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


spunko

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16 hours ago, Castlevania said:

Yes. I’ve effectively already recovered the cost of the clippers I bought.

Been doing it monthly for decades.  Clippers, scissors, and those thinning type scissors. Could buy the barbers!  "Nobody got rich by wasting money"!  Plenty of other low hanging fruit out there.  YRS?

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sancho panza
7 hours ago, DurhamBorn said:

No currency crash this cycle.The key is the fact we are in dis-inflation.Currency cant become worthless when it can buy more over time.The problems for currency come later in an inflation cycle.UK government debt for instance will be around half of the stated figures after BOE printing,because half will be sat on the CBs balance sheet,never to be paid back.The market has got itself into the situation where it is saying to governments spend what you want and pay us 1% a year in coupon.Its crazy,but thats where we are.The irony is the government will be paying around 0.5%,because the BOE will hand back the government the interest.

The MSM and the markets need to understand the only way to deal with the size of the debt is to inflate the economy faster than the coupons on the debts.That is exactly what is coming.

I agree currency crash not imminent .However the balancing act needed to run the inflation stably is beyond the competence of teh polticians/CB's who allowed us to get into this mess.There are a lot of variable factors out there.

Interestingly,someone was telling me yesterday that Russell Napier-who's been Macro Voiced- was saying how he'd gone from being a deflationist to a stagflationist.A transition much like my ownas we follow the newfsflow.My own conversion has also seen me becoem a confiremd gold bug.

It's going to be fascinating watching how the CB@s deal with maturing Gilts on their balance sheet.Once upon a time this would have been considered a default but no more.

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Perhaps a little off-topic, but does anyone know if there's such a thing as a monthly trend in prices? I ask as I've got a HL account which I drip-feed cash into once I've been paid at the end of the month, and it always seems like prices are a touch higher when I go to buy around the start of the new month.

Is it possible that traders pump shares to get their end-of-month bonuses, or am I just being paranoid?

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DRAX doubled now from the lows so another really big profit even if people missed the bottom and got in a big higher.Interesting rumours about people sniffing about to buy the company.Iv top sliced today even though i think it is still cheap,as again i had a very big holding and already above the minimum wanted return over the cycle of 65% in 3 months.Im adding that to areas of the potash sector.Iv also sold a ladder in Standard Life that was up 48%.Again i like them for the cycle,but the holding became heavier than id like.That old dog Eldorado coming good i see,i was under 50% on that at one point and didnt buy the last ladders,mistake that was,but really glad they have come good.Not on as much at the moment as im working on a project.The dollar is nudging the area where the Fed will engage again i think.

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28 minutes ago, sancho panza said:

anyone holding Eldorado?

@kibuc

image.png.e74cbfe2f0d5f57d0e545f3ebcfaca76.png

 

 

Yes - I think about £1,000 to £1,500 worth (I'd have to check as I've stocks on multiple platforms). Not been performing too well to date. However, like most of our stocks, they've been bought to hold and wait. I'm doing very little selling/top slicing. Mrs S has the main holding as she liked the hopelessly optimistic name of the company :D

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Castlevania
1 hour ago, Craig said:

Perhaps a little off-topic, but does anyone know if there's such a thing as a monthly trend in prices? I ask as I've got a HL account which I drip-feed cash into once I've been paid at the end of the month, and it always seems like prices are a touch higher when I go to buy around the start of the new month.

Is it possible that traders pump shares to get their end-of-month bonuses, or am I just being paranoid?

There’s an unproven theory that prices are a little higher at the end of the month as that’s when most people get paid and thus when their pension schemes receive their monthly pension contributions.

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7 hours ago, sancho panza said:

anyone holding Eldorado?

@kibuc

Sold mine a couple of weeks ago and put money into a gold explorer that is underperforming massively atm! Must. Not. Tinker.  Only miner I have sold though.

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8 hours ago, sancho panza said:

anyone holding Eldorado?

@kibuc

image.png.e74cbfe2f0d5f57d0e545f3ebcfaca76.png

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Not holding, but keeping an eye on. Eldorado has a lot of upside, but in the current environment it's hard to find a mid-tier producer that doesn't. Looking at my current portfolio, I don't see which position I should trim to make room for EGO. Minera Alamos? Fiore? Certainly not one of my silver miners? And shouldn't I go for HMY instead? 

It's a nice problem to have though, and we should enjoy it while it lasts :)

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TheCountOfNowhere

#ClapForBankers 

 

Boris Johnson says we must also 'clap for bankers who make our NHS possible'

 

Boris has lost the plot and he's selling is out tp those ####s in the city.

Its revolution or war now tgat awaits your children. 

No amount of savvy investing is going to save them. 

Last post for a while folks. 

 

Good luck. 

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sancho panza
8 hours ago, Cattle Prod said:

I remember some of that EROEI debates from the 2007-2010 period, it's a compelling metric. I wasn't working in the oil industry then, but trust me, when you see the scale of the operation needed to get this stuff out of the ground for yourself, you can believe it. As with gold mining, one of the biggest drilling costs is diesel. 

I can't recall the numbers exactly, but I believe on a big conventional field, you can get an EROEI of 30-50x. On a typical shale well, I think it's less than 2, i.e. an utter waste of time (which Chesapeake has just found out). A little known fact is that most fluid produced from the shale patch is waste water. Can be 10 barrels of water for every barrel of oil produced. Which has to be treated, it's often a brine, and has to be trucked and disposed of. You also have to drill 6 or more long wells, pumping in millions of pounds of sand and water to frac it. Every bit of it hauled in an out on trucks. Huge diesel gennies on site. Cementing up the whole lot afterwards. And all this to get out maybe 800k barrels of oil. Waste of time.

That really is an amazing stat there CP,how was it ever viable?was it jsut cheap financing?

20 hours ago, DurhamBorn said:

No currency crash this cycle.The key is the fact we are in dis-inflation.Currency cant become worthless when it can buy more over time.The problems for currency come later in an inflation cycle.UK government debt for instance will be around half of the stated figures after BOE printing,because half will be sat on the CBs balance sheet,never to be paid back.The market has got itself into the situation where it is saying to governments spend what you want and pay us 1% a year in coupon.Its crazy,but thats where we are.The irony is the government will be paying around 0.5%,because the BOE will hand back the government the interest.

The MSM and the markets need to understand the only way to deal with the size of the debt is to inflate the economy faster than the coupons on the debts.That is exactly what is coming.

I've been pondering this at points during the day.Not doubting that we've got inflation coming.I used to think we'd get a significant deflation first and then the inflation down the line.As Ive said,I think there''s a every chance we''ll get the deflation at the same time as the infaltion starts running.

Back to my point earlier though.It's a little known fact that imputed retns were about 2% of GDP back in the 60's.Currently about 12% depending which economy you're looking at. And this is besisdes the fatc that up until recently the GDP data for imputed rents had the effect of pushing the figure higher,whilst the deflator used for Real GDP ie CPI had a rental equivlance measure based on data that was lower than the rental data included in GDP.Shaun Ricards states this gap has now been closed but still operated for many years.

https://www.spectator.co.uk/article/why-can-t-we-have-an-inflation-index-which-includes-house-prices-

It includes no element of house prices whatsoever. It includes rents, but in such a way that social housing rents are over-represented.

 

 

 

Key take home for me is this.Whislt I agree that a currency crisis is unlikely in the coming few years,going further out the risks grow and grow.There are structural issues with GDP and inflation measurement that noone in the political class or CB circle is trying to address.

 

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sancho panza
4 hours ago, kibuc said:

Not holding, but keeping an eye on. Eldorado has a lot of upside, but in the current environment it's hard to find a mid-tier producer that doesn't. Looking at my current portfolio, I don't see which position I should trim to make room for EGO. Minera Alamos? Fiore? Certainly not one of my silver miners? And shouldn't I go for HMY instead? 

It's a nice problem to have though, and we should enjoy it while it lasts :)

Tis a nice problem.MAI is doing nicely.Rio2 is well in the green for the first time since we bought it.Integra running well too.

Sadly not in on Fiore.

Been buying a lot of BVN and NGD of late.

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26 minutes ago, TheCountOfNowhere said:

Boris Johnson says we must also 'clap for bankers who make our NHS possible'

Please tell me this is a joke. It's like a 'Private Eye' headline.

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The Idiocrat
43 minutes ago, Errol said:

Please tell me this is a joke. It's like a 'Private Eye' headline.

He forgot to mention "our taxpayers". What a cunt.

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On 29/06/2020 at 14:44, reformed nice guy said:

This part is not being picked up by a lot of people. If you are a small business such as a pub or barbers then your revenue producing ability already has hard boundaries. Number of seats in a barbers limits haircuts per hour. Throw in these extra restrictions and the only option is to up prices... which leads to..... inflation!

I do agree, certainly in some more affluent places but a lot less well off places will surely shut up shop.  People simply won't have the ability to pay the increases especially if wages lag.  And then knock on effect on local council tax income, depressed or no rent for shops etc.

Really seems to hit home to me how fragile things are and how a lot of the economy is a house of cards.  

Time will tell over the next year I guess, there should be a little bump once economy rolls into action again but is it a dead cat? 

And then in a couple of months we've maybe got to go through lockdown/ furlough again even though most people think they won't do again.  In which case some kind of UBI at least on a temporary basis surely is a very very likely possibility.  Especially as just pumping up the stock market can't work in perpetuity.

I know noses are being made about Boris and new deal dam building type work program.  This relates to what is discussed here but in the interim I can see some form of UBI being introduced.

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sancho panza
2 hours ago, Dogtania said:

I do agree, certainly in some more affluent places but a lot less well off places will surely shut up shop.  People simply won't have the ability to pay the increases especially if wages lag.  And then knock on effect on local council tax income, depressed or no rent for shops etc.

Really seems to hit home to me how fragile things are and how a lot of the economy is a house of cards.  

Time will tell over the next year I guess, there should be a little bump once economy rolls into action again but is it a dead cat? 

And then in a couple of months we've maybe got to go through lockdown/ furlough again even though most people think they won't do again.  In which case some kind of UBI at least on a temporary basis surely is a very very likely possibility.  Especially as just pumping up the stock market can't work in perpetuity.

I know noses are being made about Boris and new deal dam building type work program.  This relates to what is discussed here but in the interim I can see some form of UBI being introduced.

That;'s the deflation option.For price inflation to occur you need an increase in demand or a decrease in supply more generally. @reformed nice guy is right in a that some services that are needed will see price inflation but as @Castlevania was saying yesterday, once people have bought the clippers....

This is where the govt response gets interesting in terms of their options .The driving of demand seems a no brainer. Recent evidence has shown that given the choice between paying down debt in a crisis and spending wilfully in the face of unemployment,consumers will drive velocity down further.

I maintain though that the govts ability to drive velocity higher is much more limited than it's ability to drive money supply higher.

2 hours ago, Cattle Prod said:

It never was viable. Yes it was cheap financing and a lot of snake oil salesmen. The hook was no exploration risk, these deposits have been known about for decades. Econonists love no exploration risk, I have to persuade them to give me money that has a 75% chance of finding nothing. But I might find a 30x EROEI field. That's the game. But they went for a 2x EROEI with 100% chance of finding. And blew over $300bn doing so.

 

CP, many thanks for your various explanations of complex issues in simple terms over the last year or two.I'd take an essay to say that.I simply can't get my head around shale,the treadmill and what losing it will mean for the the balance of power in both oil markets and geo politically.

 

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sancho panza

On a separate matter,the gold bugs on here have got very blase about some of the markers en route to US$2000.$92 off all time high...

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@sancho panzainteresting point re money supply Vs velocity.  Like you say recently more people have been careful paying down debt or batting down the hatches.  But equally we have had lock down for 3 months and the many people's employment has become more perilous.

Was going to say that the MSM and gov will go on a campaign to get people spending again but I guess that's already begun with good news stories coming out of holidays and the long queues with happy shoppers on front of Primark.

Harder said than done.  I still see lots of carnage ahead and think that money creation, this time in the form of UBI is a distinct possibility.

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sancho panza
15 minutes ago, Dogtania said:

@sancho panzainteresting point re money supply Vs velocity.  Like you say recently more people have been careful paying down debt or batting down the hatches.  But equally we have had lock down for 3 months and the many people's employment has become more perilous.

Was going to say that the MSM and gov will go on a campaign to get people spending again but I guess that's already begun with good news stories coming out of holidays and the long queues with happy shoppers on front of Primark.

Harder said than done.  I still see lots of carnage ahead and think that money creation, this time in the form of UBI is a distinct possibility.

the traditoanl equation of MV=PT has allowed a number of misunderstandings to develop over the years.Not least among the MMT crowd who've begun to view V as a constant when it's anything but.This is where the pushing on a string analogies all come into play.

 

@Harley introduced me to the concept of behaviorual economics allowing me to put my read on things into context and allowing me to realise there's a small group of academic economists who have similar misgivings about MMT(the school of thought most of our CB overlords subscribe to) and there's a nuanced understanding of the issues.

the key take home is that consumer psychology plays a key role in driving aggregate demand,demand for credit, demand for specific goods etc and that trying to deny that is akin to poutting your finger in the dam and expecting it not to burst.

we kinow tehre's asplurge of govt spending coming but the govt has no control over the velocity of that injection and the duration of it's stimulus effect.It's like being a doctor and not knowing the correct dosage of meds to give,meaning you have to titrate to effect.This makes it likely they'll give moeny to people who will spend as you suggest.

 

Difficult.

 

I agree lots of cvarnage ahead.We've got the yellow stuff at $1800,without a weak USD!!!.We've got GLD inventories building up.The big insto's are waking up to the fact that govts are heading up poop creek with a small paddle on board.

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DoINeedOne

Any thoughts on this guy he's also one of the founders behind Vesa Equity Investments

https://vesaequityinvestment.com/about-us/founders/

They're building a decent stake in RoyalMail

From a article about him

German wholesaler Metro has been mooted since he and Mr Tkac began building their 10.9 per cent stake in the German group last year, they face a battle to seal the takeover. 

 

1700518077_Screenshot2020-07-01at11_19_46.thumb.png.464e9c4a2c7e4ec2d9f5c0ea433f54f6.png

 

 

Also today at 5pm

 

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DurhamBorn
2 minutes ago, DoINeedOne said:

Any thoughts on this guy he's also one of the founders behind Vesa Equity Investments

https://vesaequityinvestment.com/about-us/founders/

They're building a decent stake in RoyalMail

From a article about him

German wholesaler Metro has been mooted since he and Mr Tkac began building their 10.9 per cent stake in the German group last year, they face a battle to seal the takeover. 

 

1700518077_Screenshot2020-07-01at11_19_46.thumb.png.464e9c4a2c7e4ec2d9f5c0ea433f54f6.png

He will push them to split the company into GLS and Royal Mail.Then the unions can live in the real world.(and a lot of the middle managers)

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