Deflationary collapse and the Reflation Cycle to Come.

[Fence]

3 hours ago, Barnsey said:

DB has been a source of hope for many of us, but as he wisely says, do your own research, be diverse, ignore the mainstream media and look at the bigger picture rather than trying to make a quick buck.....

Appropriate time to mention "survivor bias", that is, you only hear about the successful and never the usually more numerous failures. 

It gives us a skewed view of reality.  Whether that's career, showbusiness, health, or finance.  This years hot stock or fund rarely is next years.

Steady returns over a long period of time is the way to go for me.  Be strong and forget the one-off flash git passing you by.  He's more likely the sole survivor of a million car crashes and screaming towards another one.

Sure, I trade for fun and hopefully for money, but I don't bet the house on it.  Steady boring Eddie.  Start small, start young.

[wish I could afford one]

4 minutes ago, Fence said:

Appropriate time to mention "survivor bias", that is, you only hear about the successful and never the usually more numerous failures. 

It gives us a skewed view of reality.  Whether that's career, showbusiness, health, or finance.  This years hot stock or fund rarely is next years.

Steady returns over a long period of time is the way to go for me.  Be strong and forget the one-off flash git passing you by.  He's more likely the sole survivor of a million car crashes and screaming towards another one.

Sure, I trade for fun and hopefully for money, but I don't bet the house on it.  Steady boring Eddie.  Start small, start young.

Very good point Fence.  I've only been at this for 10 years and so haven't really even started on my journey even though that 10 years has seen a boom and a bust.  So far my average returns (which of course is very different to my overall CAGR) have been a nominal 7.5% with a standard deviation of 10.1%.

[durhamborn]

Think a nice few thoughts on what i see now,where we are etc.

The £/$ hit my target on Friday of $1.39/$1.40.Im very happy how that call worked out,and iv now bought the $s i need for my business at those levels.I still think the dollar index should hit 88 or 86 so the £ might overshoot my target by a few cents,however i think the last bit of the fall in the dollar will be more Yen,perhaps Euro related.I sold FCG and bought IBTL with the proceeds,a nice return over a couple of months on that.

Its pretty obvious the US markets are in the final parabolic stages now.That can cover a lot of ground in a short time,but there is a huge sucking sound as retail investors get sucked in to be turned into minced meat.I think we are close in time now to a secular top in this bull market that started in 1982 (alongside the great dis-inflation cycle that started then).I also think there is a very big chance that the top is close in time,even if not in points,and that i might not see those levels again in my lifetime.The US markets that is.The massive increase in the use of derivatives, combined with the overall structure and make up of the market (leverage) are suggestive of an unwind that is likely even faster and steeper than the 2008/09 one.

Gold and silver look like they are coming out of their 5 year consolidation,and although they are behind where i expected at this stage of the dollar sell off,they could be a coiled spring .If the markets are convinced we have inflation,gold will rally,if equity markets start to fall gold will rally.My target remains $1450 before it joins in a sell off.I will be looking for exit points for my goldies over the first half of the year.

Events in the UK are going exactly as predicted on this thread over a year ago.Retail facing companies are being destroyed by input costs that cant be passed on to consumers.Margins are going south fast and the first companies with high debts are starting to roll over.This is only the start.

Carillion is a prime example of how a debt deflation will bring in a reflation cycle.The lenders get hit,the competition thats left gets to increase prices,new entrants have no chance of getting finance.

The UK equity market has already had a severe bear market in domestic facing stocks.The index is hiding this as the big cap miners,oil and others rise on momentum.There are huge parts of the market that have already seen 50% plus falls.Even very well ran cash generating companies are being beaten down each time another in the sector warns on profits.Card Factory is a prime example here.A company that chose not to pass on input costs even though it could of so that it can finish off its rivals is hit every time retail sales figures or retail companies profit warn.There is value starting to appear in a few of these areas and il likely start to build small position in a few soon.The companies with strong free cash flow should come out the other side.

The housing market in the UK has already entered a sever bear market now and falls will slowly build.Valuations falling will start to make re-financing more expensive for BTL and consumers.Many more will start to find themselves on SVRates.Given the next cycle will see rates rising throughout to a level few now expect,its going to be a lot of pain,and a long time of pain for the leveraged.MEWing will be out of the window for most people soon.

 

Edited January 20, 2018 by durhamborn

[Calcutta]

1 hour ago, durhamborn said:

Think a nice few thoughts on what i see now,where we are etc.

The £/$ hit my target on Friday of $1.39/$1.40.Im very happy how that call worked out,and iv now bought the $s i need for my business at those levels.I still think the dollar index should hit 88 or 86 so the £ might overshoot my target by a few cents,however i think the last bit of the fall in the dollar will be more Yen,perhaps Euro related.I sold FCG and bought IBTL with the proceeds,a nice return over a couple of months on that.

Its pretty obvious the US markets are in the final parabolic stages now.That can cover a lot of ground in a short time,but there is a huge sucking sound as retail investors get sucked in to be turned into minced meat.I think we are close in time now to a secular top in this bull market that started in 1982 (alongside the great dis-inflation cycle that started then).I also think there is a very big chance that the top is close in time,even if not in points,and that i might not see those levels again in my lifetime.The US markets that is.The massive increase in the use of derivatives, combined with the overall structure and make up of the market (leverage) are suggestive of an unwind that is likely even faster and steeper than the 2008/09 one.

Gold and silver look like they are coming out of their 5 year consolidation,and although they are behind where i expected at this stage of the dollar sell off,they could be a coiled spring .If the markets are convinced we have inflation,gold will rally,if equity markets start to fall gold will rally.My target remains $1450 before it joins in a sell off.I will be looking for exit points for my goldies over the first half of the year.

Events in the UK are going exactly as predicted on this thread over a year ago.Retail facing companies are being destroyed by input costs that cant be passed on to consumers.Margins are going south fast and the first companies with high debts are starting to roll over.This is only the start.

Carillion is a prime example of how a debt deflation will bring in a reflation cycle.The lenders get hit,the competition thats left gets to increase prices,new entrants have no chance of getting finance.

The UK equity market has already had a severe bear market in domestic facing stocks.The index is hiding this as the big cap miners,oil and others rise on momentum.There are huge parts of the market that have already seen 50% plus falls.Even very well ran cash generating companies are being beaten down each time another in the sector warns on profits.Card Factory is a prime example here.A company that chose not to pass on input costs even though it could of so that it can finish off its rivals is hit every time retail sales figures or retail companies profit warn.There is value starting to appear in a few of these areas and il likely start to build small position in a few soon.The companies with strong free cash flow should come out the other side.

The housing market in the UK has already entered a sever bear market now and falls will slowly build.Valuations falling will start to make re-financing more expensive for BTL and consumers.Many more will start to find themselves on SVRates.Given the next cycle will see rates rising throughout to a level few now expect,its going to be a lot of pain,and a long time of pain for the leveraged.MEWing will be out of the window for most people soon.

 

Might read that to the kids as a bedtime story. 

[Fence]

1 minute ago, Calcutta said:

Might read that to the kids as a bedtime story. 

Yes, content aside, it had a nice flow.  But who'll be the handsome prince and who'll be the wicked witch?

Well written db.  I'll do some charting but even though this is January, it just looks and feels like things have hit the buffers and indeed, it's "payment due" time in several areas.

That said, and as you pointed out, the're always opportunities out there. 

The US tax cuts have to be digested which may keep the markets up, or at least cushion a fall, for now.  Or maybe the classic "sell the news".

Regardless, this is the time to step up.  Again, thanks for waking me up in time for the main event!

[Thorn]

If this collapse arrives we will see a lot of people forced to go self-employed and this will likely be spun by TPTB as a choice.

 

[chronyx]

Do you think the self employed status will simply be a formality and they will be employed by the government one way or another?

To me it seems likely 

[chronyx]

4 hours ago, durhamborn said:

 

Gold and silver look like they are coming out of their 5 year consolidation,and although they are behind where i expected at this stage of the dollar sell off,they could be a coiled spring .If the markets are convinced we have inflation,gold will rally,if equity markets start to fall gold will rally.My target remains $1450 before it joins in a sell off.I will be looking for exit points for my goldies over the first half of the year.

 

https://www.zerohedge.com/news/2018-01-19/next-great-bull-market-gold-has-begun-rickards

 

Yes it's ZH, but still...

[Sancho Panza]

22 hours ago, Barnsey said:

For anyone interested, at the end of the trading day today, the S&P 500 will have set a new record for longest streak without a 5% correction, 395 days. This data goes back to 1927.

Make of that what you will.

It's stunning really.Trying to call turns is hard.Strangely,even amidst this bull run there are some sectors eg Telecoms that have already sold off a lot from peak.

12 hours ago, StrugglingMillennial said:

After yesterdays profit warning its looking like it might be carpet right to go next. They have been mentioned a number of times in this thread so its not a real shock. 

What are peoples thoughts on food retailers during the tough times, people always have to buy food right?

I think food retailers are an option but Aldi is a private company...sadly.

12 hours ago, Ash4781 said:

I’d imagine Walmart will want to offload Asda. There is a problem though in I think Amazon will want to enter the market. I think it will come down to lobbying The regulators eg. whether a new player is allowed in or they can carve them up amongst the others.

Asda will be the first big loser in UK supermarkets.It's core shoppers are more than happy to trade down to Aldi/Lidl and it's unlikely to benefit from Sainsbury's customers downgrading as in my experience, they go to Aldi as well.

10 hours ago, wish I could afford one said:

As DB puts it everyone "should base their own investments on what they think themselves."  I'm also not a registered professional so can't give financial advice (or charge you high fees).  Instead like others on this thread I'm just a random bloke on the internet sharing what he's doing.

All that said I hope this thread lives for a looong time.  This is not a minute, day, week or even year story we're talking about here.  We'll only know who made the right decisions for themselves in 20 or 30 years.  It's possible we will have all made the right decisions.  This is because we need to understand our own goals plus risk tolerance and not those of others which can drive us in different directions.  It's also possible we all made the wrong ones... 

That's a wise perspective. I've seen a lot of people lose their shirts after a good run in an asset class

8 hours ago, Dogtanian said:

@Funn3r interesting regarding boots.  I get the impression that a lot of people shop there on account of the loyalty card points.  I wonder what slices of demographic are heavily represented there... Millennials?   Personally I get my repeat asthma medication there only because anywhere else you get the cheaper genetic types.  The prices are pretty ambitious by and large whenever I browse though!

Boots, like M&S has a lot of customers with RPI linked incomes.They'll keep it solvent for a while.

[Sancho Panza]

These two have a long way to go to find fair value imho.

Edited January 20, 2018 by Sancho Panza

[Fence]

6 minutes ago, Sancho Panza said:

 

Nice "cup and handle" but that could be it.

[StrugglingMillennial]

http://www.telegraph.co.uk/business/2018/01/18/countrywide-shares-plunge-profit-warning/

Interesting

[Sancho Panza]

5 minutes ago, Fence said:

Nice "cup and handle" but that could be it.

Bloated up on the back of Help to Buy.

I'm watching the big builders for a sign of the turn.From what I can see,they haven't turned yet?Irrational,longer,solvent etc

[Sancho Panza]

2 minutes ago, StrugglingMillennial said:

http://www.telegraph.co.uk/business/2018/01/18/countrywide-shares-plunge-profit-warning/

Interesting

Countrywide are toast.Badly run.Still pulling the milk float with a horse metaphorically speaking.

They'll leave a lot of empty shops behind and a lot of LL's waiting for their rent payment.

Credit deflation at work.

[Sancho Panza]

70% off peak already.Impressive.Lower than in 2000

Edited January 20, 2018 by Sancho Panza

[macca13]

Fantastic article 

Carillion and the RBS 'hang themselves' memo proves it's all over for neoliberalism

http://www.heraldscotland.com/news/15886303.RIP_capitalism_____millennials_will_dig_your_grave/

[Dogtanian]

5 hours ago, macca13 said:

Fantastic article 

Carillion and the RBS 'hang themselves' memo proves it's all over for neoliberalism

http://www.heraldscotland.com/news/15886303.RIP_capitalism_____millennials_will_dig_your_grave/

I agree that some of these fat cat robber barony type schemes will not remain  acceptable.  The media and public sentiment increasingly has been pushing the line that it's not ok.  Philip green, panorama papers, Fred badwin.

[durhamborn]

11 hours ago, Sancho Panza said:

Bloated up on the back of Help to Buy.

I'm watching the big builders for a sign of the turn.From what I can see,they haven't turned yet?Irrational,longer,solvent etc

Wont be long.I dont really short because i like to be able to hold for as long as i need without paying anyone a penny,but the house builders will be really tempting.The execs filling their boots is the sign we are close.They are making out like bandits while they can.HTB is one of the most disgusting policies iv ever seen.Its simply a way to trap young people in terrible houses and destroy their ability to create capital for perhaps a lifetime.The fact the taxpayer will also take a hit and the only winners are the execs of the builders just makes it worse.

[Fence]

11 hours ago, Sancho Panza said:

70% off peak already.Impressive.Lower than in 2000

Wow.  Any narrative on that available?

[Arpeggio]

9 hours ago, macca13 said:

http://www.heraldscotland.com/news/15886303.RIP_capitalism_____millennials_will_dig_your_grave/

Good article. Quote from it: "turbo-capitalism” – the unregulated, low-tax, bandit capitalism of the last 35 years."

About the same time frame of DB's deflation cycle. No co-incidence I'm sure.

[jonb2]

12 hours ago, macca13 said:

Fantastic article 

Carillion and the RBS 'hang themselves' memo proves it's all over for neoliberalism

http://www.heraldscotland.com/news/15886303.RIP_capitalism_____millennials_will_dig_your_grave/

Good find Macca.

 

[jonb2]

13 minutes ago, fru-gal said:

The question is - What will replace this "turbo-capitalism"? We need a whole new, fairer system. We seem to only have extreme versions of socialism or capitalism on offer to us though. The worst of all worlds (Corbyn/Momentum vs May/Tories).

I think this is true FG. For me the last 40 years is a terrible failed experiment.

I think we need to make the politicians 'very uncomfortable'. Corbyn's opportunistic speech about Carillion was spot-on - but then as you say, Momentum are lurking in the background. A dangerous extreme group.

This thread is about reading the tea-leaves on what might happen to money. But never before are politics, society and money so entwined. I have been interested on the chat about energy, as for me, this is the only thing that is truly a necessity. There is land for food - food production depends on energy. Infrastructure as illustrated by Carillion can be neglected or exploited. I think only when we have a true government 'for the good of all people' will expenditure on building things be ensured.

 

 

[Will!]

13 minutes ago, jonb2 said:

This thread is about reading the tea-leaves on what might happen to money. But never before are politics, society and money so entwined. I have been interested on the chat about energy, as for me, this is the only thing that is truly a necessity. There is land for food - food production depends on energy.

If money is a claim on energy then it's all the same thing.

[Bricks n' mortar]

3 hours ago, durhamborn said:

I dont really short because i like to be able to hold for as long as i need without paying anyone a penny,but the house builders will be really tempting.The execs filling their boots is the sign we are close...

That is the sure sign, indeed.  I went to an interview with a national housebuilder in Nov 2007.  They boasted their latest results were £90 million profit on £270 million turnover (local result, in their geographical area).  10 months later, the office closed and all the workers out the door.  Those who'd been there a while told me they'd basically rounded up every spare penny from that year and other years - brought forward profits, searched the past for profits - and declared it right there.  Bonuses all round. 
Hope they enjoyed their 30 pieces.

[macca13]

33 minutes ago, jonb2 said:

Momentum are lurking in the background. A dangerous extreme group.

 

 

Yes and no.. 

we have to drain the swamp as Trump said.. then filled it full of billionaires.. 

i think momentum want new labour Blair’s lot out of the party.. we may have to let them do that.. to clean shop..  otherwise we get Red Tories 2.0 again..