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


spunko

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On 05/02/2020 at 20:18, Yellow_Reduced_Sticker said:

@Harleyjust bought Sainsburys so expect lower prices!

Cheeky bugger!  But yup, had a buy signal on the monthly in December and down 12% since then!  Not sure when I bought (fortunately just a small bit) and ain't looking!  Maybe a bit more pain to go. 

PS:  Trying their home delivery food service for the first time so that'll be interesting.  Just tried Tescos for the first time.  Quite good fun, especially atm. 

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On 05/02/2020 at 22:39, sancho panza said:

On the monhtlies,the trend looks down.Maybe Harley got a view.

IMB.  I own 'cause I love my divs!

Looking at MACD and STO:

. Monthly still looking negative.  There is a positive uptick in MACD though but we've been here a few times before!

. Weekly all negative from a high (turn) the week of 13 Jan 20, which was also the last price high.

. Daily positive STO but weakening MACD so a divergence (interestingly(?), the STO ascent hardly blipped with the recent 7% price fall).

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China to grow 5% when the place is in lock-down. xD Sure it will grow, but only in terms of them printing a trillion or whatever the figure touted is to make it look like growth.

 

 

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2 hours ago, Barnsey said:

Disagree slightly with this, like all virus' this thing doesn't do well in warm sunny weather, it likes cold damp conditions to properly spread.  It therefore has till end of April/Early May to do some damage.

The drip of bad news from China is the interesting thing, there is a distinct lack of good news propaganda, even the "Hero Doctor" who would have had everything thrown at him for some good news died.

One to watch is if/when Guangdong gets shut down, that produces way too much stuff for the world to shrug it off.

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19 hours ago, sancho panza said:

It's the Dollar index.

 

Here is the rationale between my timing guess of the next bear-market bottom for U.S. equity indices: the two previous longest bull markets in U.S. history occurred in 1921-1929 which was followed by a bear market of over 34 months from September 1929 through July 1932. The other long bull market was from October 1990 through March 2000 which was followed by a bear market of 30-31 months in duration (exactly 31 for the Nasdaq). The current lengthy bull market which began for the S&P 500 on March 6, 2009 and which may have ended for that index on January 22, 2020 might therefore last for 30-36 months, implying a bottom around the second half of 2022.

SP, sorry I was not clear, I meant to ask how might the dollar index affect GSR trading? Do you mean the general trend of when the dollar's down/commods are up, and vise versa, or is there more to this? 

 

 

Thanks for posting True Contrarian, he is good and I do respect his opinions, however did you notice his new timings? In his blog of Aug. last year, he estimated the US market would reach bottom in early 2021, now it will be late 2020 apparently. I know these are estimates but he doesn't explain his revision.

I wonder what are yours and others thoughts here about this. I know this blog isn't about market timing but a 18-month revision in the space of six months is curious don't you think? What's changed? (I can already hear the cynics saying we are always 18-months out from the big melt-up/down!) 

 

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1 hour ago, Harley said:

IMB.  I own 'cause I love my divs!

Looking at MACD and STO:

. Monthly still looking negative.  There is a positive uptick in MACD though but we've been here a few times before!

. Weekly all negative from a high (turn) the week of 13 Jan 20, which was also the last price high.

. Daily positive STO but weakening MACD so a divergence (interestingly(?), the STO ascent hardly blipped with the recent 7% price fall).

Yeah,I wish I'd used monthlies when I was buying CNA back in 2017..................you get a totally different view.Talking of CNA,that IMB balance sheet is reminsicsent of it.BATS look a lot healhier

https://www.investing.com/equities/british-american-tobacco-financial-summary

image.png

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20 hours ago, Majorpain said:

Is that MBS getting too toxic even for the Fed?

You'd have to query that.

20 hours ago, Democorruptcy said:

Not sure that means the Fed are trying to withdraw. If they were withdrawing wouldn't there be $0 on offer instead of $30bn? I just see that as near 2:1 cover, demand outstrips supply. Isn't like when our Debt Management Office sells governbankment debt and details the cover? It's only news when the cover is less than 1 i.e. they cannot sell it.

I think it's the fact that cover is 2:1 that's the issue.It's also of note that are using sale and repo with the Fed rather than amongst themselves.

Not saying it's a banking crisis but repo markets ticking up in vol are symptoms of wider problems generally.The fact that MBS are being offered on a 14 day repo seems illogical if everything is fine out there.

Happy to ebe ducated here.

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19 hours ago, confused said:

Central banks are residing in glass tower la la land. There is no trust, no transparency, no accountability. Only denial.

source https://northmantrader.com/2020/02/06/state-of-denial/

this guy has been around for a long time...

Let's see if the CBs can keep the bubble pumped or if nCoV will give them a 'dose of reality'.....interesting times....

 

Wellll (and Ive not followed the post)....

Its very easy to make the case that there is no trust now, not between different countries/regions CBs.

Banking is rapidly shrinking back to individual countries.

No CB wants a large foreign bank with fuck nos what on its it books in the CB jurisdiction.

 

Theres a massive delveraging and shrinking of banks still going on.

 

 

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15 hours ago, Ash4781b said:

But can they deliver? Eg. If one Tory says we need to build roads another says no more roads! Typically see this manifested as a battle between government levels eg. Between central and Local Government. Yeah house building is different as suddenly that random field that’s been empty for decades on your drive to work becomes a housing development.

Still I guess a housing infrastructure fund might not actually get much built. Presumably it’s all backed in the share prices? 

Around my way there's a few big developments being mothballed or going really slow.At the end of the day,there's a limit to demand at certain price points.

@Alifelessbinary is on the inside so sees the method of skew .I'm wary of calling HPI lower but demand for three bed semis at 10 times average local salary(single-I know @Democorruptcy I know) msut have limits.

13 hours ago, null; said:

I have been amazed at how quickly items bought from amazon are delivered, order in the  morning and it arrives later that evening.

That is the space which RM need to fill. They have a huge competitive advantage but perhaps lack agility.

It reminds me of the Ford workers and the unions back in the 90s. The union looked after the workers ok in the short term, but long term their jobs went to Spain.

Unions ahve become globalised as well as corporations.As long as the head boy is getting his £150k plus flat in W! they won't care.

10 hours ago, Sound Money said:

Sorry for going a little off topic, but wondering what the collective mind of this thread think about buying a house now in the states at this point in the cycle. Miami specifically.

Mortgages here are fixed for the term, 15 or 30 years and are around 3.25-3.5%. My landlord is selling and I really don’t like the idea of moving into another rental. My thinking is put down only 5%, and keep the rest of my savings invested. I could buy a modest house probably for cash but I don’t want to part with all those savings. If inflation rises over the next cycle that fixed rate mortgage should be good even if property values crash, right? I know it would be best to be in a fully paid off house but I don’t have that luxury.

My savings (including pensions) are currently roughly 15% us stock trackers, 10% international stock trackers,  10% “speculative”, meaning things learned here, miners, now averaging into oil, 10% gold/silver, 15% bitcoin, 40% cash/bonds (will sell bonds in any deflationary crash as I know bad for next cycle, and will buy up equities with the cash)

Any thoughts appreciated. To keep it more on topic, what would the advice be for the average uk renter going into this deflationary crash and reflation?

30 year mortgage from Fannie/Freddie,not a bad option at these rates.

renting/buying thread

1 hour ago, JMD said:

SP, sorry I was not clear, I meant to ask how might the dollar index affect GSR trading? Do you mean the general trend of when the dollar's down/commods are up, and vise versa, or is there more to this? 

 

 

Thanks for posting True Contrarian, he is good and I do respect his opinions, however did you notice his new timings? In his blog of Aug. last year, he estimated the US market would reach bottom in early 2021, now it will be late 2020 apparently. I know these are estimates but he doesn't explain his revision.

I wonder what are yours and others thoughts here about this. I know this blog isn't about market timing but a 18-month revision in the space of six months is curious don't you think? What's changed? (I can already hear the cynics saying we are always 18-months out from the big melt-up/down!) 

 

you've got to be careful using any one stat in isolation.

What I do is develop a working thesis that represents my best guess of where we are and where we're going.And I trade that for my family and inconjunction with them.

There are lots of issues/data/cahrts that will feed into my decision to sell our goldies.I feel you're looking for some sort of defintive rule which is why I was realitvely succinct in my previous answer.Definitve trading rules don't really exist and if you anchor to any particualr single rule or ratio or data point then you have no plan B if you're wrong.

You do appear to be anchoring on certain things.As a trader this will be your enemy.We all do it.I jsut got hosed on shorting Tesla because I anchored on my emotional belief that the price I was looking at was insane.

https://en.wikipedia.org/wiki/Anchoring

 

ref kaplan.He's done what you're not doing which is reacting to the newsflow/dataflow.He had an inital timing he felt was his best guess based on history and the Russell 2000 which nornamlly worked.His reaction the the extended rally has been to push his timelines to the right and adjsut his working 'best guess' on where the fall will msot likely come.

proof of that is that he's only jsut started shorting XLI/CLOU/SMH.

 

I constantly have to remind myself not to anchor as it's a natural tendencey I have.I constantly stress test my working 'best guess' by exposing it to sunlight on here or discussing it with financially educated friends/family.

I thought we'd be heading for the big kahuna this summer but have had to push my timelines to the right as well because quite simply hsitoical chart patterns tell us that generally -in the past-markets don't collapse immediately but certain thigns occur eg insider selling/retail buying,futures traders repositoning.

 

 

ref timing gold,you need to be looking at COT charts/DXY/UST's/G+S ratio/gold price ROC/silver price ROC/ etc never view two of them inisolation is my advice to myself.

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2 hours ago, Majorpain said:

One to watch is if/when Guangdong gets shut down, that produces way too much stuff for the world to shrug it off.

Uh oh (not entire Guangdong Province, yet)

Apologies for banging on about it as I understand there’s a separate thread but I’m really starting to think this is being underestimated as THE black swan event.

As you rightly say @Majorpain, the World will definitely take notice as the economy of Guangdong Province is larger than that of any other province in China (6th largest sub-national economy in the world).

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Silver miners. Leading the way up again after re-testing a 3-year breakout. Outpacing overall stocks and gold miners. Looks to be the beginning of another leg up for the entire precious metals space.
 
Image
 

Above is from Otavio Costa

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1 hour ago, Barnsey said:

Uh oh (not entire Guangdong Province, yet)

Apologies for banging on about it as I understand there’s a separate thread but I’m really starting to think this is being underestimated as THE black swan event.

As you rightly say @Majorpain, the World will definitely take notice as the economy of Guangdong Province is larger than that of any other province in China (6th largest sub-national economy in the world).

Oh Fuck, thats not good.

World idiot of the year goes to whichever official in Wuhan ok'ed the 100,000 person banquet, when they knew they had a virus on the loose.  That properly turbo charged this outbreak, has spread it everywhere in China fast and made the difference to SARS IMO.

It is certaintly looking like a black swan, if it starts spreading outside China then its time to go full prepper.  Im keeping my fingers crossed!

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Democorruptcy
1 hour ago, Barnsey said:

Uh oh (not entire Guangdong Province, yet)

Apologies for banging on about it as I understand there’s a separate thread but I’m really starting to think this is being underestimated as THE black swan event.

Oh well it's only money.

I've been following the coronavirus and do believe it has the potential to be something bad. Also because any vaccine will take months to sort, it's not going away quickly.  However today I've been buying back the UK stuff I sold before xmas. There's nothing technical about it, my gut was suggesting 'buy' but my head was asking it WTF are you on about? I have a little leeway but nowhere near black swan amounts, with my repurchase being 12% cheaper than when I sold. I have more soldiers and will send them climbing up ladders if things get cheaper.

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Thinking about cycles, buying/selling and their statistical distributions properties I.e kurtosis and skew, what are people's thoughts (and evidence if you cite it) on the following factors pre/post crash?

a) volume rate.

b) price

My thoughts?..obviously there will be correlation between them but would there be a difference in the distribution shapes for each?...I expect...

a) to show mid-ve skew with platykurtosis, as people gradually buy, then rapidly buy as a group, but initially hold selling off quickly as a group when SHTF.

I expect b) to show mid-ve skew with leptokurtosis, as initially volume reduction is reflected in price, and when SHTF the price goes off the cliff more quickly.

Thoughts?

 

Whats prompted this?..reading Mark`s Cycle book and he shows everything as lepto or platykutic normal distributions, which I don't feel is correct.

 

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On 07/02/2020 at 12:32, sancho panza said:

you've got to be careful using any one stat in isolation.

There are lots of issues/data/cahrts that will feed into my decision to sell our goldies. I feel you're looking for some sort of defintive rule which is why I was realitvely succinct in my previous answer. Definitve trading rules don't really exist and if you anchor to any particualr single rule or ratio or data point then you have no plan B if you're wrong.

 ref timing gold, you need to be looking at COT charts/DXY/UST's/G+S ratio/gold price ROC/silver price ROC/ etc never view two of them inisolation is my advice to myself.

SP, thanks again, I appreciate the info. and your comments. As I said criticism, good or bad is welcomed. I was hoping others here might already be doing/planning to use the GSR.

I'm still researching, but my main concern was for having capital tied up in gold/silver etf's for 5-15+ years which seems a waste. I need to understand the risks better and compare them to the missed opportunity cost of not operating a GSR strategy. But I find the GSR intriguing... depending of course on the approach employed, is it really 'trading' - or is it more comparable to rebalancing (and de-risking)? My plan is to begin very overweight in silver (a calculated risk), and then over time swop silver for gold as/when GSR is favourable. If successful, my eventual gold holding would be much larger than if I had just purchased gold at outset. I accept that finding the correct indicators to do this is key, but the only real downside risk as I see it, is that I would end up with more silver and less gold than planned; and crucially at no stage will I be 'out of' the PM complex.

 

Kaplan is great, he generously shares his portfolio, which I think is almost unique. Anyway, its just that - and i may be wrong - but reading his latest post I thought I detected he might now no longer see a big melt-up/down in the market, but instead prolonged bumpy rides across the different - over/under valued - sectors. He said he would post a follow up with more details. If so, I find this interesting because DurhamBorn was writing about something similar to this happening recently.

           

 

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1 hour ago, Democorruptcy said:

Obviously there is still time to change their minds but FT suggest Pension Tax Relief is dropping from 40% to 20% in the March 11th Budget:

It's only a matter of time and stinks.  Just about the final nail in the coffin for people wanting to work hard and earn decent money, just where is the incentive?

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2 hours ago, Democorruptcy said:

Obviously there is still time to change their minds but FT suggest Pension Tax Relief is dropping from 40% to 20% in the March 11th Budget:

Should of been done years ago really,but there will be massive complaints if true.The government need to stop hard working people from retiring because the free loaders wont work.Iv always planned my pensions so i can get out the £12.5k a year tax free and then £4.5k once the state pension kicks in.Im well over that now,but id pass the rest on in my estate.The Tories only really have this budget and next to get things in line.They need money to invest in the seats they took in the north etc (mine) .If the headline is cutting to 20%,likely instead they will say 30% or something.Too be honest id much prefer they did that than keep pushing the age back you can get them.

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22 minutes ago, ILikeCake said:

It's only a matter of time and stinks.  Just about the final nail in the coffin for people wanting to work hard and earn decent money, just where is the incentive?

Paying the massive mortgage people have around their necks will keep them working.Thats the whole point of HTB etc.However they have a massive problem about stopping people passing down too much wealth.Lots of hard workers can retire in their 50s if they have been sensible themselves and then get an inheritance.This measure,if true would be one way of cutting that.Pensions can be passed on 100% tax free before 75 and then taxed at the persons highest rate,so can be kept sat until the tax situation is better.

Social policy for 30 years has made around 30% of the population parasites.There is no way the government can row that back much without massive cuts to welfare etc.Instead they will try to keep the workers working.Pay a house off,no debt,and get into position to say FU to them.

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Chewing Grass
12 minutes ago, DurhamBorn said:

Should of been done years ago really,but there will be massive complaints if true.The government need to stop hard working people from retiring because the free loaders wont work.Iv always planned my pensions so i can get out the £12.5k a year tax free and then £4.5k once the state pension kicks in.Im well over that now,but id pass the rest on in my estate.The Tories only really have this budget and next to get things in line.They need money to invest in the seats they took in the north etc (mine) .If the headline is cutting to 20%,likely instead they will say 30% or something.Too be honest id much prefer they did that than keep pushing the age back you can get them.

I have been playing catch-up for years and still can't beat the return I got off 15 years in a superannuation scheme from 18-33 from the mid 1980s to 1990s despite now putting £1K/month into the private pension pot.

If they want to keep me working they can't make the carrot any smaller, if they do I won't bother as I can have a small carrot now.

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Democorruptcy
1 hour ago, DurhamBorn said:

Should of been done years ago really,but there will be massive complaints if true.The government need to stop hard working people from retiring because the free loaders wont work.Iv always planned my pensions so i can get out the £12.5k a year tax free and then £4.5k once the state pension kicks in.Im well over that now,but id pass the rest on in my estate.The Tories only really have this budget and next to get things in line.They need money to invest in the seats they took in the north etc (mine) .If the headline is cutting to 20%,likely instead they will say 30% or something.Too be honest id much prefer they did that than keep pushing the age back you can get them.

You mean some sort of compromise to get some people on board? What about the full cut to 20% but drop the age from 67 to 65? xD

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5 hours ago, JMD said:

or is it more comparable to rebalancing (and de-risking)? My plan is to begin very overweight in silver (a calculated risk), and then over time swop silver for gold as/when GSR is favourable. If successful, my eventual gold holding would be much larger than if I had just purchased gold at outset.

OK, perhaps I am missing something (likely as I am a novice), but here are my thoughts.

1. You are not rebalancing as the sum is in PMs (single asset type) regardless of their respective %d to each other.

2. If your plan works you could have more gold but what does this mean in regard to your whole portfolio and its increasing (hopefully!) performance?...the price of PMs could drop substantially relative to the other assets in your portfolio (or the ones you could have had in place of the PMs) so `more` could actually be `less`...your GSR plan/thinking appears to be in its own `bubble` [no offense meant :-)].

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