset what they fund and will see the welfare state cut to the bone.My friend is already working on where people can invest towards the end of that cycle to avoid as much of the pain as possible.His clients are Fortune 100 pension funds.For now though he is concerned about the collapse dead ahead and then the size of the printing to bring in the reflation.Our focus needs to be on that for now because its going to be very nasty.

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Subtly, the EU is looking to establish preparations for the coming banking crisis and how to protect the banks from massive withdrawals. The solution? The EU wants to be able to temporarily free up credits for the banks and at the same time to freeze bank deposits, In other words, like Greece, you just won’t be able to withdraw funds.  In other words, everything will be frozen. The current EU plan envisages blocking account disbursements for five working days and with the authority to extend any suspension to up to 20 days.

Recommend that you have 30 days worth of cash on hand. What the authorities do not understand is that if they freeze one bank, a run will unfold on all banks. The public will not believe whatever the government says. Therefore, banks that are not in crisis can be pushed into a crisis by a contagion. That is simply how it all unfolded in 1931-1933. The only way to stop a contagion will be a bank holiday and you have to close them all.

CASH will be KING in the middle of such a contagion.

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11 hours ago, durhamborn said:

I would think they will go down a lot,though some are already at 1993 prices (lower end terrace houses).The big hits will likely be on the new build help to buy houses.Those will likely go from £130k/£150k to £50k or less.The south will likely see 70%+ falls.The best buys will be in market towns as you dont want to be in a city at the end of a reflation cycle.The end of the inflation cycle will probably bring in a massive collapse on a scale never seen before for the UK.The US will be as bad as will most of the west.For now though we have the biggest ponzi in history built on sand.The unwind is going to be epic,but even that will seem small compared to the end of the reflation.The next 8 years will be remembered for 1000 i think.

 

I often read this thread with interest but why would you not want to be in a city ?

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25 minutes ago, houseface2000 said:

I often read this thread with interest but why would you not want to be in a city ?

I think the reflation cycle will end in systemic collapse.Government spending will be slashed.Market towns people tend to know each other,so much less chance of serious violence etc.Im a contrarian and i always add that into my macro work.So for me its likely London and the South will see house prices below northern levels at some point.Not end of the world stuff,but a massive reset of what government can pay for and a huge fall in living standards.

Thats way out in the future though and a lot depends on how this cycle ends,the scale,and the response.We have enough to worry about already.

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12 hours ago, durhamborn said:

I would think they will go down a lot,though some are already at 1993 prices (lower end terrace houses).The big hits will likely be on the new build help to buy houses.Those will likely go from £130k/£150k to £50k or less.The south will likely see 70%+ falls.The best buys will be in market towns as you dont want to be in a city at the end of a reflation cycle.The end of the inflation cycle will probably bring in a massive collapse on a scale never seen before for the UK.The US will be as bad as will most of the west.For now though we have the biggest ponzi in history built on sand.The unwind is going to be epic,but even that will seem small compared to the end of the reflation.The next 8 years will be remembered for 1000 i think.

 

Living wage at 7.50 an hour (minimum wage is 7.05, real living 8.75) 40 hours times 2 people per year is 31,200.  50k over 30 years monthly repayment is 630 a month at 15%. Is that how you see it? 1.6x household income?

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2 minutes ago, Democorruptcy said:

Living wage at 7.50 an hour (minimum wage is 7.05, real living 8.75) 40 hours times 2 people per year is 31,200.  50k over 30 years monthly repayment is 630 a month at 15%. Is that how you see it? 1.6x household income?

I think 1.5 times joint minimum wage income for starter home will be about right yes.In 1992 in the north east starter homes could be had for around 1.2 times joint incomes.Most of the falls though will be where they are the most over priced.I dont really think much about house prices because apart from my own home none of my capital is invested in domestic property,but there is no doubt that prices will be smashed down hard in a deflation,not through rates,but through loss of income/earnings etc.People buying now on HTB etc will be the main victims i expect and of course BTL will be a disaster area,but maybe more so as rates rise in the next cycle and massive social housing build kicks in.We will see how things develop soon enough.

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