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

[MrXxxx]

Thought I would share this gold quote from a book I am currently reading (Rickards Death of Money)

"Gold standards are disfavoured by those who do not create wealth but instead seek to extract wealth from others through inflation, inside information, and market manipulation"

...that'll be the world banking system then?!

[Harley]

22 hours ago, MrXxxx said:

Well if that's the case people can't say they weren't warned...be interesting to see what is in the next budget, think I may be doing some workplace pension `restructuring` before then!

Currently optional!!!!

https://www.dailymail.co.uk/news/article-8931977/Rishi-Sunaks-bond-raise-green-cash-Investors-able-raise-money-eco-projects.html

[DurhamBorn]

3 hours ago, Harley said:

Currently optional!!!!

https://www.dailymail.co.uk/news/article-8931977/Rishi-Sunaks-bond-raise-green-cash-Investors-able-raise-money-eco-projects.html

Fantastic,a green gilt,more amounts of capital miss-allocated and inflated away.I want zero debt being raised for oil and gas,ziltch.The same as when finance dried up for whaling boats in the 1800s the price of whale oil went to new highs over many years.

There will be a bubble in green energy,hopefully as rates increase mid cycle big oil will get to buy them all up for 10% of the capital invested as they start to default and cant raise new debt.

[Harley]

46 minutes ago, DurhamBorn said:

Fantastic,a green gilt,more amounts of capital miss-allocated and inflated away.I want zero debt being raised for oil and gas,ziltch.The same as when finance dried up for whaling boats in the 1800s the price of whale oil went to new highs over many years.

There will be a bubble in green energy,hopefully as rates increase mid cycle big oil will get to buy them all up for 10% of the capital invested as they start to default and cant raise new debt.

Unless it's your forced capital!   I was surprised how the likes of TRIG and UKW went down in March.  Presumably related to liquidity and profit taking but maybe also debt profiles?

[sancho panza]

 

On 22/12/2020 at 23:50, M S E Refugee said:

I can assure you they won't be, you have never met a group of spoilt and self entitled lazy so and so's.

Have you mixed with many Teachers?

On 23/12/2020 at 00:29, Cattle Prod said:

Alberta is chock full of oil, its unbelievable how much has been deposited there. There is no real need for fancy angles on it on terms of competitive advantage. Is still, after 50 years, harder to find oil in the North Sea than Alberta. Or Saskatchewan/BC, offshore Labrador has a lot of potential but high risk. Point is, exploiting it us not the problem, exporting it is. Alberta has been boxed in by the Ottowa and DC govts for years, but that'll change. Export routes will open.

So the company you want should be financially selected rather than exposure, territory or skill. I hear good things about Cenovus, but I have no clue about balance sheet.

Canada is the US biggest supplier already, little known fact. Just under 4m bbl/d, or half a Saudi Arabia. I suggest a Sancho Coma Score of the companies that supply that will be useful. But they'll all be paying a tithe to Enbridge.

My thoughts exactly CP.I had a quick look at Cenovus and it looks pretty solid.Full year results will be msotly complete by Mid Feb I'd have thought which will mena we'll have a good idea about who's emerged from Covid in a survivable shape.I think @DurhamBorn point hat debt doesn't matter so much when the companies have huge steady cashflows is true-although somewhat damaging to the wealth if they get sinking momentum as per the Scottish play.

I had a quick look for the pipeline ETF that Kaplan has used in the past but couldn't remember it exactly.Enbridge appears to be a key play in a few.

I think your line of argument that Canada is worth getting exposure to has a strong logic.I can't believe they're supplying half a Saudi already.........low geo political risk,what's not to like.It would also give me soemthing to roll our CAD into when we sell off some of the CAD PM miners we own.

I'll be redoing SCScores in late Jan and will try and find a decent set of Canadian oil/gas plays to start tracking alongside the large players we already hold

On 23/12/2020 at 16:50, DurhamBorn said:

25% fo US energy goes through them,they fund the divi and $3 billion of investment every year from free cash flow now.I expect they could pay down debt quickly if they stopped investing and rising prices would go straight to the bottom line as well.As always id refer no debt,but in an inflation cycle others wont be able to borrow to build at cheap rates,same as telcos.Bond holders funding equity holders returns.

Your right on this DB.They still have plenty of equity even with all the debts they have.Much like some of the eye watering bond deals Vod have struck -2056 3% stylee....

[sancho panza]

On 24/12/2020 at 17:09, DoINeedOne said:

The only coal-focused exchange-traded fund is closing at 12 years old, another sign of investors’ desire to withdraw from the industry.

The VanEck Vectors Coal ETF, which went public in January 2008 under the ticker KOL, stopped trading this month and will return investors’ money on Dec. 22. It had about $35 million in assets. At its height in 2011, the ETF had $908 million, said Ed Lopez, head of ETF Product at VanEck Associates.

The move comes as other investment companies withdraw from funding coal businesses.
In January, BlackRock said the firm’s actively managed funds would no longer hold shares of companies that derive more than 25% of revenues from thermal coal. It unveiled a major expansion of its sustainable-investing lineup.

This month, New York state’s $226 billion pension fund set itself the goal of reducing net emissions of greenhouse gases from its portfolio to zero by 2040. It said it is divesting from coal and tar sands and will next review fracking companies, major oil companies, fossil-fuel companies and oil-and- gas transportation and pipelines.

A number of big money managers have also set net-zero targets for their portfolios, as the Paris Agreement to curb the rise in global temperatures marks its fifth anniversary. In such an environment, it’s no surprise that coal’s fans are diminishing.

In a statement, VanEck said it “continuously monitors and evaluates its ETF offerings across a number of factors, including performance, liquidity, assets under management and investor interest, among others. The decision was made to liquidate the fund based on an analysis of these factors.”

VanEck has been adding green offerings in recent years, including the $240 million VanEck Vectors Low Carbon Energy ETF (ticker: SMOG) and the $50 million VanEck Vectors Green Bond ETF (GRNB).

If that isn't a buy signal I don't know what is.Do you remember that chart of commodity usage (featuring each commodity as a %age of world demand over last 50 years or so?)?.Coal had a dip psot 08 but then was back at previous levels by 2020....

If I could get any coal exposure via single company equities,I'd have a go here so any ideas welcomed.

On 25/12/2020 at 09:41, MrXxxx said:

Eureka moment...why compulsory workplace pensions?...traditionally financial repression (via -ve real rates) was via capping interest rates and so `stealing` from savers. Savers found ways to avoid this either by investing in hard assets I.e property  advent of online brokers/share buying or buying fewer govt bonds. To counter act this make it compulsory for pension companies to buy them, and so compulsory for the general public to buy them without realising....financial repression by stealth...brilliant idea!

Indeed,force people to have pensions,force pension companies to follow solvency ratios that heavily favour buying cruddy Gilts even though they're an awful long term investment and then sit back and watch the transfer of wealth begin.

Shocking really, but....exceptionally well covered throughout this thread ..so we're all aware.

[Harley]

Since we're talking about pensions, here's a flood I received today.....

https://www.ftadviser.com/retirement-income/2018/01/04/savers-told-they-need-300k-pension-pot-to-retire-well/

https://www.ftadviser.com/pensions/2020/07/16/govt-embarks-on-17bn-public-sector-pension-remedy/

https://www.ftadviser.com/pensions/2020/09/11/pensions-in-crosshairs-as-govt-looks-for-covid-debt-solution/

https://www.ftadviser.com/pensions/2020/04/30/pension-funds-suffer-record-losses-as-covid-19-hits/

https://www.ftadviser.com/pensions/2020/03/30/regulator-permits-three-month-pension-transfer-freeze/

https://www.ftadviser.com/pensions/2020/09/01/ifs-tells-govt-to-consider-pension-tax-hike-to-pay-for-covid-debt/

https://www.ftadviser.com/pensions/2020/10/28/govt-moves-to-mandate-guidance-when-accessing-pensions/

https://www.ftadviser.com/pensions/2020/09/23/govt-confirms-triple-lock-boost-despite-scepticism/

https://www.ftadviser.com/pensions/2020/06/05/fca-goes-ahead-with-db-transfer-contingent-charging-ban/

Welcome to 2021+

 

[DurhamBorn]

I think the issue on bonds in pensions etc is part of how our system works,and for new readers of the thread perhaps a good time to put it in simple terms.

First the central bank creates new "money",actually just liquidity.They then buy assets with it,thats gilts already in the market,forcing up prices and forcing down yields.Governments then issue lots of debt at the same or similar rates,Central Bank buys a lot of those as well,so directly funding government spending.

Now people who own those gilts from long past dont lose out,the value of the gilt increases mostly making up for the coupon/interest being below inflation.The losers are the people who buy at an INFLECTION point.That is,at the point inflation is going to move up,not down.

So someone 70 who went into a 40/60 fund 10 years ago is fine,for now.They have pulled forward their gains.However someone say 50 whos pension is set to "lifestyle" is going to be the loser as assets are switched into bonds and its likely they will at best return the nominal sum over a decade while inflation goes up 60% (the 70s was 67% over the cycle roughly)

So the people in their 50s now are at huge risk and its their wealth that will be taken to pay the spending.Remember almost all pension funds are set to go into lifestyle ie more bonds 10 years/15 years from retirement.Most people then with the biggest funds are about to transfer them into bonds at an INFLECTION point.

This also stretches past those people to those actually retiring,maybe forced.They tend to use 60% or 80% bond funds when in drawdown,usually 60%.So they are moving 60% of their liquid wealth into an area with zero inflation protection now (well nearly zero) .

The government doesnt need to force anything as most schemes already do this for them,and most workers have zero understanding and most IFAs simply project forward the recent past so will be blindsided by inflation.

10% decade coupon return,60% inflation,state debt cut in half.Private wealth used to pay for it.

No wonder they arent going to be issuing any RPI linkers.

 

[sancho panza]

6 hours ago, DurhamBorn said:

The government doesnt need to force anything as most schemes already do this for them,and most workers have zero understanding and most IFAs simply project forward the recent past so will be blindsided by inflation.

10% decade coupon return,60% inflation,state debt cut in half.Private wealth used to pay for it.

No wonder they arent going to be issuing any RPI linkers.

That's about one of the best explanations in laymens terms we'll ever get and why people need to read the thread.

All I would like to add is that the BoE won't be issuing many more index linkers as they're pension pot already has 91% RPI linkers in it.................

Genuinely disgusts me when I hear the BoE apparatchiks telling us plebs not to worry about inflation.....

https://www.bankofengland.co.uk/-/media/boe/files/about/human-resources/pensionreport.pdf

[Thorn]

9 hours ago, sancho panza said:

If that isn't a buy signal I don't know what is.Do you remember that chart of commodity usage (featuring each commodity as a %age of world demand over last 50 years or so?)?.Coal had a dip psot 08 but then was back at previous levels by 2020....

If I could get any coal exposure via single company equities,I'd have a go here so any ideas welcomed.

Indeed,force people to have pensions,force pension companies to follow solvency ratios that heavily favour buying cruddy Gilts even though they're an awful long term investment and then sit back and watch the transfer of wealth begin.

Shocking really, but....exceptionally well covered throughout this thread ..so we're all aware.

Maybe check out Westwater, CIL, Arch Coal.

[wherebee]

I've got several small pensions around the world and am slowly moving them back to Oz (hard as nails to work through the barriers put in each country, trust me).  

Then we'll look at a self managed pension scheme here - running costs each year (accountants, etc) means its only worth it once you get over about 250k, but you can invest in whatever the hell you want, including any old shite you can think of.

[Barnsey]

If this ain't a tulip mania melt up... 

 

[DurhamBorn]

1 hour ago, Barnsey said:

If this ain't a tulip mania melt up... 

 

100% bubble.Guy just started at work with an agency,collecting cardboard,that sort of thing.Said he was glad he got paid early as was needing to take out a short term loan for crimbo.He said he was getting a loan and going to buy bitcoin though,make a fortune.

Bubbles are incredible things for people who get in early,and catching one can change peoples lives for ordinary people.However its crucial people see them for what they are and diversify the profits out into undervalued boring areas.

I think whats interesting about the bubbles we are seeing at the end of this cycle is that they seem to revolve around younger people mostly.I think the fact they have yet to see capital wipe outs etc,and how most returns in investing actually come from the dividends/income is driving it.

 

 

[DurhamBorn]

6 hours ago, wherebee said:

I've got several small pensions around the world and am slowly moving them back to Oz (hard as nails to work through the barriers put in each country, trust me).  

Then we'll look at a self managed pension scheme here - running costs each year (accountants, etc) means its only worth it once you get over about 250k, but you can invest in whatever the hell you want, including any old shite you can think of.

We are very lucky in the UK to have SIPPs,the running costs on mine are 0.1% outside of buying/selling,0.7% this year,but iv churned my whole portfolio around nearly.Most people however will have an Independant Financial Advisor doing it for them and they will be looking at fees of between 1.8% and 2.2% including,fund,platform,IFA.

 

[Democorruptcy]

46 minutes ago, DurhamBorn said:

100% bubble.Guy just started at work with an agency,collecting cardboard,that sort of thing.Said he was glad he got paid early as was needing to take out a short term loan for crimbo.He said he was getting a loan and going to buy bitcoin though,make a fortune.

Bubbles are incredible things for people who get in early,and catching one can change peoples lives for ordinary people.However its crucial people see them for what they are and diversify the profits out into undervalued boring areas.

I think whats interesting about the bubbles we are seeing at the end of this cycle is that they seem to revolve around younger people mostly.I think the fact they have yet to see capital wipe outs etc,and how most returns in investing actually come from the dividends/income is driving it.

 

 

Tell him about these, he doesn't know he will love it! Just ask for a share of any profits as thanks, for some free exposure!

https://bitcointreasuries.org/index.html

 

[jamtomorrow]

1 hour ago, DurhamBorn said:

100% bubble.Guy just started at work with an agency,collecting cardboard,that sort of thing.Said he was glad he got paid early as was needing to take out a short term loan for crimbo.He said he was getting a loan and going to buy bitcoin though,make a fortune.

Looks to me like a straight repeat of every previous BTC manic episode, *including* anecdotes of latecomers selling everything / remortgaging / putting the missus on the game to get in on the act. 

That's just how BTC always moves when it moves (and of course, the downward moves are *brutal* when, inevitably, they come).

I quite like the brutality, it weeds out the crypto-tourists.

[UnconventionalWisdom]

3 hours ago, DurhamBorn said:

 

I think whats interesting about the bubbles we are seeing at the end of this cycle is that they seem to revolve around younger people mostly.I think the fact they have yet to see capital wipe outs etc,and how most returns in investing actually come from the dividends/income is driving it

Also have no faith in the system. Pay loads for an education but can only get you a job where you need to share a place (often with strangers). No possibility of owning so may as well take a punt on something that youtube said would be great. It'll be a tough lesson if anyone goes all-in. I think bitcoin has a future but too many people see it as a get rich quick scheme (main prerequisite a bubble!)

[leonardratso]

i remember that arsehole on TOS who was mining some coin in his shed on a pc, according to him in the future he would be elevated to king like status because of the amount of BTC he would have and everyone elses kids would be his serfs*.

This was before the last crash.

*Obviously until someone stuck a knife in his neck.

[JMD]

On 26/12/2020 at 15:48, sancho panza said:

If that isn't a buy signal I don't know what is.Do you remember that chart of commodity usage (featuring each commodity as a %age of world demand over last 50 years or so?)?.Coal had a dip psot 08 but then was back at previous levels by 2020....

If I could get any coal exposure via single company equities,I'd have a go here so any ideas welcomed.

Indeed,force people to have pensions,force pension companies to follow solvency ratios that heavily favour buying cruddy Gilts even though they're an awful long term investment and then sit back and watch the transfer of wealth begin.

Shocking really, but....exceptionally well covered throughout this thread ..so we're all aware.

Re coal miners, Thorn has already suggested some good coal miners, and I own some of those, I'd add warrior met coal and inner mongolia coal, there is an Australian one which I also liked - I'll post later when I can remember it's name! Don't know if you are buying long term but I bought ones doing metallurgical as that type will be needed for steel making whatever the future green policies are implemented to inhibit mining coal.

[Errol]

[JMD]

6 hours ago, Democorruptcy said:

Tell him about these, he doesn't know he will love it! Just ask for a share of any profits as thanks, for some free exposure!

https://bitcointreasuries.org/index.html

 

I monitor that site, it is a useful one I think. I also hold some microstrategy and square, but similar companies have not followed them which I find disappointing and kinda frustrates the theory that institutional money was going to begin to pile in this year. May still happen of course.

[DurhamBorn]

11 minutes ago, Cattle Prod said:

So the lawyers have got hold of the PCR test issue, and are putting class action lawsuits for loss of earnings etc. Should be an easy win, all you need to do is establish the false positive rate and that the govt wilfully ignored it, which they obviously have. WHO and other PCR test advocates are distancing themselves from it in recent weeks.

Occured to me that this is potentially another mechanism the govt could use to hand out money and keep the liquidity going, like PPI claims on steroids. Most legal stuff is protracted though, and it's likely inflation will be running before the payouts begin. If this comes to pass, could really juice the cycle.

Exactly.If your Card Factory,or a shareholder,why wouldnt you want a payout?.Government force you to close on dodgy data while allowing Tesco to continue selling cards.Government simply deciding we are going to destroy your capital and you can do nothing.I think it will prove massive.Millions of hard working people stuffed,while millions of not hard working still getting money off the government in welfare and state/council wages.

[JMD]

7 hours ago, DurhamBorn said:

100% bubble.Guy just started at work with an agency,collecting cardboard,that sort of thing.Said he was glad he got paid early as was needing to take out a short term loan for crimbo.He said he was getting a loan and going to buy bitcoin though,make a fortune.

Bubbles are incredible things for people who get in early,and catching one can change peoples lives for ordinary people.However its crucial people see them for what they are and diversify the profits out into undervalued boring areas.

I think whats interesting about the bubbles we are seeing at the end of this cycle is that they seem to revolve around younger people mostly.I think the fact they have yet to see capital wipe outs etc,and how most returns in investing actually come from the dividends/income is driving it.

 

 

DB, but BTC is not only for younger people... Max Kaiser is fond of saying BTC is a bet on the future of humanity, whereas gold is a bet on the past and against humanity. Then again that statement is very woke, which I suppose kinda reinforces your original point!!!                                                                                                 Your reminder to take profits is a excellent one. I did do that and sold some PM's and bought BTC/BTC leveraged companies (as per bitcoin treasury site Democorruptcy mentions above), if BTC goes to 100k as some models do predict it should after its recent halving, then I will sell 33% and hold the remainder. The reason why I sold some PM's to buy BTC is because I view BTC similar to gold, could be wrong, but BTC represents only a small proportion of my total PM's, so I view it as a small downside risk but huge potential upside.

[Democorruptcy]

32 minutes ago, JMD said:

I monitor that site, it is a useful one I think. I also hold some microstrategy and square, but similar companies have not followed them which I find disappointing and kinda frustrates the theory that institutional money was going to begin to pile in this year. May still happen of course.

Well done on the Microstrategy. The Bitcoin holding column must be a clue to how well similar companies have done, with regard to Bitcoin only profits.

[JMD]

28 minutes ago, DurhamBorn said:

Exactly.If your Card Factory,or a shareholder,why wouldnt you want a payout?.Government force you to close on dodgy data while allowing Tesco to continue selling cards.Government simply deciding we are going to destroy your capital and you can do nothing.I think it will prove massive.Millions of hard working people stuffed,while millions of not hard working still getting money off the government in welfare and state/council wages.

But will the truth ever be outed? The MSM only show us pub landlords and sme's that enjoy wearing their covid hair-shirts. Shocking stuff going on all around... I'm continually reminded of that Adam Curtis's documentary Hypernormalisation.