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

[sancho panza]

10 hours ago, DurhamBorn said:

And for the first time really since the mid 70s the assets its chasing will be commods.China imported a record amount of oil in May,a record.Of course they will of been buying extra in March/April due to price,but still.That gap between assets and liquidity is inflation waiting.

That's an interesting stat there DB.I presume we could see copper demand ramp too?

6 hours ago, JMD said:

To be honest I find S Keen a bit 'preachy' or is that just me?                                                                                                                                                    But for the macro in general, I've been thinking a lot about how the geopolitics might play out. For me the starting point is US isolationism, though what precise form is debatable. US-China tensions - yes, but I don't see things heating up, so more akin to a US-Sino 'cold shoulder' war, with US providing military/logistical support to Japan and others in the South China Seas region and where those countries will be doing most of the heavy lifting, re. political tensions with China, etc. The consequences of US stepping back from being world policeman will have far reaching effects on for example the formerly secure trade routes, and so the supply chains of for example exporters like Germany. This is why I think 'US isolation' will be defined by individual bilateral deals where for example US might guarantee continued safe passage for Japan's oil from the gulf so long as Japan helped with embargo on China's imports/exports. A sustained US Dollar devaluation will only be allowed to happen at a time and to the benefit of US exports, it's reserve currency status will also need to go if US is no longer a major player in world trade, oil, etc, instead US will be nearly self sufficient when including its trading neighbours in North/South America. ...Ok I have freewheeled a bit, but this is how I see things developing over next 10 years. I need to give more thought to east/west Europe, Russia, South East Asia, India, in terms of their next 10 year macro view - hopefully any conclusions(guesses) will guide me regarding investment decisions for these regions. 

Steve Keen is also worng a fair bit timing wise.But you've got to remember that the CB's are now open about the fact that loans are created ahead of deposits which wasn't always the case.

When keen wrote 'the roving cavaliers of credit ' in 2009, it brought the issue to a wider audience.At the time the CB's were still running the deposits come first line.Which makes a huge differnce in non cash reserve lending and therefore the collapses that follow.

https://www.debtdeflation.com/blogs/2009/01/31/therovingcavaliersofcredit/

Keen also widely credited as one of the few academic economsits to predict the GFC.

 

The US  response to the 1930's GD1 was increasing isoltaionism  as per @Agent ZigZag thesis what are we seeing now-MAGA/shut borders/increasing ethnic minority support for immigration restirctions etc etc.It's this isolationism that is the real problem and history shows us it will get worse.US will maintain historical intelligence/military alliances with Canada/UK/Oz/NZ-FIve Eyes but that's in their own self interest,and in line with what you say,protecting Taiwan/Japan.

 

On the third point,USD depreciation and reserve status aren't mutually exclusive.You can have both.Reserve status issue is a longer term issue.

https://history.state.gov/milestones/1921-1936/great-depression

 

 

2 hours ago, jamtomorrow said:

Wowzers what happened here? ...

Possibly this

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

https://www.nytimes.com/1988/06/19/business/the-dollar-s-wild-ride.html

[DoINeedOne]

So i have been reading a little about tower companies, just finished reading about Helios Towers 

The information below is snippets out of a report by  undervalued-shares.com so it may not make a great deal of sense as its snippets, His reports are always quite interesting companies and i would recommended signing up $49 a year is too cheap in my view but anyway the report was something like 60+ pages so DYOR 

 

Just thought it was quiet interesting as we have be talking a lot about telecoms  also we have all talked about before with vodaphone spinning of its towers into a separate company which might be interesting too

Vodafone has decided to legally separate its passive tower assets in order to create a new TowerCo organisation with a dedicated management team, which will be operational by May 2020.TowerCo will own Europe’s largest tower portfolio, comprising approximately 61,700 towers across 10 countries
https://www.vodafone.com/news-and-media/vodafone-group-releases/news/create-europe-largest-tower-company-unlocking-value-for-shareholders

 

 

Interesting things i didn't know about mobile towers

In the US, 90% of mobile phone towers are operated by independent tower companies. In Africa, it's just 27% and  30% to 40% in Europe

 

One mast, several tenants
The most important aspect to understand about these mobile phone towers is that several mobile phone companies can share them. With today's technology, you can usually fit four or five different net-work providers onto the same tower.

Which, by implication, means that it's a bad decision for mobile phone companies to own a tower network. It's much more cost-efficient for them to host their equipment on a tower that is used by multiple net-work operators. Enter the independent tower companies!

Contracts for renting out space on a tower (and its ancillary facilities) are usually made for an initial period of at least five to ten years, or even longer, depending on the country.They are usually non-cancellable except for rare circumstances. In most markets, tower companies have experienced a historical churn rate of just 1% to 2% p.a.

Contracts come with multiple extension options and price increases based on general price inflation (or slightly above that).This business model enables tower companies to publish how much revenue they have already secured for the next five, ten, or even 15 years. That's why investors have come to see them as reliable income generators.

 

 

Just look at some of these American tower companies

 

 

In Africa, the evolution of the tower business is about ten to 15 years behind that of the US and Europe:

The density of the African tower network is still comparatively small, also owing to the sheer size of the continent and the relative lack of purchasing power in rural regions.

Just 27% of existing African towers are owned and operated by in-dependent tower companies. It compares to 90% in the US, 30% to 40% in Europe, and an average of 70% across the G7 nations. It's up from just 5% in 2010, meaning the outsourcing of towers has more than quintupled in Africa within a decade.

Network operators do not yet provide all the services that we are used to elsewhere. For example, considerable parts of sub-Saharan Africa are still stuck with 2G and 3G networks. 4G licenses were granted only recently.

Tanzania (4G licensed since 2015), Ghana and Congo-Brazzaville (2016), and Democratic Republic of the Congo (2018) have yet to roll out this service properly. In comparison, most of Western Europe licensed 4G networks in 2012. For technical reasons, 4G requires a denser network of towers.It wouldn't be accurate to say that Africa is to experience the same growth pattern that we have seen elsewhere. Each market has its pe-culiarities, and there are ongoing changes in technologies, such as the increasing importance of so-called small cells (antennas that can be in-stalled on house roofs instead of towers).

Helios Towers went public, not a single African tower company was listed on a stock market anywhere in the Western world.

To minimise the potential fallout from currency fluctuations, Helios Towers has built its business in such a way that it is *almost* entirely protected against it

57% of its revenue is contracted in hard currencies, primarily US dollars. 

Only 50% of its costs are in foreign currencies. The 7% difference in foreign currency usage between income and costs provides an additional buffer for the company. In effect, its earnings are 65% dollarised.

 The company's contracts entail that currency risk is taken care of to the degree possible, e.g., through so-called inflation escalators

Between 80% and 90% of the company's cash reserves are held in US dollars, including on the level of local subsidiaries.

Helios Towers faces a number of other risks, most noteworthy:

Consolidation among mobile phone companies: 82% of the company's future revenue is contracted with just five African mobile phone companies. If two of these companies merged, Helios Tower could lose business.

Political risk: Africa is still Africa. Much as the continent has become more stable over the past 20 years, the risk of political upheaval remains. Helios Towers operates in countries that represent the entire span of macro risk in Africa, ranging from low risk (Ghana, South Africa) to high risk (Democratic Republic of the Congo).•Cost of borrowing: Helios Towers (and all other tower companies) depend heavily on external financing to fund their investments in additional towers. If financing became more expensive, it would hurt the company's bottom line.

Helios Towers has long struggled to get access to cheap funding. Not only was it the smallest of the three largest operators in Africa, it was also a privately-held company and as such, lacked transparency and credibility.It is not yet operating in a sufficiently large number of countries, and this lack of diversification (rightly) worries investors. Now that the company has gone public, it is already in a much better position to refinance itself at better conditions. A big chunk of the company's existing financing consists of a EUR 600m bond with a 9.25% annual yield and a duration until 2022.Compare that to American Tower recently refinancing a 2.8% bond be-cause it could do so with an even lower yield.Helios Towers will never be able to compete 1:1 with American Tower when it comes to financing costs. However, it's likely that sometime this year or in early 2021, Helios Towers will manage to refinance the out-standing bond with a significantly cheaper rate.

Europe

Cellnex in Spain

Infrastrutture Wireless Italiane in Italy. 

Vodafones New towers business?

America

American Towers which operates 40,000 towers in the US and a further 140,000 towers in other countries around the world

Crown Castle International

SBA Communications 

 

Africa 

Hellos Towers

IHS Towers, the largest independent tower company to come out of Africa, is planning to list its stock on the New York Stock Exchange.

 

[PaulParanoia]

12 hours ago, Cattle Prod said:

Nice tally sheet here, h/t Dan Tapiero

So does this mean we're likely to see the dollar devalue twice as much as the pound?  Taking us back to $1.50-60 to the £1.  Or is that too simple a view?

[PaulParanoia]

3 minutes ago, PaulParanoia said:

So does this mean we're likely to see the dollar devalue twice as much as the pound?  Taking us back to $1.50-60 to the £1.  Or is that too simple a view?

Quick maths ...

[DurhamBorn]

3 hours ago, jamtomorrow said:

Wowzers what happened here? ...

Inflation cycle and the tail end of fighting it ended.Liquidity then stopped being consumed by inflation and instead moved into financial assets like stocks,we are at the opposite now,the start of a reflation.

[DurhamBorn]

@DoINeedOne i really like the tower sector,and its one reason i think telcos are structurally undervalued.Telefonica own a big/huge tower business with their 50.01% stake in Telxius and they are expanding,big in Brazil as well as Europe.Vodafone have a huge network.Telia own big networks across the Scandi,Finnish and Baltic regions.I think they are putting them as seperate companies so that they can save hugely on costs,but also it cuts out any new players.Renting the space means the big players still get the margin.A bit like BAT tobacco selling tobacco to rivals.They make their margin and then can control the price more.

The market hugely undervalues the assets of the telcos,and although they have bounced very nicely (Vod is up nearly 40% from bottom) i think including divis,they will provide superb returns over the cycle.

On Vodafone though i want to see the structure of what they do with the towers.I would of liked them to simply create a new floated company and shareholders get the shares,though i suspect they will sell or IPO 49% to cut debt as they might get £10billion.

Just yesterday

https://www.broadbandtvnews.com/2020/06/09/telxius-to-double-in-size/

Late last year in Brazil

https://telxius.com/en/telxius-doubles-its-size-in-brazil-and-consolidates-its-position-as-one-of-the-main-neutral-infrastructure-operators-in-the-country/

[sancho panza]

Is capital flight beginning in China...............

Devaluation makes sense for the Chinese playbook.

June 9th 2020

https://www.reuters.com/article/us-hongkong-protests-bank/hk-residents-rush-for-offshore-bank-accounts-on-china-law-worries-sources-idUSKBN23F0W8

HONG KONG (Reuters) - Banks including HSBC, Standard Chartered and Citigroup have seen a spike in enquiries from Hong Kong residents about opening offshore accounts amid concerns stemming from China’s decision to impose a national security law on the city, five people said.

HSBC (HSBA.L) and Standard Chartered (STAN.L) have each seen a 25-30% jump in enquiries, two of the people said. All five have direct knowledge about the rise in interest but did not want to be named as they were not authorized to speak to media.

The queries add to concerns about capital flight from the Asian financial hub, which has been roiled by pro-democracy protests in the past year, and underline worries about the liquidity of assets as the new law inflames Sino-U.S. tensions.

The city’s de facto central bank has sought to allay concerns, saying it has all the means necessary to defend the Hong Kong dollar’s peg to the greenback.

None of the leading global retail banks with operations in the Chinese-ruled city have seen large outflow of deposits in the last two weeks, said two of the sources, noting it can take at least a month to open an offshore account.

 

 

June 7th 2020

https://www.bloomberg.com/news/articles/2020-06-07/slide-of-china-s-yuan-versus-peers-signals-risks-ahead

China’s Yuan Weakness Shows in Record Slide Versus Peers

 

China’s currency has moved away from testing its 2008 low versus the dollar, but that’s not stopped the yuan from weakening against its peers.

The yuan has fallen for a record 16 straight days against a basket of trading partners’ currencies -- the longest run since the basket was created in 2015 -- and is close to erasing its gain versus those exchange rates this year, according to data compiled by Bloomberg. The yuan slumped more than 4% versus the euro and Australian dollar over that period, while it has strengthened about 0.4% versus the greenback.

 

The dollar has tumbled 4% over the past three weeks, which is a boon for Chinese authorities in that they can allow the yuan to fall against those of other exporter nations without causing alarm about depreciation. In late May, escalating tensions with the U.S. helped drag the yuan back to near its lowest level since the global financial crisis.

 

Beijing will likely allow such broad weakening by the yuan to continue, giving its exporters some relief amid the global economic shutdown. Bulls beware, however, there are a number of risks that could send the greenback surging again, pushing the yuan lower. Just a few days ago, Goldman Sachs Group Inc. forecast that capital outflows triggered by tensions with the U.S. could push the Chinese currency to its weakest level in more than a decade.

“The direction of travel is clear, and the momentum is accelerating,” said Sue Trinh, managing director for global macro strategy at Manulife Asset Management Ltd., adding the yuan could “easily” hit its weakest since 2008 in the event of worsening U.S-China relations. “Factors including weak external and domestic demand could also hurt the yuan.”

Here’s a look at the push and pull factors on the yuan in the near term:

Hong Kong and Pandemic

Washington has ramped up its rhetoric toward Beijing over its handling of the virus outbreak and its planned national security law for Hong Kong. President Donald Trump has also announced the U.S. would begin the process of stripping some of the city’s privileged trade status without detailing specifics. These issues “seem unlikely to be resolved soon,” according to Goldman strategists including Zach Pandl. Continued uncertainties could increase outflow pressures and send the yuan to 7.25 per greenback in three months, he added. The currency traded at 7.0751 per dollar as of 4:38 p.m. Monday in Shanghai.

Trade Deal

This can pull the yuan either way, depending on how China and the U.S. go about the agreement. While Mizuho Bank Ltd.’s chief Asian strategist Ken Cheung says a collapse of the deal could quickly send the yuan to 7.3 per dollar -- a level unseen since late 2007 -- ING Bank economist Iris Pang argues the currency could end the year at 7.05 if tensions don’t escalate in a dramatic manner. On Thursday, U.S. Trade Representative Robert Lighthizer said he feels “very good” about progress of the phase one trade agreement with China.

Sluggish External Demand

Global demand for Chinese goods will likely remain depressed as the world economy recovers from the pandemic slowly. That means mainland exporters will bring less foreign-exchange back home, limiting a major source of capital inflows. While a positive turn in the outlook could send the yuan stronger than 7, that won’t likely happen until the fourth quarter, according to Wei Liang Chang, a macro strategist at DBS Bank Ltd.

Global demand for Chinese goods will likely remain depressed as the world economy recovers from the pandemic slowly. That means mainland exporters will bring less foreign-exchange back home, limiting a major source of capital inflows. While a positive turn in the outlook could send the yuan stronger than 7, that won’t likely happen until the fourth quarter, according to Wei Liang Chang, a macro strategist at DBS Bank Ltd.

Dividend Season

The next three months will see Chinese enterprises in Hong Kong pay out dividends that total HK$448 billion ($58 billion), 20% more than the levels seen a year ago, according to Bloomberg calculations based on company’s announcements. July will be the peak of the handout season. That will put the yuan under heavier selling pressure as firms are going to get busy using it to buy the Hong Kong dollar.

A Weaker Dollar

One thing that may help the yuan is the weaker greenback. The dollar has declined for three weeks in a row, the longest run since October, as risk appetite returned amid signs that the pandemic is easing globally. A continuous slide in the greenback could send the Chinese currency to 7.05, said Fiona Lim, senior foreign-exchange analyst at Malayan Banking Berhad.

 

[sancho panza]

1 hour ago, DurhamBorn said:

@DoINeedOne i really like the tower sector,and its one reason i think telcos are structurally undervalued.Telefonica own a big/huge tower business with their 50.01% stake in Telxius and they are expanding,big in Brazil as well as Europe.Vodafone have a huge network.Telia own big networks across the Scandi,Finnish and Baltic regions.I think they are putting them as seperate companies so that they can save hugely on costs,but also it cuts out any new players.Renting the space means the big players still get the margin.A bit like BAT tobacco selling tobacco to rivals.They make their margin and then can control the price more.

The market hugely undervalues the assets of the telcos,and although they have bounced very nicely (Vod is up nearly 40% from bottom) i think including divis,they will provide superb returns over the cycle.

On Vodafone though i want to see the structure of what they do with the towers.I would of liked them to simply create a new floated company and shareholders get the shares,though i suspect they will sell or IPO 49% to cut debt as they might get £10billion.

Just yesterday

https://www.broadbandtvnews.com/2020/06/09/telxius-to-double-in-size/

Late last year in Brazil

https://telxius.com/en/telxius-doubles-its-size-in-brazil-and-consolidates-its-position-as-one-of-the-main-neutral-infrastructure-operators-in-the-country/

and @DoINeedOne

Very interesting invesment idea this.....a utitlity within a utility.Espceailly with regard to africa where laying out traditoanl cables won't be feasible.

 

[Bricormortis]

Germany to embrace green sourced hydrogen via renewable electricity. 10 Gigawatt target. Other countries with a national hydrogen strategy are listed at the bottom of the article.

https://www.msn.com/en-gb/news/world/german-government-agrees-national-hydrogen-strategy/ar-BB15hP4I?ocid=spartanntp

[DurhamBorn]

Dollar slowly dropping now at 96 from 100 when 99.9% of the media etc said it was going much higher then.Still think 90 is the place it might bottom.After weak hands are shaken out commods should start to head higher again as they get cheaper in everywhere but the US.Sterling target is $1.35.

[sancho panza]

5 minutes ago, DurhamBorn said:

Dollar slowly dropping now at 96 from 100 when 99.9% of the media etc said it was going much higher then.Still think 90 is the place it might bottom.After weak hands are shaken out commods should start to head higher again as they get cheaper in everywhere but the US.Sterling target is $1.35.

dyodd as ever DB but are you seeing a drop to the 90 area still?.Is ia relatively straight down?

 

reason I ask is that bear dollar piece I psoted yesterday had a compelling thesis for dollar weakness medium term at least.As yet gold not reacting.

DXY started msot recent drop 22/5 from the 100 mark,gold has barely moved in that time.around $1700

Decl-been adding some Pm stocks this week.

 

 

on another matter.as @Democorruptcy would say.latest downdate from hussman

quite funny in parts.

https://www.hussmanfunds.com/comment/mc200608/

Emphatically, this is not a “buy signal,” nor what I would view as a constructive “opportunity” to add investment exposure. Rather, given the likely level of market volatility relative to the volatility currently reflected in index option prices, my inclination is to adopt an investment stance that is fairly neutral in response to “local” market movements, keeps a strong safety net, but for now, refrains from a bearish response in the event of a further advance.

I’ll say that again. In the context of extreme valuations, economic headwinds, and overbought extremes, the shift in market internals here is not a “buy signal” or even a constructive “opportunity.” It’s more like the cast of Jackass showing up on your driveway with skateboards and dynamite. You don’t need to join them, and you expect that it will end badly, but since you don’t know what they’ve got in mind, or how long they’ll hang around, it’s best not to stand directly in front of them.

[Nicolas Turgeon]

Latest blog post by Steven J Kaplan has been published, along with some intersting updates to his current holdings. Really interesting that he publishes these.

https://truecontrarian-sjk.blogspot.com/2020/06/buy-on-sound-of-cannons-sell-on-sound.html

The question is, when are you going to sell it all?!

[sancho panza]

Intersting chart

decl-long FRES.

[DurhamBorn]

@sancho panza yes down to 90 minimum,might see 87,never direct down,but no concerns of how it gets there.Its a big boost for everyone who isnt the US and they will use it to buy commods priced in dollars.

[Hardhat]

1 hour ago, sancho panza said:

Intersting chart

decl-long FRES.

Fres hasn't moved much in months, including the mini silver rally we had last month, and it quickly gave back any gains.

May be because they didn't meet their production  forecast last year? https://www.investorschronicle.co.uk/tips-ideas/2020/03/03/fresnillo-fails-to-make-hay/

Either way, they are at least producing, and may yet come to be valued on "ounces in the ground".

[Chewing Grass]

5 minutes ago, Cattle Prod said:

The Fed has just said, in at least 9 different ways, "We are far more afraid of unemployment than inflation".

I take it @DurhamBorn has stopped ignoring Powell's calls and has given him some advice 

Gulags it is then, don't know what the USA will do with their culturally bone idle underclass other than that.

Perhaps they should leave it to Antifa/BLM to work out.

[Loki]

Quote

His conclusion, however, was ominous: "we want investors to price in risk like markets should" and explained that the Fed would never hold back support for economy because it thinks asset prices are too high: "We would be prepared to tolerate or I should say to welcome very low readings on unemployment without worrying about inflation."

This actually looks like a really good article on ZH
https://www.zerohedge.com/markets/powell-fed-will-never-hold-back-support-economy-even-if-asset-prices-are-too-high

 

@DurhamBorn you absolutely nailed this cycle. 

[DurhamBorn]

3 hours ago, Cattle Prod said:

The Fed has just said, in at least 9 different ways, "We are far more afraid of unemployment than inflation".

I take it @DurhamBorn has stopped ignoring Powell's calls and has given him some advice 

It took me many many years to understand how leads and lags work and to really get to grips with what drives what.Most of the market reacts during or after things happen and think they are the only one that knows,when everybody knows.A lot of the problem is investors believe all the rubbish about an evil Fed and the 1% etc.Its utter rubbish.The guy who i learned most off knew several Fed officials,including a couple of Chairmen (he didnt know the chairmen in a personal capacity but had met them several times and knew people who advised them) and told me they were all simply trying to do their jobs.They followed models,but got things wrong sometimes.They also had to consider the state of the country,and above all protect the American way of life.Like i have said many times,Powell is trying to cushion and help a single mother in Detroit who works two jobs.He has zero interest in the elite,or how markets react.People really need to understand that and hammer it into their minds.

Dis-inflation is fantastic for the consumer and they have enjoyed a long cycle.A 1.65kg chicken cost me £2.95p in Lidl tonight and a wholemeal seeded loaf 75p.Thats incredible value,the best in human history.Right now though capital cant turn a profit in basic areas and due to that people are losing their jobs.It is always so after a long dis-inflation.The CBs fear that,and rightly they should.Our way of life starts to crumble.If that chicken goes to £3.95 over 5 years,but the CBs can increase company profits,keep governments funded and give young people a future while the backbone of the economy can heal and grow in new areas they will do it.If oil and potash go up in price with that inflation,and the companies leverage up by 3x that increase,it isnt because the CBs wanted to hand a gift to Mosaic,its simply the way it is.

Today you will read lots of people saying the Fed is removing risk from the market etc and how terrible it is.Again that is utter rubbish.3 months ago BP was hitting £2.22 a share down 2/3s,Vodafone hit £1 down 65%,BT hit £1,down 80%,.What people really mean is they have put in zero effort to understand the macro picture,and because of that they get whipsawed by the market,fear forces them to be a rabbit in headlights during fantastic buying moments,and then they blame the Fed.

That nasty Fed,i wanted BP at £1.60 and id of got it if the Fed hadnt acted.Probably yes.The Fed doesnt give a toss about that though.Systemic risk threatened the country and the peoples way of life.They did their job,far from perfect and far from over,but the correct action that the scale of the disinflation called for.

Of course all those people saying the Fed is removing risk arent listening to the cycle,or what the Fed is really telling them.They arent removing risk at all,they are simply turning the risk from deflation to inflation.The risk is moving from commods and expensive real assets to bonds and debt instruments.People need to listen,learn and let cycles unfold.

[JMD]

13 hours ago, sancho panza said:

Steve Keen is also worng a fair bit timing wise.But you've got to remember that the CB's are now open about the fact that loans are created ahead of deposits which wasn't always the case.

When keen wrote 'the roving cavaliers of credit ' in 2009, it brought the issue to a wider audience.At the time the CB's were still running the deposits come first line.Which makes a huge differnce in non cash reserve lending and therefore the collapses that follow.

https://www.debtdeflation.com/blogs/2009/01/31/therovingcavaliersofcredit/

Keen also widely credited as one of the few academic economsits to predict the GFC.

The US  response to the 1930's GD1 was increasing isoltaionism  as per @Agent ZigZag thesis what are we seeing now-MAGA/shut borders/increasing ethnic minority support for immigration restirctions etc etc.It's this isolationism that is the real problem and history shows us it will get worse.US will maintain historical intelligence/military alliances with Canada/UK/Oz/NZ-FIve Eyes but that's in their own self interest,and in line with what you say,protecting Taiwan/Japan.

On the third point,USD depreciation and reserve status aren't mutually exclusive.You can have both.Reserve status issue is a longer term issue.

https://history.state.gov/milestones/1921-1936/ggreat-dep

Thanks SP, appreciate the info. I am investing for the next 10 years and am trying to develop a personal macro framework - not a critical theory I hasten to add, just a broad narrative that will help me better identify investible regions/markets. Prediction is notoriously difficult (especially as they say when it pertains to the future!), but I hope my conclusions will enable me to better judge future risks/trends and therefore what are the realistically investible international regions/markets.

[MrXxxx]

Interesting read on the assumptions of gold in a portfolio

https://www.google.com/amp/s/seekingalpha.com/amp/article/4351376-is-golden-opportunity

[sancho panza]

3 hours ago, Cattle Prod said:

Just looking at the guy, he means every word of it. He's personally worth about $50m, and he's looking out the window at mobs like the rest of them. He doesn't want them coming for him. He specifically referred to the social unrest and racism in his speech. 

Panem et circences...for a long time. I'm struggling to see what is going to trigger the Big K here. They are going to print the other 2/3 in record time at the first sign of trouble.

Nicely put.

Some interesting videos on you tube from people driving around the wreckage.

I was looking at buying some Goldies today-Eldorado, Osisko,New Gold and BVN.I got called to sort out the kids/dinnertime etc and by the time I got back Jay had sat back down and  EGO had gone from $8.20 to $8.60.Across the 30 names I follow,they went from two thirds red to one or two red in an hour or so.

Sadly,those rioters have shafted the local people where these shops are,as they'll now be travelling further to shop.

As for the Big K,I suspect it'll be rising commodity prices,falls in aggregate demand and rising money velocity that scupper the dream.

 

 

 

 

[Loki]

29 minutes ago, DurhamBorn said:

Of course all those people saying the Fed is removing risk arent listening to the cycle,or what the Fed is really telling them.They arent removing risk at all,they are simply turning the risk from deflation to inflation.

Good point 

[sancho panza]

34 minutes ago, DurhamBorn said:

It took me many many years to understand how leads and lags work and to really get to grips with what drives what.Most of the market reacts during or after things happen and think they are the only one that knows,when everybody knows.A lot of the problem is investors believe all the rubbish about an evil Fed and the 1% etc.Its utter rubbish.The guy who i learned most off knew several Fed officials,including a couple of Chairmen (he didnt know the chairmen in a personal capacity but had met them several times and knew people who advised them) and told me they were all simply trying to do their jobs.They followed models,but got things wrong sometimes.They also had to consider the state of the country,and above all protect the American way of life.Like i have said many times,Powell is trying to cushion and help a single mother in Detroit who works two jobs.He has zero interest in the elite,or how markets react.People really need to understand that and hammer it into their minds.

 

Interestingly it echoes what DDMB was saying about Powell in 2012 and how hawkish he was until he got in the Chair and then suddenly it dawned on him,the sheer scale of the problems.

[sancho panza]

36 minutes ago, DurhamBorn said:

38 minutes ago, DurhamBorn said:

Dis-inflation is fantastic for the consumer and they have enjoyed a long cycle.A 1.65kg chicken cost me £2.95p in Lidl tonight and a wholemeal seeded loaf 75p.Thats incredible value,the best in human history.Right now though capital cant turn a profit in basic areas and due to that people are losing their jobs.It is always so after a long dis-inflation.The CBs fear that,and rightly they should.Our way of life starts to crumble.If that chicken goes to £3.95 over 5 years,but the CBs can increase company profits,keep governments funded and give young people a future while the backbone of the economy can heal and grow in new areas they will do it.If oil and potash go up in price with that inflation,and the companies leverage up by 3x that increase,it isnt because the CBs wanted to hand a gift to Mosaic,its simply the way it is.

Today you will read lots of people saying the Fed is removing risk from the market etc and how terrible it is.Again that is utter rubbish.3 months ago BP was hitting £2.22 a share down 2/3s,Vodafone hit £1 down 65%,BT hit £1,down 80%,.What people really mean is they have put in zero effort to understand the macro picture,and because of that they get whipsawed by the market,fear forces them to be a rabbit in headlights during fantastic buying moments,and then they blame the Fed.

That nasty Fed,i wanted BP at £1.60 and id of got it if the Fed hadnt acted.Probably yes.The Fed doesnt give a toss about that though.Systemic risk threatened the country and the peoples way of life.They did their job,far from perfect and far from over,but the correct action that the scale of the disinflation called for.

Of course all those people saying the Fed is removing risk arent listening to the cycle,or what the Fed is really telling them.They arent removing risk at all,they are simply turning the risk from deflation to inflation.The risk is moving from commods and expensive real assets to bonds and debt instruments.People need to listen,learn and let cycles unfold.

 

Powerfulland depressing in equal measure DB.

..WHat I find sad is that either way the man on the street gets shafted,Delfation,he loses his job he may stuggle to buy food.Inflation,he has a job but could still struggle to buy food.

I'm thankful for the enlightenment I've found through this thread but it's bloody depressing at times.

On reflection,this is where we as a family have we improved our game this time,last time I fought the fed......big msitake.

[ThoughtCriminal]

Interesting update on bounce back loans today that has confirmed my suspicion that they are going to end very badly. 

 

Romanian guy we sub our soft strip work to set up a ltd company in February. We pay the wages  to him, he pays his guys. He’s had about 20k through it from us. 

 

So he’s found out about bounce back loans and is asking me about it. I told him he’s got no chance as he hasn’t been going very long and his turnover isn’t high enough. “Bullshit!  I’ll fill in the form then jiggy jiggy: 50 grand. I go back to Romania and buy house. F*ck the government, I not pay it back.”

 

I laughed and told him he’s going to be disappointed. Well feck me, 48 hours later and he’s only got the money! 
 

He THEN tells me that all the Romanians are doing it and sending the money back home. 😳

 

I sense a BIG scandal in the making.