Jump to content
DOSBODS
  • Welcome to DOSBODS

     

    DOSBODS is free of any advertising.

    Ads are annoying, and - increasingly - advertising companies limit free speech online. DOSBODS Forums are completely free to use. Please create a free account to be able to access all the features of the DOSBODS community. It only takes 20 seconds!

     

IGNORED

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


spunko

Recommended Posts

  • Replies 35.1k
  • Created
  • Last Reply
16 hours ago, DurhamBorn said:

I would think the President can do that yes.What he didnt say,but what he meant was that he didnt intend to let the US oil industry go down the pan and them lose their energy independence.He knows the Russians and the Saudi's are trying to kill US shale.Amazing what you can do when you have the reserve currency.This is the sort of thing thats going to happen more and more in the next cycle.Governments injecting into the economy.Trump isnt stupid,he knows he is getting oil cheap for later,but it serves much more than that.

I think having issued National Emergency he can do pretty much what he wants!

Link to comment
Share on other sites

59 minutes ago, Errol said:

Many dealers now reporting near record demand for physical gold and silver. They can't keep up with it!

Music to my ears, that is !

Link to comment
Share on other sites

18 hours ago, DurhamBorn said:

Trump said in his talk that they were going to buy up the oil while its cheap and fill up the strategic reserve.There you go,direct QE straight into the economy

https://www.cnbc.com/2020/03/13/oil-rebounds-5percent-as-trump-says-us-will-purchase-oil-for-strategic-reserve.html

So government is buying crude, Fed is buying treasuries across the curve, government issues more treasuries to buy more crude.

DB, excuse this long/rambling? question but the type of spending example above is illuminating I think. Can you envision most of that $20trn US money printing (if massive QE happens as expected) going into other similar policies like this one? For example, to generate the needed inflation, I'm thinking government spending will be directed into industrial 'support schemes'. The strategy would be to encourage existing (US or UK) businesses to do more at home, and create more domestic jobs. Existing businesses will be limited in terms of borrowing, so government will provide the 'props' necessary to make them thrive. Maybe the UK economy will look like a Jeremy Corbyn one, and the US like a Bernie Saunders one - the tragedy for those guys is that their pc crap made them unelectable - but as you always say its not about the individuals/politicians, so the politics is pretty irrelevant.     

For a while I have been trying to understand where/how government 'inflation creating' spending will be spent. Infrastructure takes too long to build, so their is a natural barrier/bottleneck to spending. Apart from new housing/hospitals and ports (to replace air freight) I cannot see where it will be practically spent by government in a short time frame. However, thousands of small and big businesses each expanding their business in a sustained way as opposed to inefficient central government is a win-win.

I think I have asked you a similar question before, but wanted to expand upon my thoughts after reading about Trump hovering up all that oil - although I suppose this is a long way round of asking whether we should be expecting a new kind of 'Roosevelt New Deal'? Or would this policy not make sense for what's required and just provide more support for the types of zombie companies that we need to get rid of under a full-on bust/debt deflation?  

Of course you might reply that the government will do both/all of these things, but where the government puts most of its effort is important consideration. Especially for us in terms of where to investment. So perhaps this is an illustrator of sticking to the sources and 'de-complex' trades. Must admit I'm finding it difficult to decipher the infrastructure investment opportunities. For example to me Boris looks very comfortable with the Singapore-on-Thames idea and massive deregulation, might this mean we get big inflation without the massive spending, infrastructure or otherwise?  

Link to comment
Share on other sites

16 minutes ago, JMD said:

DB, excuse this long/rambling? question but the type of spending example above is illuminating I think. Can you envision most of that $20trn US money printing (if massive QE happens as expected) going into other similar policies like this one? For example, to generate the needed inflation, I'm thinking government spending will be directed into industrial 'support schemes'. The strategy would be to encourage existing (US or UK) businesses to do more at home, and create more domestic jobs. Existing businesses will be limited in terms of borrowing, so government will provide the 'props' necessary to make them thrive. Maybe the UK economy will look like a Jeremy Corbyn one, and the US like a Bernie Saunders one - the tragedy for those guys is that their pc crap made them unelectable - but as you always say its not about the individuals/politicians, so the politics is pretty irrelevant.     

For a while I have been trying to understand where/how government 'inflation creating' spending will be spent. Infrastructure takes too long to build, so their is a natural barrier/bottleneck to spending. Apart from new housing/hospitals and ports (to replace air freight) I cannot see where it will be practically spent by government in a short time frame. However, thousands of small and big businesses each expanding their business in a sustained way as opposed to inefficient central government is a win-win.

I think I have asked you a similar question before, but wanted to expand upon my thoughts after reading about Trump hovering up all that oil - although I suppose this is a long way round of asking whether we should be expecting a new kind of 'Roosevelt New Deal'? Or would this policy not make sense for what's required and just provide more support for the types of zombie companies that we need to get rid of under a full-on bust/debt deflation?  

Of course you might reply that the government will do both/all of these things, but where the government puts most of its effort is important consideration. Especially for us in terms of where to investment. So perhaps this is an illustrator of sticking to the sources and 'de-complex' trades. Must admit I'm finding it difficult to decipher the infrastructure investment opportunities. For example to me Boris looks very comfortable with the Singapore-on-Thames idea and massive deregulation, might this mean we get big inflation without the massive spending, infrastructure or otherwise?  

First government will ramp up everything it already does and the CBs will monetize every singlepenny/cent.So that new school roof funded.My dad is still a councillor and councils have been told to get their old work boards up and running again.Those are what built all the houses in the 60s/70s.Government is about to allow and fund massive social house building,probably taking over from the private sector.Buy Ibstocks,not house builders etc.I think a new deal type policy is certain.The backbone of the economy is hollowed out and needs re-building.Like you say i also expect supply chains to come back,not all,but a lot.

The main inflation though will simply come from CBs having to monetize the debt already out there.Id expect to see the 30 year long bond yield start to increase,maybe even from next week.

Link to comment
Share on other sites

21 hours ago, Solzhenitsyn said:

Personally I’m waiting until COV19 really starts biting in the U.K. and USA, so likely a couple weeks yet.

I'm prepping for a series of collateral damages knocking back the markets in between bullish moments.  That's on the basis that the pandemic itself may have been discounted but not the rest stemming from it and also from prior underlying tensions which CV may accelerate.  So for example, a European banking crisis.  I hope that in all this noise our old faithfulls will tick along gradually picking up value.

Link to comment
Share on other sites

On 13/03/2020 at 17:28, DurhamBorn said:

Nothing has changed as you say,its exactly as we planned for.Il be fully invested if we see more falls and i fully expect i now have some stocks that will 10 bag in my portfolio,and some that might not make it.I can honestly say the big energy companies iv been buying the last few days i will not sell until at least 2026 and maybe even 2028.Im not interested in the narrative "everyone is going to die",they arent.I worked at GSK for 10 years, they are trying to help find something for this,but its not a huge priority apart from the good publicity.Its biggest affect will be bringing a few deaths forward maybe a year on average.Not nice for families, but its what humans have had to deal with since walking out of the Great Rift Valley.

There is no doubt the reaction to this virus though is causing very large financial dislocation, again what we predicted would happen at the start of the thread.I pity the airlines and travel industry.Its also hitting stocks im buying in the transport sector.No football etc really hits travel,but again what im buying now will be kept until after 2026.Not certain every one will make it of course.If one doesnt tough.it wont hurt as much as my first love dumping me on the railway bridge when i was 16.

The real story will be whats to come,and thats inflation.It will do more damage than these fall.Equity values cut in half or more mostly and then inflation gutting bond portfolio's. When that happens is going to get costly to borrow.

Once im full allocated im going to leave this thread mostly. Iv got a lot of things in life to enjoy and get on with and it will then really just be the odd visit.

DB, whilst greatly respecting your road maps and cross trend macro analysis work, I think you have entered into pure 'speculation' in citing that 'Great Rift Valley', how dare you pump and dump such a theory concerning my ancestors and there supposed whereabout some 80,000 years ago!!!

I echo Harley's 'bugger, even bigger bugger' at news of your departure - But in all seriousness do have a great time away from the incessant? questioning of this blog, very grateful to you.

Link to comment
Share on other sites

2 minutes ago, JMD said:

DB, whilst greatly respecting your road maps and cross trend macro analysis work, I think you have entered into pure 'speculation' in citing that 'Great Rift Valley', how dare you pump and dump such a theory concerning my ancestors and there supposed whereabout some 80,000 years ago!!!

But in all seriousness do have a great time away from the incessant questioning of this blog, very grateful to you.

Well quite,my dad thinks aliens dropped us off.He also said 30k people a day die of cancer in the world,but the whole world doesnt stop.He said there were no cheap shares so "they" are stoking things up so they can buy up inflation assets at insane low prices before they turn the printers on.Getting retail to go into cash just before they inflate it away .B|

Link to comment
Share on other sites

1 hour ago, Errol said:

Many dealers now reporting near record demand for physical gold and silver. They can't keep up with it!

This is not necessarily good for PMs, assuming they are telling us the truth and not trying to trick us into buying. I still remember the 2011 peak on Gold and back then crowds have also rushed to buy physical at around $1900. See yourself what happened next. What is also important for me is that the current price is still the highest since 2013, and some of my friends who have never invested into anything have recently asked me if this is the time to buy gold. I'd say no. Not to mention that during the 2008 market crash gold also went down with the stock market.

As with Silver, the situation is even worse, see the chart attached.

Silver is trapped into a multi year triangle with probability of breaking to the downside. Yesterday, the price was just 15 cents away from 2019 low of $14.29,  below that level we have $13.89 2018 low, and 10 years low at $13.64. Now a few words about orderflow... below these levels there are clusters of pending sell orders, and they are stop orders (sell stop or stop loss) which means once the price is hit, they are executed at the next bid! Where are bids below $14.29..? Well, they may be a few above the other two lows, $13.89 and $13.64, but I don't think they are big enough to stop the cascade of sell orders. Once we break the $13.64 level there are no bids, just empty space! The next meaningful level is at around $9.oo and we may get there very quickly...

As always, this is just my opinion... and I may be totally wrong, I accept that. I'll try to sell once we get closer to $14.29 on Silver with a tight stop, the risk/reward ratio is potentially astronomical.

I've marked SL clusters in red.

image.thumb.png.dbfdc8b5c2c64bdf4b3bd27ae3e6dab8.png

Link to comment
Share on other sites

5 hours ago, janch said:

Is this because of the currency fluctuations?  I just had a look and DXY is around 98 and $/£ around 1.22 so it's changed quite a lot in just one day.  I never used to look at that but since reading this thread I've learnt it's quite important!

When the Fed prints like mad and the dollar goes down perhaps my portfolio won't look quite a s sick!

You had me worried because I had problems with my charting software template and the colours seemed mixed up.  Still do.

Link to comment
Share on other sites

On 13/03/2020 at 17:28, DurhamBorn said:

Nothing has changed as you say,its exactly as we planned for.Il be fully invested if we see more falls and i fully expect i now have some stocks that will 10 bag in my portfolio,and some that might not make it.I can honestly say the big energy companies iv been buying the last few days i will not sell until at least 2026 and maybe even 2028.Im not interested in the narrative "everyone is going to die",they arent.I worked at GSK for 10 years,they are trying to help find something for this,but its not a huge priority apart from the good publicity.Its biggest affect will be bringing a few deaths forward maybe a year on average.Not nice for families,but its what humans have had to deal with since walking out of the Great Rift Valley.

There is no doubt the reaction to this virus though is causing very large financial dislocation,again what we predicted would happen at the start of the thread.I pity the airlines and travel industry.Its also hitting stocks im buying in the transport sector.No football etc really hits travel,but again what im buying now will be kept until after 2026.Not certain every one will make it of course.If one doesnt tough.it wont hurt as much as my first love dumping me on the railway bridge when i was 16.

The real story will be whats to come,and thats inflation.It will do more damage than these fall.Equity values cut in half or more mostly and then inflation gutting bond portfolio's.

When that happens is going to get costly to borrow.

Once im full allocated im going to leave this thread mostly.Iv got a lot of things in life to enjoy and get on with and it will then really just be the odd visit.

 

 

The most precious, limited and valuable thing we all have is time.

You have given up a big chunk of your own personal time and have been generous in sharing your insights.

The days are getting longer out there in the real world, enjoy your time away from the keyboard.

Link to comment
Share on other sites

1 hour ago, DurhamBorn said:

I cannot see where it will be practically spent by government in a short time frame. However, thousands of small and big businesses each expanding their business in a sustained way as opposed to inefficient central government is a win-win

Training?....High tech, medium size companies?....provision for the former is there already (Unis...just reduce number of non-vocational degrees with `sandwich`/day release), the latter (small business units) are already under utilised, and are easy to put up quickly and/or in-house Unis/hospitals etc.

Link to comment
Share on other sites

Noallegiance
3 hours ago, BearyBear said:

This is not necessarily good for PMs, assuming they are telling us the truth and not trying to trick us into buying. I still remember the 2011 peak on Gold and back then crowds have also rushed to buy physical at around $1900. See yourself what happened next. What is also important for me is that the current price is still the highest since 2013, and some of my friends who have never invested into anything have recently asked me if this is the time to buy gold. I'd say no. Not to mention that during the 2008 market crash gold also went down with the stock market.

As with Silver, the situation is even worse, see the chart attached.

Silver is trapped into a multi year triangle with probability of breaking to the downside. Yesterday, the price was just 15 cents away from 2019 low of $14.29,  below that level we have $13.89 2018 low, and 10 years low at $13.64. Now a few words about orderflow... below these levels there are clusters of pending sell orders, and they are stop orders (sell stop or stop loss) which means once the price is hit, they are executed at the next bid! Where are bids below $14.29..? Well, they may be a few above the other two lows, $13.89 and $13.64, but I don't think they are big enough to stop the cascade of sell orders. Once we break the $13.64 level there are no bids, just empty space! The next meaningful level is at around $9.oo and we may get there very quickly...

As always, this is just my opinion... and I may be totally wrong, I accept that. I'll try to sell once we get closer to $14.29 on Silver with a tight stop, the risk/reward ratio is potentially astronomical.

I've marked SL clusters in red.

image.thumb.png.dbfdc8b5c2c64bdf4b3bd27ae3e6dab8.png

Or is just scraping along the bottom of as very long cup. Pennies of variance is little given the potential upside.

Link to comment
Share on other sites

sancho panza
11 hours ago, Boon said:

Thanks. I don't have the monies for the most efficient fees ($40,000 gold, $20,000 silver), is paying 1% effective via the ETF still reasonable or is there a cheaper alternative?

Also, would metals prices respond more to the fiscal stimulation or market sentiment? I feel that panic has yet to set in amongst the US/UK, I don't know whether this would see a reduction or increase in metals prices short-term.

point to note here is that there's a clear disconnect between the miners and the underlying at the moment.When that reasserts they may well rocket.

strange tosee gold getting sold off during this crisis which is the opposite of what you'd expect but there you go.

Link to comment
Share on other sites

sancho panza

 

10 hours ago, Yellow_Reduced_Sticker said:
 
I averaged down and bought K & S AG AND Mosaic on Friday, reading ya post i went to check ...BLOODY Hell that's some GAIN i bought around 3.30pm because i had gardening work to do, didn't even bother to check prices as i never do, WHY? cos I KNOW THEY WILL BE DOWN :Old:after i buy...on this occasion ...blimey i got the intra day LOW!:D
 
BTW, I forgot to buy US STEEL, looking at the chart i think they are cheaper NOW than what they were when Jesse Livermore was trading 'em in the early 1900's xD
 
 
 
DB, Are ya a buyer of US STEEL, also you called GOLD correctly TO HIT around $1700, if i remeber you said way back it could correct to $1000 area, any Thoughts? CHEERS!:D
 
 
 

Must say they have crossed my radar for a small nudge YRS......likek you say probably cheaper than the 30's.Iirc balance sheet could be worse.Weak dollar phase looks likely which would really suit them.

 

Good work on the timing btw,nice to see one of us a get  a win

Link to comment
Share on other sites

sancho panza
6 hours ago, Errol said:

Many dealers now reporting near record demand for physical gold and silver. They can't keep up with it!

Be interesting to see the GLD inventory levels.

Link to comment
Share on other sites

sancho panza
4 hours ago, DurhamBorn said:

Well quite,my dad thinks aliens dropped us off.He also said 30k people a day die of cancer in the world,but the whole world doesnt stop.He said there were no cheap shares so "they" are stoking things up so they can buy up inflation assets at insane low prices before they turn the printers on.Getting retail to go into cash just before they inflate it away .B|

Worth noting that 1000's die every year from seasonal flu.650,000 worldwide.Forget things like RTC's/Sepsis etc.

Mortality rate for this low,was speaking ot someone who works at the local Uni and they've cancelled lectures not because there's any evidence it will work but because they don't want to be the Uni that doesn't and gets one death.

That sort of logic has been the backbone of a lot of govts responses thus far.UK govt showed a little sense but was undermined by businesses and instos front running them.

The cynical part of me looks at the way this crisis has allowed Macron to finally get rid of the gilers jaunes or the Chiense to practice putting a whole city on martial law......etc etc.

Your oint ref the trading is about representative of my experience ie instos looking for retail patsy's.

Link to comment
Share on other sites

6 hours ago, DurhamBorn said:

councils have been told to get their old work boards up and running again.Those are what built all the houses in the 60s/70s.

I grew up in a 70s build ex council House.  Do you expect a return to decent sized houses of quality construction?  (I wondered if your figures would show this to be 'priced in'. If not feel free to take a guess as it will be worth more than mine!)

It would be nice if the private sector could return some value for the buyer's money too, but one step at a time!

Link to comment
Share on other sites

7 hours ago, Loki said:

I grew up in a 70s build ex council House.  Do you expect a return to decent sized houses of quality construction?  (I wondered if your figures would show this to be 'priced in'. If not feel free to take a guess as it will be worth more than mine!)

It would be nice if the private sector could return some value for the buyer's money too, but one step at a time!

They wont be as big,smaller gardens,but yes i expect mass social house building in the next cycle.

Link to comment
Share on other sites

Castlevania

Who’s going to build these houses? Actually who built council houses? Were the builders privately contracted or were they on the council payroll?

Link to comment
Share on other sites

Lightscribe
15 hours ago, BearyBear said:

This is not necessarily good for PMs, assuming they are telling us the truth and not trying to trick us into buying. I still remember the 2011 peak on Gold and back then crowds have also rushed to buy physical at around $1900. See yourself what happened next. What is also important for me is that the current price is still the highest since 2013, and some of my friends who have never invested into anything have recently asked me if this is the time to buy gold. I'd say no. Not to mention that during the 2008 market crash gold also went down with the stock market.

As with Silver, the situation is even worse, see the chart attached.

Silver is trapped into a multi year triangle with probability of breaking to the downside. Yesterday, the price was just 15 cents away from 2019 low of $14.29,  below that level we have $13.89 2018 low, and 10 years low at $13.64. Now a few words about orderflow... below these levels there are clusters of pending sell orders, and they are stop orders (sell stop or stop loss) which means once the price is hit, they are executed at the next bid! Where are bids below $14.29..? Well, they may be a few above the other two lows, $13.89 and $13.64, but I don't think they are big enough to stop the cascade of sell orders. Once we break the $13.64 level there are no bids, just empty space! The next meaningful level is at around $9.oo and we may get there very quickly...

As always, this is just my opinion... and I may be totally wrong, I accept that. I'll try to sell once we get closer to $14.29 on Silver with a tight stop, the risk/reward ratio is potentially astronomical.

I've marked SL clusters in red.

image.thumb.png.dbfdc8b5c2c64bdf4b3bd27ae3e6dab8.png

The same happened in 2008. PMs had an initial rise (when instabilities leading up to 2008) and then had pullback as everything shit the bed (like they are doing now) then over the next couple of years it went peak 2011. I’m buying more physical silver in the current pullback.

552C1A48-0B66-4973-B56A-AD0C38F628C4.png

Link to comment
Share on other sites

Democorruptcy
On 14/03/2020 at 08:57, DurhamBorn said:

Very true,and another reason i use road maps.For instance,on cash,it says that cash i hold will lose around 85%+ of its spending power over the next cycle before interest rate increases.With interest rate increases i expect the loss to be around 50% as rates trail inflation all the way until 2028.

Cash is a superb asset to hold as other assets fall in price against it in a low inflation/deflation period,but it is 100% certain to lose its buying power in the next cycle.The reason is the CBs will first not worry when inflation hits 4%,then feel 5% is the top,at 7% start to chase with rates at 4% and at 10%+ probably get to double digits.Just of course as inflation assets crash and the money has lost most of its buying power.

I dont think the banks as a whole will take the pain this time,i think it will be the bond markets.Its one reason why iv avoided buying any insurance company etc.They will do very well in a rising rate cycle,and are now very cheap,but they could be at huge risk on their capital holdings.

Re holding cash, as I said last week, I tried to get the Treasury to up the ISA limit. It makes sense with savers penalised again by lower rates and the FTSE falling. The chap I phoned seemed to think it was a good idea but told me to email it in as they could only act on something written.

You and others could take 5 mins to give it a go, for extra in a tax shelter? Pick a name!

[email protected]

[email protected]

[email protected]

https://www.gov.uk/government/organisations/hm-treasury

Link to comment
Share on other sites

Archived

This topic is now archived and is closed to further replies.

  • Recently Browsing   0 members

    • No registered users viewing this page.

×
×
  • Create New...