Deflationary collapse and the Reflation Cycle to Come.

[Errol]

12 hours ago, maverick73 said:

The money is being shifted out of China back to America. 

Or not. The gold - actual money as opposed to fiat currency - is flowing West to East.

He who has the gold makes the rules.

Edited August 18, 2017 by Errol

[durhamborn]

47 minutes ago, oldsport said:

It doesn't need interest rate rises. The damage has already been done and it's all baked in.

Yes houses are toast without rate increases this will be a balance sheet recession in that its falling earnings doing the damage for consumers and business.In the Uk we are seeing that already as inflation is higher than wage increases.The BOE will have no choice in the next cycle though.The Fed will see treasury rates heading north once we get well into the cycle.Currency will be collapsing against real assets and the CBs will tighten rates hard.

[durhamborn]

38 minutes ago, Errol said:

Or not. The gold - actual money as opposed to fiat currency - is flowing West to East.

He who has the gold makes the rules.

I think thats a reason we will see massive military spending as part of the reflation in the west.I also think fiat collapse might come into play at the end of the next reflation cycle.Long way ahead to consider that yet,but if the inflation does run hot then there will be a big risk and this thread will be re-named the inflationary collapse and the stagflation to come 

[Sancho Panza]

2 hours ago, nothernsoul said:

Ive found this thread very informative. I agree with the analysis that in such a crisis central banks will print and pump money into the economy eventually causing inflation. However, apologies if this may sound naive, but isnt it possible the bank of england will keep rates ultra low, seeing inflation as the evil with the lesser political consequences than raising them and causing the biggest house price crash this country has ever seen.

The issue you have is that IR's rising aren't necessarily needed for HPD(house price deflation).If the long side drops off,then it's game on,no IR rise in sight.

[Sancho Panza]

1 hour ago, durhamborn said:

I think thats a reason we will see massive military spending as part of the reflation in the west.I also think fiat collapse might come into play at the end of the next reflation cycle.Long way ahead to consider that yet,but if the inflation does run hot then there will be a big risk and this thread will be re-named the inflationary collapse and the stagflation to come 

https://mishtalk.com/2017/08/15/serious-credit-card-delinquencies-rise-for-the-third-straight-quarter-trend-not-seen-since-2009/

'Every quarter, the New York Fed publishes a report on Household Debt and Credit.

The report shows serious credit card delinquencies rose for the third consecutive quarter, a trend not seen since 2009.

Let’s take a look at a sampling of report highlights and charts.

Household Debt and Credit Developments in 2017 Q2

• Aggregate household debt balances increased in the second quarter of 2017, for the 12th consecutive quarter, and are now $164 billion higher than the previous (2008 Q3) peak of $12.68 trillion.
• As of June 30, 2017, total household indebtedness was $12.84 trillion, a $114 billion (0.9%) increase from the first quarter of 2017. Overall household debt is now 15.1% above the 2013 Q2 trough.
• The distribution of the credit scores of newly originating mortgage and auto loan borrowers shifted downward somewhat, as the median score for originating borrowers for auto loans dropped 8 points to 698, and the median origination score for mortgages declined to 754.
• Student loans, auto loans, and mortgages all saw modest increases in their early delinquency flows, while delinquency flows on credit card balances ticked up notably in the second quarter.
• Outstanding student loan balances were flat, and stood at $1.34 trillion as of June 30, 2017. The second quarter typically witnesses slow or no growth in student loan balances due to the academic cycle.
• 11.2% of aggregate student loan debt was 90+ days delinquent or in default in 2017 Q2.'

[leonardratso]

4 minutes ago, Sancho Panza said:

https://mishtalk.com/2017/08/15/serious-credit-card-delinquencies-rise-for-the-third-straight-quarter-trend-not-seen-since-2009/

'Every quarter, the New York Fed publishes a report on Household Debt and Credit.

The report shows serious credit card delinquencies rose for the third consecutive quarter, a trend not seen since 2009.

Let’s take a look at a sampling of report highlights and charts.

Household Debt and Credit Developments in 2017 Q2

• Aggregate household debt balances increased in the second quarter of 2017, for the 12th consecutive quarter, and are now $164 billion higher than the previous (2008 Q3) peak of $12.68 trillion.
• As of June 30, 2017, total household indebtedness was $12.84 trillion, a $114 billion (0.9%) increase from the first quarter of 2017. Overall household debt is now 15.1% above the 2013 Q2 trough.
• The distribution of the credit scores of newly originating mortgage and auto loan borrowers shifted downward somewhat, as the median score for originating borrowers for auto loans dropped 8 points to 698, and the median origination score for mortgages declined to 754.
• Student loans, auto loans, and mortgages all saw modest increases in their early delinquency flows, while delinquency flows on credit card balances ticked up notably in the second quarter.
• Outstanding student loan balances were flat, and stood at $1.34 trillion as of June 30, 2017. The second quarter typically witnesses slow or no growth in student loan balances due to the academic cycle.
• 11.2% of aggregate student loan debt was 90+ days delinquent or in default in 2017 Q2.'

getting more tapped out eh

[Sancho Panza]

 

Shedlock has been a long term deflationist for years.

https://mishtalk.com/2017/08/12/state-of-retail-jcpenny-plunges-now-a-penny-stock-amazon-to-blame/

Please consider JCPenney Nosedives to All-Time Low on Big Loss.

Yup. JCPenney is now a penny stock — a Wall Street term for a company trading under $5. JCPenney (JCP) said it lost $62 million in its second quarter. That’s more than a year ago. The retailer also said that same store sales — a measure of how well stores open at least a year are doing — fell more than 1% during the quarter.

JCPenney is the latest department store chain to announce dismal results. Macy’s (M), Kohl’s (KSS) and Dillard’s (DDS) all reported a decline in same store sales on Thursday as they struggle to compete against Amazon (AMZN, Tech30) and Walmart (WMT).

The massive shift in the retail landscape has led many chains to shut down underperforming stores.
JCPenney is one of them, announcing earlier this year it would be closing 138 stores. JCPenney wound up delaying the closings by a month though after consumers rushed to many of the stores to take advantage of the massive liquidation sales.

Ellison also said during the analyst call that JCPenney expects many retailers to ramp up promotions and discounts to try and lure shoppers into their stores. The CEO warned these sales may be even more aggressive than “what we’ve traditionally seen.”

Don’t Blame Amazon

Amazon is not to blame, but Amazon sure does not help either.

Retail is massively overbuilt. That’s the big problem. And it’s not just the box retailers. The fast food restaurants are all cannibalizing each other’s sales too.

Vitaliy Katsenelson accurately states It’s not just Amazon’s fault. Changing consumer habits are killing old retail biz

Retail stocks have been annihilated recently, despite the economy eking out growth. The fundamentals of the retail business look horrible: Sales are stagnating and profitability is getting worse with every passing quarter.

Jeff Bezos and Amazon get most of the credit, but this credit is misplaced. Today, online sales represent only 8.5 percent of total retail sales. Amazon, at $80 billion in sales, accounts only for 1.5 percent of total U.S. retail sales, which at the end of 2016 were around $5.5 trillion. Though it is human nature to look for the simplest explanation, in truth, the confluence of a half-dozen unrelated developments is responsible for weak retail sales.

Our consumption needs and preferences have changed significantly. Ten years ago we spent a pittance on cellphones. Today Apple sells roughly $100 billion worth of i-goods in the U.S., and about two-thirds of those sales are iPhones.

Consumer income has not changed much since 2006, thus over the last 10 years $190 billion in consumer spending was diverted toward mobile phones. Between phones and their services, this is $340 billion that will not be spent on T-shirts and shoes.

But we are not done. The combination of mid-single-digit health-care inflation and the proliferation of high-deductible plans has increased consumer direct health-care costs and further chipped away at our discretionary dollars. Health-care spending in the U.S. is $3.3 trillion, and just 3 percent of that figure is almost $100 billion.'

All this brings us to a hard and sad reality: The U.S. is over-retailed. We simply have too many stores. Americans have four or five times more square footage per capita than other developed countries. This bloated square footage was created for a different consumer, the one who in in the ’90s and ’00s was borrowing money against her house and spending it at her local shopping mall.

Hugely Overbuilt

Malls, retail stores, and fast food restaurants are all hugely overbuilt. Analysts still have not put 2 and 2 together on what this means.

It’s the overbuilding of all kinds of retail and fast food stores that has provided the high job growth, low wage growth environment that we are in.

You can blame (or thank) the Fed for that, depending on your view. Regardless, the expansion will come to an end at some point. And when it does, the Fed governors will not know what hit them.

Lowering interest rates further will not do a thing for the economy in this overbuilt setup, once the turn takes place.'

Mike “Mish” Shedlock

Edited August 17, 2017 by Sancho Panza

[darkmarket]

10 minutes ago, Sancho Panza said:

The report shows serious credit card delinquencies rose for the third consecutive quarter, a trend not seen since 2009.

At the start they said it was from such a low base, they didn't need to panic. Now it's been spiking for three quarters and still the dollar was sold off with rate hike odds down 10%. The Fed is stuck.

As ever, wonder what's happening with the derivatives trading on this debt.

[Sancho Panza]

1 minute ago, darkmarket said:

At the start they said it was from such a low base, they didn't need to panic. Now it's been spiking for three quarters and still the dollar was sold off with rate hike odds down 10%. The Fed is stuck.

As ever, wonder what's happening with the derivatives trading on this debt.

Don't worry,it's all covered by CDS issued by by Deutsche Bank.......

[darkmarket]

26 minutes ago, Sancho Panza said:

Don't worry,it's all covered by CDS issued by by Deutsche Bank.......

I'm okay with the events that are unfolding currently.

 

[stairlift needed]

On 8/15/2017 at 2:17 PM, Option5 said:

I've been watching  Wood Group's £2.2bn takeover of Amec Foster Wheeler and the words Pig and Poke keep jumping into my mind for some reason.

Coz of the high debt from Amec or fraud or regulators,mind saying a little more?

 

 

[cognitive dissonance]

6 hours ago, darkmarket said:

I'm okay with the events that are unfolding currently.

 

Any more info?

S&P down over 1.5% yesterday, I smell fear in the air, get ready troops!!! 

[Option5]

29 minutes ago, cognitive dissonance said:

Any more info?

S&P down over 1.5% yesterday, I smell fear in the air, get ready troops!!! 

FT -0.70% this morning, blaming Trump, Barcelona etc etc. Now if that decimal point moves one place to the right we'll know the crash has arrived

[Option5]

6 hours ago, stairlift needed said:

Coz of the high debt from Amec or fraud or regulators,mind saying a little more?

 

Nothing concrete, just don't see them both as being sustainable in the long term. The duration of a lot of their contracts signed at the top of the oil price boom is quite long, however I don't see them all being renewed with the same level of work or margins. And as you mentioned the debt is high.

When oil was high a lot of service companies relied on extra/variations and clients who wouldn't enforce liquidated damages for overruns for their profits. I don't imagine Oil companies will be so generous/forgiving in the current climate.

[Noallegiance]

How many of the world's stock markets have a fail safe to stop gigantic falls? You know, like the one used in China at the start of last year?

[Option5]

6 minutes ago, Noallegiance said:

How many of the world's stock markets have a fail safe to stop gigantic falls? You know, like the one used in China at the start of last year?

I would imagine most of them, they're there primarily to prevent algorithms "overshooting" and crashing the market in error. In a real crash they just close the market down to stop panic selling. What happens then of course is it reopens at a vastly reduced level and everyone loses.

[durhamborn]

3 minutes ago, Noallegiance said:

How many of the world's stock markets have a fail safe to stop gigantic falls? You know, like the one used in China at the start of last year?

All of them probably.Hopefully the falls wont be huge in the markets yet.Nasty but not huge will be nice as it will give gold and the miners time to get going .Im going out walking a lot so i dont buy any dips 

[Sancho Panza]

18 minutes ago, Option5 said:

I would imagine most of them, they're there primarily to prevent algorithms "overshooting" and crashing the market in error. In a real crash they just close the market down to stop panic selling. What happens then of course is it reopens at a vastly reduced level and everyone loses.

They also ban shorting and effectively take out the only buyers that are in the market(shots covering)................you couldn't make it up.

[leonardratso]

1 minute ago, Sancho Panza said:

They also ban shorting and effectively take out the only buyers that are in the market(shots covering)................you couldn't make it up.

yes, we saw this shorting ban back in 2011 when the financials went a bit swing happy in europe. Doesnt matter, doesnt last long in the rigged casino, long holders in the right place at the right time wont be stopped as they ride the peaks and the troughs.

Ive just binned my US equity in my work pension, it had a good run, but couldnt really find anywhere much better to put it so slapped it in european industrials, cant be hanging around in the us techs.

[durhamborn]

1 minute ago, Sancho Panza said:

They also ban shorting and effectively take out the only buyers that are in the market(shots covering)................you couldn't make it up.

Yeah but they make those shorts stay up all night drinking heavily 

Hopefully there is no need to shut markets im enjoying today very much.

https://www.google.co.uk/search?rlz=1C1CHJX_enGB479GB479&q=JSE:HAR&stick=H4sIAAAAAAAAAONgecRoyi3w8sc9YSmdSWtOXmNU4-IKzsgvd80rySypFJLgYoOy-KR4uLj0c_UNkrNLTA0reAAH8ugHOgAAAA&sa=X&ved=0ahUKEwiDrKLGveDVAhWBB8AKHYtsDhYQsRUIkgEwFA&biw=1366&bih=638

Dips will probably be bought for a while yet as the CBs have it all under control 

Wonder when the hugely leveraged BTL brigade and HTB "homeowners" start to notice.

[Option5]

6 minutes ago, durhamborn said:

Yeah but they make those shorts stay up all night drinking heavily 

Hopefully there is no need to shut markets im enjoying today very much.

https://www.google.co.uk/search?rlz=1C1CHJX_enGB479GB479&q=JSE:HAR&stick=H4sIAAAAAAAAAONgecRoyi3w8sc9YSmdSWtOXmNU4-IKzsgvd80rySypFJLgYoOy-KR4uLj0c_UNkrNLTA0reAAH8ugHOgAAAA&sa=X&ved=0ahUKEwiDrKLGveDVAhWBB8AKHYtsDhYQsRUIkgEwFA&biw=1366&bih=638

Dips will probably be bought for a while yet as the CBs have it all under control 

Wonder when the hugely leveraged BTL brigade and HTB "homeowners" start to notice.

I'm sure they'll mark your South African gold down in case Grace is arrested and Zimbabwe invade

[durhamborn]

Just now, Option5 said:

I'm sure they'll mark your South African gold down in case Grace is arrested and Zimbabwe invade

The miners need gold through that $1300 level.The COMEX will probably be manipulated as much as possible to keep it down.Interesting few months ahead.

[darkmarket]

19 minutes ago, leonardratso said:

yes, we saw this shorting ban back in 2011 when the financials went a bit swing happy in europe.

Also last year's circuit breaker incident on the Shanghai SE, where it paused trades for 15 minutes at +/-5% (in comparison with 13% on the S&P). At +/-7% trading was closed for the day (20% on the S&P).

From an SSE review:

Quote

Jan 7: Second Triggering

• At 9:42 am, trading was suspended for 15 minutes after the CSI 300 index dropped by over 5%.
• The index further declined 2% within 2 minutes after the resumption at 9:57 am, and trading was ceased. It was the shortest full day trading time in the history of China's stock market.

...The mechanism is not the major reason for the market plunge, but it failed to achieve the anticipated effects. The mechanism in effect accelerated the plunge as some investors decided to sell when the index has drop nearly 5% or 7%.

...Currently, the negative effects of the mechanism are greater than the positive effects.

 

Edited August 18, 2017 by darkmarket

[Talking Monkey]

2 hours ago, Noallegiance said:

How many of the world's stock markets have a fail safe to stop gigantic falls? You know, like the one used in China at the start of last year?

wouldn't say a 50% fall be over several months a couple of percent down then up a bit then down the end result 50% down in a few months

[Craig_]

4 hours ago, Option5 said:

I would imagine most of them, they're there primarily to prevent algorithms "overshooting" and crashing the market in error. In a real crash they just close the market down to stop panic selling. What happens then of course is it reopens at a vastly reduced level and everyone loses.

Everyone, that is, except those with prior warning!