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

[Hancock]

Anyone know why Jinchuan Group, is looking relatively cheap?

https://www.google.com/search?q=jinchuan+group+share+price&rlz=1C1CHBD_en-GBGB864GB864&ei=vjZZYMyMOYeW8gKGwYeQAQ&oq=Jinchuan+Group+share&gs_lcp=Cgdnd3Mtd2l6EAEYADIHCAAQRhD6ATICCAAyBggAEBYQHjoHCAAQRxCwAzoECAAQQzoJCAAQQxBGEPoBUIwjWM9FYOxQaAFwAngAgAGWAYgB-gWSAQMzLjSYAQCgAQGqAQdnd3Mtd2l6yAEIwAEB&sclient=gws-wiz

[Barnsey]

 

[Viceroy]

This is a free report from Goehring & Rozencwajg - Natural Resource Market Commentary - THE PROBLEMS WITH COPPER SUPPLY

It goes into much more than copper, 30 pages long about oil supply, gas, silver+gold, potash.. i've pasted some snippets.

https://f.hubspotusercontent40.net/hubfs/4043042/Commentaries/2021.Q1%20Commentary/2021.Q1%20Goehring%20%26%20Rozencwajg%20Market%20Commentary.pdf

 

The United States Department of Agriculture (USDA) just released its 2021 US farmers’ planting intention report. It was a shocker: US farmers now plan to plant almost 5 mm fewer corn and soybean acres versus the most recent surveys. We remain very bullish on global agricultural markets and recommend investors have significant exposure.

 

..We are entering into a new era in global oil markets. While most analysts are concerned about demand, the most important driver will likely be supply. After a decade of robust growth, the US shales are now exhausted and incremental growth will be very difficult to achieve. Two decades ago, investors worried we were running out of oil while today’s investor worries that we have passed peak demand. Although we cannot say for certain what the coming decade will bring, it will almost certainly defy conventional expectation. The US shales have been an extremely prolific source of supply but we firmly believe their best days are behind them. As this realization sinks in, we believe investors will focus on those companies with the remaining high-quality assets. We recommend investors maintain sizeable investments in high quality E&P and oil service companies with a sizable earnings leverage to higher oil prices.

 

..We remain extremely bullish toward grain prices as we progress through the decade. As we described in our last letter, we run high risks of slipping into a global agricultural crisis. Grain inventories are now at extremely low levels and the 2021 Northern Hemisphere growing season looks problematic. Given the strength in global grain and related protein demand and the change about to take place in global weather, namely that we have now entered a prolonged cooling cycle, global crop growing conditions will become much more challenging in the next several years. Strong demand is about to collide with climate-related supply problems. It now looks like China might become a huge wild card in global grain markets as its agricultural demands, now spilling over into exports markets, continue to increase. We recommend investors maintain significant exposure to agricultural-related equities, with a particular emphasis on fertilizer producers.

 

..The inflation signal, first delivered by the April 2019 BusinessWeek/Bloomberg cover story, is now being confirmed by underlying economic and financial data. Money supply growth is surging and physical shortages are developing. The banking system is in excellent shape and stands ready to lend.

Despite these trends, investors continue to pile into technology stocks, SPACs, crypto-currencies and long-term bonds; each of which will perform terribly in an inflationary environment. In stark contrast, inflation hedges such as commodities and natural resources remain priced at record low levels relative to financial assets and are ignored by almost all investors.

The countdown to inflation is ticking and we are getting closer and closer to an explosion in inflationary pressures. All economic signs point in that direction, yet few investors are prepared to protect themselves, yet alone profit from an investment landscape that is about to suddenly and radically change. It’s 1979 all over again — except in reverse.

 

..For investors looking for an asset class with huge sensitivities to inflation, silver should be seriously considered. In the inflationary 1970s, silver appreciated an amazing 40 fold in price. It was ultimately the focus of a huge operation by the Hunt Brothers to corner the market, driving silver to over $50 per ounce — a price that is still 100% higher than the price of silver today.

Although not as cheap relative to gold as it was last year (the gold-silver ratio is 70 versus its all-time high of 125 last year), silver still has significant upside potential. In the last gold bull market which peaked in 2011, the gold-silver ratio fell to under 35. During the great precious metals bull market of the 1970s, the ratio fell to 15.

Given our belief that inflation is about to become a huge problem, we would like to emphasize two points. We believe the manipulation of silver prices last quarter by retail investors will only be the first of many attempts by speculators to “bull” the silver market this decade. Before this precious metals bull market is over, we believe another attempt will be made by either financial speculators or wealthy individuals to corner the silver market, much like the Hunt Brothers tried to do 40 years ago. In dollar terms, the silver market is only 5% of the gold market. Given the massive amounts of money creation, silver would present itself as a tempting target. Second, we believe before this precious metals bull market is over, we will see the gold-silver ratio approach the level it saw back in 1980 — 20 or below. If gold hits our $15,000 target and the gold-silver ratio falls to 20, this implies a silver price of $750 per ounce — 30 times higher than today’s price.

In summary, the corrective phase in gold remains in place. Although gold demand remains extremely strong in India, conflicting demand signals are still emanating from China. However, central bank gold buying has receded to almost nothing and western physical gold demand has now turned into a source of supply. The loss of this demand from both central bank and western investors is pressuring the gold price. We are carefully monitoring the potential return of demand from both sources. For long-term patient investors, you are again being presented with another great buying opportunity in both gold and silver. For investors with shorter time horizons, we still believe that depressed markets such oil, natural gas, and agricultural fertilizers offer greater opportunity in the short term.

 

..The great bear market in gas over the past 13 years was caused by surging supply. Our research tells us that natural gas supply growth in the US will slow dramatically, if not turn negative, in the next several years. At the same time, domestic and export demand for US natural gas continues to grow. The bull market in natural gas has begun with little attention from the press. We recommend investors own a diversified portfolio of natural gas-related equities. Valuations are very low and natural gas prices are going much higher.

[DurhamBorn]

30 minutes ago, Barnsey said:

 

Yep,banks mostly repaired their balance sheets after 08.This is a fiscal driven recovery cycle with the usual wild swings as cycles turn.

 

[Harley]

On 15/05/2021 at 14:07, MrXxxx said:

OK so this weeks Macrovoices podcast [https://www.macrovoices.com/podcasts-collection/macrovoices-podcasts] were discussing a new interest rate hedging approach [Simplify Interest Rate Hedge ETF | Simplify] that may be viewed as an alternative strategy to the PM silver approach discussed on here in the last year or so. So here are my thoughts on this ETF/interview, please feel free to critique.

The ETF could be used in three ways:

1. as a mid-term ETF trading oppportunity that would focus on the potential for rapid interest rate rises in the next 2-4 years, by buying now and trading out on a high rather than holding for the long-term.

2. as an insurance policy hedge for those

a) with high wealth in a variety of assets, especially those that are illiquid and susceptible to increased interest rates i.e. those with property (especially mortgaged) and/or

b) with a company pension scheme with limited options i.e. having a 60/40 provision and unable to transfer out of easily.

Thoughts?

 

I just listened.  I need to do some DD this week but I noted the emphasis that this was for those exposed to interest rates rises.  Maybe a simple options hedge would suffice for those primarily concerned with portfolio risk, but the leverage offered by the ETF seemed high (need to check).  Is this ETF open to UK investors?  I'm also going to check out the other ETF offerings (one now with more to follow).

[23rdian]

18 minutes ago, Harley said:

I just listened.  I need to do some DD this week but I noted the emphasis that this was for those exposed to interest rates rises.  Maybe a simple options hedge would suffice for those primarily concerned with portfolio risk, but the leverage offered by the ETF seemed high (need to check).  Is this ETF open to UK investors?  I'm also going to check out the other ETF offerings (one now with more to follow).

Appears to be buyable on Interactive Investor at least.

[Lightscribe]

Looks like it could be another leg down today. Nikkei over 1% down today and futures are slightly down too so far.

BTC is leading the way shitting the bed. I’m shored up in PAXG and GBP while I wait to see how today unfolds.

[MrXxxx]

2 hours ago, Harley said:

Is this ETF open to UK investors?

Don't know, the options available to our US cousins is always greater. I think the advantage with this ETF was that a) you were covering both sides of the equation, and b) its longer duration.

[Lightscribe]

Nikkei recovered to just over 1% down now. Futures still flat. BTC recovered to $45k very quickly. With the reopening of everything today (however long that lasts) I expect the FTSE now to be up today, depending of course whatever happens when the US opens later.

[Harley]

38 minutes ago, Lightscribe said:

Nikkei recovered to just over 1% down now. Futures still flat. BTC recovered to $45k very quickly. With the reopening of everything today (however long that lasts) I expect the FTSE now to be up today, depending of course whatever happens when the US opens later.

So another day in the markets then!  Actually yes, things are getting choppy all round at these elevated levels.  The Japan ETF VJPN looks like it has topped on the monthly, although my holdings are OK for now (Yoko Rubber up a nice 4%).  Hopefully I'll be able to pick up more stocks later.  HK appears to have been acting the opposite these last few days.  Not sure what's next.  Down or forming a bullish symmetrical triangle?  FTSE getting close to overbought but maybe a bit more before a move either way.  US looks interesting with NASDAQ v S&P v RSP.   BTC has just created a major inflexion point for me in GBP so could go either way but down 3.8% atm.  Been weakening for a while, topped out with a doji last month, and now down 25% MTD.  All IMO, DYOR.

PS:. Vol is my friend.  Nice to see it back.

[Harley]

TYX, US 30yr bond yield, looking toppy here.  Hit major resistance on the monthly and momentum now weakening from overbought.  But looking at the other side, been range bound (congested?) for the last few months so maybe base building?

[Harley]

Is GDX doing what it does best - not following the technicals?!   Pulled back on the monthlies, setting up a nice downtrend only to reverse, for now.  But after several years fighting the bagger, I finally got it, for now!   Or rather some constituents.  Gapped up today.  All that ex-BTC?

[MvR]

11 hours ago, Harley said:

Anyone using the Dragon portfolio and how did you go about implementing it as a UK retail investor?

Funnily enough I've just been looking into this as I've got to the point I could consolidate various accounts into one and make use of portfolio margin rules to sell futures and index options. 

The plan, which may well change, is to use something like this as the core holding of a options selling account. The idea is to make better use of the cash that otherwise sits there as margin collateral.  

The stocks, bonds and gold portions are easy enough. I can't buy the ETFs directly due to KIDD nonsense, but I can sell an in-the-money put(s) just before expiry and have the ETF put to you that way instead.  Or I might create the deltas that are equivalent to the stock position with some short vol structure ( e.g. Jade lizards, short put spreads etc).

The trend following commodities could be CFDs or spread bets, or commodity futures. For a long term low maintenance portfolio you could time the trend with a simple 50/200 MA crossover or something similar.  There's also a timing model called "Duel Momentum" which appears to be another good way to time things.

The tricky one is the long vol obviously. In my case I'm looking into ways of constructing  something with 30-90 DTE SPX options, along the lines of this..

Or, given I trade so actively anyway, I may do something a bit more manually timed with VIX.. maybe naked puts funding long VIX call spreads?  The trick of course is to minimise hedging costs or ideally take in small profits from the hedge in case we don't get a crash/vol spike.

When I figure something out, share it here.

BTW I learned of a great site for back testing portfolio allocations/timing models etc. The free service is pretty good on it's own.  https://www.portfoliovisualizer.com

 

[Craig]

4 hours ago, Lightscribe said:

Looks like it could be another leg down today. Nikkei over 1% down today and futures are slightly down too so far.

BTC is leading the way shitting the bed. I’m shored up in PAXG and GBP while I wait to see how today unfolds.

Got my PAXG in a Nexo account, currently earning 8%.

[Lightscribe]

36 minutes ago, Craig said:

Got my PAXG in a Nexo account, currently earning 8%.

I find it a good pair, when BTC looks like it’s going on another downwards leg instead of GBP. Also it’s handy to set high sell orders and immediately hit them before the price reverts to make the most of any whale big buy spikes. $3k up this morning before I got out of bed, if only I could do that everyday. 

[christh]

13 hours ago, DurhamBorn said:

Yamana looks really cheap to me and iv been buying.It also owns a huge gold/copper deposit about to be developed.12 billion of copper minimum in that project and a good few million oz of gold.

It sold one of its mines far too early,but that did clear debts.

Harmony also has a huge copper project ,but it looks a long way from being built.

Hi DB, you buying Yamana on the Toronto exchange? I see there's AUY.L on a CDI in London but seems super thinly traded. Cheers.

[DurhamBorn]

1 hour ago, christh said:

Hi DB, you buying Yamana on the Toronto exchange? I see there's AUY.L on a CDI in London but seems super thinly traded. Cheers.

I buy the CAD version yes.

[DoINeedOne]

BERLIN (Reuters) - Work to complete the subsea Nord Stream 2 gas pipeline can go ahead in German waters, Germany’s federal maritime regulator BSH said on Monday.

Two environmental groups had in January filed complaints with BSH against a move to expand the period during which construction work could theoretically take place, effectively preventing further work on the pipeline.

[Underwhelmed]

New post by S Kaplan after months, still reading & digesting it

https://truecontrarian-sjk.blogspot.com/2021/05/dont-panic-time-to-sell-is-before-crash.html

[23rdian]

7 hours ago, MrXxxx said:

Don't know, the options available to our US cousins is always greater. I think the advantage with this ETF was that a) you were covering both sides of the equation, and b) its longer duration.

EDIT: Some more info here

https://www.google.com/amp/s/www.barrons.com/amp/articles/4-etfs-for-investors-nervous-about-inflation-51621027024

[JMD]

15 hours ago, Harley said:

Anyone using the Dragon portfolio and how did you go about implementing it as a UK retail investor?

Harley, the Dragon Portfolio is i admit beyond my skill set, but i did do some research on it early last year as it intrigued me. I remember that Patrick Ceresna (macro voices) produced some videos for the 'commodity trending' component, US focused so perhaps not what your after, and unfortunately I don't have any links to the videos but probably still available on the macro voices site.

[Lightscribe]

https://www.reuters.com/world/us/households-including-most-us-children-get-monthly-stimulus-payment-2021-05-17/
 

“A poverty-fighting measure included in the COVID-19 relief bill passed this year will deliver monthly payments to households including 88% of children in the United States, starting in July, Biden administration officials said on Monday.

The Democratic-backed American Rescue Plan, signed into law by President Joe Biden in March as a response to the coronavirus pandemic, expanded a tax credit available to most parents.

Those people will get up to $3,000 per child, or $3,600 for each child under the age of 6, in 2021, subject to income restrictions. The benefit will reach 39 million households, many automatically and by direct deposit every month, starting on July 15.

It is one of several measures the administration says could lift more than 5 million children out of poverty, half of the total number of U.S. youngsters in that situation.”

[JMD]

5 hours ago, MvR said:

Funnily enough I've just been looking into this as I've got to the point I could consolidate various accounts into one and make use of portfolio margin rules to sell futures and index options. 

The plan, which may well change, is to use something like this as the core holding of a options selling account. The idea is to make better use of the cash that otherwise sits there as margin collateral.  

The stocks, bonds and gold portions are easy enough. I can't buy the ETFs directly due to KIDD nonsense, but I can sell an in-the-money put(s) just before expiry and have the ETF put to you that way instead.  Or I might create the deltas that are equivalent to the stock position with some short vol structure ( e.g. Jade lizards, short put spreads etc).

The trend following commodities could be CFDs or spread bets, or commodity futures. For a long term low maintenance portfolio you could time the trend with a simple 50/200 MA crossover or something similar.  There's also a timing model called "Duel Momentum" which appears to be another good way to time things.

The tricky one is the long vol obviously. In my case I'm looking into ways of constructing  something with 30-90 DTE SPX options, along the lines of this..

Or, given I trade so actively anyway, I may do something a bit more manually timed with VIX.. maybe naked puts funding long VIX call spreads?  The trick of course is to minimise hedging costs or ideally take in small profits from the hedge in case we don't get a crash/vol spike.

When I figure something out, share it here.

BTW I learned of a great site for back testing portfolio allocations/timing models etc. The free service is pretty good on it's own.  https://www.portfoliovisualizer.com

 

Hi MvR, i've just responded to Harley, but the Dragon Portfolio posts have prompted me to take a proper look back at my notes. Found the below - maybe not that helpful to you or Harley, i.e. from your above post i think you are already planning this approach? But anyway just my very basic scribbles from last year gleamed from podcasts, and posting just in case you may want to research more detail of what Mike Green and/or Horizon are currently up to. (Btw, despite still intending to dip my toe in at some point, i haven't as yet done anything in regards options trading. Just mentioning as you might recall i visited your options trading thread some time back, but in the interim i decided to get my pension portfolio sorted first).

Dragon Portfolio 'active long vol.' trading component...                      Mike Green/long vol. - may use straddles, directional trade in markets where try to make money in both directions.                                  Horizon Kinetics/long vol. - may replace their fixed income with: buying stocks with 'collars' - meaning sell a call and buy a put option. The stock is therefore hedged within a narrow collar. Collect the dividends, and if the stock goes up, you get the maximum return.

[janch]

3 hours ago, Underwhelmed said:

New post by S Kaplan after months, still reading & digesting it

https://truecontrarian-sjk.blogspot.com/2021/05/dont-panic-time-to-sell-is-before-crash.html

Thanks for posting.

He says to sell US tech and has shorted some but he is long TLT and also GEO.  I was curious as this is a new one on me.   Geo Group Inc is a real estate investment trust which invests in private prisons and mental health facilities in US, Australia, Soth Africa and UK according to google. 

Maybe he is betting on "the Covid" and the imminent crash putting many people in either  prison or giving them mental health problems (I suppose it's not funny really)

[DoINeedOne]

Vantage Towers aims to generate revenues of around the €1 billion mark in the current financial year, a modest increase on its pro forma turnover in full-year 2021.

The mobile towers business, spun of out Vodafone last year and listed in Frankfurt in March, reported group revenue of €545 million for the last financial year. However, the figure does not include a full-year’s performance for many of the assets it picked up during the 12 months to the end of March; on a pro forma basis its top line came in at €966 million, slightly up on the €945 million it posted the previous year.

For the current financial year it expects to generate €995 million-€1.01 billion in revenues. It forecasts stable adjusted EBITDAaL – its 2021 figure was €524 million, up 2.1% – and recurring free cash flow of €390 million-€400 million, compared with €384 million last year.

“I am pleased that we have fully delivered on our FY21 operational and financial targets, and we remain focused on commercialising our business and delivering our medium-term targets,” said Vivek Badrinath, chief executive of Vantage Towers, in a statement accompanying the results.

Key among the firm’s medium-terms targets is its aim to increase its tenancy ratio – or the number of retail operators using its sites – to greater than 1.5x. As of the end of March it had a ratio of 1.4x, up from 1.37x at the end of Q3.

Growing that tenancy ratio will be vital to increasing turnover. Of the company’s reported revenues of €545 million, just €58 million came from customers other than Vodafone. The firm added around 1,800 new tenancies in the last financial year, of which a significant 1,300 were from non-Vodafone customers. It grew its footprint of macro sites to 45,700 across its eight consolidated European markets by fiscal year-end, an increase of around 2,300, while the figured reached 82,200 when its UK and Italian joint ventures, Cornerstone and INWIT respectively, were factored in.

Speaking of INWIT, the Italian towers business Vodafone shares with TIM last week presented its first-quarter numbers and like Vantage Towers reported massive growth due to the merger. On an organic basis though, its Q1 revenues grew 3.4% while its EBITDAaL margin was up 8.3% to 65%. It built out 30 new sites in Q1 and raised its tenancy ratio to 1.92x.

“The business plan objectives and 2021 guidance are confirmed,” said INWIT CEO Giovanni Ferigo. “During the year growth will accelerate with the gradual contribution of new hostings, the creation of new sites and the development of new services.”

There was a similar message from Vantage Towers.

“We are working to grow our revenues and deliver our efficiency programmes to provide attractive returns for our shareholders and make a significant contribution to better connectivity and the sustainable digitisation of Europe,” Badrinath said.

Those returns to shareholders are looking healthy, as you would expect from an infrastructure business. As it has noted previously, Vantage is paying out a dividend of 60% of recurring free cash flow to shareholders, which equates to a payout of around €280 million.

Much of that figure will go to Vodafone this year, which still owns 81.1% of Vantage Towers; Vodafone is due to report its full-year numbers tomorrow, incidentally.

There was nothing from Vantage Towers about its future shareholder structure, but with so much M&A action in the towers space in recent months and big guns talking openly about the possibility of joint ventures, the status quo is unlikely to remain indefinitely.

 

Completely forgot Vantage Towers listed in march