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


spunko

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With PM prices on the up, is anyone considering buying platinum?

Platinum prices have hardly moved, but the article below (5 year old but still relevant to today i think) has good Gold vs Platinum price chart. I couldn't find the 50 year chart i was really looking for - for 1970-2020 - as this also shows platinum trending closely with gold but again interestingly with platinum price always at higher to gold.  

https://stockhouse.com/opinion/independent-reports/2015/04/20/platinum-or-gold-here-where-to-put-your-money-today

...found a more recent article with a 120 year chart!!!

https://sdbullion.com/blog/platinum-value-vs-gold

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Eventually Right
8 minutes ago, Loki said:

Thanks for that @M S E Refugee.  Great info!

Hi Loki,

Just FYI, I don't think Kuppy is in STNG anymore.  I got in, following listening to a podcast about 15 months ago where he made the case for the tankers.  Watched the share price double from circa $20 to nearly $40 and then nosedive since the start of the year to about $13 now.

I've switched to Teekay Tankers as the balance sheet is apparently stronger, and I think Kuppy himself is now out of STNG because of concerns over this.  I still own a few STNG options that i haven't disposed of yet, though.

(obviously it'll be like the PM miners if the tanker rates spike dramatically-the worst quality stuff will tend to do best, so STNG could perform very well if that happens)

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3 minutes ago, Eventually Right said:

Hi Loki,

Just FYI, I don't think Kuppy is in STNG anymore.  I got in, following listening to a podcast about 15 months ago where he made the case for the tankers.  Watched the share price double from circa $20 to nearly $40 and then nosedive since the start of the year to about $13 now.

I've switched to Teekay Tankers as the balance sheet is apparently stronger, and I think Kuppy himself is now out of STNG because of concerns over this.  I still own a few STNG options that i haven't disposed of yet, though.

(obviously it'll be like the PM miners if the tanker rates spike dramatically-the worst quality stuff will tend to do best, so STNG could perform very well if that happens)

Thanks for that - that's an amazing rise on the TNK chart in late November!

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Australia's 10-year rate is about 0.9 per cent and its 30-year bond is near 1.75 per cent. That's 6.6 times and 3 times the average yield of US, UK, German, Japanese and Canadian bonds of those maturities.

 

Australia just sold 15 Billion aussie dollars worth of bonds.  I reckon 1.75% for 30 years is a bloody good deal for Australia.  What I don't get is why people are happy to take 30 years at 1.75% when history tells us that's a mental low rate?

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Just now, Cattle Prod said:

Where else do you get a risk free return these days? Many pension funds have to take these bonds. It'll end in tears, of course, but not for Australia! Agree with you on that.

US 30y yield down 2.3% today to 1.22%. Not sure about your sources sums! Probably averaging in UK/US/German together without weighting or something, and ignoring that the US bond sets the tone for the rest.

 

But it's not risk free, is it?  Lots of risk of opportunity costs there...!

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Short 4 min video posted earlier today on the three things you should do before/during a PM bull market correction.

It's nothing new to most on here as it reaffirms the thoughts already shared, but might be of use to some.

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reformed nice guy
4 hours ago, Harley said:

I'm looking to buy coin or bars (swap out my ETFs).  Any current info on the best places for gold/silver please?  I've looked at Chards, Coininvest, Bullion By Post (funny Ireland seems cheaper) , and gold.co.uk.  Gold coin premiums vary from 4% up but silver seems more like 25-30%?!

Hatton garden http://hattongardenmetals.com/ have usually been good for me

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3 hours ago, DurhamBorn said:

Fed is involved across the curve keeping it flat,dollar is falling as people are selling treasuries etc to buy commods and none US assets because they are so cheap.

 

Don't know if I am being a bit simplistic here, but does that mean todays fed announcement will rates stable or rise slightly to keep $s at home?

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@Cattle Prod

Its great isnt it when the road map helps you see it.People get hooked up on the past,and the near term when the real action is always signalled along the curve.Debt isnt a problem at all to the person issuing it when they can lock in rates lower than inflation.The market thinks its deflation,or actually dis-inflation forever.They are confusing the end of a credit cycle with the end of a business cycle.

Fed isnt even trying to hide it,they are forcing the curve down to help the big industrial companies and government get their debt profiles in order.Its just like the 70s where policy makers feared unemployment much more than inflation because they worried about the young going down a leftie/commie road.People only need to watch the news to see the same now,just playing in slightly different ways.

The whole thesis of this thread is playing out now,and will continue.Next high capital asset companies will start to see their shares prices turn and start to increase,give or take a big whack in market sell offs.

Fed will buy a lot of the debt and put it in a dusty cupboard in the basement.This is all about injecting inflation,but allowing big companies and market entities to structure their balance sheets first.

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1 hour ago, DurhamBorn said:

@Cattle Prod

Its great isnt it when the road map helps you see it.People get hooked up on the past,and the near term when the real action is always signalled along the curve.Debt isnt a problem at all to the person issuing it when they can lock in rates lower than inflation.The market thinks its deflation,or actually dis-inflation forever.They are confusing the end of a credit cycle with the end of a business cycle.

Fed isnt even trying to hide it,they are forcing the curve down to help the big industrial companies and government get their debt profiles in order.Its just like the 70s where policy makers feared unemployment much more than inflation because they worried about the young going down a leftie/commie road.People only need to watch the news to see the same now,just playing in slightly different ways.

The whole thesis of this thread is playing out now,and will continue.Next high capital asset companies will start to see their shares prices turn and start to increase,give or take a big whack in market sell offs.

Fed will buy a lot of the debt and put it in a dusty cupboard in the basement.This is all about injecting inflation,but allowing big companies and market entities to structure their balance sheets first.

DB ,  I have some Gold Sovs , which I am considering selling soon , maybe within the next three months while prices are high & buy some again at the end of next year , if prices have dropped . Would you hazard a guess to when prices are going to (if they do) fall in that gold/silver crash you have mentioned . I believe you have said Gold & silver should then rise and rise over the next ten years or so.  I am aware dyor etc

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Alifelessbinary

For people looking for a quick reference guide for where to pick up gold with the lowest premium I’ve found the link below really useful. I found this on the silver forum and have been using it for about 18 months. 

http://goldprice.eu5.net/
 

The premiums of gold continue to be high compared to the last few years, but demand for physical gold is at historic highs so it’s not a surprise. 

previously I’ve brought silver from the European Mint and Goldsilver.be. Physical is certainly expensive at the moment but I thought that about the miners a month ago!

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2 minutes ago, Hardhat said:

"Nest will also seek to reduce its carbon-intensive holdings, such as with the traditional oil giants, while investing more money in renewable energy infrastructure."

...even though BP and Shell are investing billions in renewables.

I imagine they wanted to get out of big oil anyway, but dressing it up as fighting climate change will give them some publicity and brownie points with the apostles of St. Greta.

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2 minutes ago, Alifelessbinary said:

previously I’ve brought silver from Goldsilver.be

Same here, and always had good service. But since March, they don't seem to have much stock at all (last time I tried to buy 2020 Brits off them, they had a whole 49 in stock) and the prices are on the high side.

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3 minutes ago, AWW said:

..even though BP and Shell are investing billions in renewables.

I imagine they wanted to get out of big oil anyway, but dressing it up as fighting climate change will give them some publicity and brownie points with the apostles of St. Greta.

I expect what will happen is that the money goes into smaller companies that are developing new tech, which then get bought up by BP and Shell etc in the future. 

Key is to identify areas considered "green" at the moment and invest accordingly. 

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3 hours ago, JMD said:

With PM prices on the up, is anyone considering buying platinum?

Platinum prices have hardly moved, but the article below (5 year old but still relevant to today i think) has good Gold vs Platinum price chart. I couldn't find the 50 year chart i was really looking for - for 1970-2020 - as this also shows platinum trending closely with gold but again interestingly with platinum price always at higher to gold.  

https://stockhouse.com/opinion/independent-reports/2015/04/20/platinum-or-gold-here-where-to-put-your-money-today

...found a more recent article with a 120 year chart!!!

https://sdbullion.com/blog/platinum-value-vs-gold

Thanks for posting.  I don't have any physical Pt but have a small stake in SLP Sylvania Platinum which is doing OK along with the other PMs.  Perhaps I should have a bigger stake if those articles are any guide:)

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2 hours ago, Cattle Prod said:

Absolutely. I should have put it in air quotes.

Question for @DurhamBorn and the hive mind. 1.22% is getting very attractive looking for the US govt to refinance their debt. If they could auction off 25 trillion tomorrow for 30yrs at 1.22%, they'd have effectively solved the problem, especially if they let inflation run after. It'd an effective default/jubilee/whatever. But who is going to buy it, the Fed I guess? Maybe they'll make their pension finds buy it? Where should we look for evidence of this starting to happen?

Just did the sum on that: 1.22% interest on 25 Tn is only 305bn. A drop in the ocean for Uncle Sam.

Edit:

According to this, the interest was only 375bn last year?! So I'm guessing they are doing all the time, bringing it down little by little, auction by auction.

 penny really, really drops! I can see now they are absolutely going to do what DB said. Get this number down as low as possible, locking in a low coupon (already only 8.5% of outlays) and letting inflation destroy the principal. If this line of thinking is correct, the inflection point is when the stop selling 30y bonds, not start. People go on and on and on about the US debt, but the amount of debt does not matter, only the cost of servicing it does. And if you can get a 30y fix on it, forget it. If they need to print another 13 Tn, they just need to get the 30yr down a bit more. It was at 0.84% a few months ago. Not a problem at all, is it? 

Pension fund managers must have collective insanity. It they are mandated to do this, they should quit.

Sorry, rambling again. But helps clarify thinking.

Excellent post.

So it looks pretty locked in that loading up on cheap debt and then inflating it away is the path being chosen.  I really cannot think of any other way short of a big war to get the world out of the debt bubble.

That means hard assets (the right sort) to the moon.  And companies with / making hard assets will do OK, all things considered.  Financial companies locked into low income streams (such as banks in the US with their 25 and 30 year fixed mortgages at 2%) not so much?  What happened in the last burst of inflation in the 70's?  

Am I right in my memory that commodities did well, miners did well, food companies did well, etc?  Edge spending sectors (such as fashion) did badly?

Looks like pretty shitty for me personally, though.  No debt, no independent assets which will rocket (house is for living in).  Money I am earning now will be worth fuck all in ten years for buying food.

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Alifelessbinary
54 minutes ago, AWW said:

Same here, and always had good service. But since March, they don't seem to have much stock at all (last time I tried to buy 2020 Brits off them, they had a whole 49 in stock) and the prices are on the high side.

Agreed, they went from being one of the cheapest places to quite expensive. A year or two back they had a huge variety of stock, but like most of the whole sellers their supply of physical was squeezed after March. 

Through sheer luck I picked up all my physical allocation in 2015 and 2017. The only thing I’m buying now is a few Queens Beast to complete the collection. 

Gold I’ll continue to pick up a couple Of sovereigns every quarter. Who knows where gold will end up but sovereigns do have the benefit of hiding well in the prison wallet and can buy you out of a tough situation. I’m not sure I’d want to transport silver in the same way!

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26 minutes ago, wherebee said:

That means hard assets (the right sort) to the moon.

Best Performing Real Assets  
     
Following the end of Bretton Woods, the value of money fell and prices rose. But it was the prices of real, tangible assets which benefited the most during inflation, posting returns far in excess of conventional investments like stocks and bonds.
     
The 1970s Boom in Real Assets
     
(Performance of various investments, June 1970 – June 1980,
compound annual rates of return)
     
     
  Return (%) Rank
Oil 34.7 1
Gold 31.6 2
U.S. Coins 27.7 3
Silver 23.7 4
Stamps 21.8 5
Chinese Ceramics 21.6 6
Diamonds 15.3 7
U.S. Farmland 14 8
Old Masters 13.1 9
Housing 10.2 10
Consumer Price Index 7.7 11
Treasury Bills 7.7 12
Foreign Exchange 7.3 13
Bonds 6.6 14
Stocks 6.1 15
Source: Salomon Inc.  
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leonardratso

wow, kodak certainly made its way back quick to its all time high, in 2 days, lol.

no worries, im sure that will be back at $2 in a few months. Would have been a hell of a ride for such a shit share though eh.

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7 minutes ago, leonardratso said:

wow, kodak certainly made its way back quick to its all time high, in 2 days, lol.

no worries, im sure that will be back at $2 in a few months. Would have been a hell of a ride for such a shit share though eh.

It is quite something, isn't it?

image.png.9c32bd0112fc3fcac346a71dc7acaf0d.png

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49 minutes ago, Alifelessbinary said:

Agreed, they went from being one of the cheapest places to quite expensive. A year or two back they had a huge variety of stock, but like most of the whole sellers their supply of physical was squeezed after March.

They do have a very nice 1kg silver proof Red Dragon QB in stock, which I keep trying to tell myself is an expensive ornament rather than an investment. I really should take it out of my cart.

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