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


spunko

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2 minutes ago, Simon said:

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?

When my parents were alive they didnt have a pot to **** in, and got their full state pension and council tax paid for. Whilst not much they were both able to get by. Coming from a big family every time one us visited home we would all drop our mother a few bob, so in affect her children were her pension. I guess strength in numbers and it pays to breed. It got to a point that my mother and father went on more holidays than Judith Chalmers

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2 hours ago, BearyBear said:

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? 

Much more than gold price, I'll be watching DXY and gold/silver ratio as primary indicators of when to exit. So far both are in stratosphere, so there should be plenty of road left. 

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1 hour ago, Agent ZigZag said:

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

Yep and the police precept is the same,almost all the increase goes to pay pensions.We could end up just funding the pensions.Council tax is a huge issue because you get no tax free allowance.The amounts are just crazy now.Most damage was done by Labour ramping it up.The worst bit is now they can add on the social care bit extra to back to 4% increases every year.Massive reform is needed,including in business rates.Council pensions will have to change,and the police,but nobody wants to tackle it.

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1 hour ago, Simon said:

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?

Keep under £3k and doesnt matter.Just have a metal detector in the cupboard,amazing what you find detecting Redcar beach.

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Bobthebuilder
41 minutes ago, DurhamBorn said:

Yep and the police precept is the same,almost all the increase goes to pay pensions.We could end up just funding the pensions.Council tax is a huge issue because you get no tax free allowance.The amounts are just crazy now.Most damage was done by Labour ramping it up.The worst bit is now they can add on the social care bit extra to back to 4% increases every year.Massive reform is needed,including in business rates.Council pensions will have to change,and the police,but nobody wants to tackle it.

Shocking, My council tax bill is about the same as i spend on food a month, to pay for their pensions? crikey. Meanwhile my wife cant get a MRI scan, earns to much money so low down on the list.

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55 minutes ago, DurhamBorn said:

Keep under £3k and doesnt matter.Just have a metal detector in the cupboard,amazing what you find detecting Redcar beach.

In the past I have tended to keep it under 5k. The branch I bank with Natwest told me this as they have to do paper work above this sum. So £4995

In 2012 when I bought my last house I transferred a significant 5 figure sum I held with Goldmoney. No questions were asked as I understand that Goldmoney account is with RBS and it was a straight transfer over to their sister branch at Natwest 

 

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26 minutes ago, Bobthebuilder said:

Shocking, My council tax bill is about the same as i spend on food a month, to pay for their pensions? crikey. Meanwhile my wife cant get a MRI scan, earns to much money so low down on the list.

The whole public sector pension scene is disgusting. I have so many examples and have mentioned some before. An ex teacher living near my parents, early retirement early 50s. Constant holidays. Funds school in Africa. Bought them a tractor recently. People in civil service getting redundancy plus early retirement then their wife getting them job in local government. Never paid any real tax. Pensions being paid for by schmucks in private sector who will retire with nothing. I hate paying council tax and pay as little other taxes as possible.

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50 minutes ago, Simon said:

The whole public sector pension scene is disgusting. I have so many examples and have mentioned some before. An ex teacher living near my parents, early retirement early 50s. Constant holidays. Funds school in Africa. Bought them a tractor recently. People in civil service getting redundancy plus early retirement then their wife getting them job in local government. Never paid any real tax. Pensions being paid for by schmucks in private sector who will retire with nothing. I hate paying council tax and pay as little other taxes as possible.

Me too.One of the reasons i invested,saved and learned the game was because i hate hard working people funding all the scroungers in society at the bottom,middle and top.I even buy everything 2nd hand now (Facebook marketplace is fantastic) to avoid most VAT.My car fuel bill is £10 a week so keep that tax down.Its only really council tax,but there is no way out of that one really.Iv friends who rent flats above shops etc that dont exist so pay no council tax,but thats about it.

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22 hours ago, Cattle Prod said:

😅 there is no extinction rebellion where I go! Honestly, I'd like to have a conversation about it, oil people are scientists and engineers at the end of the day and want to solve problems. We invited them into hq a few months ago. "Just shut your entire business, now" "Shareholders be pissed..." ..."Now". Where do you go with that? Dogma, not rational. 

Mood in the industry is a steadily increasing, but cautious positivity (except Tullow, 40% layoffs I heard. Not unusual, but dont over egg your production because that is how you are valued). My exploration department is hiring, after laying off 3 years ago. For exploration, you invest for 5+ years down the road. I suspect we are not the only ones seeing the potential of the next cycle. 

The big change is in green energy. BPs new strategy most obviously, but even my small company is looking seriously at carbon neutral. Possibly CCS (I'm pushing for this, its our skillset). We will adapt and be part of the solution.

Red on screens - coronavirus aside, its a seasonal time of year for red. Almost over. That said I didn't like the numbers out of Japan yesterday. I could easily see another dip to ~45 like @DurhamBorn suggests. But I really think it'll be a short, less than 1 month price discovery excursion. And most of us are hedged, so no panic. Yet!

Ontop of all that the supply problems in the US are becoming apparent as I predicted 9 months ago. This is why OPEC is stalling. The US is on the verge of reporting a negative growth number. I can't predict what'll happen when it comes out, but many of us are dying to see. I suspect there will be many complacent traders re-looking at the cost of a marginal barrel.

Edit: supply shortage  would have been apparent Q2, but coronavirus will probably push it out, I guess Q4. But I wouldnt try and time it. What is more important is sentiment and perception of supply. There is a ~$25 difference in price between now, in terms of inventory, and the very same inventory level but when the market thought added supply was hard to come by around 2015. When the current perception of supply changes, it'll get bid, big time. If there is liquidity to do so...

Edit edit: I work in exploration and we are the optimists of the industry. Talk to one of the miserable gits in development or production, they might tell you a different story. Dyodd, as ever

Thanks for your insights CP.There was a post a few pages back talking about how little the price of oil changed during periods of tiem when the shares of the big oilies were quite volatile.

DB $43 call whilst nbot yet right ,got the right direction of travel against the majority of oil bulls running into Christmas.

This market has got the feel of downward momentum.I was going to purcahse RDSB/XOM/EQNR/BP fir last but held off and am glad I have .Liike you,I'm not sure how long this window will stay open for but the bargains look compelling.We've already got the best part of a 15% portfolio position in big oil and I think we'll add some more tmrw as I'm off.EQNR/XOM looking cheap but may get cheaper yet.

Inteeresting to see how your' timeline for shortage has moved but makes sense with the current problems in China.

I'm always wary of expecting a deep kahuna wave in a US election year.I think 2021 is now becoming a more likely big drop year as per Steve Kaplan's theory and my won read on things.

12 hours ago, spygirl said:

I am not a banker.

neither do I have any inside or sector knowledge  on BTL.

However ....

Until very recently, AFAICT, neither did the banks or BoE.

And I do read bank news and have a reasonable idea of house sales in a number of nrothern towns and have access to the LR data via houseprices.io.

Putting aside the technicalities and the banking terms,  the more they look at BTL, the worse its gets.

~75% of IO BTL is owned by ~25% of LL.

~75% of IO BTL is Northern, in areas where there have been no nominal increases. Indeed, looking at some the price increases, most IO BTL is looking at 50% losses. In the places I monitor there are *NO* buyers for IO BTL housing stock, at least not anywhere near what the LL paid in 2002-2015ish.

Most Northern IO BTL are looking at 30/40k hit on selling. Now bear in mind IO BTL only put in ~10k and they typically own 3-10, theres a huge hit that will require the LL own house to sold, pension to be took and he bank to take a massive hit too. Cluster fuck. Remember, IO BTL is commercial lending - the banks can go after everything inc pension.

In so-em towns, IO BTL have been *the* market since ~2002ish. Even in the South, I reckon towns like Reading have seen the private rented sector housing stock increased from about ~5% when I lived there 25+ years ago, to 50%. And in Readings case most fo the occupants are low paid andor foreign.  Thats a massive amount of hot money which will evaporate with migrant/benefit changes andor a slowdown.

The BoE have barely progressed IO BTL - its been left to explode/market to sort out.

Its took the regulators ~10 years o sort out IO OO lending. And even then all theyve only managed is to clear 50% of the loans - either moving he younger and more solvent to repayment and moving the olderand better pensioned off to RIOs.

The remaining 50% are either earn too little andor have too small/no pension.

I think any sort of depopulation of the UK for what ever reason could have a huge impact.That Asset Service paper really does dig the data wel on private LL's and certainly concurs with my own expereince of mainly middle aged/retirees levering up,As I've said several times,I'm not sure how many realise their own home is at risk.

BTL unwind when it happens could gather a pace of it's own due to the relatively small sectors of slcoirty in there that are actually exposed/levereaged in equal measure.

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10 hours ago, Majorpain said:

The world is going completely mad, China produces 85% of the worlds Tungsten (critical for tooling), its an opaque market at the best of times and rumours are circling about a shortage.

End of this month is going to be interesting when people run out of Chinese new year stocks.

Mentioned in the corona thread that engineering factory in Leicester has oput workers on short time 32 hrs.Supply issues.

This virus thing has legs.

8 hours ago, kibuc said:

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?

Leverage to silver portfolio,constructed the following of things with coma scale scores voer 16 to give us leverage to the underlying.Lots of risk but potentialy lots of reward too.Have you followed the ramp up today K? Intereating to see who's out performing.Some of the ugly cousins like Hecla.

Gold at $1600 is a key staging post on the way to $2000 imho.And this ia all with the dollar being strong.Heaven forbid Powell delivers on his QE promises as per below.

image.png.5e0a0b8e300b9fc1040829b7127fada8.png

On 16/02/2020 at 21:21, UnconventionalWisdom said:

They are prepping the world for mad money printing.

Link to article here

On the heels of reports that U.S. household debt hit $14 trillion for the first time in history, Federal Reserve Chair Jerome Powell told lawmakers Wednesday that the central bank would use quantitative easing as the primary weapon to combat the next recession. 

With interest rates hovering around 1.50% and 1.74%, quantitative easing—injecting more cash into the economy through buying back government bonds—is the best solution available, said Powell. 

"We will have less room to cut [rates,]" Powell told the Senate Banking Committee. "That means it is much more likely that we will have to turn to the tools that we used in the financial crisis when we hit the lower bound."

 

8 hours 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.

I've had to readjsut my timeline now ref the oilies to inlcude some considerable disruption fromthe Corona virus.Thought I was getting a good deal on XOM at n$60..............could get cheaper yet.

 

image.png

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3 hours ago, kibuc said:

Much more than gold price, I'll be watching DXY and gold/silver ratio as primary indicators of when to exit. So far both are in stratosphere, so there should be plenty of road left. 

My t.houghts exactly.I was saying to another poster the other day that I anticipate the main use of the G/S ratio to be in terms of selling

This gold bull is jsut beginning imho and whislt I've done some deckchair arranging thus far eg getting rid of Hecla and Coeur before they rallied sharply:ph34r:, I also got rid of EGO at teh same time.Streamlining they call i think.

If we get the QE I think we will then some of the weaker dollar trades will significantly outperform.

Thinking about adding some Newcrest and BVN tmrw.

6 hours ago, DoINeedOne said:

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

 

Nice work.

I've been surprised of late how much the big boys have gone up.

5 hours ago, Agent ZigZag said:

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

They need to radically restructure the councils.Leicestershire has circa 8 dsitrict councile plus the city.That's at least 9 CEO's on eye watering sums

I'm amazed theyve last this long tbh

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One half of me just wishes the market would correct itself so we can all get on with it. But life it not like that all neatly packaged up. But I must be careful what I wish for as I think any significant correction is going to be brutal. Very nervous about it all I must confess  

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https://moneymaven.io/mishtalk/economics/largest-shipping-decline-since-2009-and-that-s-before-coronavirus-f6OOIXYGjE6it2boCW-3Tw

 

The January Cass Freight Shipping Index is more bad news for the global economy.

The Cass Freight Shipping Index is down 9.4% year-over-year, the largest decline since 2009. And this is for January, before the Coronavirus disruption.

Massive Shipping Disruptions Coming Up

The most important aspect of this report is that coronavirus implications are not yet reflected in the charts.

Note that Half the Population of China, 760 Million, Now Locked Down

Supply chain disruptions have barely started.

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6 hours ago, sancho panza said:

Thanks for your insights CP.There was a post a few pages back talking about how little the price of oil changed during periods of tiem when the shares of the big oilies were quite volatile.

DB $43 call whilst nbot yet right ,got the right direction of travel against the majority of oil bulls running into Christmas.

This market has got the feel of downward momentum.I was going to purcahse RDSB/XOM/EQNR/BP fir last but held off and am glad I have .Liike you,I'm not sure how long this window will stay open for but the bargains look compelling.We've already got the best part of a 15% portfolio position in big oil and I think we'll add some more tmrw as I'm off.EQNR/XOM looking cheap but may get cheaper yet.

Inteeresting to see how your' timeline for shortage has moved but makes sense with the current problems in China.

I'm always wary of expecting a deep kahuna wave in a US election year.I think 2021 is now becoming a more likely big drop year as per Steve Kaplan's theory and my won read on things.

I think any sort of depopulation of the UK for what ever reason could have a huge impact.That Asset Service paper really does dig the data wel on private LL's and certainly concurs with my own expereince of mainly middle aged/retirees levering up,As I've said several times,I'm not sure how many realise their own home is at risk.

BTL unwind when it happens could gather a pace of it's own due to the relatively small sectors of slcoirty in there that are actually exposed/levereaged in equal measure.

Every - and I mean every  BTL Ive spoken to about risk - does the 'hand the keys back to the bank' reply.

They seem to think yjr UK has non recourse mortgage lending, just liek the US.

At very long last, UK banks have regulation in place to stop banks ofering mortgages the customer is unlkikely to pay back. Theres loads of checks and whatnot, to ensure the mortgagee has the income stream to pay the motgage of.

Unless its commercial mortgage, where the regulation assume the the mortgagee has done their own research. No protection, no come back. Thats why BTL has boomed so much as OO mortgage has fallen - its unregulated.

as part of the playing with thebig boys, a BTL mortgage can be asked to be paid back, for whatever reason ,within a1 month. And if the balance is not paid off then the bank can go after every thing, inc pensions - a simple charge o nthe person til they are 55 when a pension cn been withdrawn.

Mr nM rs NotGettingMuchibnTheBabnkLetsButaRental tend to be not that leveraged, so they dont really get the IO BTL leverage to the moon returns - about ~4%  Assuming theyve got less than 60% LTV  or less leverage and 1 or 2 houses, will escape their BTL investment with a hefty but not house threatening loss.

 

 

 

 

 

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9 hours ago, Simon said:

Funds school in Africa. Bought them a tractor recently. People in civil service getting redundancy plus early retirement then their wife getting them job in local government. Never paid any real tax. Pensions being paid for by schmucks in private sector who will retire with nothing. I hate paying council tax and pay as little other taxes as possible

But is this any worse than the government foreign aid policy giving money to India who then spend their money sending a rocket to the moon?!...at least the teacher has a choice in his donation, and the tractor will increase local food production.

As for your last point, I have made this a personal goal/passion, even more so than maximizing my retirement funds...to ensure they get as little of my money/taxes to waste.

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Bricks & Mortar

Them that enjoyed Harleys "introduction to charts", (that includes me), might want to check out this new Youtube channel.
I guess she's a bit 'marmite', so maybe not for everyone.  The first video is just 'welcome to my new youtube channel'.  The second is how she's traded and used charts on gold & silver over the last year.
I was thinking I could learn something, and do prefer to get on at the start of a youtube channel.
 

 

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14 minutes ago, BearyBear said:

..and yesterday it closed above $1600 which is the highest closing since 2011-2013..! Very bullish!

The market is waking up to the consequences of this, there is no quick fix to companies being unable to produce because they are missing parts.  JLR are transporting components from China to UK in suitcases.....

Government splurge is nailed on now, its merely a question of inflation only or deflation then inflation.

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52 minutes ago, Majorpain said:

The market is waking up to the consequences of this, there is no quick fix to companies being unable to produce because they are missing parts.  JLR are transporting components from China to UK in suitcases.....

Government splurge is nailed on now, its merely a question of inflation only or deflation then inflation.

I think deflation then inflation still very much in play, Sweden just posted its sharpest drop in CPI for over 40 years, and seen as the leading indicator for rest of Europe. Whilst supply chain issues will possibly arise and have an inflationary effect, this will be more than offset by plummeting demand for goods both within China and globally for the near future in this downturn. However once things get back on track...

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1 hour ago, Bricks & Mortar said:

Them that enjoyed Harleys "introduction to charts", (that includes me),......

I had no idea.  Assumed I was a bore. 

I could do more.....?

BTW, I'm prettier!

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56 minutes ago, Majorpain said:

The market is waking up to the consequences of this, there is no quick fix to companies being unable to produce because they are missing parts.  JLR are transporting components from China to UK in suitcases.....

Government splurge is nailed on now, its merely a question of inflation only or deflation then inflation.

Exactly thats the only question the next cycle is a reflation.Lots will flow back to the west from the east,all this China is the new US is just rubbish.

@Cattle Prod on oil id expect a 3 month lag on price from this virus in purely macro terms stand alone so it should be affecting price very soon (so far sentiment only),but i still see the liquidity as the main driver.That is still pointing to a $43 price.However the falls have slowed and are moving towards my down line road map,so the falls could stop soon.I usually use my road maps for positioning,not as direct buy signals.So the oil road map saying down from $60 to $43 was for positioning ie putting ladders in place for the sector along that line.For instance iv been picking up the sector,but only about half of what id like to deploy and there is room for expansion in that amount.Even at $43 i would still hold back some capital,simply in case that big spike down happens.That however relies on a lot of "if"s.

The main thought really is this.Lower oil prices will hold up the main economy for a little longer.$43 is only $7 away,$250+ is the next cycle target.What i can say is i wont be selling any oil connected stocks until oil is at least $180,none.The only people with capital to grow a green business in the next cycle will be the very oil companies everyone hates right now.Want to invest in future energy?,buy big oil.

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12 minutes ago, Barnsey said:

I think deflation then inflation still very much in play, Sweden just posted its sharpest drop in CPI for over 40 years, and seen as the leading indicator for rest of Europe. Whilst supply chain issues will possibly arise and have an inflationary effect, this will be more than offset by plummeting demand for goods both within China and globally for the near future in this downturn. However once things get back on track...

Have you broke into my house and read my things :o .Sweden is key as you say,not many people know that or use their numbers.Their supply chains are lead indicators for Germany and most of Europe due to the nature of the products.

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On the BTL front the immigration news today on the new system has in the small print "no access to means tested benefits until settled status",settled status is after 5 years.So no tax credits,no Universal Credit,no Housing Benefit.That will hammer BTL over the mid term.

Im not 100% but i think that means they cant claim for children,unless maybe if the child is born here.Have to dig deeper into that,but its a massive change.

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25 minutes ago, TheNickos said:

Anyone using iweb ? tempted to try it as it is the cheapest in fee terms but a little bit no frills compared to something like ii.

I have my wife's ISA on iWeb. For basic FTSE shares - no problems at all. Minimizing transaction costs is a fantastic way to get the best growth.

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