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


spunko

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Merry Christmas to you all and thanks for the highly interesting and informative discussion over the year. I worked in IT most of my life and thought that was a pretty technical, propellor head type field but some of the discussion here is in another league altogether. I don't pretend to understand a lot of it but it is fascinating and keeps me coming back for more.

This year my modest SIPP and SS ISA holdings are finishing 18% up on the amount originally invested. Not bad at all! I added some of the  telco, energy, and other reflation stocks on top of the PM miners I bought last year. Got some very welcome dividend income coming in too. 

Cheers!

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Happy Christmas to everyone who contributes and/or reads this thread.For me the no1 most important thing is that ANYONE is welcome here,to contribute from the technical,to what they simply see with their own eyes.Iv always been driven by the thought people who work get fleeced,by the rich and by the poor.The ultimate aim of this thread is that peoples saved labour,because thats what money really is,is protected and grows.Mostly peoples labour is stolen (transferred),and we are about to see the biggest transfer ever probably.Its all that money parking in bonds and property and equity "growth".

 

 

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Next year is all about the sipp. Up till now life has been a case of dealing with toddlers and building up a cash safety net. As of January it's every quid I can grab going into primary industries and getting my 60s or the kids inheritance in the bag. I figure once that's sorted all I've got to do is have enough cash to last me once I cba working anymore.

Been watching this thread since the beginning, it's been an education. Before this I would never had had these options, or known about them. I was looking at working myself to death like every other schmuck. Cheers to one and all and a very merry Christmas.

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My last order of physical silver arrived the other day - just in case we lose the VAT loophole buying via Germany when we leave the EU. (Small price to pay anyway.)

 

That's my physical stash done now. It's only modest but it should do. Time to focus purely on reflation and cyclicals.

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Chewing Grass
On 23/12/2019 at 18:19, DurhamBorn said:

Just an interesting stat on pension provision.The fact this is the people 55 to 64 is quite incredible.I would guess many in that age group in the private sector would still have DB pensions,even if deferred.How many of these think their home is their pension?.

"The figures were drawn from data published by the Office for National Statistics this month, representing pension wealth in the UK from the period of April 2016 to March 2018. 

Equiniti said this data also showed a "stark difference" between public and private sector savings, with those aged 55 to 64 in the public sector having a median workplace pension savings of £181,100 and those in the private sector having pots roughly seven times smaller at just £27,000."

Had a dig through that Equiniti article to find its references and the references references and there are some really interesting numbers in this ONS spreadsheet.

It would be even more interesting if I could get beyond the 75th percentile point.

https://www.ons.gov.uk/file?uri=%2fpeoplepopulationandcommunity%2fpersonalandhouseholdfinances%2fincomeandwealth%2fdatasets%2fpensionwealthwealthingreatbritain%2fjuly2006tojune2016andapril2014tomarch2018/pensionwealthtablesfinal.xlsx

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Happy Christmas to one and all !!

Had no spare time the last few weeks to contribute and 2020 looking even busier. Need to get my isa fully allocated and make some decisions within my SIPP. 

I always find time to read this topic though at least every other day. Keep posting!

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I often mention $ liquidity as one of the most important primary indicators.However almost everyone doesnt understand the affects this has.

For instance,go and ask anyone  what happens when the government (US) borrows and spends a lot more and they will answer "inflation,look at the countries who saw hyper-inflation".

WRONG.

Why?,because the $ is the reserve currency.When the treasury borrows it sells bonds,and when it does,foreign nations,entities and primary banks buy these bonds with their surplus dollars and/or bank reserves,so these dollars flow OUT from the world economy and INTO the treasury causing $ liquidity to dry up.Its DEFLATIONARY for the world.

So once you know this you can do cross market work.

Lets take Australian housing.Austalian lenders can lend cheap to homeowners by borrowing in US$ and converting to Aussie dollars instead of using the depleted deposit fund at home.That is what they have done .Until around 6 months ago as $s tightened.Aussie housing anyone?

So when the US treasury sells more bonds,over the amount the Fed QEs then world $ liquidity falls.With a lag you can do cross market work on where these affects will work first (who is using the carry trade most to fuel bubble markets as well).

Dollar liquidity has fallen 50% since 2014 at the FBOs (foreign banks) and the GSIB (Amercian primary banks).

The Fed knows this,and have started a new easing cycle already.That is about to speed up,and end up going to massive new heights.

So i see a lag affect of the tightening forcing oil down to maybe $44,but a new easing cycle taking the $ down to around 88.9 in its first wave.Those are road maps built off cross market work on the dollar liquidity profile.They arent certain,oil could trade off the dollar easing coming instead of the lagging affects of a lack of dollars in other markets cutting demand for oil.BUT if oil does trade down in the next couple of months before the easing kicks in (roughly 5 month lag) then it will be a superb buy point.If you are already buying oilies,then it provides the point you average down heavily.

If the above is so,then why is it we expect an inflation cycle?

Because the debt deflation isnt affecting the US treasury,its affecting the banking system and so the Fed will print hugely more $s than the treasury will soak up in new debt/bonds,so the extra dollars will allow other CBs to print heavily as well.Instead of having to buy US treasuries with the surplus $s there will be lots spare,these will flow into commods and spark a run.

 

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Talking Monkey
1 hour ago, DurhamBorn said:

I often mention $ liquidity as one of the most important primary indicators.However almost everyone doesnt understand the affects this has.

For instance,go and ask anyone  what happens when the government (US) borrows and spends a lot more and they will answer "inflation,look at the countries who saw hyper-inflation".

WRONG.

Why?,because the $ is the reserve currency.When the treasury borrows it sells bonds,and when it does,foreign nations,entities and primary banks buy these bonds with their surplus dollars and/or bank reserves,so these dollars flow OUT from the world economy and INTO the treasury causing $ liquidity to dry up.Its DEFLATIONARY for the world.

So once you know this you can do cross market work.

Lets take Australian housing.Austalian lenders can lend cheap to homeowners by borrowing in US$ and converting to Aussie dollars instead of using the depleted deposit fund at home.That is what they have done .Until around 6 months ago as $s tightened.Aussie housing anyone?

So when the US treasury sells more bonds,over the amount the Fed QEs then world $ liquidity falls.With a lag you can do cross market work on where these affects will work first (who is using the carry trade most to fuel bubble markets as well).

Dollar liquidity has fallen 50% since 2014 at the FBOs (foreign banks) and the GSIB (Amercian primary banks).

The Fed knows this,and have started a new easing cycle already.That is about to speed up,and end up going to massive new heights.

So i see a lag affect of the tightening forcing oil down to maybe $44,but a new easing cycle taking the $ down to around 88.9 in its first wave.Those are road maps built off cross market work on the dollar liquidity profile.They arent certain,oil could trade off the dollar easing coming instead of the lagging affects of a lack of dollars in other markets cutting demand for oil.BUT if oil does trade down in the next couple of months before the easing kicks in (roughly 5 month lag) then it will be a superb buy point.If you are already buying oilies,then it provides the point you average down heavily.

If the above is so,then why is it we expect an inflation cycle?

Because the debt deflation isnt affecting the US treasury,its affecting the banking system and so the Fed will print hugely more $s than the treasury will soak up in new debt/bonds,so the extra dollars will allow other CBs to print heavily as well.Instead of having to buy US treasuries with the surplus $s there will be lots spare,these will flow into commods and spark a run.

 

DB where would any large scale stock market correction most likely occur in terms of sequencing. My understanding of the easing cycle is the Fed drops interest rates and after this when rates are close to zero does huge printing. Is that correct.

So would any large scale downturn be after the easing but before huge printing gets underway. There has been discussion of a 50-60% stockmarket correction

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23 hours ago, Loki said:

My last order of physical silver arrived the other day - just in case we lose the VAT loophole buying via Germany when we leave the EU. (Small price to pay anyway).

Just received another mail about a free shipping offer.

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3 hours ago, Talking Monkey said:

DB where would any large scale stock market correction most likely occur in terms of sequencing. My understanding of the easing cycle is the Fed drops interest rates and after this when rates are close to zero does huge printing. Is that correct.

So would any large scale downturn be after the easing but before huge printing gets underway. There has been discussion of a 50-60% stockmarket correction

Its hard to tell.The Fed is easing already,but it is in the short end at the moment,mainly the repo markets.Stock markets usually top when inflation picks up,so it could be a classic case of a few months after oil goes back above say $75.However there is a lot of stress in the markets and they could crack at any time.Most of the bubble is in bonds and housing though likely they will take most of the pain.I do think the US markets might still fall 50%+,but some companies will likely see 90% falls,and others might even go up.

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On 04/12/2019 at 23:25, Thorn said:

That might be the individual stock for Silvercrest (which I think is a wee rocket about to go off- DYOR etc) rather than the US ETF basket of miners SIL

897AE5E4-EEDF-430F-A342-C3B889420C11.thumb.jpeg.c27bb70ea907e6a454c5f530b22880a4.jpeg

 

Only got 1 ladder in on this the other day better than none 

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Talking Monkey
9 hours ago, DurhamBorn said:

Its hard to tell.The Fed is easing already,but it is in the short end at the moment,mainly the repo markets.Stock markets usually top when inflation picks up,so it could be a classic case of a few months after oil goes back above say $75.However there is a lot of stress in the markets and they could crack at any time.Most of the bubble is in bonds and housing though likely they will take most of the pain.I do think the US markets might still fall 50%+,but some companies will likely see 90% falls,and others might even go up.

Cheers DB looking t the US markets things seem so toppy, I just can't see how Q1 2020 earnings will meet expectations, therefore when you say things could crack any time definitely feels like it could. Its hard to articulate but there is a sense of an almighty car crash coming

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8 hours ago, Talking Monkey said:

Its hard to articulate but there is a sense of an almighty car crash coming

It's felt that way for a long time though.  Even with manipulation the numbers don't add up, yet on the charade goes.

It won't crash until 'they' decide to crash.  I don't think that's a contradictory opinion to hold on this thread - there's plenty more they can throw at things to keep it going BUT when it does go, things will be as per durhamborns roadmaps.

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19 hours ago, DoINeedOne said:

897AE5E4-EEDF-430F-A342-C3B889420C11.thumb.jpeg.c27bb70ea907e6a454c5f530b22880a4.jpeg

 

Only got 1 ladder in on this the other day better than none 

Got any more tips like this? !

On 23/12/2019 at 19:17, Tdog said:

Well i tried to buy £500 of SCIF from my kid and £1500 for myself ... and i cant due to KID.

Then i tried to buy my kid £400 of Fission Uranium as it was at 26 and now need a NR-301 tax form.

Whoever invented "government" needs stringing up.

I wonder if this will change when we leave the EU?

This really is a major fuckin PITA.

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I did a brief seach on Silvercrest (Not to be confused with Silvercorp) and found this

https://seekingalpha.com/article/4314229-silvercrest-metals-time-to-book-profits

Quote

Silvercrest Metals owns arguably one of the most impressive undeveloped projects in the sector and has a management team that has done it before in the same jurisdiction. On this basis alone, the company remains an exceptional candidate for a takeover, or for a company to bring Las Chispas into a profitable and high-margin operation within two years. The company's nearly US$80 million in cash after the recent financing has de-risked the project substantially, as the company now holds more than 70% of the needed capital to put Las Chispas into production. Having said that, the stock is no longer cheap here at 1.50x P/NAV, and this has led to increased risk for investors. I believe investors would be wise to book profits on 1/3 of their position here and wait for a 15% plus correction before adding any further exposure to Silvercrest Metals.

 

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Clueless Imbecile
On 23/12/2019 at 08:06, CVG said:

Cash is cash. It's purpose is to be highly liquid, readily deployable to the right situations and safe from investment risk (but not inflation risk as you realise). You can only partially mitigate the affects of inflation by losing some liquidity and speed of deployment. I have mine in premium bonds (effective 1.4%) and easy access accounts (similar). You can't expect to match inflation.

Others may offer some other ideas like inflation linked bonds. they'll advise if better than the above.

I also keep some of my cash in physical and foreign currency -- for immediate execution!

Thanks for the reply.

I have some premium bonds. However, the cash I'm most worried about is in my ISA. I don't want to withdraw it, but I worry that it will get withered by inflation &/or currency-debasement in the long run if I don't invest it in something. I was thinking maybe I should have some index-linked (goverment) bonds, but then I'm not sure I really understand the bond markets well enough, and bonds seem over-valued at the moment. I suppose I'll just end up keeping the cash in my ISA in the hope of investing it in equities when/if "the bust" happens.

I'm fascinated by this thread and I respect peoples opinions. I've had to really wrestle with my beliefs to implement any of the kind of strategies talked about on here. I came from an index-tracker/passive-investment background and in trying to follow this thread it feels like I've been going against a lot of the theory that I've believed in for many years (e.g. diversifying across hundreds of stocks instead of just a few dozen, not trying to time the market, not trying to be a stock-picker, etc). I stopped adding money to my index funds early last year, in anticipation of the bust happening, but it didn't seem to happen.

Cheers,
Clueless Imbecile

Disclaimer: I am not an expert. Anything I post here is just my opinions, which may not be factually correct. My posts are intended purely for the purpose of debate and are not to be taken as advice. If you act on any of the above then you do so entirely at your own risk. I do not accept any liability.

 

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34 minutes ago, Loki said:

I did a brief seach on Silvercrest (Not to be confused with Silvercorp) and found this

https://seekingalpha.com/article/4314229-silvercrest-metals-time-to-book-profits

 

Expensive would be the right word, $2Bn worth of total resources at current prices vs $800 odd Market cap is a ratio of about 2.5.  For no operating mine.  Or Cashflow.  And 20 million in the bank for a project neeeding 100m in capex.

Barrick producing about 5 million ounces of gold per year is at a ratio of 5 for comparison, if Barrick looks good value then the market has got it wrong IMO!

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Clueless Imbecile

Is anyone one here still holding PM mining stocks?

I sold some of mine in the summer when they boomed, but I kept most because I hadn't invested much and I thought there might be more upside to come. I began to regret not selling the lot when the silver price began to fall and the pound started rising against the dollar.

Since then I've been holding on, inpsired by David Hunter's twitter comments (@DaveHcontrarian) about gold to $1800 and silver to $26. However, I don't know how much that would be offset by fx rates if the pound rises further against the dollar. I think the fx rate (GBP to USD) could be quite volatile, particularly around any significant BREXIT dates. My dilemma now is whether to sell the mining stocks that are in a good profit for me (Coeur Mining Inc, First Majestic Silver Corp), or whether to hold in the hope of further gains in the stock price (in USD or CAD) at risk of that being undermined by GBP rising. Although it's tempting to sell the stocks that are in profit, I've tended to think that I should hold them in the hope that they might benefit more from a rising market enough to off-set my other PM mining stocks if they don't rise as much. I bought into Great Panther Mining Ltd thinking that it was cheap, but my holding is currently down about 45% as I write this. PM mining stocks are high risk!!

Cheers,
Clueless Imbecile

Disclaimer: I am not an expert. Anything I post here is just my opinions, which may not be factually correct. My posts are intended purely for the purpose of debate and are not to be taken as advice. If you act on any of the above then you do so entirely at your own risk. I do not accept any liability.

 

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3 minutes ago, Clueless Imbecile said:

 anyone one here still holding PM mining stocks?

New Gold.  Holding because what's the point in selling and realising a loss when who knows what the future holds.  It was only 'punt' money anyway

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27 minutes ago, Clueless Imbecile said:

Is anyone one here still holding PM mining stocks?

HZM, which is just the profit left in now,  Fres, which is down, plus an allocation in GDX and GDXJ.

All long term holds. As much for a hedge as anything.

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22 minutes ago, Clueless Imbecile said:

Is anyone one here still holding PM mining stocks?

 

 

Long term holder myself. But only about 15% of my stocks and shares ISA, the rest in pharma, oil, telco's, energy etc.

Generally I'm up on NEM, FNV, PAAS. Down on AUY but bought more at $2.60 so should be even on that dog soon. As I've said before I consider Gold/Silver and the miners as SHTF insurance. I don't really do any serious research other than watching the waves! If Gold and Silver pick up though to say $1800/$26 though I may well sell a chunk to deploy elsewhere, provided I can see some perceived value (oil services/big oil???):Jumping:

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5 minutes ago, Hardhat said:

HZM, which is just the profit left in now,  Fres, which is down, plus an allocation in GDX and GDXJ.

All long term holds. As much for a hedge as anything.

I forgot, I have some FRES, another poodle I'm down on! But happy to hold.

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