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

[Loki]

Just now, Knickerless Turgid said:

Having sold out at $24 a few months ago, I shall be sore!

Will this lead to a light being shone on the wider PM miners sector?

I think so.  David Hunter's run up to $2300 gold $35 silver sounds legit, followed by a low as people sell everything.

[wherebee]

Just now, Loki said:

I think so.  David Hunter's run up to $2300 gold $35 silver sounds legit, followed by a low as people sell everything.

A contact of mine just tried to sell a kruger in the UK to a dealer last week.  They offered 5% below spot, so he walked away.  I must point out to him that at some point there will be a top and that 5% might seem small beans.

[JMD]

1 hour ago, wherebee said:

I knew some pretty senior police guys back in the 90's/00's in the UK who were proper collar takers.  They all retired/left after being passed over for promotions where a soyboy or a ladyee got it despite less experience at the coalface.

diversity, innit.

Yes, and those Soyboys in blue (actually now back!?) have been joined by the latest incarnation of virtue-signaling performance artists - the Kneeler-Squealers. Its pathetic really. Then again even F1 has been 'taking-the-knee', although i note that 8 out of the 22 drivers refuse to do this. 

[Loki]

5 minutes ago, wherebee said:

A contact of mine just tried to sell a kruger in the UK to a dealer last week.  They offered 5% below spot, so he walked away.  I must point out to him that at some point there will be a top and that 5% might seem small beans.

Depends how long he's planning to keep it.  My physical is a long term hold for the end of the decade fun and games

[M S E Refugee]

7 minutes ago, Loki said:

I think so.  David Hunter's run up to $2300 gold $35 silver sounds legit, followed by a low as people sell everything.

I listened to him on Palisade Radio.

Would you be prepared to trade his thesis or just let things ride?

I'm tempted.

[Loki]

Just now, M S E Refugee said:

I listened to him on Palisade Radio.

Would you be prepared to trade his thesis or just let things ride?

I'm tempted.

I am, got a load of CFDs open on trading 212.  Mostly all green.  If it even gets to $30 that will be a nice little bonus.

What I will probably do is sell and then put that in a proper Bullionvault account to complement my physical.  (Eggs, basket, etc)

[JMD]

13 hours ago, sancho panza said:

Didn't realsie @DurhamBorn had such a strong Frecnh accent-death of the 60/40 portfolio,inflation etc etc

This one from Macrovoices really is straight from this thread.If I could advise worth the full lsiten if you have time and also well worth registering to access the chart package which runs alongsdie the interview.I have done a precy for the time poor,but it doesn't do the guy jsutice.

Ticks so many boxes from thsi thread nad particualrly interesting to see this guy discussing generational inequity being at the root of political instability .

I've said before that the one size fits all inflation measures we use covers all manner of ills, in terms of not showing how different income or age deciles suffer different experiences of the same economy.soemthing that echoes with my experience of watching the young kids coming through at work carrying £50k student debt,35 year mortgages,high rents etc etc

https://www.macrovoices.com/875-macrovoices-232-vincent-deluard-the-nuclear-winter-of-60-40-portfolio

The Nuclear Winter of the 60/40 Portfolio

SP, thanks, another interesting macrovoices podcast as usual. Are you planning on doing any of those gold/silver covered calls that they talk about at end of their podcast? I ask only because i seem to recall you talking about maybe learning options trading in the near future?

I guess you need slv, which we don't have in the UK. But it would seem (to the naive/gullable me ?!?) that for those silver investors (many on here i think) that say also held a sizeable chunk of slv, trading its volatility over the next say 5 year period could be a very smart thing to do. Carries risk of course, but i understand that 'covered calls' (actually owing the share option) doesn't cost much if setup correctly.    

[Castlevania]

1 hour ago, Cattle Prod said:

It's a real shame. I sound like an old git when I say "it wasn't like that in my day", but thats only because it has changed so much in a relatively short time.

Where I grew up, coppers were big country boys. They had a height minimum of 5'10", which was tall 35 years ago. I assume thatd be discrimination now? They were unarmed, but by God you'd fear them. We were all taught to speak to them very respectfully, lest you get a clip around the ear, and this policy had the full support of parents and the community. Can you imagine that?! My Dad would ask them to put me in jail for the night for various minor infractions 😅. And if you didn't speak nicely to a female copper they'd all come round and lamp you. The motorcycle cops were proper nutters for some reason. On the sharper end of their jobs, they had to deal with paramilitaries, unarmed. They were tough, and respected.

This hobbling/defunding/cutting and lack of respect for the police is very alarming to me. I can stomach looking at war zone carnage on the news, but I had to turn off watching them kneel (or being made to kneel by their gimp bosses). The look on their faces. It just makes me want to retrench more. I don't expect much for my taxes, but police is one if then. I'd say your brother in laws view is not unusual and I don't blame him. There is a social contract being broken here, and it's going to be part of the next macro cycle I think. Think crime, property, urban decay, inequality. If the bribes to not go out on the rob (benefits) get cut, as they need to, where are the coppers going to be to stop it? I agree with DB that tax credits in particular are a major policy error. Massive. The options are: a) BOE keeps supporting the govt deficit. This amounts to printing money for benefits. Bye bye sterling. b) Huge infrastructure and manufacturing jobs investement, get those 25k a year jobs back, give people on benefits a bit of pride, and sort out apprenticeships, c) Cut benefits, raise taxes, continue castrating the police and watch the citizens take the law into their own hands.

I think we'd all prefer option b), but that takes leadership. After watching them bungle the coronavirus response so badly, I don't see it, unfortunately. I think the UK has produced good leaders out of a shitshow (Churchill, Thatcher etc), so we may have to have some of the other options first. a) is inflationary, c) is deflationary, and per this thead, we'll probably get both.

I’ve been thinking whether large parts of New York and London that have been gentrified over the past few decades will end up being the dumps they were in the 1970’s and 1980’s.

[JMD]

1 hour ago, Cattle Prod said:

It's a real shame. I sound like an old git when I say "it wasn't like that in my day", but thats only because it has changed so much in a relatively short time.

Where I grew up, coppers were big country boys. They had a height minimum of 5'10", which was tall 35 years ago. I assume thatd be discrimination now? They were unarmed, but by God you'd fear them. We were all taught to speak to them very respectfully, lest you get a clip around the ear, and this policy had the full support of parents and the community. Can you imagine that?! My Dad would ask them to put me in jail for the night for various minor infractions 😅. And if you didn't speak nicely to a female copper they'd all come round and lamp you. The motorcycle cops were proper nutters for some reason. On the sharper end of their jobs, they had to deal with paramilitaries, unarmed. They were tough, and respected.

This hobbling/defunding/cutting and lack of respect for the police is very alarming to me. I can stomach looking at war zone carnage on the news, but I had to turn off watching them kneel (or being made to kneel by their gimp bosses). The look on their faces. It just makes me want to retrench more. I don't expect much for my taxes, but police is one if then. I'd say your brother in laws view is not unusual and I don't blame him. There is a social contract being broken here, and it's going to be part of the next macro cycle I think. Think crime, property, urban decay, inequality. If the bribes to not go out on the rob (benefits) get cut, as they need to, where are the coppers going to be to stop it? I agree with DB that tax credits in particular are a major policy error. Massive. The options are: a) BOE keeps supporting the govt deficit. This amounts to printing money for benefits. Bye bye sterling. b) Huge infrastructure and manufacturing jobs investement, get those 25k a year jobs back, give people on benefits a bit of pride, and sort out apprenticeships, c) Cut benefits, raise taxes, continue castrating the police and watch the citizens take the law into their own hands.

I think we'd all prefer option b), but that takes leadership. After watching them bungle the coronavirus response so badly, I don't see it, unfortunately. I think the UK has produced good leaders out of a shitshow (Churchill, Thatcher etc), so we may have to have some of the other options first. a) is inflationary, c) is deflationary, and per this thead, we'll probably get both.

CP, great post (i say that because maybe i agree with it! Confirmation bias at al!). But in response to the highlighted bit above i'd say that that is not an example of a 'policy error'... I think it's a bit more challenging than that. I accept this is not a political forum, but i post this merely to state the type of political control and/or freedom (i hope the latter) i think happening over the next 20 years. And these ideas do inform my investment decisions.

Anyway for me, I have eventually come (dragging and screaming i might add) to the conclusion that democracy itself is on trial. My favored (dream?) solution is a form of libertarianism with secured individual rights via blockchain tech (it may sound wild, but this is becoming 'a thing', although i have yet to find a decent thread or website that discusses these topics in detail). I even think many of the hot 'moral arguments' infecting todays world could be reduced to a mere simmer if individual rights were boosted at the expense of the agitprop activists.

However, I do admit it is dispiriting when hope comes in the form of these types of ideas, oh and looking forward to Neil Howe's coming sequel to The Fourth Turning, out later this year apparently. Interesting times.

[JMD]

1 hour ago, JMD said:

Yes, and those Soyboys in blue (actually now back!?) have been joined by the latest incarnation of virtue-signaling performance artists - the Kneeler-Squealers. Its pathetic really. Then again even F1 has been 'taking-the-knee', although i note that 8 out of the 22 drivers refuse to do this. 

...meant 'black' (not back) of course

[JMD]

13 minutes ago, Cattle Prod said:

You can get SLV options with Saxo, I assume with IB. I have a few.

CP, that's good to hear. After i get fully invested i plan to investigate this area. The 'problem' i'd have i guess is that as my silver investments are all in my sipp/isa, it would mean selling them and then buying them again but on say the Saxo trading platform; and that would mean losing my sipp/isa tax advantages? I don't know nearly enough about these things yet as you can tell.  

[MvR]

1 hour ago, JMD said:

SP, thanks, another interesting macrovoices podcast as usual. Are you planning on doing any of those gold/silver covered calls that they talk about at end of their podcast? I ask only because i seem to recall you talking about maybe learning options trading in the near future?

I guess you need slv, which we don't have in the UK. But it would seem (to the naive/gullable me ?!?) that for those silver investors (many on here i think) that say also held a sizeable chunk of slv, trading its volatility over the next say 5 year period could be a very smart thing to do. Carries risk of course, but i understand that 'covered calls' (actually owing the share option) doesn't cost much if setup correctly.    

A Covered Call is a two leg position. You buy ( or already own ) the stock, and sell a call against it.  You have the same risk to the downside as just owning the stock, your upside is limited because your stock can be called away, but statistically, because SLV is more likely to have false breakouts and pullback along the way,  the odds are you'll do better than just owning the stock, or buying a call option.

The only problem is you can't buy SLV directly, but you can hold it if you get "put" the stock after having sold a put option which gets exercised.

And conveniently, a short put option has exactly the same P&L and response to price movement as a covered call. If your short put is exercised and you end up with some SLV, you can sell a covered call against it.

A simpler approach though, which saves on commission, margin, and doesn't involve owning the stock, would be to sell an At-The-Money put option every week, and buy it back when it's worth half what you sold it for, or it's about to expire. ( i.e. before it gets exercised ) Then sell another for the next week. Rinse / repeat.  

If you have a strong directional opinion, you can sell the put at a higher strike if you're bullish, or a lower strike if you're bearish. ( or use a more bearish strategy )  

If you think SLV could be peaking, but want to push for more without risking being caught in a massive correction, you could buy a put option a few strikes below the one you sold limiting downside, but reducing profit potential of course.

[sancho panza]

2 hours ago, AWW said:

To quote my brother-in-law, 18 months away from retiring from the Met, you would have to be a mug to join the police now. Even moreso if you don't tick any diversity boxes.

The pay to shit ratio in London is off the scale.We're 9 meals from utter chaos in this country and the political class are fiddling away.

And these days your back up when you're getting filled in isn't some ex para with tours of Afghan/Iraq under his belt but someone with a degree msot likely.I pity the police man and woman in this video.Thye shouldn't be working as unprotected as they are.

 

[sancho panza]

2 hours ago, Loki said:

I think so.  David Hunter's run up to $2300 gold $35 silver sounds legit, followed by a low as people sell everything.

hattip kaplan

great interview here-reasons to own gold exposure.

As ever tho,importnant to remember MvR's excellent advice a few pages back that if you're not a trader ,jsut sit tight in the Bull,not getting back in could be a real risk.

https://www.kitco.com/news/2020-08-12/-Last-great-buying-opportunity-Gold-price-can-dip-below-1-700-this-year-before-resuming-its-path-towards-15K-Goehring-Rozencwajg-Associates.html

(Kitco News) After taking a major step back from its massive summer rally with a temporary drop below $1,900 an ounce on Tuesday, gold attempted to recover. But the price pullback might not be over, according to Goehring & Rozencwajg Associates managing partner Leigh Goehring, who is not ruling out seeing $1,500-$1,700 levels this year.

A corrective pullback was widely expected as gold prices rose incredibly fast in a very short period of time. The precious metal managed to breach its 2011-high of $1,920 an ounce, rise above $2,000 and make new record highs above $2,050 an ounce all in under three weeks.

At the time of writing, December Comex futures were trading at $1,926.70, down 1.01% on the day.

The price correction seems to have some weight behind it and gold could retreat as far as $1,700 or even $1,500 this year before reversing and hitting new record highs above $2,000 an ounce. 

Perspective is everything when it comes to price drops, Goehring told Kitco News on Tuesday, noting that this pullback in particular might represent “the last great buying opportunity.”

“Prices could continue to see a pullback because of quickly receding fears of the COVID-19 pandemic. It is not uncommon for bull market moves like this. This bull market started at $1,050 and got as high as $2,050. To give back 50% of it, you would have to pull all the way back to anywhere between $1,500 to $1,700 in gold and below $20 in silver,” Goehring said.  

This massive price drop could strike any time this year or at the beginning of 2021, stated the managing partner. “From then on, the gold bull market goes crazy,” Goehring said. 

Gold is currently on the second leg of its bull market, Goehring described. “The gold bull market started all the way back in 1999-2001, when gold was $250. Gold then peaked at $1,920 in 2011, after which it pulled back by 45%, before climbing up and hitting new record highs this year.”

And as economy begins to strengthen this year and more people return to work, the gold buyers who bought based on COVID-19 fears will become sellers. 

“The gold price is going to be lower at the end of the year than it is today … This would be a tremendous buying opportunity because I'm a firm believer that the next leg is going to be driven not by COVID-19 fears but by inflationary problems,” Goehring said. “So, wait for the next several months, use any weakness you see in this pullback to accumulate.”

In terms of how high the next rally will take us? Goehring projects for gold to climb as high as $15,000 an ounce by the end of this decade. 

“Based on our research, gold often trades at a certain relative size to the Federal Reserve’s balance sheet. Using this type of analysis — the amount of gold outstanding, specifically how much gold the U.S. government holds, relative to the size of Federal Reserve’s balance sheet, you can get anywhere between $10,000-$20,000,” Goehring explained. “Our target is between $10,000-$15,000. That will happen at the end part of this coming decade — 2027-28.”

One of the major drivers to take gold there will be inflation, according to Goehring. 

“The gold market is giving us a warning that the deflationary environment that we’ve been experiencing for 40 years is coming to a close and a new era, which is going to include inflation, is coming upon us,” Goehring noted. 

This summer’s gold rally is sending a clear message to investors: the financial landscape is changing and inflation, along with currency debasement, will now be part of the picture. 

“What's going to happen with inflation is that it's going to be driven by black swan events. It might be the dollar weakening or it will start with commodity inflation. It could come out of nowhere and set off an inflationary problem that will be very difficult to get in control,” Goehring warned. 

The managing partner drew an interesting comparison between the 1970s and today. “Through the late 1960s and early 1970s, because of the Vietnam war and huge government spending, a lot of credit was created. It was like laying tinder on the forest floor, just waiting for spark to catch fire. And we've done the same thing today with massive expansions of both monetary and fiscal policies. There’s a huge amount of tinder on the floor and all it needs is a spark and it is going to catch fire just like it did in the 1970s,” he said. 

And the more money the U.S. and other governments print, the harder it will be to rollover the debt, especially if inflation starts to accelerate.  

“As the bond market begins to incorporate longer inflationary expectations, it's going to end up impacting the U.S. government's finances, which is going to bring about a whole set of new problems,” Goehring said. “There is going to be increased focus on the financial state of the U.S. government.”

With all of this in mind, gold will be viewed as a solution by most investors. “If you think about it, almost every financial asset is somebody else's liability, including all the bonds that are outstanding. And gold will be perceived as a financial asset that is no one else’s liability. And that itself will be another huge driver of this global market,” Goehring pointed out. 

In the next several years, Goehring sees the next leg of the bull market really taking shape. “[There will be a] huge amount of speculative and hyper-speculative interest,” Goehring said. 

Western investors will be playing a key role this time around as well after largely missing prior to this. “The first leg of the gold bull market was driven almost exclusively by Eastern investors. The Chinese investor and the Indian investor were the ones who realized that gold as an asset class was incredibly cheap … From 2000 to 2008, most Western hedge funds were short gold because the central banks were selling. That kept the Western investor out,” Goehring explained. “This leg of the bull market, we had no central bank selling and in fact central banks were buyers. And big Western investment advisors are now advising people to buy gold.”

 

1 hour ago, Castlevania said:

I’ve been thinking whether large parts of New York and London that have been gentrified over the past few decades will end up being the dumps they were in the 1970’s and 1980’s.

I think that's quite likely CV.Detroit was once home the finest of Masonic halls.Zero hedge years ago had a great gallery of photo's of the sad decline as it featured the same houses with a few years in between and you could watch the decline in slow mo.

I think teh big inner cities of London and Birmingham are most at risk of empying out

[sancho panza]

2 hours ago, Cattle Prod said:

It's a real shame. I sound like an old git when I say "it wasn't like that in my day", but thats only because it has changed so much in a relatively short time.

Where I grew up, coppers were big country boys. They had a height minimum of 5'10", which was tall 35 years ago. I assume thatd be discrimination now? They were unarmed, but by God you'd fear them. We were all taught to speak to them very respectfully, lest you get a clip around the ear, and this policy had the full support of parents and the community. Can you imagine that?! My Dad would ask them to put me in jail for the night for various minor infractions 😅. And if you didn't speak nicely to a female copper they'd all come round and lamp you. The motorcycle cops were proper nutters for some reason. On the sharper end of their jobs, they had to deal with paramilitaries, unarmed. They were tough, and respected.

This hobbling/defunding/cutting and lack of respect for the police is very alarming to me. I can stomach looking at war zone carnage on the news, but I had to turn off watching them kneel (or being made to kneel by their gimp bosses). The look on their faces. It just makes me want to retrench more. I don't expect much for my taxes, but police is one if then. I'd say your brother in laws view is not unusual and I don't blame him. There is a social contract being broken here, and it's going to be part of the next macro cycle I think. Think crime, property, urban decay, inequality. If the bribes to not go out on the rob (benefits) get cut, as they need to, where are the coppers going to be to stop it? I agree with DB that tax credits in particular are a major policy error. Massive. The options are: a) BOE keeps supporting the govt deficit. This amounts to printing money for benefits. Bye bye sterling. b) Huge infrastructure and manufacturing jobs investement, get those 25k a year jobs back, give people on benefits a bit of pride, and sort out apprenticeships, c) Cut benefits, raise taxes, continue castrating the police and watch the citizens take the law into their own hands.

I think we'd all prefer option b), but that takes leadership. After watching them bungle the coronavirus response so badly, I don't see it, unfortunately. I think the UK has produced good leaders out of a shitshow (Churchill, Thatcher etc), so we may have to have some of the other options first. a) is inflationary, c) is deflationary, and per this thead, we'll probably get both.

super post.sums up my feelings.

I think it's going to take a huge amount of social/political upheavel before the public are ready to accept that the free money has limits.We moved out of leicester(where I'd grown up and lived for 45 years) because of the looming problems I could see coming.

Working as I do,I see first hand what the cops have to deal with,how underarmed and under manned they are and I find it simply breath taking that we're spending 20% of the Police budget on pensions.Problrem is that the Oxbridge elite in charge have zero-and I mean zero-understanding of the problems be they red or blue team.

Last decent leader was Maggie. and she led a party that had a lot of idiots in it.

[leonardratso]

im loving this t212 account, averages are real averages for a change, and small punts are worth it now.

 

[wherebee]

40 minutes ago, sancho panza said:

super post.sums up my feelings.

I think it's going to take a huge amount of social/political upheavel before the public are ready to accept that the free money has limits.We moved out of leicester(where I'd grown up and lived for 45 years) because of the looming problems I could see coming.

Working as I do,I see first hand what the cops have to deal with,how underarmed and under manned they are and I find it simply breath taking that we're spending 20% of the Police budget on pensions.Problrem is that the Oxbridge elite in charge have zero-and I mean zero-understanding of the problems be they red or blue team.

Last decent leader was Maggie. and she led a party that had a lot of idiots in it.

One huge difference between the 1980's and now is that in the political classes in the 1980's you had a lot of people who had done either national service, or actually fought in a war.  They therefore had a good understanding of what a fight really was, what happens when things turn to shit and, most importantly, how big muscly men are fucking critical for getting things done.

You think people like Osborne or Abbott have ever been in a real fight?  Or seen someone killed?

Hence across all political classes for 40 years a willingness to let diversity and weak, small, female bodies into roles than really need thugs.

 

There will be a hell of a reckoning when it comes.  As per my other posts, if you are in a mult-cultural area in the west, you need to move.

[MrXxxx]

3 hours ago, wherebee said:

A contact of mine just tried to sell a kruger in the UK to a dealer last week.  They offered 5% below spot, so he walked away.  I must point out to him that at some point there will be a top and that 5% might seem small beans.

So its not just people selling houses then? :-)

[Loki]

Timely tweet

 

[wherebee]

33 minutes ago, MrXxxx said:

So its not just people selling houses then? :-)

?

[BurntBread]

3 hours ago, Cattle Prod said:

This hobbling/defunding/cutting and lack of respect for the police is very alarming to me. I can stomach looking at war zone carnage on the news, but I had to turn off watching them kneel (or being made to kneel by their gimp bosses). The look on their faces. It just makes me want to retrench more. I don't expect much for my taxes, but police is one if then. I'd say your brother in laws view is not unusual and I don't blame him. There is a social contract being broken here, and it's going to be part of the next macro cycle I think. Think crime, property, urban decay, inequality. If the bribes to not go out on the rob (benefits) get cut, as they need to, where are the coppers going to be to stop it?

Home security sector, e.g. NYSE:ADT? 

I'm guessing a fair amount of this sector is now technology- and internet-driven, so will end up being owned by the big tech giants. More traditional firms might therefore end up being left behind, while the big tech companies might already be overvalued for other reasons. However, the physical side of home security: locks, screens, bullet-proof glass (!?), cameras, alarms etc. might be somewhat separate.

Sorry, I have no information about this area, but might be worth contemplating if someone here does!

[Loki]

5 minutes ago, BurntBread said:

Home security sector, e.g. NYSE:ADT? 

I'm guessing a fair amount of this sector is now technology- and internet-driven, so will end up being owned by the big tech giants. More traditional firms might therefore end up being left behind, while the big tech companies might already be overvalued for other reasons. However, the physical side of home security: locks, screens, bullet-proof glass (!?), cameras, alarms etc. might be somewhat separate.

Sorry, I have no information about this area, but might be worth contemplating if someone here does!

I read somewhere that the South African farm raiders had military spec mobile signal jammers etc.

There's some things money will do you no good for sadly. Starvation (As in world wide crop failures), bad illness, and 'life or death'(?) security spring to mind. (Unless you're talking private bunker levels of wealth).  A Redcare system that sends a diversity hire round to issue a crime reference number? Pointless.

[Castlevania]

3 minutes ago, BurntBread said:

Home security sector, e.g. NYSE:ADT? 

I'm guessing a fair amount of this sector is now technology- and internet-driven, so will end up being owned by the big tech giants. More traditional firms might therefore end up being left behind, while the big tech companies might already be overvalued for other reasons. However, the physical side of home security: locks, screens, bullet-proof glass (!?), cameras, alarms etc. might be somewhat separate.

Sorry, I have no information about this area, but might be worth contemplating if someone here does!

The share that must not be named sell a security camera that links to your mobile

[Errol]

On ‎14‎/‎08‎/‎2020 at 23:14, M S E Refugee said:

https://www.google.com/amp/s/ca.finance.yahoo.com/amphtml/news/warren-buffett-buy-barrick-gold-201428776.html

Strange move from someone who doesn't see any value in Gold.

He does know - his Father would have told him:

"I will not take time to review the history of paper money experiments. So far as I can discover, paper money systems have always wound up with collapse and economic chaos."

- Congressman Howard Buffett, 1948 (father of Warren Buffett)

[Hardhat]

Well, the market has decided that PM miners are sexy again. Lots of blue today. Thanks uncle Warren!