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


spunko

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2 hours ago, DurhamBorn said:

Labour has no chance of winning the election these are fantasy politics,laughable actually.The point is though the fact that all these areas are places that will see investment and growth going forward.Even if Labour had a minority government,that i doubt very much,the Libs wouldnt support this kind of rubbish.Just noise.

Those sort of things definitely make me not to want to vote for them.  Utilities already seem to be heavily regulated and beaten up in terms of their share price, so I am not sure what exactly they are trying to achieve.  Other that they had some feedback that both parties were too central and they just needed to pick some policies that needed to look left wing, and anything went.  Apologies for the slightly off-topic rant

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8 hours ago, Bear Hug said:

Those sort of things definitely make me not to want to vote for them.  Utilities already seem to be heavily regulated and beaten up in terms of their share price, so I am not sure what exactly they are trying to achieve.  Other that they had some feedback that both parties were too central and they just needed to pick some policies that needed to look left wing, and anything went.  Apologies for the slightly off-topic rant

They know they have destroyed their vote and are going to suffer a big defeat so they are simply playing to their real lefty members and voters.They know they will never have to do these policies.If you watch Corbyn this election its pretty obvious he isnt interested.Hes ill,or has no intention of winning,or both.The people at work were all laughing at todays policy release,and they are union members and mostly Labour voters.This time though they are nearly all voting Tory.Its actually incredible the sort of policy they are coming out with.It shows most of the MPs have no input,or are letting the front bench destroy itself to get shot of them.

4 hours ago, Tdog said:

  

Hopefully crashing so i can buy some more as i flogged some of mine the other day, held for over a year and a profit made.

Will loog to buy GDX and GDXJ in the future as for me picking winners is akin to throwing a dart at board whilst blindfolded.

image.png.b0a7bea77d209686b4d5e74c70842860.png

Thats a fantastic return.Some of my rubber band stocks and technical ones.

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8 minutes ago, Errol said:

Can I clarify with anyone whether there are KIIDs for GDXJ and GDX now? I still can't seem to buy these though ii.

Nope, and the EU has dictated its too risky for you without one. 

Can i interest you in some low risk Woodford patient capital instead?  (that directive is not ageing well...)

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35 minutes ago, Errol said:

That's what I thought. So nobody in the UK can buy GDX/GDXJ. The EU is having a laugh (at our expense).

Auco pretty much mirrors GDX and is a UK fund.

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38 minutes ago, Errol said:

That's what I thought. So nobody in the UK can buy GDX/GDXJ. The EU is having a laugh (at our expense).

 

17 minutes ago, Tdog said:

Thought you can get them from AJ Bell? 

Looks like I can get GDX on Hargreaves too. Although I've opted for iShares Commodity Producers Gold ETF (SPGP), which matches GDX well enough.

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16 hours ago, DurhamBorn said:

Labour has no chance of winning the election these are fantasy politics,laughable actually.The point is though the fact that all these areas are places that will see investment and growth going forward.Even if Labour had a minority government,that i doubt very much,the Libs wouldnt support this kind of rubbish.Just noise.

I think this election will be a no play event for me.I've specualted heavily on politis in the past but see little value in anythign lqiuid this far out.

 

the main theme of my trading would be capitalising on Labours looming collapse.Know quite a few middle class former Corbyn fans voting LD.BuyingTory maj is the only liquid trade and a lot that could go worng with that.

I think we could see quite a few more three way seats than previously.

14 hours ago, Majorpain said:

Yes, It was more an observation that its easy to think the world is in a unique situation, I look at things like that and think its rarer than thought that this time is different and history wont repeat itself!

1950's Bull was followed by half a working life of flat to declining stocks.

Yeah,makes you wonder where this drug induced US market could end up over twenty years.

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the bad data continues to stack up but as ',markets remain irrational etc etc'

https://wolfstreet.com/2019/11/13/the-holy-cow-moment-for-subprime-auto-loans/

The Holy-Cow Moment for Subprime Auto Loans; Serious Delinquencies Blow Out

by Wolf Richter • Nov 13, 2019 • 157 Comments • Email to a friend

But it’s even worse than it looks. And this time, there is no jobs crisis. This time, it’s the result of greed by subprime lenders. 

Serious auto-loan delinquencies – auto loans that are 90 days or more past due – in the third quarter of 2019, after an amazing trajectory, reached a historic high of $62 billion, according to data from the New York Fed today:

US-auto-loan-deliquencies-dollars-2019-Q

This $62 billion of seriously delinquent loan balances are what auto lenders, particularly those that specialize in subprime auto loans, such as Santander Consumer USA, Credit Acceptance Corporation, and many smaller specialized lenders are now trying to deal with. If they cannot cure the delinquency, they’re hiring specialized companies that repossess the vehicles to be sold at auction. The difference between the loan balance and the proceeds from the auction, plus the costs involved, are what a lender loses on the deal.

The repo business, however, is booming.

But delinquencies are a flow: As current delinquencies are hitting the lenders’ balance sheet and income statement, the flow continues and more loans are becoming delinquent. And lenders are still making new loans to risky customers and a portion of those loans will become delinquent too. And now the flow of delinquent loans is increasing – and this isn’t going to stop anytime soon: These loans are out there and new one are being added to them, and a portion of them will be defaulting.

Total outstanding balances of auto loans and leases in Q3, according to the New York Fed’s measure (higher and more inclusive than the Federal Reserve Board of Governors’ consumer credit data) rose to $1.32 trillion:

US-auto-loan-balance-v-number-2019-Q3.pn

Serious delinquencies jumped to 4.71% of these $1.32 trillion in total loans and leases outstanding, the highest since Q4 2011, when the auto industry was emerging from collapse. And on the way up, this 4.71% is just above the level of Q3 2009, months after GM and Chrysler had filed for bankruptcy and a year after Lehman had filed for bankruptcy, when the US was confronting the worst unemployment crisis since the Great Depression, and when people were defaulting on their auto loans because they’d lost their jobs:

US-auto-loan-deliquencies-2019-Q3-.png

The current rate of 4.71% is just 56 basis points below the peak of Q4 2010. But these are the good times – and not an employment crisis, when millions of people who lost their jobs cannot make their loan payments.

So what is going to happen to auto loan delinquencies when employment experiences a pullback, even a fairly modest one, such as when one million people lose their jobs? That was a rhetorical question. We know what will happen: The serious delinquency rate will set a record for the annals of history.

But it’s even worse than it looks.

“Prime” auto loans have minuscule default rates. The total of $1.3 billion in auto loans and leases outstanding includes leases to consumers who could pay cash for the vehicles but lease them for various reasons. According to a different measure by Fitch, “prime” auto loans currently have a 60-day delinquency rate hovering at a historically low 0.28%.

Of the $1.32 trillion in auto loans outstanding, about 22% are subprime, so about $300 billion. Of them roughly, $62 billion are seriously delinquent – or around 20% of all subprime loans outstanding. One in five!

But this subprime delinquency fiasco is not a sign of an employment crisis and a brutal recession as these types of numbers indicated during the Financial Crisis. Employment is still growing, and unemployment claims are near historic lows. Nevertheless, subprime auto loans are defaulting at astounding rates.

What’s going on? Greed – not an economic crisis.

Subprime lending is risky but immensely profitable. The thing is: Customers who have a subprime credit rating are painfully aware of it. They have been turned down for low-interest rate loans. They have been turned away. And now they walk on a car lot where their credit rating suddenly is no problem. And they become sitting ducks. The industry knows this.

They don’t even negotiate. They just accept the price, the payment, the interest rate, and the trade-in value. They’re ecstatic to get a car. And they end up with a huge payment at a high interest rate, and given how strung out they already are to be subprime rated in the first place, that loan is doomed.

That’s the irony: a low-interest-rate loan on an affordable car, sold at an average profit, would give the customer a much higher chance of keeping the loan current than a loan with a 15% interest rate on a car the customer cannot afford, including a big-fat dealer profit of the type that can only be obtained from a sitting duck. Those loans, born out of greed, and are doomed.

This is what we’re seeing here. These loans were born out of greed over the past few years, as the industry was getting very aggressive in pursuing subprime rated customers because they’re sitting ducks and so immensely profitable. What we’re seeing now are the consequences of that greed.

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https://wolfstreet.com/2019/11/13/the-holy-cow-moment-for-subprime-auto-loans/

The Holy-Cow Moment for Subprime Auto Loans; Serious Delinquencies Blow Out

by Wolf Richter • Nov 13, 2019 • 157 Comments • Email to a friend

But it’s even worse than it looks. And this time, there is no jobs crisis. This time, it’s the result of greed by subprime lenders. 

Serious auto-loan delinquencies – auto loans that are 90 days or more past due – in the third quarter of 2019, after an amazing trajectory, reached a historic high of $62 billion, according to data from the New York Fed today:

US-auto-loan-deliquencies-dollars-2019-Q

This $62 billion of seriously delinquent loan balances are what auto lenders, particularly those that specialize in subprime auto loans, such as Santander Consumer USA, Credit Acceptance Corporation, and many smaller specialized lenders are now trying to deal with. If they cannot cure the delinquency, they’re hiring specialized companies that repossess the vehicles to be sold at auction. The difference between the loan balance and the proceeds from the auction, plus the costs involved, are what a lender loses on the deal.

The repo business, however, is booming.

But delinquencies are a flow: As current delinquencies are hitting the lenders’ balance sheet and income statement, the flow continues and more loans are becoming delinquent. And lenders are still making new loans to risky customers and a portion of those loans will become delinquent too. And now the flow of delinquent loans is increasing – and this isn’t going to stop anytime soon: These loans are out there and new one are being added to them, and a portion of them will be defaulting.

Total outstanding balances of auto loans and leases in Q3, according to the New York Fed’s measure (higher and more inclusive than the Federal Reserve Board of Governors’ consumer credit data) rose to $1.32 trillion:

US-auto-loan-balance-v-number-2019-Q3.pn

Serious delinquencies jumped to 4.71% of these $1.32 trillion in total loans and leases outstanding, the highest since Q4 2011, when the auto industry was emerging from collapse. And on the way up, this 4.71% is just above the level of Q3 2009, months after GM and Chrysler had filed for bankruptcy and a year after Lehman had filed for bankruptcy, when the US was confronting the worst unemployment crisis since the Great Depression, and when people were defaulting on their auto loans because they’d lost their jobs:

US-auto-loan-deliquencies-2019-Q3-.png

The current rate of 4.71% is just 56 basis points below the peak of Q4 2010. But these are the good times – and not an employment crisis, when millions of people who lost their jobs cannot make their loan payments.

So what is going to happen to auto loan delinquencies when employment experiences a pullback, even a fairly modest one, such as when one million people lose their jobs? That was a rhetorical question. We know what will happen: The serious delinquency rate will set a record for the annals of history.

But it’s even worse than it looks.

“Prime” auto loans have minuscule default rates. The total of $1.3 billion in auto loans and leases outstanding includes leases to consumers who could pay cash for the vehicles but lease them for various reasons. According to a different measure by Fitch, “prime” auto loans currently have a 60-day delinquency rate hovering at a historically low 0.28%.

Of the $1.32 trillion in auto loans outstanding, about 22% are subprime, so about $300 billion. Of them roughly, $62 billion are seriously delinquent – or around 20% of all subprime loans outstanding. One in five!

But this subprime delinquency fiasco is not a sign of an employment crisis and a brutal recession as these types of numbers indicated during the Financial Crisis. Employment is still growing, and unemployment claims are near historic lows. Nevertheless, subprime auto loans are defaulting at astounding rates.

What’s going on? Greed – not an economic crisis.

Subprime lending is risky but immensely profitable. The thing is: Customers who have a subprime credit rating are painfully aware of it. They have been turned down for low-interest rate loans. They have been turned away. And now they walk on a car lot where their credit rating suddenly is no problem. And they become sitting ducks. The industry knows this.

They don’t even negotiate. They just accept the price, the payment, the interest rate, and the trade-in value. They’re ecstatic to get a car. And they end up with a huge payment at a high interest rate, and given how strung out they already are to be subprime rated in the first place, that loan is doomed.

That’s the irony: a low-interest-rate loan on an affordable car, sold at an average profit, would give the customer a much higher chance of keeping the loan current than a loan with a 15% interest rate on a car the customer cannot afford, including a big-fat dealer profit of the type that can only be obtained from a sitting duck. Those loans, born out of greed, and are doomed.

This is what we’re seeing here. These loans were born out of greed over the past few years, as the industry was getting very aggressive in pursuing subprime rated customers because they’re sitting ducks and so immensely profitable. What we’re seeing now are the consequences of that greed.

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1 hour ago, sancho panza said:

I think this election will be a no play event for me.I've specualted heavily on politis in the past but see little value in anythign lqiuid this far out.

 

the main theme of my trading would be capitalising on Labours looming collapse.Know quite a few middle class former Corbyn fans voting LD.BuyingTory maj is the only liquid trade and a lot that could go worng with that.

I think we could see quite a few more three way seats than previously.

Yeah,makes you wonder where this drug induced US market could end up over twenty years.

You want to see it here in the North east.I think the Cons will take my seat for the first time ever.Great candidate as well.Labour are going to get wiped out.Everyone i work with is voting Con.Its a factory with 100% Unite union membership.Iv never seen so much anger over politics.Im convinced that if Brexit isnt done we will have an armed civil war at some point.70 year old ex miners voting Con.Our Con candidate in a pub in West Auckland last night,the village where some miners won the first world cup and they are sat drinking with her and talking,and voting for her.

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Bricks & Mortar
4 hours ago, S Brule said:

Looks like I can get GDX on Hargreaves too

I got GDXJ on Hargreaves back in March.  I'd exchanged some emails with support, and they assured me I could get both - they had to check to see the KIIDs had come through. 
Both GDX and GDXJ have KIIDs now, or did back in March, I'm not sure how often they need updated or renewed.  So if your platform isn't allowing them, it's worth an email to support if you want them.

 

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9 hours ago, Errol said:

That's what I thought. So nobody in the UK can buy GDX/GDXJ. The EU is having a laugh (at our expense).

https://www.vaneck.com/etf-europe/library/regulatory-documents/kiid-gdx-en/

My mistake, it appears it does have one yet II have not updated it yet (8 months??!!).  Im going to ping an email in to see why the haven't added it.

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Re the post from @sancho panza on auto loans, a friend has recently come back from a business trip to the land of the free and commented on how every car he saw appeared to be new or nearly new. All the Uber drivers had brand new cars on finance, so even those on a basic wage of say $12 an hour are driving brand new cars.

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BlackRock Gold and General also worth a look, I have it in my Standard Life company pension as no other choices but it’s available on HL as well  

Have had to do quite a lot of research to get that company pension anywhere near where it should be, you are auto-enrolled in one of those lifestyle funds 😳

Will post up the available funds I think meet the requirements discussed on this thread in case anyone else is in the same boat as it will save you a bit of time  

NB: would be for Standard Life only  

I have GDXJ in HL ISA too, if GDX is now available I may pick some of that up but checking over allocations this week after not having had much time to check anything recently I notice I’m 30% in PMs and PM miners!

Clearly got a bit over excited there😬 

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https://www.ft.com/content/5f708692-06fc-11ea-a984-fbbacad9e7dd

See how its all starting.Reversing some of the rail cuts and re-opening stations etc.This will increase more and more.The government will push this.The new lines will likely be more like little metros connecting to the mainlines.I often think how busy the east coast line would be now from Whitby down to Brid.Ones like that would cost too much to re-open,but a lot wont.Also rates cuts for small cinemas and music venues.They will encourage more mixed use in town centres.I expect the regions to do much better than the south during a reflation period.

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1 hour ago, null; said:

Re the post from @sancho panza on auto loans, a friend has recently come back from a business trip to the land of the free and commented on how every car he saw appeared to be new or nearly new. All the Uber drivers had brand new cars on finance, so even those on a basic wage of say $12 an hour are driving brand new cars.

Pretty much same here.My 05 Peugeot diesel is the 2nd oldest car in the car park at work out of roughly 600 cars.Im working with 20 year olds with £30k cars on lease deals.20 year olds who will lose their jobs between xmas eve this year and May next year if my road map is right.Its incredible really.The flip side is you can get amazing value 2nd hand.Iv just bought a Peugeot convertible 07 for £1400 and its in superb condition.Iv got it in the garage and will do a few bits like treat the bottom with wax,service a few bits etc.Engine is mint,no wear on rings,belts all top notch etc.We will use it next summer for days over the Lake district etc,only 1 hr 30 from my house.I see motoring as pretty much free as far as the cars themselves are concerned.My depreciation over the last 10 years works out at about £9 a week all in including all repairs.

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I have a work pension with Standard Life, there are loads of funds, most I wouldn.t touch with a  barge pole tbh. I went through them all and found the following worth looking at in the context of this thread (not investment advice!), you can check details + the top ten holdings via the links

SL Investec Enhanced Natural Resources Pension Fund

http://factsheets.financialexpress.net/SLEFL/GPEJ_JJFE.pdf

SL JP Morgan Natural Resources Pension Fund

http://factsheets.financialexpress.net/SLEFL/EQB4_Z1.pdf

SL LF Macquarie Global Infrastructure Securities Pension Fund

http://factsheets.financialexpress.net/SLEFL/Y722_YP.pdf

SL BlackRock Gold & General Pension Fund

http://factsheets.financialexpress.net/SLEFL/MJU0_BFBG.pdf

There's a cash one (which I don't trust 100%) but have parked cash there anyway short term whilst I am waiting to invest 

SL BlackRock Cash Pension Fund

http://factsheets.financialexpress.net/SLEFL/K3CY_LLND.pdf

There's an index linked gilt fund too

SL iShares Index Linked Gilt Index Pension Fund

http://factsheets.financialexpress.net/SLEFL/I571_NB.pdf

And a Vanguard FTSE all share tracker

SL Vanguard FTSE UK All Share Index Pension Fund

http://factsheets.financialexpress.net/SLEFL/0I0V_BFCK.pdf

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we're currently in a 'market can remain irraitonal longer than you can stay solvent ' phase.......but makret currently melting up steadily.

Some UK building/suport services shares flying in the face of deteriorating fundamentals in their markets.Could be an interesting New year

https://moneymaven.io/mishtalk/economics/gdp-estimates-crash-on-dismal-economic-reports-aStCkKtVwU2Wpl0QzH642w/

GDP Estimates are well below 1.0% following industrial production and retail sales estimates.

The GDPNow model forecast for the fourth quarter took a dive today to 0.3% from 1.0% a week ago. Similarly, the Nowcast model fell to 0.4% from 0.7%.

Pat Higgins at GDPow explains:

"The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2019 is 0.3 percent on November 15, down from 1.0 percent on November 8. After this morning's retail trade releases from the U.S. Census Bureau, and this morning's industrial production report from the Federal Reserve Board of Governors, the nowcasts of fourth-quarter real personal consumption expenditures growth and fourth-quarter real gross private domestic investment growth decreased from 2.1 percent and -2.3 percent, respectively, to 1.7 percent and -4.4 percent, respectively."

Real gross private domestic development is now clocking at -4.4%.

Wow.

Recession Warnings

A bit ago I noted Industrial Production Dives and It's Not All Strike Related.

Trucking provide another recession warning: Freight Volumes Negative YoY for 11th Straight Month

Donald Broughton, founder of Broughton Capital and author the Cass Freight Index says the index signals contraction, possibly by the end of the year. That's just one one month away.

Strike Resolved

The GM strike is resolved. We will soon find out how much strike-related damage there was, but the risk is over-estimating the rebound going forward.

The trade deal with China is still unresolved.

Mike "Mish" Shedlock

 

 

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53 minutes ago, Ma2 said:

I have a work pension with Standard Life, there are loads of funds, most I wouldn.t touch with a  barge pole tbh. I went through them all and found the following worth looking at in the context of this thread (not investment advice!), you can check details + the top ten holdings via the links

SL Investec Enhanced Natural Resources Pension Fund

http://factsheets.financialexpress.net/SLEFL/GPEJ_JJFE.pdf

SL JP Morgan Natural Resources Pension Fund

http://factsheets.financialexpress.net/SLEFL/EQB4_Z1.pdf

SL LF Macquarie Global Infrastructure Securities Pension Fund

http://factsheets.financialexpress.net/SLEFL/Y722_YP.pdf

SL BlackRock Gold & General Pension Fund

http://factsheets.financialexpress.net/SLEFL/MJU0_BFBG.pdf

There's a cash one (which I don't trust 100%) but have parked cash there anyway short term whilst I am waiting to invest 

SL BlackRock Cash Pension Fund

http://factsheets.financialexpress.net/SLEFL/K3CY_LLND.pdf

There's an index linked gilt fund too

SL iShares Index Linked Gilt Index Pension Fund

http://factsheets.financialexpress.net/SLEFL/I571_NB.pdf

And a Vanguard FTSE all share tracker

SL Vanguard FTSE UK All Share Index Pension Fund

http://factsheets.financialexpress.net/SLEFL/0I0V_BFCK.pdf

Don’t get me started on work defined contribution pension funds. The choice is almost always abysmal. I spent a whole afternoon going through the selection available in my new job. All abysmal. Couldn’t get any exposure to either US Treasuries or precious metals. I’ve ended up with 65% in a global stocks fund (with a 5% up front charge) and 35% in a Latin America fund. 

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6 minutes ago, Castlevania said:

Don’t get me started on work defined contribution pension funds. The choice is almost always abysmal. I spent a whole afternoon going through the selection available in my new job. All abysmal. Couldn’t get any exposure to either US Treasuries or precious metals. I’ve ended up with 65% in a global stocks fund (with a 5% up front charge) and 35% in a Latin America fund. 

how much?

that's daylight robbery.

On 15/11/2019 at 15:51, subutai80 said:

Fresnillo heading for weekly support at 570. Will it hold if reached? Haven't seen lower since than 570 since 2009.

LCG_Trader.thumb.png.e1e4a0ce473efb69b8b3ae6f7e1364d1.png

Must say I like the look of Fres over 5 years from here.could go down but huge upside too.

decl long

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