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


spunko

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M S E Refugee
18 minutes ago, wherebee said:

I can't imagine anything more insane than buying or selling precious metals via ebay, and using paypal for settlement on top.

Mainly because Hatton Garden Metals which is one of the best Bullion dealers will currently give you £17.31 for a Silver Britannia and on eBay you will receive around £30.

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44 minutes ago, M S E Refugee said:

Mainly because Hatton Garden Metals which is one of the best Bullion dealers will currently give you £17.31 for a Silver Britannia and on eBay you will receive around £30.

well, yes, but if one trade in 4 goes bad you're not making any more....

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1 hour ago, wherebee said:

I can't imagine anything more insane than buying or selling precious metals via ebay, and using paypal for settlement on top.

Then I am insane. I've bought both gold and silver this way. The secret is to buy from someone with 100% feedback gained over a long time. I only bought via buy it now and always contacted the seller first to engage in some dialogue. With two people I then bought outside ebay for subsequent purchases. No real price gains over Chards/HGM but it did allow me to clear out the positive balance in my PayPal account. Not buying now though and would only do so if there was a big pull back in prices. 

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M S E Refugee
16 minutes ago, wherebee said:

well, yes, but if one trade in 4 goes bad you're not making any more....

I still think that Bullionvault is the best compromise when it comes to owning Silver in the UK as you will get a poor offer from a Bullion dealer or potentially get ripped off on eBay.

 

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1 hour ago, M S E Refugee said:

Mainly because Hatton Garden Metals which is one of the best Bullion dealers will currently give you £17.31 for a Silver Britannia and on eBay you will receive around £30.

Chards appear to be offering £21.75 for a britannia.

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On 08/08/2020 at 23:44, sancho panza said:

I think we're in a long bull to mid 20's. Having said that I think there's a trade on to sell your PM expsoure ahead of the BK and then buy it back for 30% of what you sold....just trying to time it will be tough 

SP, that's interesting because i am looking to at least top-slice my own pm miners. But when you estimate buying back for 30% of the sell price, do you mean you expect prices to drop 70%? Is that both gold/silver miners and the physical, i suppose they would (logically?) fall in (sort of) lock-step?   

I guess a lot depends on how high/quickly prices rise in the near term, dollar rate (<85 which is i believe one of your personal parameters that you mentioned in a recent post)... so there are many variables, and of course i don't expect you to have a crystal ball. However, i know you have been looking at this possible pm trade for a long time, so very interested in your risk/reward calculation here.   

(btw, welcome back!)

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M S E Refugee
2 minutes ago, Sasquatch said:

Chards appear to be offering £21.75 for a britannia.

That is pretty good,

I still don't like the premiums and VAT associated with buying Silver in the UK, its a lot to claw back before you make a profit.

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16 minutes ago, M S E Refugee said:

I still think that Bullionvault is the best compromise when it comes to owning Silver in the UK as you will get a poor offer from a Bullion dealer or potentially get ripped off on eBay.

 

MSE, not specifically directing this question at you (as i don't think this was your point). But others it seems to me - could be wrong - have alluded that selling PM's on eBay as maybe not being sensible thing... Perhaps showing my naivety here, but how could you get ripped of if you were the one selling?

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9 minutes ago, JMD said:

MSE, not specifically directing this question at you (as i don't think this was your point). But others it seems to me - could be wrong - have alluded that selling PM's on eBay as maybe not being sensible thing... Perhaps showing my naivety here, but how could you get ripped of if you were the one selling?

What if they go missing in transit?  Or the customer claims they never arrived?  or they claim you sold a fake?

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1 hour ago, M S E Refugee said:

Mainly because Hatton Garden Metals which is one of the best Bullion dealers will currently give you £17.31 for a Silver Britannia and on eBay you will receive around £30.

Or £16 if you go to my local gold dealer. But you do get cash.

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9 minutes ago, wherebee said:

What if they go missing in transit?  Or the customer claims they never arrived?  or they claim you sold a fake?

The first two can be mitigated using tracked insured postage. The last one is possible although I'm not aware of any britannia fakes out there? Probably more risk with sovereigns as there are plated versions but they are obviously over sized.

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M S E Refugee
40 minutes ago, JMD said:

MSE, not specifically directing this question at you (as i don't think this was your point). But others it seems to me - could be wrong - have alluded that selling PM's on eBay as maybe not being sensible thing... Perhaps showing my naivety here, but how could you get ripped of if you were the one selling?

If you had certain 1oz Silver Bars such as Johnson Matthey,APMEX and Scottdale Silver there nothing to stop a buyer taking the real bars off a seller then deciding to return you their fake Chinese versions claiming you sent the buyer fakes.

They would get their money back and keep the real Silver.

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sancho panza
3 hours ago, JMD said:

SP, that's interesting because i am looking to at least top-slice my own pm miners. But when you estimate buying back for 30% of the sell price, do you mean you expect prices to drop 70%? Is that both gold/silver miners and the physical, i suppose they would (logically?) fall in (sort of) lock-step?   

I guess a lot depends on how high/quickly prices rise in the near term, dollar rate (<85 which is i believe one of your personal parameters that you mentioned in a recent post)... so there are many variables, and of course i don't expect you to have a crystal ball. However, i know you have been looking at this possible pm trade for a long time, so very interested in your risk/reward calculation here.   

(btw, welcome back!)

Cheers JMD,been away in Switzerland for a holiday seeing friends,and was that busy catching up and making sure the kids didn't wreck our friends hosue,I ended up witha lot of reading to catch up on.

My thesis...we'll see $ weaken here,gold and commodities move higher,most importantly we'll see supply squeeze on oil which added to weaker USD$ will see oil rise as we head into the BK.High oil prices will contribute to wider inflationary concerns/reduced scope of movment for CB's/broader defaults adding to debt deflation via drops in aggregate demand and corporate bond market yields moving hihger.

BK -as I currently see it-will consist of a debt defaltion in credit marekts running alongside price inflation in commodities as currencies weaken

AS BK looms,commodities will drop and everyone will head into teh USD for one l;ast time(I reference here an excellent discussion a few hundred pages back where the conclusion was that the USD had one last run in the sun-and I agree with that thesis).This period will liekly feature the motehr of all banking crises.

Ergo-the 360 trade as I call it becuase my aim is to come full circle-conssits of selling commodities,then buying UST's or USD cash,hopefully watch your commodity stocks drop and then repurchase with your cash

BK will be signified as proven to me after 60%-70% drop in Fang stocks hattip @Cattle Prod. No 60% off then the BK hasn't happened

Timings

First of all,I reserve the right to not sell a thing if I can't see a clear strategy/likelihood of getting our goldies/oilies/potash back.The Plan B trade is to jsut sittight

I don't have a crystal ball,and prefer triggers which I've already listed ie they'll make me feel like a bottom might be in/coming so DXY<85,UST yields higher,GSR sub 45(on monthly chart).Key thing is that I want to be sure we're approaching a bottom in the dollar.without that,I'll stick to plan B.

Last thing I want us to be is stranded in GBP/USD as gold moves to Errol's selling point.

That's the main thing I'd stress is that we're facing a huge test of contral bank omnipotence(and I think they're going to lose),you drop your PM exposure at your peril imho.

 

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sancho panza

@JMD this wolf st post sums up the structural issues a lot of CB's are going to face.really does.they're eitehr genius traders or they've made some walloping errors over the last decade .

Worth noting the SNB is privately owned.

Having recently been there,I can affirm that a collapse in the Swissie will be a real shock to the locals.

https://wolfstreet.com/2020/08/05/top-40-us-stocks-at-the-swiss-national-bank-gains-bought-sold-and-how-the-snb-can-keep-that-racket-going/

U.S. Stocks at the Swiss National Bank Balloon to Record: Gains, Bought, Sold, and How it Keeps that Racket Going

by Wolf Richter • Aug 5, 2020 • 147 Comments

As long as the SNB can bamboozle global speculators into chasing after the incredibly watered-down tiny Swiss franc, it can continue to print money to buy up global assets at essentially no cost.

By Wolf Richter for WOLF STREET.

The Swiss National Bank – now a fund that prints its own money to buy global assets denominated in foreign currency – doesn’t disclose its detailed holdings. But in the US, it has to disclose on a quarterly basis its holdings of US-traded stocks and American Depositary Receipts (ADRs) of foreign companies, which it did this morning with its Q2 SEC filing.

The SNB Top 40.

Of its total holdings of $118.3 billion at the end of June, $51.9 billion were concentrated on its Top 40 stocks and ADRs.

 

Apple moved into the top spot, pushing Microsoft down into second place. Amazon remained in third place, Alphabet (class A and C shares combined) in fourth place, and Facebook in fifth place.

Speculators in Swiss francs enable the SNB to run this racket.

All kinds of folks think that buying Swiss francs (CHF) is sort of an insurance policy against devaluation of their own currency. Others buy the CHF for pure speculation. The Swiss economy is tiny, and the Swiss franc is a tiny currency, but there is enormous global demand for the CHF which drives up its value against other currencies, such as the euro, dollar, or yen. Ostensibly, the SNB attempts to cap the exchange rates by creating new CHF and selling them to buy assets denominated in other currencies.

Total assets on the SNB’s balance sheet amounted to CHF 835 billion in June. Switzerland’s nominal GDP was CHF 700 billion in 2019. So the SNB’s total assets amount to 119% of 2019 GDP. How big is this?

The Fed’s gargantuan balance sheet currently measures $6.95 trillion. That’s about 31% of 2019 nominal GDP:

  • The SNB’s assets are proportionately speaking nearly four times the size of the Fed’s assets.
  • If the Fed’s balance sheet were 119% of 2019 nominal GDP, it would amount to $26 trillion instead of $6.95 trillion.

That’s how proportionately huge the SNB’s balance sheet is.

To keep this racket going, the SNB must make the world believe by hook or crook that the CHF can only go up, that the SNB itself is struggling valiantly but vainly to keep a lid on the rise, that it will ultimately lose the battle, and that the CHF will always rise against other currencies. That’s what the SNB must make the world believe in order for this racket to continue.

And this scheme then encourages speculators and others to pile into CHF and actually drive up its value, so that the SNB can then print an unlimited amount of CHF and hand them to those speculators in exchange for assets denominated in other currencies, such as Apple shares.

As long as global speculators believe in this racket, the SNB can keep it going. But if these global investors realize what the SNB is actually doing – namely, printing CHF, thus watering down the CHF – and if they then flee the CHF and sell it, its value would drop sharply against other currencies, and after a while the SNB would be forced to end or even reverse the program to save the currency.

But as long as the SNB can fool global speculators into chasing after that incredibly watered-down tiny currency, thus creating insatiable demand, it can continue to print the currency to buy up assets around the globe at essentially no cost.

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Democorruptcy
2 hours ago, Chewing Grass said:

Have the gdp figures been fessed up yet, was supposed to be 9:30 this morning.

The NIESR was originally scheduled for 9:30am today but now shifted to Wed. The ONS 2nd quarter that puts us officially in recession (those 3 months individually were -5.8%, -20.4% and +1.8%) is 7am Wed.

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Democorruptcy
On 08/08/2020 at 23:23, sancho panza said:

You're right K.I think there's an overriding imperative with this PM bull to stay spread across a range of stocks(if you can).Ive been burned already in 2018/2019 and have learned the hard way that it takes a lot of study and experience to avoid the obvious dogs.If it's hard to avoid the obvious dogs,then it's even harder to avoid the less obvious ones.There's a reason I spray n pray.History shows I'm a poor stock picker.

As you've said,some of these stocks are going to be throwing off FCF(especailly given how low detbs are across the sector) with $25 silver or $2000 gold.

 

As an alternative to picking stocks I mentioned Sprott & Wisdom Tree up thread.

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leonardratso

hehe, advent PE buying up most of Herpes UK and some of Herpes germany.

kin ell, cant type Her mes without auto correct.

 

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