Credit deflation and the reflation cycle to come (part 2)

[CVG]

53 minutes ago, Cattle Prod said:

Another penny drops for me. I never really understood why deflation is so bad per se, clears out bad debts and zombies and makes stuff cheaper. But I hadn't taken it to its logical conclusion - that is quite the incentive. 

That also shows that gold is good to hold in a deflation. If you can suffer the initial liquidity selloff, you are covered if (a) deflation is allowed destroy fiat, or (b) CBs print their way back out of the deflationary hole back to inflation. Always hold gold IMO. I bought some more on Friday.

PM's are one of my five Asset Classes - 20% split between physical at home, physical in vault, miners and ETF's for simplified balancing. I also weight within that according to the gold silver ratio. So at the moment I'm buying more silver action than gold. As PM prices fall I'm forced to rebalance from my winning asset classes thus buying low.

[JMD]

3 hours ago, dnb24 said:

Long time lurker here, love this thread- best education I’ve ever had I think (including the 12 years at school)!
Afraid I can’t offer the insights like DB/CP etc but Just a few things I’ve been made aware over the past week showing how money from BOE is being spent across government initiative. Our hospital-I work in NHS as clinician (and from what I’m told 35-40 more UK wide) will be rebuilt- our hospital build is forecast to cost £1billion- so that’s £40billion earmaked.
Also been made aware of Some infrastructure initiatives in Italy- Which seem incredibly generous https://www.romizi.com/eco-bonus-sisma-bonus-and-super-bonus/#toggle-id-4 - I wonder if UK may try something similar.

Seems like they are trying pretty hard to fight off deflation, despite continuing with these lockdowns! my thoughts on that is they don’t see the hospitality parts of the economy playing a roll in the reflation and want the weakest hands out the market.

 

Welcome dnb24. Wasn't that hospital build target that you mention seen as just another one of our prime minister's early faux pas? He was widely poked fun of at the time, about 18 months ago I believe, for suggesting such an ambitious idea, but was it in reality just typical unprofessional Boris letting the 'reflation cat' out of the bag...?                                                                                                                                                           If we do get 50 new hospitals, is there a clear investment strategy for us to play here? What do others here think?                                                                                                                                                                                           ...Perhaps we won't get a commodity cycle, but a covid cycle, sort of makes terrifying sense if you think about it! (Don't have nightmares!)

[MrXxxx]

5 hours ago, arrow said:

The Fed is terrified of low inflation

"If inflation expectations fall, interest rates would decline too. In turn, there would be less room to cut interest rates to boost employment during an economic downturn. Evidence from around the world suggests that once this problem sets in, it can be very difficult to overcome

But is this not what they have all done over the last 5-10 years and why in Europe they are screwed with -ve interest rates?!

[MrXxxx]

1 hour ago, JMD said:

Welcome dnb24. Wasn't that hospital build target that you mention seen as just another one of our prime minister's early faux pas? He was widely poked fun of at the time, about 18 months ago I believe, for suggesting such an ambitious idea, but was it in reality just typical unprofessional Boris letting the 'reflation cat' out of the bag...?                                                                                                                                                           If we do get 50 new hospitals, is there a clear investment strategy for us to play here? What do others here think?                                                                                                                                                                                           ...Perhaps we won't get a commodity cycle, but a covid cycle, sort of makes terrifying sense if you think about it! (Don't have nightmares!)

Short Private Healthcare?...Long Big Pharma/Biomed/Equipt?....or maybe its all being set-up for a sell off to mates?

[Noallegiance]

2 hours ago, DurhamBorn said:

True on gold,but remember its very unlikely Fiat would ever fail in a dis-inflation/outright deflation because CBs will react on steroids.The fail would come if they didnt react.The macro work is around the size of their action in regards to the situation,too little or too much.The nature of the beast is its very unlikely to be ever just right.

Fiats likely demise will come at the end of an inflation cycle.Its that point CBs are trapped.They can remove fiat of course,but its a very difficult thing to get right.

Iv been thinking a lot about the next/this next cycle end.This cycle is running for me now so im more interested in looking at the end of the roadmap now.

I have been and am very very scared of what the macro position will be.However smoke is clearing a bit and a roadmap out of systemic collapse.I think it will involve taxation,a basic income,and a lowering of working hours.

I think we might see 10 hours a week citizens income,and a reduction in hours worked in full time workers.

Im going to be doing a lot more work on the end of the roadmap the next couple of years,but for now i dont want to go into it too much as it doesnt affect us yet,wont for several years and doesnt change the investment thesis at all for a long time.

Do you see PMs as a vital hold over the next few years?

[DurhamBorn]

21 minutes ago, Noallegiance said:

Do you see PMs as a vital hold over the next few years?

I see them as a vital hold always to be honest for insurance.I think topping up silver at anything below $30 makes sense.Iv been buying some miners again myself,mostly Harmony Gold at the moment as that and Cameco are going to form most of my Uranium assets.

[BurntBread]

2 hours ago, JMD said:

is there a clear investment strategy for us to play here? What do others here think?

I guess this is where we call on the wide experience of the posters here. Hospital re-build is very different to pharma, so who actually makes medical equipment? There are some specialist companies for new medical devices in the Cambridge business parks, but I guess the big spend will be on fitting out theatres and wards, so more mundane stuff. I do know that 20 years ago, UK surgeons would swear by Black & Decker, but I don't think surgeons are a large part of B&D's consumer base.

More generally, for the reconstruction, what UK based engineering co's are people buying? As DB has said, JCB unfortunately only has two shares, and neither of them are for sale. Rolls Royce looks very saddled with debt and is loss-making. Who will be the main contractors in general infrastructure re-builds (transport, hospital buildings, power stations etc.)? The oil, energy and telcos will presumably have their own parts of that story sewn up, but what other players will benefit?

[dnb24]

The hospital rebuild partners are as follows. It seems the basis for hospitals is folllowing the Chinese model- ie you’re assessed and investigated on the day- the plan is investigations (Mri/ct/bloods etc) all completed on the day- therefore massively increasing imaging and testing capacity -shares in imaging Companies may be worth worth looking at

Programme Management	Currie & Brown
Architect Led Design Team	Ryder Architecture Lead
Healthcare Planning	ETL
Project Management	Aecom
Quantity Surveyor	Currie & Brown
Enabling Works Project Management	Currie & Brown

[DurhamBorn]

3 hours ago, MrXxxx said:

But is this not what they have all done over the last 5-10 years and why in Europe they are screwed with -ve interest rates?!

Yes and no.After the financial crisis the CBs pretty much re-financed the banks balance sheets with QE and also monetized half of governments welfare budgets .This time they are going to finance direct fiscal investment.They are even nudging governments to get on with it.Its a once in a generation chance to print enough to actually re-tool,re-build.I wont see it again,my children might not.

Europe has made massive policy errors yes.Its mainly because they have the same currency but different fiscal needs.Germany has pretty much stolen all the wealth.As usual.

[Errol]

Shell must pay nearly half a billion for oil spill in Nigeria, court rules

Nigeria’s Supreme Court has declined an application from Royal Dutch Shell which aimed to set aside a previous ruling that ordered the company to pay $467 million for damages caused by an oil spill almost five decades ago.

The judges upheld the previous decision, which ruled that the oil conglomerate must pay damages for an oil spillage in Ejama-Ebubu in Rivers State. According to Bloomberg and local media reports, the five-member panel said that Shell’s request to review the case lacked merit.

https://www.rt.com/business/508092-shell-oil-spill-nigeria/

[Democorruptcy]

Just looking at True Contrarian's largest shorts in his last post Nov 8th  he could do with a turn

Quote

I have 17.5% of my total liquid net worth short XLK, 5.2% short TSLA, 4.1% short QQQ (some new), 2.3% short ZM, 0.8% short AAPL, and 0.4% short SMH. I plan to keep adding especially to my QQQ short into strength whenever QQQ is near 295 or above.

https://www.marketwatch.com/investing/fund/xlk/holdings?mod=mw_quote_tab

https://www.marketwatch.com/investing/stock/tsla

https://www.marketwatch.com/investing/fund/qqq/holdings?mod=mw_quote_tab

https://www.marketwatch.com/investing/stock/zm

[CVG]

12 minutes ago, Democorruptcy said:

Just looking at True Contrarian's largest shorts in his last post Nov 8th  he could do with a turn

https://www.marketwatch.com/investing/fund/xlk/holdings?mod=mw_quote_tab

https://www.marketwatch.com/investing/stock/tsla

https://www.marketwatch.com/investing/fund/qqq/holdings?mod=mw_quote_tab

https://www.marketwatch.com/investing/stock/zm

It's Big Short 2 stuff. Can he hang in long enough?

[DurhamBorn]

10 minutes ago, Democorruptcy said:

Just looking at True Contrarian's largest shorts in his last post Nov 8th  he could do with a turn

https://www.marketwatch.com/investing/fund/xlk/holdings?mod=mw_quote_tab

https://www.marketwatch.com/investing/stock/tsla

https://www.marketwatch.com/investing/fund/qqq/holdings?mod=mw_quote_tab

https://www.marketwatch.com/investing/stock/zm

Must admit shorting isnt for me.I never use leverage ever and with longs you can sit and wait with no pressure.Im pretty sure all his shorts will fall huge amounts from where they are now,but a parabolic increase would destroy anyone leveraged.Tesla is a huge bubble of course.Even a guy at work said his son had started buying it on some App,hes 21 and works in Tesco.Tesla only makes money on carbon credits etc from what i can see in its accounts.

Instead of shorting though i prefer to look at the opposite end of the bubble,of course that old style energy right now.

Steve is a superb contrarian and has really deep knowledge in areas most people dont even consider.He would be first to admit though timing is never perfect.

[Don Coglione]

8 minutes ago, CVG said:

It's Big Short 2 stuff. Can he hang in long enough?

I fucking hope so, because I am in with him on Tesla!

https://www.bbc.co.uk/news/technology-55103706

[Noallegiance]

The comedy/tragedy of all this is that the West spent millions of lives in the 20th century trying to defend itself against socialism. Now we're at the stage where we've let so much socialism in that the only response available is more of it because the free market antidote would initially be so expensive that it's unpalatable.

Would you like to continue to eat the sick, or get out of eating sick by first eating shit?

[Democorruptcy]

1 hour ago, DurhamBorn said:

Must admit shorting isnt for me.I never use leverage ever and with longs you can sit and wait with no pressure.Im pretty sure all his shorts will fall huge amounts from where they are now,but a parabolic increase would destroy anyone leveraged.Tesla is a huge bubble of course.Even a guy at work said his son had started buying it on some App,hes 21 and works in Tesco.Tesla only makes money on carbon credits etc from what i can see in its accounts.

Instead of shorting though i prefer to look at the opposite end of the bubble,of course that old style energy right now.

Steve is a superb contrarian and has really deep knowledge in areas most people dont even consider.He would be first to admit though timing is never perfect.

I seem to remember you were shorting Amazon at one time? Spread firms allow you to use leverage but you could set a  maximum loss and set aside or even deposit the whole amount as if writing it off. I think shorting has a place at specific times, I was happy with my 'Covid' list earlier this year. Though over a longer period prices should rise because of inflation and there's always that pesky Fed. Shorting isn't a long game.

[StrugglingMillennial]

Which websites are good for shorting, ive always been interested in having a go with a small amount of money. 

[DurhamBorn]

26 minutes ago, Democorruptcy said:

I seem to remember you were shorting Amazon at one time? Spread firms allow you to use leverage but you could set a  maximum loss and set aside or even deposit the whole amount as if writing it off. I think shorting has a place at specific times, I was happy with my 'Covid' list earlier this year. Though over a longer period prices should rise because of inflation and there's always that pesky Fed. Shorting isn't a long game.

Iv shorted a few things over the years but we are talking 1% of my portfolio and usually if ever as a pair trade,long one short the other.You have the interest charge decay as well to consider.I think like you say its a short term thing.I think your mindset changes as you get older and hopefully your wealth gets higher.In my 20s i wanted growth and ever considered taking any income,where now i tend to focus on income and beating inflation.

Another thing to consider when shorting and is the main reason i dont is that im not very good at it.I think its more suited to chartists etc.

I guess its how Steve shorts and if there is leverage etc.Not sure how it works in the US.

[DurhamBorn]

23 minutes ago, StrugglingMillennial said:

Which websites are good for shorting, ive always been interested in having a go with a small amount of money. 

I used Cityindex in the past,no idea what its like now though as havent used for a long time.My advice would be to be very careful,most people lose,something like 75% i think.

[Democorruptcy]

13 minutes ago, DurhamBorn said:

Iv shorted a few things over the years but we are talking 1% of my portfolio and usually if ever as a pair trade,long one short the other.You have the interest charge decay as well to consider.I think like you say its a short term thing.I think your mindset changes as you get older and hopefully your wealth gets higher.In my 20s i wanted growth and ever considered taking any income,where now i tend to focus on income and beating inflation.

Another thing to consider when shorting and is the main reason i dont is that im not very good at it.I think its more suited to chartists etc.

I guess its how Steve shorts and if there is leverage etc.Not sure how it works in the US.

I think age is a factor. Like old golfers stood over a putt who have more misses to remember, so do investors. It can become a fear of losing rather than only thinking of winning.

[Democorruptcy]

43 minutes ago, StrugglingMillennial said:

Which websites are good for shorting, ive always been interested in having a go with a small amount of money. 

I've used City and IG

[JMD]

21 hours ago, CVG said:

PM's are one of my five Asset Classes - 20% split between physical at home, physical in vault, miners and ETF's for simplified balancing. I also weight within that according to the gold silver ratio. So at the moment I'm buying more silver action than gold. As PM prices fall I'm forced to rebalance from my winning asset classes thus buying low.

Similar to you, two of my asset classes are PM's and commodities. I am looking to rebalance/sell high buy low, within each, whilst maintaing overall allocation portfolio %'s. My other equity investments pay me dividends, so im keen to try and make my pm/commods earn their keep!                                                                                              You also mention the GSR. Have you a strategy plan for using it to sell silver and buy gold? I ask because I have a large etf silver holding that I bought at average of 100/1, and I hope to begin 'swopping' the silver for gold when the gsr gets below 50/1. I would then buy physical gold for long term hold. Just enquiring in case you are doing something similar. I am trying to decide on a rational plan so I dont let emotion get in the way when it comes time to begin selling silver, etc.

[Boon]

IGIndex are good.

Although I 'fought the fed' earlier on during the crash (and lost) and it seems obvious to me why a lot of people lose.

Either you need extremely disciplined trade management to minimise losses, or you have to have the appetite to sit on losses for a while and willing to wait for the market to turn your way. You also have to appreciate the nature of the stake limits and accept you can lose much more than budgeted. 

The amateur trader has none of this, they'll either trade with no stop or meaningless stop, and not have the balls to ride out a bad position. For example, I was short the FTSE earlier this year and kept on taking profits at what I thought were turning points. There was one savage rip in June where the markets went back up to 6500 and I closed at a loss, wiping out all the profits I had made.

Had I rode this out I would have made a large profit as the FTSE rebounded back down to 5500 last month. But going against that is the imputed interest charge, essentially you are borrowing something off them to short and you get charged interest on that whether you like it or not. So waiting it out a long time was costing money, to the point where waiting a couple of months would then mean needing a huge move just to break even. This interest charge is sly, just debited against your cash balance and is very small on its own so you don't notice, but it accumulates over time.

So 76% of people lose, and I am not surprised. 

I have reformed my opinions and I think the best use of the short may be to hedge something specific, also at a specific time (for instance, fundamental news). The opposite use (hedging something general, over a long period of time) is not efficient.

If you are trying to make money it may be better to find something to be long with, as I see it that is swimming with the tide.

 

[Lightscribe]

3 hours ago, Cattle Prod said:

Interesting. Here's a decomplex play on imaging: helium. It's very rare, and can get very expensive. Little known is that one of its biggest uses is MRI scanners. Much to date has come from US stockpiles, now running down. It's found alongside hydrocarbons sometimes, though rarely in commercial quantities. I've seen it cropping up here and there in oil and gas project chatter. Qatar produces some, I think Prof Gluyas in Durham was hawking a project in Tanzania. Perhaps @DurhamBorn can get him drunk once the pubs open?! He's a friendly character 

Not sure if these hospital plans are enough to affect world supply, but could be part of a wider trend. For the extreme contrarians: buy up party balloon bottled supply now!

 

https://www.bbc.com/news/amp/business-49715838

Yup Helium is also used in chip manufacturing. US stockpiled it during the First World War, due to non combustible properties vs hydrogen in the airships. Germany didn’t have a choice however as the US had cut off all avenues of supply. 

Bit like when the US sneakily managed to get supplies of Titanium from Russia for the SR-71 so they were providing the materials to spy on themselves. 

https://www.wearethemighty.com/articles/russia-sold-its-enemy-the-metal-for-sr-71-blackbird-spyplane/

All interesting stuff, but also quite sobering to think how stuffed we would be in another conflict as we don’t make or have supplies of anything much anymore as we over rely on importation of everything.

Anyways back on topic. Helium will become very rare. Perhaps that’s why China is so interested in getting to the moon recently (where there is an abundance of helium and other rare metals) and testing to transport cargo back.

[JMD]

16 hours ago, DurhamBorn said:

Yes and no.After the financial crisis the CBs pretty much re-financed the banks balance sheets with QE and also monetized half of governments welfare budgets .This time they are going to finance direct fiscal investment.They are even nudging governments to get on with it.Its a once in a generation chance to print enough to actually re-tool,re-build.I wont see it again,my children might not.

Europe has made massive policy errors yes.Its mainly because they have the same currency but different fiscal needs.Germany has pretty much stolen all the wealth.As usual.

DB, are you looking at any specific builders to invest in, or do you think the construction sector is risky and/or maybe not 'decomplex'? I.e... maybe stick to the fundamentals like energy, commods, or the steel/chemical industries? Thing is I'd really like to invest in the 'great rebuild of the country', but is that just an emotional response, and better sticking to the fundamental/basic sectors?                                                                              Btw, I agree with you about Germany, just don't tell them your real name... or you might find that 'your name will also go on the list!' (at least that's what private Pike tells me happens)