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

[UnconventionalWisdom]

9 hours ago, DurhamBorn said:

"Government spending is likely to head back towards 1970s levels "

I think of this thread everytime I see these headlines. Plenty of examples over the past couple of months.

[BearyBear]

Subprime Auto Giant’s Loans Souring at Fastest Clip Since 2008

https://www.bloomberg.com/news/articles/2019-10-25/subprime-auto-giant-s-loans-souring-at-fastest-clip-since-2008

[DoINeedOne]

alot gambling companies down 10+% today i have not even started buying any ladders in these yet

 

MILAN, Nov 4 (Reuters) - Shares in British gambling
companies tumbled on Monday after a cross-party group of
lawmakers called for a raft of measures to overhaul online
casinos and protect vulnerable people.

 

The lawmakers called for limiting maximum stakes in online
betting, similar to rules for high-speed slot machines where
bets are restricted to 2 pounds, and banning the use of credit
cards to gamble online.

In addition, the report http://www.grh-appg.com/latest-news
called for a more responsible approach to advertising and
restrictions on VIP accounts, which can involve offering more
frequent gamblers bigger rewards.

The recommendations included calling for treatment of
gambling addiction to be offered under the state-run National
Health Service (NHS).

The Guardian newspaper said https://www.theguardian.com/society/2019/nov/03/call-for-radical-overhaul-of-online-casinos-after-far-reaching-inquiry
Prime Minister Boris Johnson was thought to be sympathetic to
calls for stricter regulation.

 

Bookmaker William Hill plans to close 700 British betting
shops and GVC expects to shut about 900 outlets due to stricter
rules that have forced firms to shift their focus to U.S. sports
betting and online gaming.

[Errol]

20 hours ago, sancho panza said:

WOuld be nice to hear if anyone else has any?And by that I mean high odds bets.No more,no less.I'll see if I can dig a few more out.

My one for this category is Vista Gold.

http://vistagold.com/

 

I've also been looking into Affinity Metals Corp recently.

https://affinity-metals.com/

[Thorn]

3 hours ago, Errol said:

My one for this category is Vista Gold.

http://vistagold.com/

 

I've also been looking into Affinity Metals Corp recently.

https://affinity-metals.com/

Really interesting Errol. Had been ignoring them there for a while. But a rising tide- if indeed it’s about to kick off for the PM stocks- could really float all boats including them... their history is big... for such a cheap stock today it would be life-changing to have a wee bit if they were ever to climb up to where they once were. 

You never know. 

So is one share at current prices able to climb to those levels again- I am thinking of what we found about POG here before- how can you tell if a company has diluted its shares...? 

[Castlevania]

8 hours ago, DoINeedOne said:

alot gambling companies down 10+% today i have not even started buying any ladders in these yet

 

MILAN, Nov 4 (Reuters) - Shares in British gambling
companies tumbled on Monday after a cross-party group of
lawmakers called for a raft of measures to overhaul online
casinos and protect vulnerable people.

 

The lawmakers called for limiting maximum stakes in online
betting, similar to rules for high-speed slot machines where
bets are restricted to 2 pounds, and banning the use of credit
cards to gamble online.

In addition, the report http://www.grh-appg.com/latest-news
called for a more responsible approach to advertising and
restrictions on VIP accounts, which can involve offering more
frequent gamblers bigger rewards.

The recommendations included calling for treatment of
gambling addiction to be offered under the state-run National
Health Service (NHS).

The Guardian newspaper said https://www.theguardian.com/society/2019/nov/03/call-for-radical-overhaul-of-online-casinos-after-far-reaching-inquiry
Prime Minister Boris Johnson was thought to be sympathetic to
calls for stricter regulation.

 

Bookmaker William Hill plans to close 700 British betting
shops and GVC expects to shut about 900 outlets due to stricter
rules that have forced firms to shift their focus to U.S. sports
betting and online gaming.

Ouch! They’d run quite hard since the Summer mind you.

[MvR]

14 hours ago, sancho panza said:

Markets on a tear today across the globe.'Trade wars off ' trading day.

I jsut cannot see what buyers of Eurozone stocks are looking at today........

Oil and oil services trundling up on the back of it.

I sold my VW into Monday's strength since it had made a good 20% since I bought it a few weeks ago. Quite possibly far too early, as the longer term technical outlook looks good, but I wanted to free up some cash in my ISA which was fully invested. The holding was too small to be worth top slicing, and given it's my long-term investment account and I'm around 23% up overall since earlier this year, I'm slowly starting to thin it out ready for a potential bust, whenever that happens. It also looked a little overbought in the short term, and being a consumer facing stock, I figured it could take quite a hit in the short term if consumer confidence starts to fail. 

I'm still betting on an equity melt-up in my speculative options account, where my downside risk is limited, but now the boat-hire season just about over I'll have time to watch the charts much more closely over the next few months. Therefore I'm preparing to enter "sniper" mode, with the aim to protect my decent gains for the year, and make sporadic short-term technical trades.  That may well involve hopping back into VW via a spread-bet in the next few days after a mini-correction, or it may not, so don't take my sale as a recommendation.

Everyone has their own risk profile and trading/investment goals. If I had more capital available for long term investment I'd possibly have stayed in, but in my case I need to both protect what I have, and generate a monthly income from my options selling, so I'm taking profits when I see them. As the old traders' saying goes "Pigs get fat, hogs get slaughtered". 

One thing I've learned in my 20 years in the markets is that there are always other opportunities just around the corner, particularly now I've got long/short stock trading, spread-betting, long/short options and futures in my tool-box.

I'm even about to make my first treasury bond purchase in the next day or so. Not that I have a directional opinion, so I'll go for an extremely short dated one since although I've traded bond futures before now, and TLT of course, I've never bought an actual bond before. This will be mainly about dipping my toe in the water, figuring out the platform, how to order the right one etc. I just want to be completely comfortable with the process so if the spectre of bank failures or bail-ins, or even brokerage failure raises it's head over the next few years, I'll know how to react so I can safely protect my capital.

[Heart's Ease]

A snippet from the FTs 'opening quote' piece about Imperial (just picked up from Twitter). I know FT do not welcome full pastes of their articles so only brought this over. Results on Tuesday.

"But Imperial also warns it is taking a “more cautious approach” to its outlook for 2020. It predicts “low single digit” revenue and earnings per share growth, and that is partly dependent on its vaping efforts getting back on track. For now, it has cut back investment on “next generation products” while regulatory uncertainty lingers and competitors discount in a fight for consumers."

[sancho panza]

13 hours ago, Errol said:

My one for this category is Vista Gold.

http://vistagold.com/

 

I've also been looking into Affinity Metals Corp recently.

https://affinity-metals.com/

Like the look of the last one Errol.Basically a holding company with a cost of carry on it's assets which it's balance sheet can run for decades at this rate.These are the sorts of punts that offer good value in a bull because a)noone's burning cash trying to dig aything out b) noone really knows what's there.

Upside could be huge if something turns up at a similar spot geologically speaking.

 

4 hours ago, MvR said:

I sold my VW into Monday's strength since it had made a good 20% since I bought it a few weeks ago. Quite possibly far too early, as the longer term technical outlook looks good, but I wanted to free up some cash in my ISA which was fully invested. The holding was too small to be worth top slicing, and given it's my long-term investment account and I'm around 23% up overall since earlier this year, I'm slowly starting to thin it out ready for a potential bust, whenever that happens. It also looked a little overbought in the short term, and being a consumer facing stock, I figured it could take quite a hit in the short term if consumer confidence starts to fail. 

I'm still betting on an equity melt-up in my speculative options account, where my downside risk is limited, but now the boat-hire season just about over I'll have time to watch the charts much more closely over the next few months. Therefore I'm preparing to enter "sniper" mode, with the aim to protect my decent gains for the year, and make sporadic short-term technical trades.  That may well involve hopping back into VW via a spread-bet in the next few days after a mini-correction, or it may not, so don't take my sale as a recommendation.

Everyone has their own risk profile and trading/investment goals. If I had more capital available for long term investment I'd possibly have stayed in, but in my case I need to both protect what I have, and generate a monthly income from my options selling, so I'm taking profits when I see them. As the old traders' saying goes "Pigs get fat, hogs get slaughtered". 

One thing I've learned in my 20 years in the markets is that there are always other opportunities just around the corner, particularly now I've got long/short stock trading, spread-betting, long/short options and futures in my tool-box.

I'm even about to make my first treasury bond purchase in the next day or so. Not that I have a directional opinion, so I'll go for an extremely short dated one since although I've traded bond futures before now, and TLT of course, I've never bought an actual bond before. This will be mainly about dipping my toe in the water, figuring out the platform, how to order the right one etc. I just want to be completely comfortable with the process so if the spectre of bank failures or bail-ins, or even brokerage failure raises it's head over the next few years, I'll know how to react so I can safely protect my capital.

Responding in order

1 melt up definitely possible.I shut down all my short term book a week or so back as it was loaded up with shorts on builders UK.Noones ever gone bust taking a profit.Melt down possible as well but the shares we're loading up on are dirt cheap and all weak dollar trades(oil,gold,copper in that order).if that doesn't pan out then we'll sit on them.We've been heavily in cash for a few years while I was working out what to do next.I don't focus so much on annual results as when I sell I do so in a oner which can distort those returns.I focus more on the decade,where we were at the start of it and where we are at the end of it.Some US stocks eg AAPL,AMZN etc are jsut pure over hyped like 2000

2 there are some great short term trades avaialble.recently went long FRES/HOC in the short term account but have exited already.My short term book is 80% cash this week waiting for the turn.I tend to short overbought  in bears(I think we're in a bear) and go long oversold in bulls

3 how have you found the futures trading.I've traded options before and now have saxo bank set up can access virtually everything.I have now honed my plan for the next two years and looking to trade options ahead of perceived turns .As youre a lay trader like me,Im intrigued to know how you've found them.

4 also kudos on your first bond trade.I've never done one.Had my eyes opened by the likes of DB re TLT and ETF's.Anticipating trading them next year or possibly 2021 depending so defo need to trial run it.Can you buy 4 week UST's?is it cost effective to do it?

[MvR]

3 hours ago, sancho panza said:

3 how have you found the futures trading.I've traded options before and now have saxo bank set up can access virtually everything.I have now honed my plan for the next two years and looking to trade options ahead of perceived turns .As youre a lay trader like me,Im intrigued to know how you've found them.

Mechanically, futures trading is pretty straight forward. I just select the symbol (/ES, /CL etc) and select the expiry month. Interactive Brokers defaults to the nearest month, which is the one most people trade so is the most liquid and offers the most accurate short term technical signals.

I've also sold options on futures to achieve greater diversification in my Income Options account.  Selling individual equity options offers a decent return when the market is playing nice, but they all become highly correlated during a correction so can lead to some painful losses. Being able to sell options on things like oil, wheat, silver, cattle, coffee, etc means I can be in more non-correlated markets at the same time, and they're more likely to stay non-correlated.

I could sell options in single commodity ETFs, but I've found these to be either too small, requiring a large number of contracts and therefore larger commissions,  or too illiquid to get decent prices, or both.

I also like futures for sniper type day-trading. I've used spread-betting for this in the past, but the new, larger margin requirements make this impractical for me. When trading this way I like to have super-tight stops, and spread-betting margins no longer take this into account. I'd need to tie up more cash in the account to trade at reasonable size.  I still day-trade with spread-betting for fun sometimes using their minimal contract size, where a "big win" is something around £10, and a loss might be around £5. Trading this way a few times a month also gets me a free subscription to IG's nifty ProRealTime charts.

Day-trading futures allows larger, more useful sized trades, and I can make them in the same accounts I use for options trading too, which makes for more flexible capital allocation. I can also trade options against a given futures position.

One can also trade futures spreads - eg long a near month, and short a further out month. This can be a neat way to trade changing interest-rate expectations for example, or take a agricultural commodity position based on the weather, how healthy the crops look in the fields etc.  I've only scratched the surface with this kind of trading, but I find it fascinating. Tastytrade.com has couple of great futures education shows with Pete Mulmat. Well worth tuning in for to learn about this advanced stuff.

The other great thing about futures for day-trading purposes is that it's the futures market that drives the market overall. This means they offer the best, most accurate technical, volume and price action signals.  /ES is the most traded contract of all, and if you're trading with super-tight stops, it gives the best chance to get a good entry based on extremely short term charts.

Quote

4 also kudos on your first bond trade.I've never done one.Had my eyes opened by the likes of DB re TLT and ETF's.Anticipating trading them next year or possibly 2021 depending so defo need to trial run it.Can you buy 4 week UST's?is it cost effective to do it?

it appears that there are lots of treasuries to buy ( or short ) with very near term expiries, or rather "maturities". These often started out as longer term bonds/bills, which are close to their maturity dates. I just had a look and there are 8 standard treasury bills to choose from which mature this month alone.

Bond commissions on Interactive Brokers seem to have a minimum of $5 to $7.5 per trade, ( depending on which exchange the order is executed on ).  I've run a couple of examples here, based on a US-T bill maturing on 29/11/2019, about 3 1/2 weeks away. ( A treasury bill is just the name for a short term treasury bond ).

If I'm understanding things correctly ( which is by no means certain! ), and the bond will settle for $1000 on maturity, so in this case, it appears the trade would be roughly a $6.50 loser.  

Upping the trade size to $10,000 means it would make about a dollar... I think.

The maintenance margin requirement to hold these bonds is very small, just under $8 per $1000 lot, so even if I chose to convert most of the cash in my trading account to bonds, it doesn't prevent me trading other things. Understandable really, since US-Ts are perfectly good as collateral.

Obviously there's no point leveraging up to hold lots of bonds long term. The interest rate I pay the broker would be more than I make on the bond. That's a game for banks and other big institutions.  But as a leveraged short-term trade... possibly, though bond futures, or options on bond futures, may be a safer bet. A limited-risk options spread means my maximum loss is known on order entry, regardless of what the market does.

The symbol, btw is US-T, at least on Interactive Brokers.  It took me a while to figure this out.

Disclaimer. All this is based on what I've figured out this morning. Definitely DYOR as I am no expert!

[MvR]

@sancho panza

I just had a look at Saxo's commission on US-Treasuries. 50-80 euros minimum ( ouch ) so it would be expensive to use them as safer cash alternative on that platform.  Interactive Brokers still takes the prize for me as best overall "trade anything" platform. Only TastyWorks is cheaper, but with a much more limited range of instruments.

[Heart's Ease]

Keiser reports 1457/58 are worth a listen. Both ranging on and around the central premise of this thread and for these episodes pulling in Wolf, Saudi over depletion of oil fields, miners, silver, repo market (Max tips up JP Morgan for insolvency) etc etc.  Basically, everything bar the pizza oven.

[Democorruptcy]

2 hours ago, MvR said:

The maintenance margin requirement to hold these bonds is very small, just under $8 per $1000 lot, so even if I chose to convert most of the cash in my trading account to bonds, it doesn't prevent me trading other things. Understandable really, since US-Ts are perfectly good as collateral.

Obviously there's no point leveraging up to hold lots of bonds long term. The interest rate I pay the broker would be more than I make on the bond. That's a game for banks and other big institutions.  But as a leveraged short-term trade... possibly, though bond futures, or options on bond futures, may be a safer bet. A limited-risk options spread means my maximum loss is known on order entry, regardless of what the market does.

The symbol, btw is US-T, at least on Interactive Brokers.  It took me a while to figure this out.

Disclaimer. All this is based on what I've figured out this morning. Definitely DYOR as I am no expert!

What about any move in USD v GBP? 

 

[Noallegiance]

45 minutes ago, Heart's Ease said:

.  Basically, everything bar the pizza oven.

[MvR]

45 minutes ago, Democorruptcy said:

What about any move in USD v GBP? 

Let's assume I have £20,000 GBP cash in the account, with no other currency or other positions. Assuming it works the same way as other instruments, buying $10,000 worth of US-Ts ( which must be paid for in USD ), would result in a $10,000 short USD position.

So my account would now have £20,000 sterling, $10,000 worth US-Ts, and minus $10,000 dollars. The long bond / short dollars would effectively cancel each other out in terms of currency fluctuations, but of course I'd be paying margin interest on the negative (borrowed) dollar position.

It wouldn't be a high interest rate, since I'd only being doing this in a very low interest rate environment in the first place, but if I wanted, I could close out the short dollar position to avoid this margin interest. At this point I would be exposed to any currency fluctuations.

I could hedge this some other way if I wanted, maybe with options, or a long position in FXB ( the dollar denominated GBP ETF ), or some other means.

One thing I have found is that once you start trading regularly in foreign instruments, get to see the long or short currency positions and their effect on your overall portfolio value, you stop thinking of everything in terms of GBP. It's an extra thing to think about, but generally now I like to keep my money in a range of currencies, including gold. It means I won't benefit so much from a rise in GBP against other currencies, but then again I won't lose out so much in a fall either. 

Another approach, to avoid the issue all together, and assuming I still want to do this within my main brokerage account, would be to buy UK government bonds (Gilts) instead. I haven't looked into this yet though, since I haven't activated UK bond trading permissions or market data yet. My guess is that commissions will be more expensive, but I don't know for sure.

If you're not trading within a multi-currency, all-instruments margin account like Interactive Brokers, all this is pretty academic. The FSA £85k protection limit per institution will protect most people, and then there's premium bonds, national savings certificates etc. I only do it because I'm a very active trader, try to squeeze the most bang for my buck from my limited capital, and like to be able to act instantly.

[UnconventionalWisdom]

3 hours ago, Heart's Ease said:

Basically, everything bar the pizza oven.

They clearly dont know how good that oven is 

[kibuc]

Endeavour Silver reported today. 

AISC $21.52 net of gold credits.

Considering El Cubo closure. 

Dżizas kurwa ja pierdolę. 

[Loki]

Gold and silver spot fell today, I noticed.

[BadAlchemy]

4 hours ago, Heart's Ease said:

Keiser reports 1457/58 are worth a listen. Both ranging on and around the central premise of this thread and for these episodes pulling in Wolf, Saudi over depletion of oil fields, miners, silver, repo market (Max tips up JP Morgan for insolvency) etc etc.  Basically, everything bar the pizza oven.

Good episodes, thanks for the heads up! Couple of highlights (for me)... E1457 @ 6 mins in on the Fed repos and suspected insolvent bank, and E1458 @ 20 mins in talking about PMs and gold miners (still cheap!). I like the Keiser report and this time, as always, I'm left wondering a) do I have enough gold and b) do we have enough rope and lamposts!

E1457 https://youtu.be/vYS59HP46eM

E1458 https://youtu.be/FRAPlJ1_gR4

[Heart's Ease]

1 hour ago, BadAlchemy said:

Good episodes, thanks for the heads up! Couple of highlights (for me)... E1457 @ 6 mins in on the Fed repos and suspected insolvent bank, and E1458 @ 20 mins in talking about PMs and gold miners (still cheap!). I like the Keiser report and this time, as always, I'm left wondering a) do I have enough gold and b) do we have enough rope and lamposts!

E1457 https://youtu.be/vYS59HP46eM

E1458 https://youtu.be/FRAPlJ1_gR4

Thanks for putting the links up.  Go long gold, silver, bitcoin and pitchforks!

[Bear Hug]

2 hours ago, kibuc said:

Endeavour Silver reported today. 

AISC $21.52 net of gold credits.

Considering El Cubo closure. 

Dżizas kurwa ja pierdolę. 

10% fall is not bad considering the news and ~5% fall in some other miners due to today's gold movement. 

[kibuc]

15 minutes ago, Bear Hug said:

10% fall is not bad considering the news and ~5% fall in some other miners due to today's gold movement. 

Look at the chart in this tweet and cry with me. 

I wish them all the best but I reallocate to $AG for the near term and will be looking for a long-term home for that money (corvus gold perhaps? would prefer silver, though). 

[Democorruptcy]

5 hours ago, MvR said:

Let's assume I have £20,000 GBP cash in the account, with no other currency or other positions. Assuming it works the same way as other instruments, buying $10,000 worth of US-Ts ( which must be paid for in USD ), would result in a $10,000 short USD position.

So my account would now have £20,000 sterling, $10,000 worth US-Ts, and minus $10,000 dollars. The long bond / short dollars would effectively cancel each other out in terms of currency fluctuations, but of course I'd be paying margin interest on the negative (borrowed) dollar position.

It wouldn't be a high interest rate, since I'd only being doing this in a very low interest rate environment in the first place, but if I wanted, I could close out the short dollar position to avoid this margin interest. At this point I would be exposed to any currency fluctuations.

I could hedge this some other way if I wanted, maybe with options, or a long position in FXB ( the dollar denominated GBP ETF ), or some other means.

One thing I have found is that once you start trading regularly in foreign instruments, get to see the long or short currency positions and their effect on your overall portfolio value, you stop thinking of everything in terms of GBP. It's an extra thing to think about, but generally now I like to keep my money in a range of currencies, including gold. It means I won't benefit so much from a rise in GBP against other currencies, but then again I won't lose out so much in a fall either. 

Another approach, to avoid the issue all together, and assuming I still want to do this within my main brokerage account, would be to buy UK government bonds (Gilts) instead. I haven't looked into this yet though, since I haven't activated UK bond trading permissions or market data yet. My guess is that commissions will be more expensive, but I don't know for sure.

If you're not trading within a multi-currency, all-instruments margin account like Interactive Brokers, all this is pretty academic. The FSA £85k protection limit per institution will protect most people, and then there's premium bonds, national savings certificates etc. I only do it because I'm a very active trader, try to squeeze the most bang for my buck from my limited capital, and like to be able to act instantly.

I thought you would be long not short USD if you are using an account with sterling in to buy UST. I was thinking the whole point would be that it's partly a bet on the currency move. I suppose for you it means keeping your cash in one place with no delay for a transfer from such as NS&I Income Bonds.

 

[MvR]

30 minutes ago, Democorruptcy said:

I thought you would be long not short USD if you are using an account with sterling in to buy UST. I was thinking the whole point would be that it's partly a bet on the currency move. I suppose for you it means keeping your cash in one place with no delay for a transfer from such as NS&I Income Bonds.

Yes.. the point for me is to be able to trade everything in one account without delay, and to be able to hedge efficiently with different instruments in the same account.

 Multi-currency margin accounts also work differently to regular single currency cash accounts in that when you buy something in a foreign currency, you don't convert currency to make the trade. Hence no currency conversion costs. You just end up with a negative balance in the foreign currency. When you sell again the sale proceeds pay off the negative currency balance ( plus or minus any profit or loss on the trade ). Very useful if you're constantly trading foreign instruments as I am. ( Not that currency conversion is expensive in Interactive Brokers. The bid/offer spread is measured in fractions of a penny and the commission is around a dollar a trade. )

I prefer US markets for most things because they are so liquid, commissions tend to be lower, and most of the instruments I want to trade are only available on US exchanges.

[Bear Hug]

2 hours ago, kibuc said:

Look at the chart in this tweet and cry with me. 

I wish them all the best but I reallocate to $AG for the near term and will be looking for a long-term home for that money (corvus gold perhaps? would prefer silver, though). 

That looks like a useful twitter account, thanks for the link.  I find it really interesting looking at all the PM miners and seeing either none at all or huge PE ratios.  Is Fresnillo the only one actually making any money?