Deflationary collapse and the Reflation Cycle to Come.

[suresh786]

3 minutes ago, durhamborn said:

Nothing,its now trading about 1c more than i expected it to be when the dollar hit 87 (its hit 88).I still think the dollar should hit 86 on the dollar index and id expect the pound to start to fall then.There is always a chance it goes a bit higher of course.

do you think that pound reached to high for now and will reverse

[suresh786]

45 minutes ago, durhamborn said:

Nothing,its now trading about 1c more than i expected it to be when the dollar hit 87 (its hit 88).I still think the dollar should hit 86 on the dollar index and id expect the pound to start to fall then.There is always a chance it goes a bit higher of course.

what do you think pound will be this time next year

[durhamborn]

1 hour ago, suresh786 said:

what do you think pound will be this time next year

I dont work on times as there can be a lot of stretch,but my targets from 16 months ago still stand,just my opinions of course.

Dollar index 86 ( i saw 88 then and thats hit,but i now see 86 as likely)

Pound up to $1.42 from $1.21 then down to $1.10 (maybe $1.00),first target hit.

Gold $1140 up to $1450+ (maybe $1550+) then down below $800,on way to target,slightly behind where i expected,but going well.

S+P 80% decline from a top,we are close in time,but points unknown.Could see 3000/3100,but of no concern to me now.

TLT up to $150 as treasuries see a final spurt to end their bull market from 82,then begin a huge bear that see's them reverse most/all of the gains from 82 ( i mostly added treasuries once the pound hit $1.39 in 1c staircase)

Fed to increase balance sheet by $12 trillion+ that kick starts a reflation.

Rates to increase slowly through the cycle then speed up.We might see 12%+ rates,inflation likely to see 15%-20% by around 2026

The end of that cycle will likely see a complete system collapse.The worst in history.The end of the debt super cycle.However its too far ahead and a lot depends on the action taken in the credit deflation coming at us (and actually already happening).

The money supply growth has been slowing, the yield curve is not far from inverting, the Fed is tightening, loan growth is slowing, consumer credit delinquencies are rising and credit spreads though still  very low have turned up. These are all signals that we are late in the cycle and that a recession will follow.Due to the leverage (and derivatives) on the system a recession will see a financial crisis unfold.

Off to cut the grass)

Edited April 18, 2018 by durhamborn

[Ash4781]

The big shopping centre deal between Hammerson and Intu has collapsed. No surprise really there was a lot of shareholder opposition. Edit: it looks like they will be advising shareholders to vote against the deal. That will keep me laughing for a while.

Edited April 18, 2018 by Ash4781

[Lavalas]

I’m still learning about all this but for the past year or so (and longer probably, I don’t know) there’s been an inverse correlation between gold/silver and the dollar but this seems to have become unpegged of late. Even more severe manipulation maybe, I really don’t know. Anyway, for the past week or so silver has been testing it’s 200 day MA and today it has broke out by nearly 3%. Now I know all this isn’t about watching the tape but if we’re looking for silver to be moving up then could be it maybe.

Just some observations

[chronyx]

Jeez it's shot up! Like you say, could be nothing, but nice to look at, anyway

[durhamborn]

27 minutes ago, Lavalas said:

I’m still learning about all this but for the past year or so (and longer probably, I don’t know) there’s been an inverse correlation between gold/silver and the dollar but this seems to have become unpegged of late. Even more severe manipulation maybe, I really don’t know. Anyway, for the past week or so silver has been testing it’s 200 day MA and today it has broke out by nearly 3%. Now I know all this isn’t about watching the tape but if we’re looking for silver to be moving up then could be it maybe.

Just some observations

Its interesting because when all my signals pointed to the dollar going from 102 to 88 (now 86 expected) id tracked gold alongside to $1450+ (maybe even $1550) and silver to $22/23.So although the direction has been very strong (gold was around $1150 then) it has lagged behind slightly.This is likely due to the stock market not rolling over.Gold is responding to the falling dollar,but the equity markets in the US holding up (for now) is making coming out of the long consolidation tough as is the expectation of three rate increases.

Iv been tracking a lot of silver miners and there are a lot of large net short positions in them,so if silver can break out then there could be some explosive moves up.Id like to see $17.42 taken out though on silver.

[Talking Monkey]

9 hours ago, durhamborn said:

I dont work on times as there can be a lot of stretch,but my targets from 16 months ago still stand,just my opinions of course.

Dollar index 86 ( i saw 88 then and thats hit,but i now see 86 as likely)

Pound up to $1.42 from $1.21 then down to $1.10 (maybe $1.00),first target hit.

Gold $1140 up to $1450+ (maybe $1550+) then down below $800,on way to target,slightly behind where i expected,but going well.

S+P 80% decline from a top,we are close in time,but points unknown.Could see 3000/3100,but of no concern to me now.

TLT up to $150 as treasuries see a final spurt to end their bull market from 82,then begin a huge bear that see's them reverse most/all of the gains from 82 ( i mostly added treasuries once the pound hit $1.39 in 1c staircase)

Fed to increase balance sheet by $12 trillion+ that kick starts a reflation.

Rates to increase slowly through the cycle then speed up.We might see 12%+ rates,inflation likely to see 15%-20% by around 2026

The end of that cycle will likely see a complete system collapse.The worst in history.The end of the debt super cycle.However its too far ahead and a lot depends on the action taken in the credit deflation coming at us (and actually already happening).

The money supply growth has been slowing, the yield curve is not far from inverting, the Fed is tightening, loan growth is slowing, consumer credit delinquencies are rising and credit spreads though still  very low have turned up. These are all signals that we are late in the cycle and that a recession will follow.Due to the leverage (and derivatives) on the system a recession will see a financial crisis unfold.

Off to cut the grass)

Hi DB with the S&P 80% decline would the DOW do something similar or would there be much less of a decline

And for oil would you say there is much more upside, if it goes higher from here would the price start acting as a brake on a lot of economies

Edited April 18, 2018 by Talking Monkey

[durhamborn]

1 hour ago, Talking Monkey said:

Hi DB with the S&P 80% decline would the DOW do something similar or would there be much less of a decline

And for oil would you say there is much more upside, if it goes higher from here would the price start acting as a brake on a lot of economies

Dow is weighted different,and hard to say though likely a smaller fall.Oil i saw $65 as very likely a top,but its gone to $68.I see sub $15 in the deflation,then $200+ in the next cycle.Oil would act as a brake,but the main problem is falling liquidity.Its highly likely the markets sniff falling inflation is the risk soon and the market then leads the economy down.Im seeing signs a debt liquidation cycle is already underway (involuntary),but masked by the top of an earnings cycle.Im pretty convinced the market (and almost everybody) is looking the wrong way when a key inflection point is close.Due to the nature of the set up (leverage) the market and economic reversal will likely be very fast,and very furious when it hits.The speed will catch most people out i think.We could easily see the housing market suffer the same fate in the UK,with prices collapsing at eye watering speed.

[chronyx]

Just out of interest DB, how often do you refer to your charts or run the calculations again to take new data into account, or is this unnecessary with the cyclical approach? Do you have a particular software setup? No worries if you don't want to show too much behind the curtain 

[durhamborn]

8 minutes ago, chronyx said:

Just out of interest DB, how often do you refer to your charts or run the calculations again to take new data into account, or is this unnecessary with the cyclical approach? Do you have a particular software setup? No worries if you don't want to show too much behind the curtain 

Three i track every month,liquidity, cost of money and leverage across all main economies and two more i dont want to go into.The charts ,numbers and signals i use on these i have very high faith in.They gave me a clear sign on the dollar topping at 102 and turning to 88.At the time every big institution was calling for  higher dollar and i didnt see one forecast for the dollar down as far as 88.Those charts are from my friend who was top 1 percentile pension fund manager for years in the US.He developed them during the 70s and the same charts picked the start of the dis-inflation cycle in 82.They were the reason he moved the pension schemes into consumer stocks then .I do cross market stuff from that when i can be bothered.Macro cycle forecasts arent trading calls,they are destinations likely to be reached if present actions continue (and in some cases even if they dont continue)

Cycles develop over time and most people miss that.A lot see the numbers and think a collapse is certain.They are right.It is.However they miss the fact that during a disinflation/deflation, CBs have almost unlimited ability to print.The wealth destruction and credit deflation ahead will be very painful,but it isnt a depression.That comes at the end of the reflation when high inflation and rates removes the ability of the CBs to print,and that leads to governments being shut out of the capital market.Im very worried that we might see the biggest crash in human history by around 2026.Thats not hyperbole,its what i see when i run printing of $12 trillion from the Fed and similar % amounts from other key CBs.I try to stop looking that far out as its a bit foggy and a lot can change.

I think its highly likely investors get caught by the next cycle though.Very few will buy inflation assets and when i look around at the leverage ordinary people are carrying on houses,cars etc i know the pain they are going/likely to suffer.

The facts are i fully expect many/most people to disagree and as long as people are respectful and put across their own thoughts thats fine by me and i hope this thread can be open to anyone to do just that,and that it remains a worthwhile debate.However iv also had pretty much 100% of people iv told that there is a very real chance interest rates will be above 10% by 2025 call that crazy talk.They say that would crash the housing market etc.When i say no,it will just keep down a market that has already crashed they think im mad.They are about to get an education i think.

 

[UnconventionalWisdom]

6 hours ago, durhamborn said:

The facts are i fully expect many/most people to disagree and as long as people are respectful and put across their own thoughts thats fine by me and i hope this thread can be open to anyone to do just that,and that it remains a worthwhile debate.However iv also had pretty much 100% of people iv told that there is a very real chance interest rates will be above 10% by 2025 call that crazy talk.They say that would crash the housing market etc.When i say no,it will just keep down a market that has already crashed they think im mad.They are about to get an education i think.

Most will disagree with you but also have never heard of QE and don't know about fractional reserve banking. They believe the "not enough houses" argument. The people going hard into property just look at how much their house or their parent's house has gone up over the past 20 years. Most people told me to get into big debt for a 1 bedroom flat as "it will make more than wage increases". We now have a generation that expect cheap money and low rate lending to continue forever. If you are right, a lot of people will look back at this time in bewilderment for people expecting that interest rates and lending costs to remain at such low levels. 

Edited April 19, 2018 by UnconventionalWisdom

[durhamborn]

31 minutes ago, UnconventionalWisdom said:

Most will disagree with you but also have never heard of QE and don't know about fractional reserve banking. They believe the "not enough houses" argument. The people going hard into property just look at how much their house or their parent's house has gone up over the past 20 years. Most people told me to get into big debt for a 1 bedroom flat as "it will make more than wage increases". We now have a generation that expect cheap money and low rate lending to continue forever. If you are right, a lot of people will look back at this time in bewilderment for people expecting that interest rates and lending costs to remain at such low levels. 

Exactly,and as i said earlier in the thread any market will hurt the maximum amount of people it can when it bursts.House prices have nothing to with not enough houses like you say.They have everything to do with a dis-inflation cycle from 82 where rates slowly saw lower lows.People have simply invested in an asset class to the extreme.I also find it very interesting that people actually think governments can keep rates low to protect debtors (or is that protect creditors).They cant.A credit deflation is already underway,that will see the first big falls in houses,then the next cycle will see rates climb,slowly at first,but then faster.The market provided a long window of low rates for people to de-leverage,those who failed to do so will be made to pay.Its always been so,and it will always be so.

 

[Bricks n' mortar]

7 hours ago, durhamborn said:

Im very worried that we might see the biggest crash in human history by around 2026.Thats not hyperbole,its what i see when i run printing of $12 trillion from the Fed and similar % amounts from other key CBs.I try to stop looking that far out as its a bit foggy and a lot can change.

What chance the CBs see this too?  They, after all, should have some good economic advisors, who specialise in what happens to economys if this or that action is taken by the CB.
We all should take note of your point about not looking too far out. What if they don't print and spend?  Or try to minimise their printing and spending?

https://www.telegraph.co.uk/business/2017/11/30/huge-government-debts-put-uk-stability-risk-warns-bank-england/

[UnconventionalWisdom]

19 minutes ago, Bricks n' mortar said:

What if they don't print and spend?  Or try to minimise their printing and spending?

I might be wrong, but they don't have the weapon of lowering interest rates and cheap lending to increase spending in an economic down-turn. If there is a big downturn, their only option is to spend to stimulate activity. 

[chronyx]

Superb reply to my post DB, thanks very much.

Do you think the infrastructure development you've spoken about will be a deliberate effort to weather the huge crash, or just a 'make work' scheme?  What I mean is, if we've already got the cables laid, buildings built, roads re-surfaced , etc - won't we be in a better position than if we went straight from where we are now to the huge crash - with worn out roads, infrastructure in parts running flat out, you know the deal.

 

[Funn3r]

1 hour ago, durhamborn said:

Exactly,and as i said earlier in the thread any market will hurt the maximum amount of people it can when it bursts.House prices have nothing to with not enough houses like you say.

 

18 minutes ago, chronyx said:

if we've already got the cables laid, buildings built, roads re-surfaced , etc - won't we be in a better position than if we went straight from where we are now to the huge crash - with worn out roads, infrastructure in parts running flat out

 

I agree that it isn't about "not enough houses"  but the housebuilding companies certainly believe it! Where I am (Wokingham/Bracknell) you can barely move for residential construction. It's everywhere you look; mostly seems to be 1 &2 bed flats but all sorts being built really. If the market pops in the short term (or even if it doesn't as there is already a glut and rents are falling fast round here) I really can't see what the developers are going to do with all this new stock.

About the roads. As everyone must have noticed the potholes and condition of the roads is the worst I remember in my life ever. Wondering why this is, considering that road mending policy is a local thing so it's funny how they all have gone bad at once. Wondering if TPTB have told the councils forget about the roads for now as there's a massive infrastructure program coming soon enough.

[durhamborn]

2 hours ago, Bricks n' mortar said:

What chance the CBs see this too?  They, after all, should have some good economic advisors, who specialise in what happens to economys if this or that action is taken by the CB.
We all should take note of your point about not looking too far out. What if they don't print and spend?  Or try to minimise their printing and spending?

https://www.telegraph.co.uk/business/2017/11/30/huge-government-debts-put-uk-stability-risk-warns-bank-england/

Its a very good point,but from a macro picture the mistakes are already made,it is already baked in.How they respond isnt baked in as you say.However the Fed (and all CBs) main job is to protect the financial system from collapse.It is for that reason they will act.The numbers are so extreme now it will be very difficult for them to right size their action.They will be too slow at first,then over cook.CBs have always tended to do this going back through history.If they dont print enough we will get a crash far worse than the depression.If they do print,the credit deflation and wealth destruction will be extreme and they will do what is needed to stop the collapse.The key sign for me is gold.I expect gold to get hit as well,but i also expect it to turn first.

[durhamborn]

1 hour ago, chronyx said:

Superb reply to my post DB, thanks very much.

Do you think the infrastructure development you've spoken about will be a deliberate effort to weather the huge crash, or just a 'make work' scheme?  What I mean is, if we've already got the cables laid, buildings built, roads re-surfaced , etc - won't we be in a better position than if we went straight from where we are now to the huge crash - with worn out roads, infrastructure in parts running flat out, you know the deal.

 

Its more to do with the lack of investment for 30 years.The consumer isnt dead,its just they will become a smaller part of the economy as more money flows to investment from consumption.Military spending will be a big area in the west.That and green energy will likely be two of the best areas.

[UnconventionalWisdom]

44 minutes ago, durhamborn said:

Its more to do with the lack of investment for 30 years.The consumer isnt dead,its just they will become a smaller part of the economy as more money flows to investment from consumption.Military spending will be a big area in the west.That and green energy will likely be two of the best areas.

I work in developing new technologies and a focus of ours has been to bring machine vision into industrial environments to aid automation. It is shocking but it seems many British plants were bought by competitors to reduce their competition. They then just keep them going and are happy with the output and don't want to upgrade. Speaking with the older guys, it used to be different with their own research teams. It's all gone now and they are just waking up to the fact that automation be needed to remain competitive. If DB predictions are true, I can see these guys doing well along with high tech firms working to increase their productivity(and hence capacity). 

[UnconventionalWisdom]

2 hours ago, Funn3r said:

 

 

I agree that it isn't about "not enough houses"  but the housebuilding companies certainly believe it! Where I am (Wokingham/Bracknell) you can barely move for residential construction. It's everywhere you look; mostly seems to be 1 &2 bed flats but all sorts being built really. If the market pops in the short term (or even if it doesn't as there is already a glut and rents are falling fast round here) I really can't see what the developers are going to do with all this new stock.

About the roads. As everyone must have noticed the potholes and condition of the roads is the worst I remember in my life ever. Wondering why this is, considering that road mending policy is a local thing so it's funny how they all have gone bad at once. Wondering if TPTB have told the councils forget about the roads for now as there's a massive infrastructure program coming soon enough.

I remember walking around the dock area in Dublin and seeing big building blocks half finished and some that were finished (a cafe fully kitted out) but laying empty. These were just abandoned after the bust and left for years. I know house prices in Dublin have shot up over the past couple of years but I'd guess the half-finished buildings still stand there. Prob the same would happen- finish one's near completion and pill the plug on the others. Once btl speculation disappears, there will be no need for a 2 bed flat with an ensure and a separate bathroom. 

Edited April 19, 2018 by UnconventionalWisdom

[payoyo]

3 hours ago, Funn3r said:

About the roads. As everyone must have noticed the potholes and condition of the roads is the worst I remember in my life ever. Wondering why this is, considering that road mending policy is a local thing so it's funny how they all have gone bad at once. Wondering if TPTB have told the councils forget about the roads for now as there's a massive infrastructure program coming soon enough.

I suppose that much of the typical local authority's budget is going on housing benefit these days, so when there's a bad winter there's no money left to fix the roads. The private slumlords who are in receipt of much of this money no doubt complain about the state of the roads whilst surveying their property empires in their Range Rovers.

[Houdini]

3 hours ago, payoyo said:

I suppose that much of the typical local authority's budget is going on housing benefit these days, so when there's a bad winter there's no money left to fix the roads. The private slumlords who are in receipt of much of this money no doubt complain about the state of the roads whilst surveying their property empires in their Range Rovers.

Housing Benefit eventually comes from the DWP nowadays. The reason why councils have no money is that social care needs and demands have gone through the roof and councils don't have the money to pay for them.

[hurlerontheditch]

The pound has touched its lowest level against the dollar in 10 days, after Mark Carney told the BBC that Brexit uncertainty could slow the pace of interest rate rises.

[TJHooker]

7 minutes ago, hurlerontheditch said:

The pound has touched its lowest level against the dollar in 10 days, after Mark Carney told the BBC that Brexit uncertainty could slow the pace of interest rate rises.

Nothing to do with him being a useless c### who has made the economy far  worse with reinflating Labours bubble and handing out free money via TFS, more QE and dropping interest rates to their lowest level in history.