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

[DurhamBorn]

12 minutes ago, sancho panza said:

yeah,as someone who lived through the tech bubble and sold before the top because of the madness I was seeing,I really appreciate the historical context.

interesting that he cites tight moeny as the root cause of bubbles popping.I've felt for soemtime,this BK will hit when the Fed can no longer print for whatever reason.

I'm not sure it'll take rising rates if increasing default rates restrcit credit creation.

 

Fed is doing everything it can,but it now needs a massive fiscal bolt from government.Fed stated again yesterday they intend to keep rates below inflation.I think thats the cycle plan.Run rates below inflation right along the curve apart from right at the long end.In short its not companies in debt who will suffer (as long as they have free cash flow) its ones who need to expand debt to compete etc.

Bond holders are going to be rinsed,the Fed is even telling them,but they arent listening.

[UnconventionalWisdom]

22 minutes ago, sancho panza said:

interesting that he cites tight moeny as the root cause of bubbles popping.I've felt for soemtime,this BK will hit when the Fed can no longer print for whatever reason.

Yep, probably the case. As the graph a few pages back shows, the market doesn't fear freak events or issues that arise. People just think, ih well the fed/central banks will support this through money printing/lowering interest rates.

Take away those options and we enter uncharted waters.

[UnconventionalWisdom]

9 minutes ago, DurhamBorn said:

Fed is doing everything it can,but it now needs a massive fiscal bolt from government.Fed stated again yesterday they intend to keep rates below inflation.I think thats the cycle plan.Run rates below inflation right along the curve apart from right at the long end.In short its not companies in debt who will suffer (as long as they have free cash flow) its ones who need to expand debt to compete etc.

Bond holders are going to be rinsed,the Fed is even telling them,but they arent listening.

I suppose the governments will think the same, load up on debt over the next couple of years and lock-in the minimal rates. Get set on building and improving tech infrastructure and then not care about rates. If people moan about getting screw due to debt payments they can say they don't care as they sorted out the high unemployment resulting from covid. Also point to improving GDP. 

[kibuc]

21 hours ago, sancho panza said:

One trick is to take out your stake at the doubling point and you're effectively 'in for free'.I did that with Harmony but then sold all our GFI a few weeks back as they were near enough to my price target at $13

That's a very common way to look at things among regular folk, and it's something I cannot agree with. If your pot increases then your winnings is not "free money", it's a reward for the risk you took and by taking that risk you had earned it. 

If you then approach it like you would with a free bet at an online casino or just consider it a throwaway money, you're basically accepting that you're happy with your initial stake remaining your total wealth forever, and everything above it is a "bonus" or "play money".

I say: no matter how much you've stared with and how much you have now, as long as you're still chasing your goal you should be making optimal decisions based on your views of the market, investing goals and timeframes. Just like you shouldn't take unnecessary risk to "make up" when your pot is down, just also shouldn't become loose with your investment decisions if your pot multiplies, unless you've already reached a point where you have more than you wanted to get.

[kibuc]

FUCK THIS NEW LAYOUT AND THE HIDDEN EDIT BUTTON
 

[DoINeedOne]

Looking into Edward Chancellor not much online interview wise

But from 2016 still interesting talking about dot com boom, miners and house builders and the money often wasted by them 

 

[Ma2]

22 hours ago, sancho panza said:

One trick is to take out your stake at the doubling point and you're effectively 'in for free'.

I have a few different ways I look at this, and often end up in some kind of analysis paralysis! I list some considerations below, if anyone has a different way of looking at it would be great to add that to my items to look at. Edit; Just seen your post @kibuc

Considerations:

 - Am I investing in the stock for dividends or for capital gains

 - Does the increase take me above my max desired value of the stock as a % of a particular sector and/or my entire portfolio (Concentration Risk)

 - Is there another stock out there at a good price that I believe will outperform the one I hold, or match the performance whilst introducing further diversification either within or outside the sector (Opportunity Cost, Concentration Risk)

 - Do I need to consider other sectors and gradually rotate into them from the one I'm in (Cyclical Risk?)

 Example 1:

William Hill shares have gone up nicely.

If I sell the ladder that doubled then I am forgoing the future dividends from the shares that I've sold.

Sound obvious but when you sell a certain value of shares you're not just reducing your holding in £'s but also in terms of indivdual shares. So if you bought for divis then that is a consideration.

If WH has become too large a holding for me in that sector I can look at another stock in that area that looks good value.

If my gaming sector has got too big then maybe look where there are opportunities in other sectors where I am potentially underweight

Example 2:

GDXJ has gone up massively.

I didn't invest for future divis, I was hoping for some growth

I sell up when a ladder has done well and move it into good value divi stock that's available at the right price, in the right sector.

[Noallegiance]

2 hours ago, DurhamBorn said:

Fed is doing everything it can,but it now needs a massive fiscal bolt from government.Fed stated again yesterday they intend to keep rates below inflation.I think thats the cycle plan.Run rates below inflation right along the curve apart from right at the long end.In short its not companies in debt who will suffer (as long as they have free cash flow) its ones who need to expand debt to compete etc.

Bond holders are going to be rinsed,the Fed is even telling them,but they arent listening.

Do I still get a cheap house?

It's all i give a shit about now, tbh.

[DurhamBorn]

15 minutes ago, Noallegiance said:

Do I still get a cheap house?

It's all i give a shit about now, tbh.

Well they are at 1992 prices here in the north east in many places.Thats nominal.Inflation adjusted probably cheaper than any time in history.Thats the low end terraces of course,but even the nicer 3 bed semis etc are at 2005 nominal,much cheaper inflation adjusted.The south will be much cheaper by the end of the cycle,but it could be inflation adjusted and some nominal.Likely inflation adjusted,down 60%+ by 2030.

[Transistor Man]

On 14/09/2020 at 16:42, JMD said:

 

For Nuclear, companies like: Rolls Royce, Siemens have been mentioned. Are there other companies/ways to invest?               

 

Having said this reactor is a paper design right now, I’ve seen a few things today suggesting the government are very interested. Kicking off some major industrial spending. Perhaps for Wylfa site even. 

https://www.constructionenquirer.com/2020/09/17/mini-nuclear-power-lifeline-for-wylfa-site/

[Chewing Grass]

6 minutes ago, Transistor Man said:

Having said this reactor is a paper design right now, I’ve seen a few things today suggesting the government are very interested. Kicking off some major industrial spending. Perhaps for Wylfa site even. 

https://www.constructionenquirer.com/2020/09/17/mini-nuclear-power-lifeline-for-wylfa-site/

Basically a Submarine Reactor which is stuff RR do already.

[Shamone]

9 hours ago, Panda said:

Just gone head deep into RDSB @ 10.17p

It'll be either crisp sarnies or turkey at Xmas...

 

Nothing wrong with crisp sarnies, eat them every day on my walk home from work. Same thing as the old “you’ll be eating beans on toast in retirement bullshit”. We eat that once or twice a week. Worth it to never work full time again. And if you’ve ever worked in a poultry processing plant, you might prefer the crisps 

[CVG]

9 minutes ago, Shamone said:

We eat that once or twice a week

Fried eggs on mine and Mrs CVG has cheese as in cheesie beano.

[Transistor Man]

1 hour ago, Chewing Grass said:

Basically a Submarine Reactor which is stuff RR do already.

Not really, imo.

Their submarine PWR is about 145 MWt. Highly enriched fuel, very compact.

The proposed SMR is 1200-1300 MWt.

I’m sure they can get it done, given time and money. I hope it happens. 

[Harley]

Been re-listening and pouring over the recent David Hunter interview and concluded a lot of what we discuss here is trading and not macro investing.  At least in so far as aligning our actions to his roadmap.  Nothing wrong with that but it is what it is and it was the right thing to do in 2020.  For example, DH clearly warned against getting into the post 2021 reflation stocks too early (i.e. now).  He cautioned to navigate and survive the 2021 crash first and then buy at the lows.

And people can have lost money if they had not been trading but trying to follow a macro roadmap.  My income portfolio (started in 2019) is down 32%.  Some stocks like Stagecoach (SGC) are down close to 60%.  That stock was bought for good macro reasons (IMO) and at a solid weekly technical low.  It was on the rise for several weeks and then came the CV crash.  Sure, I'm up overall thanks to PMs and equity exposure to other markets, but that's due to (balanced) asset allocation rules, etc rather than any macro roadmap.

There was a macro call for a blow off top and some have traded that top.  There is a macro call for a melt down in 2021 and some may trade that too.  Then there's a macro call for the period 2022 to 2030ish.  Now that's something you can invest in, at the right time!

[Hardhat]

17 minutes ago, Harley said:

Been re-listening and pouring over the recent David Hunter interview and concluded a lot of what we discuss here is trading and not macro investing.  At least in so far as aligning our actions to his roadmap.  Nothing wrong with that but it is what it is and it was the right thing to do in 2020.  For example, DH clearly warned against getting into the post 2021 reflation stocks too early (i.e. now).  He cautioned to navigate and survive the 2021 crash first and then buy at the lows.

And people can have lost money if they had not been trading but trying to follow a macro roadmap.  My income portfolio is down 32%.  Some stocks like Stagecoach (SGC) are down close to 60%.  That stock was bought for good macro reasons (IMO) and at a solid weekly technical low.  It was on the rise for several weeks and then came the CV crash.  Sure, I'm up overall thanks to PMs and equity exposure to other markets, but that's due to (balanced) asset allocation rules, etc rather than any macro roadmap.

There was a macro call for a blow off top and some have traded that top.  There is a macro call for a melt down in 2021 and some may trade that too.  Then there's a macro call for the period 2022 to 2030ish.  Now that's something you can invest in, at the right time!

This is very true Harley, one of the principles of this thread has always been that buying reflation stocks in ladders and holding through any potential crash would be a better way of positioning than trying to buy everything at once post BK or timing tops and bottoms. Ultimately we are talking about a 10 year cycle for the reflation stocks... they might even be underwater for much of the first few years of the cycle.

It's my personal opinion that Covid 19 is speeding up some of the structural changes, but also, it is a separate thing, and is having its own effects. Trying to tell what is Covid and what is cyclical is the trick.

[Harley]

34 minutes ago, Hardhat said:

This is very true Harley, one of the principles of this thread has always been that buying reflation stocks in ladders and holding through any potential crash would be a better way of positioning than trying to buy everything at once post BK or timing tops and bottoms. Ultimately we are talking about a 10 year cycle for the reflation stocks... they might even be underwater for much of the first few years of the cycle.

It's my personal opinion that Covid 19 is speeding up some of the structural changes, but also, it is a separate thing, and is having its own effects. Trying to tell what is Covid and what is cyclical is the trick.

Yes, I heard DH but am buying initial stakes into the reflation stocks to be ready to scale up quickly and mitigate the risk of being wrong or having the cash stolen.  And yes, looking at CV in the context of the macro roadmap is fascinating.  Likely to create as many blind alleys and distractions as real changes.

PS:. If these are ladders now, what will we call them in 2021!  I already have long established holdings in the suggested sectors like materials (BHP, RIO, etc) and they are doing just fine.  But I'm sure they'll be hit hard in 2021.  If so, I wouldn't be buying much to invest right now.  Energy stocks may be OK given they largely haven't risen but even here DH forecasts a $10 bottom in oil in 2021 so maybe even more pain to come.

PPS: I'm just so grateful to @Heart's Ease for his link to the latest and probably clearest DH interview.  Really made my day.  Right or wrong, DH has provided an early, excellent and very reasonable detailed hypothesis against which to evaluate the mass of macro commentary out there.

[DurhamBorn]

43 minutes ago, Harley said:

Yes, I heard DH but am buying initial stakes into the reflation stocks to be ready to scale up quickly and mitigate the risk of being wrong or having the cash stolen.  And yes, looking at CV in the context of the macro roadmap is fascinating.  Likely to create as many blind alleys and distractions as real changes.

PS:. If these are ladders now, what will we call them in 2021!  I already have long established holdings in the suggested sectors like materials (BHP, RIO, etc) and they are doing just fine.  But I'm sure they'll be hit hard in 2021.  If so, I wouldn't be buying much to invest right now.  Energy stocks may be OK given they largely haven't risen but even here DH forecasts a $10 bottom in oil in 2021 so maybe even more pain to come.

PPS: I'm just so grateful to @Heart's Ease for his link to the latest and probably clearest DH interview.  Really made my day.  Right or wrong, DH has provided an early, excellent and very reasonable detailed hypothesis against which to evaluate the mass of macro commentary out there.

Stop complaining and enjoy Mosaic doing a silver miner. .Im actually like you Harley looking outside finance now at things.Im still buying 2nd hand tools i need so i can fix anything in my house myself.Im also thinking of getting an allotment in a month ready for next year.Healthy and free food etc.I cant really get my bills down any lower including car so there isnt much more i can do that way.I did meet an interesting guy who told me about the money he finds at bus stops.He knows where the wind blows the leaves etc and finds many a fiver  he also walks his dog around the fields next to the golf course and uses some special torch that really reflects the balls and finds dozens every time he goes,makes a very decent amount selling them.I think i need to dust my metal detector off as well,i was at the coast Monday and the amount of people on the beach there must be a lot of coin spills etc.

[UnconventionalWisdom]

1 hour ago, Harley said:

For example, DH clearly warned against getting into the post 2021 reflation stocks too early (i.e. now).  He cautioned to navigate and survive the 2021 crash first and then buy at the lows.

This is what facinates me about looking at the macro picture. 

The disinflation had resulted in so much money going on over leveraged non productive assets. Debt levels were increasing and the real economy was suffering. Pre covid, the government were already talking about directly printing for fiscal spending. There was a chance the reflation could have happened without a big bust. So many things were wrong with the economy that there was always going to be a flipping point. 

Now covid has happened, it looks like the better macro strategy is, as you point out, to wait for the bust to realise even more gains. Unfortunately, this is all new, so it's not easy to know how to play it. What if the bust doesn't happen and you miss out and buying from this point? I'm buying reflation stocks now but not going all-in as I think the economy is in for a big shock, especially if people lose faith in the cemtral banks. 

[Errol]

1 minute ago, UnconventionalWisdom said:

if people lose faith in the central banks. 

Wait ... people still have faith in central banks?

[UnconventionalWisdom]

1 minute ago, Errol said:

Wait ... people still have faith in central banks?

The sheeple do!

[Heart's Ease]

1 hour ago, Harley said:

PPS: I'm just so grateful to @Heart's Ease for his link to the latest and probably clearest DH interview.  Really made my day.  Right or wrong, DH has provided an early, excellent and very reasonable detailed hypothesis against which to evaluate the mass of macro commentary out there.

You are very kind but really the young pup must take the credit for waking me up so comprehensively that I turned to the twitter to get me back to sleep! Will echo your previous comment that the quality of information shared on here is absolutely second to none.

(PS I am a burd!).

[Errol]

Excellent contrarian indicator:

 

 

[Harley]

2 minutes ago, Heart's Ease said:

(PS I am a burd!).

OMG, I'm so sorry.  Not sure if I'm sexist for assuming a bloke doing finance or the opposite for assuming a bloke nursing a baby!

[Errol]

“Within the next five years you could see a situation in which foreigners who have been lending money to the United States won’t want to, and the dollar would not be as readily accepted for making purchases in the world as it is now.”

- Ray Dalio