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

[sancho panza]

1 hour ago, Errol said:

why the excessive run up in goldies today?

any ideas welcomed.

[sancho panza]

 @Cattle Prod was looking at Occidental today and wondering if it's time to average down a little.How expsoed are they to shale? dyor natch.

The calls are pricey.

Also looks like I won't be getting my XOM Jan $50's............

[JMD]

8 hours ago, Craig said:

Sadly, advising folk to buy a Ferrari pizza oven has probably been my greatest contribution on here...

I wouldn't know about that and wasn't my point, and know (hope) you didn't take it that way. In fact I read and appreciate all posts here and appreciate that the 'P' theme is a recurring hot and crusty topic here. Unlike the c-word that must of course never be named!

[DurhamBorn]

With all the focus on the US OPEC members also dont have much storage,and of course most dont own down stream assets to at least send oil to.Big oilies can at least send their own oil to their own refineries,or run their wells at the minimum and take the cheapest oil they can get on the market.

 

In an interview with the Premium Times, Nigerian National Petroleum Corp. managing director, Mele Kyari, said the OPEC member state would be forced to cut output due to country's lack of storage capacity "whether with or without OPEC output cut deal".

Kyari reportedly put Nigeria's oil output at near 2.44m b/d.

That compared to 1.853m b/d as per OPEC's March Monthly Oil Market Report.

Nigeria only had storage worth 1.5 days of output, the Premium Times said, citing IHS Markit estimates.
 

[sancho panza]

[whocares]

On 23/04/2020 at 00:00, Loki said:

Reading now and this is brilliant 

But frightening? I am a bit of a pessimist but I look cheery compared to what he can see ahead for us all?! Gulp.

[JMD]

13 hours ago, sancho panza said:

He's very much along with the credit deflationists about the coming Big Kahuna.Page 34 he talks about debt deflationa and a velocity of money crisis.................wow.....calling all the students of behaviorual economics.

 

 

Well worth a read I've pulled a few points out

 

I think he nails it with his 3 phase theory-(saying we're in the panic).Very much echoes some of kaplan's work.Some great points on stock market history from 1929.

1) the panic

2) the hope

3) the insolvency.

A lot of the 120 pages i charts so you can skim read quite a bit.

Having said that,he calls for a possible move SPX to 2000 first two weeks in April-wrong.

Calls for a six month rally from the bottom-I think he's right on (decl-thats roughly what we're postioned for).

 

great quote-

'what's unfolding has elements of all the macro events of my life plus 1929,all rolled into one.'

 

'The everything crisis

Largest equity bubble of all time

Largest wave of retirees of all time

Largest student loan bubble

largest auto loan bubble

Indexation bubble

largest corporate credit bubble

ETF/market structure bubble

Foreign borrowings bubble

Monetary policy bubble

EU banking crisis'.

 

 

 

Edit to add:it's a proper bear fest.Should carry a warning to all baby boomers holding ETF's. @Harley he refers a lot to market structure I struggle to see how ETF's like GDX are a problem structurally.I can see why some high yield/junk bond ETF's with illiquid assets are a problem.Are ETF's like GDX a problem in your opinion?

Edit to add 2:Consumption crisis->corporate debt crisis->govt debt crisis->velocity of money crisis->dollar standard crisis pushes up dollar->foreign dollar debt crisis->dollar breaks after dollar spike->somewhere in thsi the EU loses it's banking system->'finally the entire sh1tshow  of global debt and pension losses-say $50trillion-goes onto govt balance sheets l;eading to a loss of faith in the financial system and money itself'

I feel like a Bull for once.

I note he has quarter of his liquid wealth in each of PM's/cash/bitcoin/equities. I like it when commentators 'show you' their portfolio. Kaplan is probably best for doing this type of thing. So long as people are being truthful, I think it shows their commitment to their own ideas. Personally I find portfolio allocations useful in helping evaluate/develop my own attitudes toward investment risk.                                                                                                                                             However there are many moving parts to investment risk, where for example Raul sees bitcoin as being not just another asset class but instead views it as becoming 'the network' of the digital encryption infrastructure (I believe that's how he stated it). It follows then that Raul would be very bullish about bitcoin. However I would temper that bullishness by highlighting the concern that banks may introduce their own digital currencies, and moreover ones that you can use to pay your taxes with. I suppose I am saying that decisions over risk can be/are so subjective, depending as much on judgement as on personal biases around outcomes that one would favour happening.

[CVG]

5 hours ago, JMD said:

Personally I find portfolio allocations useful in helping evaluate/develop my own attitudes toward investment risk.     

Posted before. Love this guys site:

https://portfoliocharts.com/

[Craig]

8 hours ago, JMD said:

I wouldn't know about that and wasn't my point, and know (hope) you didn't take it that way. In fact I read and appreciate all posts here and appreciate that the 'P' theme is a recurring hot and crusty topic here. Unlike the c-word that must of course never be named!

Not at all, just rueing the fact that I appear to be more adept at making pizzas than investing... 

[BadAlchemy]

On 22/04/2020 at 18:20, Vendetta said:

Anyone have any thoughts on Evraz? 

I believe they have, or had, quite high debt. (I've got a note on my 'stock picker' spreddy that describes them as 'doing a Chesapeake' I could be utterly wrong/too harsh about that of course!) I think they have been discussed previously here so maybe do a This topic search for more info ...

[sancho panza]

19 minutes ago, Cattle Prod said:

I dont know the %, but they bought Anadarko for their shale assets, and overpaid for them. Bad move, I didn't like it, and I don't see how they will get their money back.

Many thanks for that.It's the only realloser I have in the oilies but my smallest allocation.

I need to remember @Castlevania s excellent adivce from a few pages back about when a shares dwon 50% you need to tkae an honest look at why you want more.I'd be buying oxy for the wrong reasons.

I'm anchoring to a loser here.Got to be honest with myself.

[sancho panza]

what bubble?

[Shamone]

6 minutes ago, sancho panza said:

Many thanks for that.It's the only realloser I have in the oilies but my smallest allocation.

I need to remember @Castlevania s excellent adivce from a few pages back about when a shares dwon 50% you need to tkae an honest look at why you want more.I'd be buying oxy for the wrong reasons.

I'm anchoring to a loser here.Got to be honest with myself.

Sound info. Wish I’d known this before my small punt on premier foods!

[Fully Detached]

I appreciate you guys are more into profit making than wealth preservation but hope it's ok to post for some opinions here on my proposed strategy as you sure as hell know a lot more about it than I do.

My current split is approx 60% NS&I index linked savings certs, 15% land, 12% pms, 10% cash and dribs and drabs of crypto and investment funds. I'm happy with that split up until the point unless at some stage we're looking at currency collapse, in which case the index linking on my GBP is not going to be much good to me. So at that point I'll want to rotate all of that into shares.

My current plan is to go all large cap defensives, focussing on the products people will need regardless of how badly the shit hits the fan - food, utilities, pharma and defence. To that end I've identified a number of stocks in each sector (including the unmentionable one), and I'll be researching them over the coming months to identify which have lower debts because I assume that's going to be a major impediment going forwards.

Does that sounds like a reasonable strategy for preservation? I'm a little unsure whether debt would be such an issue in a highly inflationary environment, so maybe I'm barking up the wrong tree there, but I guess buying companies with less debt can't be a bad thing if you're looking at preservation rather than profit. The other thing that's bugging me now is that if I bought shares to ride out massive inflation then presumably there'd be a CGT liabiity on the "profits", so I guess there's an argument for maxxing out share ISA allowances asap and every April in the meantime. On the cash it makes sense to do that because I'm getting bugger all interest on it, but the index linked certs give a decent return because they still use RPI not CPI.

Apologies if this risks derailing the thread here - if so let me know where to post it instead and I'll delete this one.

[nirvana]

@Fully Detached I can't give you any advice on what do to with your wealth except make sure you have a good time before you die! 

BUT I will observe that the £ has already collapsed against the three biggest currencies in the world ie $ € and yen (can't see that symbol on my keyboard) ok swissy is important apparently but I have little time for the 'swiss gnomes' 

ie £ to $ was 2.2 now 1.2

£ to yen was 236 about 20 years ago, now 132 (and if you look at what Wilson did to the £ since 1968 you'll get an even bigger shock....)

£ to € was 1.4 just three years ago before Brexit, now 1.15............actually 1.4 to the £ gives you massive purchasing power on the continent.....

Also look at charts of Gold price in £s to see what has happened there...

Good luck!

 

[Fully Detached]

Thanks @confused - my intention has always been to remain in the UK, and my money will (probably) get spent on a house eventually, so whilst the £ has collapsed agaisnt other currencies already I guess it's less of a problem for me. I know even buying a house I'm competing against foreign money, but I hope that might change in future.

I'm not much of a risk taker, so while my intended purchases are denominated in GBP I've been happy to keep my investments in it.

[nirvana]

AHA I can rename jpegs to png and post piccies, what joy!

 

[JMD]

3 hours ago, CVG said:

Posted before. Love this guys site:

https://portfoliocharts.com/

For sure CVG, I think that site piqued my initial interest in the topic. Its just that portfolio ideas from investors who are actively positioning for the next cycle add so much extra information, especially if the investor explains their decision making.  

[Dogtania]

22 hours ago, Democorruptcy said:

Try to do folk a favour and you get kicked in the balls!

I'm going to have a look for pizza bases (dry) in sainsburys today or tomorrow.  The way the count makes definitely makes sense and probably healthier tastier but I liked the ease of having a ready to go pack with hardly any prep too.  Both beat buying a ready made - so seeing all this pizza chat think I'm going to go for olives spicy sausage meat red onion and whatever else I can find in the cupboard to add to my abomination.   Weird but I'm a partial to cold pizza too (same as cold sausages) so may make extra.

[Loki]

10 hours ago, whocares said:

But frightening? I am a bit of a pessimist but I look cheery compared to what he can see ahead for us all?! Gulp.

Yes, I just meant from both a technical aspect (Satisfying to read it all so well detailed and explained) and seeing some sense written down.  It is worrying.

[JMD]

1 hour ago, confused said:

BUT I will observe that the £ has already collapsed against the three biggest currencies in the world ie $ € and yen 

ie £ to $ was 2.2 now 1.2

£ to yen was 236 about 20 years ago, now 132 (and if you look at what Wilson did to the £ since 1968 you'll get an even bigger shock....)

£ to € was 1.4 just three years ago before Brexit, now 1.15............actually 1.4 to the £ gives you massive purchasing power on the continent....

Confused, I understand the currency risk point you make, and it is an important one to consider. However, (...and this is where I hopefully don't embarrass myself if i've got this wrong) aren't the currency swings you show above actually 'in favour' the UK investor once/if they sold their foreign stocks/assets at the end of the periods you mention - because the investor would effectively be receiving 'more pounds'.

I realise that you had to use historical data to help make your point, and grateful for the examples, but is my thinking correct?

Isn't the big risk going forward one of foreign governments massively devaluing their currencies - looking at you America! Meaning UK investors would receive potentially 'less pounds' after selling their foreign currency denominated stocks?

[reformed nice guy]

9 minutes ago, JMD said:

Isn't the big risk going forward one of foreign governments massively devaluing their currencies - looking at you America! Meaning UK investors would receive potentially 'less pounds' after selling their foreign currency denominated stocks?

Will they not all try to devalue as much as possible to sweeten exports?

[nirvana]

@JMD yes it favours the foreign investor but in effect you've screwed over all the natives cos their buying power has been decimated......doubley so when you've misreported inflation and made things like houses totally unaffordable for the young uns........

add in the fact that the governement have turned a blind eye to all the russian and chinese mafia money buying multi million pound pads in London.....

All governments are now devaluing their currencies, that's where the expression 'race to the bottom' comes from methinks

7 minutes ago, reformed nice guy said:

Will they not all try to devalue as much as possible to sweeten exports?

YES EXACTLY! I believe that was Wilson's excuse in 1968.....it's been getting worse ever since!

EDIT: UK has nowt worth exporting nowadays so not sure how it works currently lol....o hold on, UK PLC (aka 51st state of the USA ) is world leader in 'financial services' aka DEBT!!! And warmongering ie selling guns n ammo 

[JMD]

37 minutes ago, Loki said:

Yes, I just meant from both a technical aspect (Satisfying to read it all so well detailed and explained) and seeing some sense written down.  It is worrying.

Agreed.

Can any one comment on Raul's theory/concern about how/where the boomers will find ready buyers for their over-priced assets? Is he only talking about houses here, or is it a wider thing he's talking about?

I may have misunderstood him, but surely the institutions will always be buyers of assets? Or is he simply describing/underlining the future trend of low growth for most assets? (...i.e. not the type of 'reflation assets' we are focused on here of course!)

[DurhamBorn]

2 hours ago, Fully Detached said:

I appreciate you guys are more into profit making than wealth preservation but hope it's ok to post for some opinions here on my proposed strategy as you sure as hell know a lot more about it than I do.

My current split is approx 60% NS&I index linked savings certs, 15% land, 12% pms, 10% cash and dribs and drabs of crypto and investment funds. I'm happy with that split up until the point unless at some stage we're looking at currency collapse, in which case the index linking on my GBP is not going to be much good to me. So at that point I'll want to rotate all of that into shares.

My current plan is to go all large cap defensives, focussing on the products people will need regardless of how badly the shit hits the fan - food, utilities, pharma and defence. To that end I've identified a number of stocks in each sector (including the unmentionable one), and I'll be researching them over the coming months to identify which have lower debts because I assume that's going to be a major impediment going forwards.

Does that sounds like a reasonable strategy for preservation? I'm a little unsure whether debt would be such an issue in a highly inflationary environment, so maybe I'm barking up the wrong tree there, but I guess buying companies with less debt can't be a bad thing if you're looking at preservation rather than profit. The other thing that's bugging me now is that if I bought shares to ride out massive inflation then presumably there'd be a CGT liabiity on the "profits", so I guess there's an argument for maxxing out share ISA allowances asap and every April in the meantime. On the cash it makes sense to do that because I'm getting bugger all interest on it, but the index linked certs give a decent return because they still use RPI not CPI.

Apologies if this risks derailing the thread here - if so let me know where to post it instead and I'll delete this one.

Debt isnt the problem in some companies.Building long term assets with borrowed money at 2% coupons is fantastic if demand isnt going to collapse and you can increase prices over the cycle.However you need the right balance sheet and the debt spread out over the years.They key will be paying it down as it comes due with free cash flow.Rolling it over in a rising rate cycle would be terrible.