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


spunko

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A bit of mining updates:

SilverCrest hit over 16kg (as in: KILOgrams) of silver equivalent per tonne (90g oz gold and over 9kg silver). Not just a single lucky hit either, surrounded by other hits of over 5kg silver plus plent of gold to boot.

Alexco sold it's entire environmental branch - the only (and very reliable) source of their revenues - for a touch over $13m. Getting ready to finally build a mine, perhaps?

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2 minutes ago, BearyBear said:

Can they not just print goods..?

They can't print food either, if inflation becomes systemic inside China their relative cost of living till rocket. a cheap working population requires cheap food.

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14 minutes ago, BearyBear said:

Can they not just print goods..?

3DQE xD

Would highly recommend taking a few minutes to read the following from Scott Minerd of Guggenheim (he was surprisingly bullish until recently), superb article:

https://www.guggenheiminvestments.com/perspectives/global-cio-outlook/coronavirus-impact-on-the-global-economy

Quote

The impact of all this on corporate profits and free cash flow will be dramatic. The effect on oil and energy prices could be even more extreme. Right now, excess oil production in the world is an estimated one million barrels per day, so as demand dries up from repercussions, oil could plunge to $25 a barrel unless OPEC or other producers decide to cut production.

Quote

This will eventually end badly. I have never in my career seen anything as crazy as what’s going on right now. It was crazy in 2006 when I was pounding the table saying we were going to have a financial crisis of biblical proportions. And it was crazy in 1997, when high yield spreads got as tight as 239 basis points over Treasurys in October of that year, and then zigzagged their way higher for five years, until they peaked at 1,036 basis points in October 2002.

Deflation ahead?

 

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17 hours ago, Agent ZigZag said:

I own my own house outright so I dont need to allocate any assets towards that area. The area I am interested is my retirement and as DB says as long as my assets keep up with inflation I am happy. I am still building my wealth largely in stocks now and my aim is to pack in work by 55. My stock portfolio is largely those areas discussed in this forum without the widows and orphans stock pickers. My aim is to have 12k for living and 12k for luxury. Trust me I need it as my council tax is about £2300 and gas electricity about £2000. In todays money that is 300k to last me 12 years to reach state retirement age. I  intend to spend that so that by 67 I have no money, on paper at least. The reason why is that the prudent it seems gets screwed by governments. If I have no assets on paper then it it is hoped I will get full state pension, council tax paid for leaving me with little trips now and then to Blackpool Baird to top up my income.

 

Note - If the facts change then so does my plan

A guy I know down my local. Retired last year. Funnily enough he makes trips to Blackpool every month.

£150k house paid for. A few grand in the bank. Gets full state pension, pays no council tax.

Rumours are he built up a pot of Gold Sovereigns over the years. Circa £100k worth. Like he tells everyone, he's worth nothing on paper, bar a few grand on deposits.

He's out most nights.

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Democorruptcy
13 minutes ago, Panda said:

A guy I know down my local. Retired last year. Funnily enough he makes trips to Blackpool every month.

£150k house paid for. A few grand in the bank. Gets full state pension, pays no council tax.

Rumours are he built up a pot of Gold Sovereigns over the years. Circa £100k worth. Like he tells everyone, he's worth nothing on paper, bar a few grand on deposits.

He's out most nights.

I remember surmising about that on ToS years ago. Even if the value of the sovs dropped say 40%, you still have 60% of something. The governbankment would in effect take 100% by not allowing you to claim benefits and making you pay your own.

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14 minutes ago, Panda said:

A guy I know down my local. Retired last year. Funnily enough he makes trips to Blackpool every month.

£150k house paid for. A few grand in the bank. Gets full state pension, pays no council tax.

Rumours are he built up a pot of Gold Sovereigns over the years. Circa £100k worth. Like he tells everyone, he's worth nothing on paper, bar a few grand on deposits.

He's out most nights.

I think its why the government brought in the new state pension.Its pretty much the old means tested level.That means almost everyone will be just above means testing level,so no point hiding assets etc.Of course the council tax is on top of that.Even a small workplace pension wil pay just enough to pay the council tax etc on top.

It wouldnt surprise me if at some point the tighten up pension freedoms so you have to have x amount of income before you can access.

 

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Democorruptcy
34 minutes ago, Barnsey said:

Crazy times! This time REALLY IS DIFFERENT! It'll take the US stock market a little longer to figure this out as inventory is worked through, definitely a bit of a lag to this wave of pain coming, but when it does :ph34r: Central banks can't control this like they have all the previous black swans.

Are you trying to disrupt the market?

spacer.png

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Just to add my oil target is still $43 with a possible spike down to $14 in a credit event.(paper market).

However cheaper oil kills Tesla more than it kills big oil.Its also fantastic for transports who can hedge 4 years out.

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Democorruptcy
1 minute ago, DurhamBorn said:

Just to add my oil target is still $43 with a possible spike down to $14 in a credit event.(paper market).

However cheaper oil kills Tesla more than it kills big oil.Its also fantastic for transports who can hedge 4 years out.

14$!

Instead of trying limit supply to market to keep the price up, they will be trying to stuff existing stock back down the wells.

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1 hour ago, DurhamBorn said:

 

When i was importing you had a 3 month lead roughly.You ordered after your stock had been here about 6 weeks,by the time the next arrived about 14 weeks later youd ber just about out.

I can tell you exactly what the Chinese will be saying to customers,no problem,everything ok,production ongoing etc,then when it doesnt ship they will say next week,then next week,then next week etc etc.Their factories are the biggest liars you will ever meet in life.Thats fine once you know that of course.

They do have a strange need to save face, it will be interesting to see what happens on the inflationary side of things when this supply shock works its way through to the real economy.  This is very much uncharted waters, the only thing guaranteed is its going to end badly.

1 hour ago, Barnsey said:

The missus works for a large parts supplier to EU/US factories, importing a large % from China of course. Lead time went from 5-7 days to 12 weeks! The business has also stopped providing 30 days credit to customers, will keep you posted how things develop for as long as she's employed there.

Thanks for some concrete reliable information that confirms what im hearing from other sources!  A major US furniture manufacturer (100,000 workers) was sourcing all its textiles from china, they were told early June for the next shipment, but i couldn't verify it.

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Ok, on a serious note I'm glad I've sold all my semiconductors on Thursday for a decent profit, still having lots of gold/silver miners and ETFs... have opened a small short on sp500 today (playing with fire=FED, I know!) but the setup was rare and too juicy...

I've sold Sibanye, maybe a bit too early but still, +370% so I won't complain. The position was just too big for me to handle ;)

Gold, Silver, Bitcoin and USD seem to be benefiting from Coronavirus so far, I think we may see $1800 level soon on Gold (12.5% from where we are now) and that's where I'll be selling everything.

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1 hour ago, BearyBear said:

Ok, on a serious note I'm glad I've sold all my semiconductors on Thursday for a decent profit, still having lots of gold/silver miners and ETFs... have opened a small short on sp500 today (playing with fire=FED, I know!) but the setup was rare and too juicy...

I've sold Sibanye, maybe a bit too early but still, +370% so I won't complain. The position was just too big for me to handle ;)

Gold, Silver, Bitcoin and USD seem to be benefiting from Coronavirus so far, I think we may see $1800 level soon on Gold (12.5% from where we are now) and that's where I'll be selling everything.

I had £10k in Sibanye and sold it when up 45% ,yeah i know :CryBaby:,reason was though the way things worked out i had a much bigger stake in HMY and i just had far too much in South Africa,so one had to go early and i decided on Sibanye.Got nearly a double out of HMY and it was a big stake,but still a financial mistake selling Sibanye too early,but for safety reasons still the right move.Maybe should of cut stakes in both instead.Anyway really glad to see others on here did so well out of them.

Wonder if people still have that old dog Eldorado Gold,? i was sitting on a nasty loss on that then a lovely profit in 3 months xD

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32 minutes ago, DurhamBorn said:

I had £10k in Sibanye and sold it when up 45% ,yeah i know :CryBaby:,reason was though the way things worked out i had a much bigger stake in HMY and i just had far too much in South Africa,so one had to go early and i decided on Sibanye.Got nearly a double out of HMY and it was a big stake,but still a financial mistake selling Sibanye too early,but for safety reasons still the right move.Maybe should of cut stakes in both instead.Anyway really glad to see others on here did so well out of them.

Wonder if people still have that old dog Eldorado Gold,? i was sitting on a nasty loss on that then a lovely profit in 3 months xD

Sibanye was a pure luck, bought them at the bottom @2.24, then it skyrocketed because of Palladium which was unexpected (I bought them because of Gold, not Palladium)... was also planning to sell everything when the gold price reached $1550 as you did, it was a perfect moment because GBPUSD was at the bottom @1.2. It even produced a nice daily bullish pinbar on the same week Gold reached its high! I was too busy at work that time so I couldn't properly analyse what was happening... so rather than selling my assets when the selloff began, I decided to hold them a bit longer till Gold reaches $1800. Will sell my Silver holdings as well as they're not behaving as I would expect and I don't see Silver going to $25-26 this year as some predict. But hey, who knows?

Yes, I do hold some EGO :) but the worst asset I have is New Gold, -56%, +%5.59 today wow!

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Sold Eldorado at +67%

Sold Harmony at +97%

Sold Sibayne at +83%

Sold Wesdome at +75%

Sold Barrack at +55%

Sold Yamana at +29%

Currently hold mako mining and silvercreast and would buy back into wesdome if there's a drop

 

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5 hours ago, kibuc said:

There's no magic bullet, it's always a risk-reward play and the higher the risk, the stronger the emotions.

Laddering reduces the risk (and, by extension, the emotional load) by reducing your initial exposure, but that goes both ways - your exposure to upside is also reduced, and if your ladders don't get hit you end up underweight or you add at higher price. Conversely, if they get hit and it's not a falling knife, then you're much less unhappy than you'd be otherwise.

Emotions don't have to be a problem in itself. It's when they overrun you and make you make irrational and knee-jerk decisions that they become an issue. It's been shown that people feel uncomfortable with losses much more than they enjoy gains, so if they pile in early and then face a 10, 20, 30% drop they are more likely to cut their losses (therefore buying high and selling low) regardles of the fundamentals, whereas with laddering their losses would be smaller and there'd be a bigger chance they see through the storm.

Thank-you, excellent reply. I think a lot of studies have been done showing how losses (and maybe missed gains) hurt much more than gains give pleasure. My wife just says don’t worry about it, she’s a better investor than me!

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I have a small amount in Sibanye and have just today 'bottom sliced' (is that a thing?) out my initial stake leaving the gains of 333% invested. Now I get to fire the same 'bullet' a  second time but at a different target. What an insane trade this one has been. I do have my share of beginner's bad luck too though... currently 75% down on Mirasol, 25% down on Endeavour and 35% down on SWN. Hold and pray for those...

Maybe I should hang on to some of this Sibanye cash for when some scrote comes along and steals the catalytic converter off my car ?!

Thanks everyone. I'm learning a lot and enjoying the ride so far...

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42 minutes ago, DurhamBorn said:

I had £10k in Sibanye and sold it when up 45% ,yeah i know :CryBaby:,reason was though the way things worked out i had a much bigger stake in HMY and i just had far too much in South Africa,so one had to go early and i decided on Sibanye.Got nearly a double out of HMY and it was a big stake,but still a financial mistake selling Sibanye too early,but for safety reasons still the right move.Maybe should of cut stakes in both instead.Anyway really glad to see others on here did so well out of them.

Wonder if people still have that old dog Eldorado Gold,? i was sitting on a nasty loss on that then a lovely profit in 3 months xD

Snap! I had a £10k stake in Sibanye and a slightly smaller one in Harmony and also felt that I was over-exposed to South Africa (especially having visited the country a few times in recent years and appreciating what a cluster-fuck tinder-box it is), so sold out of SBGL at 55% up at $4.00...Still in HMY at a double, others doing well, especially my personal favouite, TGZ.

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3 hours ago, janch said:

I too haven't enough for laddering but can see the advantages.  With regard to winners and losers I have a few (CNA/CARD/RG) which are showing considerable losses but I'm ignoring them and will hang on for the turnaround.  It's only luck but I have two which I took a punt on which are running (SLP/AAU) so I'm keeping them to see how far they go.  I only put a very small amount on each so of course I wish I'd put more but there you go.............win some; lose some.  You learn to be philosophical. 

I've definitely made some mistakes eg I sold Sibanye and then it carried on going up plus I sold SSE and NG which should be in my "hold" group for the divis and of course they've both gone up a lot since I sold them.  I'm hoping I've learnt to stop trading and just hang on to the ones I want for the long term.  It's definitely a learning process and fun.  I'd hate it as a job though and responsible for other peoples' money.

Great post, thank-you. I am aiming on being more philosophical. I too have sold things early that I should have kept. Also bought a bit of Tesco in 2011 instead of NG that I was thinking about and have hung on suffering my opportunity cost ever since!:CryBaby:  Emotions are dangerous in this game! Great job on SLP!

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14 minutes ago, onlyme said:

Not my figures, but these are apparently the Tomtom figures for other major cities for which there is data.

image.png.9460b8b6d4fbc6184f976ab44bf7daeb.png

Beijing isnt massively important, its not a major exporter like Guangzhou/Shanghai/Shenzhen.  The figures for those are important and well down.

One of the biggest problems is the migrant population is still at home in the countryside, until they get them back to work in the city they wont be anywhere near capacity.  Only problem with that is that mass population movements are guaranteed to spread the virus, so its a rock and hard place for the CCP.

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3 hours ago, DurhamBorn said:

t wouldnt surprise me if at some point the tighten up pension freedoms so you have to have x amount of income before you can access.

 

Well lets hope they dont do it in 7 years time until I can get hold of mine.

Council tax is my big bug bear that I consider is going to be a huge head ache for Government and Local councils as the rate of % increase year on year at present is way above inflation. Projecting into the future in say 10 years time at the current rate of increase I could be looking at nearly 4k, excluding inflation. Thats a lot of money to find. They had better put up the taxable allowance to accommodate

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4 hours ago, Panda said:

A guy I know down my local. Retired last year. Funnily enough he makes trips to Blackpool every month.

£150k house paid for. A few grand in the bank. Gets full state pension, pays no council tax.

Rumours are he built up a pot of Gold Sovereigns over the years. Circa £100k worth. Like he tells everyone, he's worth nothing on paper, bar a few grand on deposits.

He's out most nights.

Doesn’t the gold cash get paid into a bank account, though? Also, do you only get your council tax paid if you are single?

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