Deflationary collapse and the Reflation Cycle to Come.

[Freki]

oh yeah free money, what an oxymoron.

Once we do not believe in our own money, humanity will have to mutate in something new.

[durhamborn]

Just now, Freki said:

oh yeah free money, what an oxymoron.

Once we do not believe in our own money, humanity will have to mutate in something new.

Its not free money though,its in exchange for having all the common land stolen many years ago.Many people on welfare now get much higher incomes than people working.They would see very big cuts.Its not relevant at the moment,but it will be one day.Probably another cycle to go first.

[Houdini]

1 hour ago, durhamborn said:

https://www.ft.com/content/8865383b-d82c-3ca2-bad0-057774d4588a

Tightening into a recession.

Equally US car sales don't look good

NISSAN AUG. U.S. AUTO SALES FELL 13%, EST. DOWN 0.6%

Yes its 1 company compared to the whole industry but the final figure is going to be far worse then -0.6%

[Errol]

2 minutes ago, Houdini said:

NISSAN AUG. U.S. AUTO SALES FELL 13%, EST. DOWN 0.6%

lol. Did the person who did the estimates get fired?

[durhamborn]

Just now, Houdini said:

Equally US car sales don't look good

NISSAN AUG. U.S. AUTO SALES FELL 13%, EST. DOWN 0.6%

Yes its 1 company compared to the whole industry but the final figure is going to be far worse then -0.6%

Auto sales are falling off a cliff in the US.The dealers are seeing stock go up and up on the forecourt even with big price cuts.

 

[kibuc]

1 hour ago, durhamborn said:

https://www.ft.com/content/8865383b-d82c-3ca2-bad0-057774d4588a

Tightening into a recession.

Previous releases got revised down, too: 21k down for June and 20k down for July.

[stuckmojo]

18 minutes ago, durhamborn said:

Auto sales are falling off a cliff in the US.The dealers are seeing stock go up and up on the forecourt even with big price cuts.

 

Though it appears that the hurricane has somewhat solved the inventory problem in Texas and so on - it's an insurance problem now. 

[Houdini]

36 minutes ago, Errol said:

lol. Did the person who did the estimates get fired?

if he's working in a central bank he's probably been promoted

[Errol]

If Everything's So Awesome, Why Did US Construction Spending Growth Just Collapse To Its Worst Since 2011?

http://www.zerohedge.com/news/2017-09-01/if-everythings-so-awesome-why-did-us-construction-spending-growth-just-collapse-its-

[Democorruptcy]

58 minutes ago, durhamborn said:

Auto sales are falling off a cliff in the US.The dealers are seeing stock go up and up on the forecourt even with big price cuts.

 

 

The average "incentive" has gone up just over $1100 from 2012 to 2017. If that's a discount but the price has gone up more than that, the price hasn't been cut? Leasing should allow them to charge more as it's on the tick.

[durhamborn]

18 minutes ago, Democorruptcy said:

 

The average "incentive" has gone up just over $1100 from 2012 to 2017. If that's a discount but the price has gone up more than that, the price hasn't been cut? Leasing should allow them to charge more as it's on the tick.

Yes ,the key point on the discounts if from last year to this year.They went up a lot just as the vehicles on the forecourts started to go up.Leasing must of topped out as well seeing as sales are falling.I would expect much bigger falls in sales as we move forward..

[Option5]

7 minutes ago, durhamborn said:

Yes ,the key point on the discounts if from last year to this year.They went up a lot just as the vehicles on the forecourts started to go up.Leasing must of topped out as well seeing as sales are falling.I would expect much bigger falls in sales as we move forward..

If it's the same as the UK the dealers get so many days before they have to pay the car company. If they sell in that time they're quids (dollars?) in. If they're stuck with it they're losing margin paying the interest on the money they owe the bank (most sales cars are financed, usually by the finance company the dealer promotes). Therefore it pays them to discount to get rid of the cars before they have to pay for them, even if they make no profit. If cars carry on hanging around we can expect quite a few manufacturer independent car sale companies to go under, followed by manufacturers outlets being closed down.

[Will!]

On 01/08/2017 at 8:51 PM, Calcutta said:

Would war be in China's economic interests? I'm not thinking WW3 nuclear apocalypse, full scale total war with the US, but perhaps engineering a conflict between their puppet in Pyongyang and a US alliance. There's always issues with India/Pak and the Himalaya border regions. The South China Sea islands have various opportunities for a decent conflict.

They'd be playing a very dangerous game and if they drew the US into a wider conflict they're finished. But how much could it be worth to them? Are they in that much trouble it'd be worth the risk?

A friend of mine's father is a senior manager in a state run Chinese chemical company.  He is well paid but he has juniors who covet his position and rivals who would do him down.  He's well aware that an accusation of embezzlement or similar could land him in prison with his assets that the Chinese state knows about seized.  He also anticipates that the Chinese credit bubble will burst with massive monetary destruction and deflation in China.  He thinks the Chinese Communist Party will respond to this by loosening North Korea's leash a little bit and use the prospect of a small war to distract the Chinese people from the economic downturn and also as an economic stimulus.  We may be seeing this already.

For these reasons he is moving his money out of China and into property in... Sutton!  He doesn't know much about Sutton, but he knows it's 'in London' and he's heard of London.  He doesn't really care about an HPC and a sterling collapse because losing ~90% of the cash value of his bolt hole is better than losing 100% of his assets and going to prison. 

Edited September 1, 2017 by Will!

[leonardratso]

maybe he ignored the coalfield suffix on the forms, hahaha would be funny if only

[Sancho Panza]

On 8/30/2017 at 5:15 PM, Fence said:

Care to share any thoughts on the answer or the general question of risk mitigation?

For my part, I have started (here!) a risk assessment of:

• Institutional risk.  Institutions include "debtors" (e.g. banks, brokers, prepayments), creditors (e.g. credit card and mortgage companies), and custodians (e.g. of paperwork, stock certificates, and assets).
• Security risk, such as the risk of collapse of providers (e.g.  ETF managers), bad terms (e.g. ability to halt redemptions, ability to seek immediate repayment), bad practices (e.g. loaning of underlying assets) and the degree to which the security actually meets requirements (e.g. physical versus derivative backed backed ETF). 
• Regulatory risk.  This covers government or other regulatory changes resulting in loss (where a loss could either be a loss of value or incurring avoidable costs).  Examples include capital controls, limits on money withdrawals, confiscation, banning of certain assets, taxes, market closures or bans, and forced bond/gilt swaps/purchases.    
• Performance risk (i.e. market risk).  The risk of a loss of asset value by making a bad investment decision.  But it also includes the inverse - loss of performance through being too risk adverse.

.

I'm going to break these up for comment.Some excellent analysis Fence.Excellnet because they highlight a lot of worries I have

1) Institutional risk-see RBS,see many brokers moving to holding investor's shares in nominees meaning that the shares become their assets in the event of a bail in being needed.All under the cover of it making it cheaper and more efficient to hold the shares.Huge MF Global style risk. If it's looks and sounds like they're prepping for a bail in,they are probably expecting one.

2) ETF's- depending how they hold the underlying asset or if instead they actually purchase a construct of derivatives.Anything based on derivatives is subject to a big player going under

3) Regulatory risk could also include a range of omissions on the parts of regulators not exercising appropriate oversight

4) Market risk comes with the territory.

[Sancho Panza]

On 8/30/2017 at 5:15 PM, Fence said:

 

Do each of our holding and provider institutions pass a basic risk assessment (e.g. no silly high returns and they are not part of a larger, less secure, organisation)?

• Has our family collectively diversified across holding and provider institutions for each type of account (e.g. SiPPs, ISAs, and bank) and security?  
• Are we sure we have diversified across holding and provider institutions given several are owned by the same institution? 
• Is there an opportunity for geographical diversification across holding institutions, providers, securities, physical assets, etc? 
• Have we optimised any government/other protection schemes (note: some brokers may use foreign banks and there are differences between ISAs, SiPPs, cash, etc)?
• Can we prove we own our assets should a holding or provider institution lack sufficient records.  Should/can we hold any assets more securely (e.g. stock certificates)?
• Have we undertaken preparatory work should we need to activate any "bug out" routes (e.g. created accounts with NS&I to hold cash)? 
• Do we have sufficiently liquid, accessible, and acceptable funds on hand if needed?
• Are our physical assets secure and diversified?
• Have we identified all possible asset classes?  Does our asset allocation feel appropriate and do we know when we would need to change it and to what?  
• Do we feel we have invested in the right markets? 
• Have we assessed current debt levels and outgoings, are they appropriate,
• Are we at risk of early redemptions of loans, etc (e.g. of a liquidity crunch) and can we mitigate any risks?

 

1)I think the issue of holding institutions will become a massive issue over the next few years.Period.I know I keep banging on about nominee accounts at Brokers but we're be moved from owning stocks to having our names recorded as owners on a Brokers ledger................a massive massive difference.Diversification across institutions is key going forward.

2) It's well worth making sure you maximise your govt protection by holding money with separate banks

3) NS&I is a great place to hold cash but it does mean you're tied to sterling.There are limits on what you can hold with them though.

4) Liquidity is everything and one of the reasons I've never purchased a house for myself.I like to be liquid,so in five days,if I so wished I could have everything somewhere else.

5) The search for value is neverending due to it's inherent relativity.

[Sancho Panza]

On 8/31/2017 at 5:38 PM, B63 said:

Great thread. Just reading this by Albert Edwards

"If I were a Fed Governor I would be pretty shocked/concerned/bemused at inflation developments this year. However confident the Fed is of a self-sustaining-recovery, there is growing evidence of a slide into outright deflation even ahead of the next recession which will likely unambiguously take us deep into deflationary territory."

http://www.zerohedge.com/news/2017-08-31/i-was-wrong-albert-edwards-finds-something-has-never-happened

Albert Edwards is always worth reading

[Will!]

On 13/08/2017 at 9:14 PM, Barnsey said:

Prepare for negative interest rates in the next recession, says top economist

Negative interest rates will be needed in the next major recession or financial crisis, and central banks should do more to prepare the ground for such policies, according to leading economist Kenneth Rogoff.

Quantitative easing is not as effective a tonic as cutting rates to below zero, he believes. Central banks around the world turned to money creation in the credit crunch to stimulate the economy when interest rates were already at rock bottom.

http://www.telegraph.co.uk/business/2017/08/13/prepare-negative-interest-rates-next-recession-says-top-economist/

The BoE or the Fed cancelling the government debt they currently hold would be a very effective anti-deflationary measure though.

[Errol]

Gold will go through the roof in overt negative interest conditions.

[Mooping]

Would that mean everybody taking money out of banks?

[Fence]

7 minutes ago, Errol said:

Gold will go through the roof in overt negative interest conditions.

Then ban or tax that.  Let's play "Wack a Mole!

[Errol]

They won't be able to ban the Chinese/Russian etc exchanges and price mechanisms.

[Thorn]

On ‎29‎/‎08‎/‎2017 at 4:22 PM, durhamborn said:

I agree 100% with you Sancho on credit,however i dont think the printing to come will be going to the consumer through the banks.The reflation will be government driven.The consumer is dead for a cycle now.The reflation i see ahead is industrial.It depends on the size of the printing though in any deflation ahead.If the Fed prints $8 trillion as i expect then il be buying for a full on reflation cycle.The metals would be the backbone to my portfolio.Im not worried about that though because there are leads to watch during any falls.Reflation cycles start slowly as well.

Checking info on Hargreaves Lansdown and Cityam recently reported they are being told to put more money aside by regulator.

Durhamborn I am reading this to mean there is a Bust ahead and they are being told to get themselves ready... but do you reckon it still means they will be a safe enough place for a personal pension to be?

[ian_g]

3 hours ago, Mooping said:

Would that mean everybody taking money out of banks?

Essentially yes, but for huge amounts the costs involved in doing so mean that it's better to leave it in the bank and take a hit. The powers that be are well aware of the problems at hand (even if we don't hear about it so directly through the media) and are discussing ways around it. Jim Rickards is one of the best people to listen to about the future of money and how he believes that in 2007 the central banks bailed out the private banks. This time it's the central banks that will need saving by the IMF. In fact the IMF changed certain rules regarding the interest rates on SDR's to accommodate the (never supposed to happen) negative interest rate environment. They still haven't worked out what the solution is... although one of the ideas is to move to electronic money to get around the 'problem' of negative rates. If you want to really go down the rabbit hole read some of the PDF's released by the IMF regarding negative rates. https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Breaking-Through-the-Zero-Lower-Bound-43358

[ian_g]

The policy paper from last month was an interesting read regarding negative rates.

file:///D:/Internet%20Downloads/pp080317-negative-interest-rate-policies.pdf