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


spunko

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4 hours ago, 5min OCD speculator said:

if you chop and saw your wood in winter that keeps you warm too :)

I had an accident with a stihl saw a while back and a large thorn from a branch went into my wrist as the branch fell.....when I 'pulled out' the blood spurted about 6 inches into the air before I threw the saw out the way and put my other hand on it......

I seriously thought I might bleed to death cos I was in a remote location but actually it stopped quite quickly, stung for a while though and I limit myself to lawnmowers now xD

Planed the top of my finger once.  Remote and alone.  Remember eating something sugary and driving to the community hospital before the shock kicked in or I passed out!  Always helps to have a plan!  I only plane on the flat now, and nice and secure.  Also fell through a corroded drain cover once while carrying some heavy beams.  Again, remote and alone.  I remember being crumpled at the bottom thinking "OK, so which bits are broken" especially given any pain takes a while.  Nothing!  Always carry a phone now.  That and many others - I should be well dead by now!

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7 minutes ago, Panda said:

Cheers DB. Stuff I didn't know. Divi day Monday. Not for me as I bought ex divi.

Wondering whether a bounce might occur post divi payment.

RDSB is great value sub 10.00. 

Funny. Trying to explain to err in doors how the price paid only matters if you intend to sell, and is more importantly a function of the yield you expect, .I.e. Divi.

Like finding rockin horse shit.

The hardest thing is to buy hated sectors as they continue down.However its crucial to focus on the cycle,not the short term.It was only a few short years ago everyone was saying the likes of Sibanye and Harmony were dead,slow death decline.300% to 500% later you never hear those people now.People have no understanding of the length of cycles,the leads and the lags involved.They see Tesla stock riding high and they say oh everyone will have an EV car,and they might be right,but they then add that fact to tomorrow,rather than is likely 15+ years.A contrarian investor loves those situations.We arent emotional.We road map out the likely cycle,then we price the likely cash flow.In doing so i think Shell and BP will deliver between 200% and 300% returns over the cycle,dividend and share price gains.I think Repsol might deliver between 250% and 400%.I think during all that EV sales will grow and grow,and indeed the price spike in oil will help speed up the move.We will need to look at things when oil goes over $100 (the price almost everyone is now saying will never be seen again) but likely that will be mid cycle,so we will then see $150,and maybe a parabolic 6 month period where is goes between $200 and $300.My advice to everyone is to relax,build positions,keep within your own risk profiles,keep decent diversity,but let the cycle play out.It wont be linear,markets never are.

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Bricks & Mortar
11 hours ago, JMD said:

Yes, as i mentioned recently, it seems to me that more 'ordinary type folk', well outside of the anti-Fed/gold bug fraternity, such as Jake are becoming aware of what's ahead' 

 

re Rick Rule - was that the podcast he did with George Gammon?... where they both also spoke of buying Thermal Coal producers (for steel manufacture) as they are very cheap. Is anyone doing this?

...For those interested, I did actually go as far as looking into the main ones: Arch resources, Inner Mongolia coal, Warrior Met coal, Coal India, Teck resources (more of a conglomerate, but still interesting),

AFAIK: Thermal coal is pretty much any common or garden variety coal, mostly burnt in power stations to make steam for turbines.  It's called that cos you burn it - gets hot, (quite hot, anyway)
For steelmaking, you want metallurgical coal.  That stuff would burn the bollocks off a steel monkey.
From your list of companies, I know you're on the right track, and I'm posting this thing about the technical defintion for others who might be reading.  Don't want anyone buying the wrong thing.

I looked into it when I heard about the Woodhouse mine in Cumbria.  Yeah, totally seems a good idea to me.  Seems you can only make steel with metallurgical coal.  SSAB in Sweden have a plan for an electrical process, but they might be able to do it on an industrial scale by 2035 or some such distant future date.

Anyhoo, you can't buy shares in West Cumbria Mining, they're owned by some EMR Capital outfit, and I didn't bother looking into them. (cos they're overseas)

I deduced, from the experience, I'm predisposed to investing in Britain's new industrial revolution.  I didn't feel inclined to go looking for thermal coal abroad.  I'm prolly just the guy that would lose his shirt in a polyhallite hole-in-the-ground.  I'll need to watch that.

-----------------------

But while we're talking commodities, I became aware of these guys:  Nevada Copper.  They got a working deep mine for copper in Nevada.  A plan for open-cast, not fully thought through/permitted yet.  They had to close the underground for covid, and the share price is beaten down to pennies, (perhaps as a result of the shut-down?)

I was thinking to maybe take a small position/punt.  I'm no good with financials though, and basing that on the above pararaph only.  I guess they'll have debt out the wazoo.  I was thinking the price of copper might take off, especially if Joe Biden starts playing 'She's Electric' on his phone, and that might take care of the debt problem.

Would welcome any reply from someone who can read a balance sheet.

https://nevadacopper.com/

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10 hours ago, reformed nice guy said:

This is a big fear of mine, especially with the tensions in America. If it went to shit there then all of the politicos around the world would start seizing assets like there is no tomorrow.

 

Completely agree with that and @Popuplights 

NS&I take depostis up to a bar and you can have mulitple accouhts.Treasury won't haricut their own cutomers.

9 hours ago, DurhamBorn said:

I noticed that the other day from Vitol,il add the link so people can see it and Oil Trader is a useful read for people investing in the sector.

https://www.worldoil.com/news/2020/9/16/oil-trader-vitol-projects-rapidly-shrinking-stockpiles-by-year-s-end

Oil needs to stay around $40 for a few months yet,we need those rig counts to stay down and the structural decline to really stick.It will add rocket fuel to the upside later in the cycle.

Interesting that theyre predicting 96mn bpd demand going forwardwith inventories shrinking at 300mn per quarter from 1.2bn at peak Corona.But that 6mn daily drop will be met with dwindling US shale suppy which has got 150 rigs working when it needs 600 to keep going.........all I'm thinking is that when that inventory runs down and we've had another month or two at $40 WTI keeping the rig count down.

'Demand should stay largely unchanged at around 96 million barrels a day, Hardy said. That compares with Vitol’s view a year ago that it would be about 102 million barrels a day.'

7 hours ago, DurhamBorn said:

The main cause of the 70s inflation was when the CBs and politicians feared unemployment more than inflation.That is where we are now.Incredible amounts of liquidity is parked in the pipes (low velocity is the enemy of employment and tax take) and the CBs mean to release it one way or another.The BOE is simply telling the market the same thing the Fed is telling them.We intend to get inflation above rates right across the curve apart from the far end.If you dont invest in the economy,we will QE your currency away and pass it to government to do it for you.Thats why the Fed mentioned at its last meeting they needed government to do more.

 

I need to tattoo that bit in bold onto the top of my trading screen for the next year or two.

7 hours ago, Harley said:

I was wondering this morning if this CV stuff being prolonged as much as possible (as others have highlighted) is to provide the necessary tools to deal with a stormy Q4.  That we're currently in the eye of the storm.   Especially as it's best for the polos to get bad things done while they're still early in office.   Brexit negotiations (sellout?) concluded and the "hit the prudent but nasty" Budget to name just two things.  Nothing better than the legal, physical, etc infrastructure provided by CV (and the prior tupperist stuff) to stop those remaining Hull fishermen and/or formerly wealthy but disgusted from the shires picking up their pitchforks and marching. 

POlitcally,it's a mess.

The more that comes out about the possiblitiy of false postive PCR tests outnumbering true positives,the more the public see the various clashing social dsitancing policies eg you're encouraged to go to work/pub but not see your mum n dad,the more that comes out about needless deaths inc ar ehomes/curative cancer procedures being cancelled et cetc the more politicians have to double down on project fear to cover the economic crash that's likely inbound.

It jsut feels to me theyre starting to losee the public.

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Yup it all stinks to me. One of three possibilities of which will become more apparent in time.

1) The government is genuinely inept. At the moment the global serious case rate is 1% of that only 6% die. That’s flu death proportions and the global governments have way overplayed the response at the expense of the global economy because they thought the R=0 number and mortality rate would be higher.

2) All flashing red indicators were pointing to around 2020 for a financial recession (treasury yield curves going negative etc) COVID happened and the governments have thanked their lucky stars it came along so that they can use it as an excuse to go full on into stimulus with full public backing and have a scapegoat.

3) Tin foil hat option. It was all planned all along for an eventual currency and political reset. It all seems very rushed however, so they all seem to be making a bit of hash it to adhere to some unspoken timeframe.

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4 hours ago, Sideysid said:

Yup it all stinks to me. One of three possibilities of which will become more apparent in time.

1) The government is genuinely inept. At the moment the global serious case rate is 1% of that only 6% die. That’s flu death proportions and the global governments have way overplayed the response at the expense of the global economy because they thought the R=0 number and mortality rate would be higher.

2) All flashing red indicators were pointing to around 2020 for a financial recession (treasury yield curves going negative etc) COVID happened and the governments have thanked their lucky stars it came along so that they can use it as an excuse to go full on into stimulus with full public backing and have a scapegoat.

3) Tin foil hat option. It was all planned all along for an eventual currency and political reset. It all seems very rushed however, so they all seem to be making a bit of hash it to adhere to some unspoken timeframe.

Sadly it’s 3 with a bit of ineptitude as cover. You mentioned full public backing and the Greta mob certainly will be happy that the planes have stopped flying, also part of the plan.

24CA98D4-B4AB-49B8-A2AD-07BF2C933B07.jpeg

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14 hours ago, 5min OCD speculator said:

US indices are looking heavy....well Nasdaq is O.o .....

Trump might have to call in the PPT next week or things will be getting even cheaper

Don't forget cycling at the weekend xD

 

download (9).jpeg

Have you got the video please? :-) :-) :-)

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11 hours ago, Harley said:

Planed the top of my finger once.  Remote and alone.  Remember eating something sugary and driving to the community hospital before the shock kicked in or I passed out!  Always helps to have a plan!  I only plane on the flat now, and nice and secure.  Also fell through a corroded drain cover once while carrying some heavy beams.  Again, remote and alone.  I remember being crumpled at the bottom thinking "OK, so which bits are broken" especially given any pain takes a while.  Nothing!  Always carry a phone now.  That and many others - I should be well dead by now!

Had to pick someones finger out of the sawdust once when he machined it off with a Spindle moulder...nice clean cut though as he had only just sharpened the cutter!

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https://www.theguardian.com/environment/2020/jul/29/national-employment-savings-trust-uks-biggest-pension-fund-divests-from-fossil-fuels

Incredible to think that most of the investors in NEST pensions are some of the lowest paid workers in the country and a lot in temporary jobs etc.Selling/sold everything in BHP due to coal (when mostly met coal not thermal) yet BHP will probably provide more commods for renewables than any other company.And below.Do they not realise that the people investing the most in the new energy infrastructure will be those very oil and gas companies?.Where others have to use debt,debt in a rising rate cycle,big oil will use free cash flow and then probably buy up a lot of other companies towards the end of the cycle as they struggle to re-finance.Given they have already sold out of tobacco their trackers are going to track the FTSE with a huge proportion of the companies who will gain from the cycle removed.Local government pension schemes are doing similar.

"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."

  

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9 hours ago, sancho panza said:

NS&I take depostis up to a bar and you can have mulitple accouhts.Treasury won't haricut their own cutomers.

Yup, opening an NS&I account now with a small deposit is the sort of prepper thing I'd be doing now, except I already have!  I didn't want the stress, struggle and potential failure later on.

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I’ve read elsewhere that last 2 – 3 days modest falls, coupled with overall negative 2 prior weeks in DOW and NAS has played a big role in causing an bloodbath in the call options market due to the unique situation that was created by the Robin Hood traders.
But as I don’t have any data to shows me how much of those call options were bought with margin loans I’m not if sure this is going to be the trigger this week for a major drop - BK even..?

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9 hours ago, sancho panza said:

It jsut feels to me theyre starting to losee the public.

The whole administrative (and all the rest) class has lost me, not just the elite Oxbridge polos.  At the macro and micro levels.  One great p*ss take.  On three weekly bin collections here except they missed us, so six weeks.  Went through their notification service, not even a reply.  Probably say "Covid" knowing they could say anything and get away with it.  This is indeed going to end badly, causing as much hurt as possible.  Totally avoidable but they're in a bubble.  Relevant for this thread?  Don't doubt it!   

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8 hours ago, Sideysid said:

3) Tin foil hat option. It was all planned all along for an eventual currency and political reset. It all seems very rushed however, so they all seem to be making a bit of hash it to adhere to some unspoken timeframe.

Spot on.  I favour they were starting a slow process of dealing with the ponzi bust (with the tupperist legislation, "causes", social conditioning, etc) and along came mother nature to throw a brick.  They've been on the left foot since but are now back and will/are using this threat as an opportunity.  They (and all the rest of the complex) are polos - opportunists.  

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10 minutes ago, Harley said:

The whole administrative (and all the rest) class has lost me, not just the elite Oxbridge polos.  At the macro and micro levels.  One great p*ss take.  On three weekly bin collections here except they missed us, so six weeks.  Went through their notification service, not even a reply.  Probably say "Covid" knowing they could say anything and get away with it.  This is indeed going to end badly, causing as much hurt as possible.  Totally avoidable but they're in a bubble.  Relevant for this thread?  Don't doubt it!   

They are all at home Harley doing 10% of the work they used to.My partner is a nurse in the community on a council service.She hasnt seen any of her bosses or office staff since March,none have been in,all at home,pretty much doing nothing.It seems a lot of council/government workers have decided Covid is an excuse to sit at home on full pay for years.

The structural deficit will now be huge and the only way to close it is eliminate 30% of government spending,or inflate everyones savings away.We know the one coming.

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4 hours ago, Sugarlips said:

 

24CA98D4-B4AB-49B8-A2AD-07BF2C933B07.jpeg

To be seriously honest, I'm beginning to feel the wrong sort in the early days of the Reich.  I've seen in my lifetime how quick and bad things can go. Time to learn some more history.  Some people were insightful enough to break the grounding and get sorted early back then.

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5 minutes ago, Harley said:

To be seriously honest, I'm beginning to feel the wrong sort in the early days of the Reich.  I've seen in my lifetime how quick and bad things can go. Time to learn some more history.  Some people were insightful enough to break the grounding and get sorted early back then.

When i tell my dad his silver coins have gone up in value he always replies they arent for making money,they are for bribing the guards.

 

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26 minutes ago, DurhamBorn said:

When i tell my dad his silver coins have gone up in value he always replies they arent for making money,they are for bribing the guards.

 

Exactly that. The spot price has seen even the old crowns and pre-1920 silver coins I buy get expensive. I’ve now resorted to beaten up sterling silver fruit bowls, tankards and goblets which go a fair bit below spot.

I envisage a time in the future when a small shiny cup with hallmarks will safeguard/provide for my family over the next guy with handfuls of plastic notes.

8F7281F8-1237-4B5D-B360-EDBC9A5295A1.jpeg

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On 17/09/2020 at 08:34, Harley said:

He's presumably saying be careful investing in the right sectors, etc for 2022 onwards right now as you could get stung in 2021.  That is, wait until the 2021 lows.  Best to watch the video.

Finally found time to watch this. That was a good interview, really probed the most important questions. 4 takeaways for me:

1. PM lows in the bust. Was interesting to hear David's response to this question. The idea that metal markets respond fastest to inflation expectations makes sense - we definitely saw some of that in March. Solidifies my intention to HODL physical thru the bust.

2. Industrials. The last time industrials had a decade (the 70s), "tech" was in its infancy. Which got me thinking: are there some companies we regard as "tech" (today), but which might turn out to be "industrials" when we look back 10 years from now? The world of the 2020's is going to need a lot of semiconductors to power an industrial cycle. Why won't those companies have just as much pricing power as a telco? Case against is of course current overvaluations, but worth watching in the bust?

3. The limits of David's model. I enjoy David's intellectual honesty, and get the sense he's really wrestling with what his model is telling him about the run-up to 2030. This is clearly an area of great uncertainty. I see reasons to think the collapse could get underway sooner than his model says, because the US suddenly loses the exorbitant privilege of reserve currency status as increasing numbers of market participants change their behaviour in expectation of collapse.

4. What comes next. David rightly reminds us that moralising about making difficult changes to the monetary system now to head off a greater catastrophe later this decade is not something the USG would ever do. It's something China could do though. I'm wondering more and more whether that's China's game here. It would explain the recent commodity stockpiling and seemingly retrograde trend towards increasing social control - they'll need both to pull off a phoenix move.

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1 hour ago, DurhamBorn said:

 

https://www.theguardian.com/environment/2020/jul/29/national-employment-savings-trust-uks-biggest-pension-fund-divests-from-fossil-fuels

Incredible to think that most of the investors in NEST pensions are some of the lowest paid workers in the country and a lot in temporary jobs etc.Selling/sold everything in BHP due to coal (when mostly met coal not thermal) yet BHP will probably provide more commods for renewables than any other company.And below.Do they not realise that the people investing the most in the new energy infrastructure will be those very oil and gas companies?.Where others have to use debt,debt in a rising rate cycle,big oil will use free cash flow and then probably buy up a lot of other companies towards the end of the cycle as they struggle to re-finance.Given they have already sold out of tobacco their trackers are going to track the FTSE with a huge proportion of the companies who will gain from the cycle removed.Local government pension schemes are doing similar.

"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."

  

BHP have a sizeable oil and gas business too. So it wouldn’t have just been coal that would have put them on the uninvestable list.

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11 hours ago, sancho panza said:

NS&I take depostis up to a bar and you can have mulitple accouhts.Treasury won't haricut their own cutomers.

NS&I never email FSCS warning's that banks do but if it came to a bail-in, who knows for sure? If they just go for a general wealth tax instead of a bail in, anything there would still be counted in your total assets.

I have some money at NS&I but taking any interest or PB wins out, to keep the balance at a number ending in 99 rather than let to slip to 01, it would be a shame to be just over an important threshold! Obviously 85k is the FSCS.

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1 hour ago, Harley said:

To be seriously honest, I'm beginning to feel the wrong sort in the early days of the Reich.  I've seen in my lifetime how quick and bad things can go. Time to learn some more history.  Some people were insightful enough to break the grounding and get sorted early back then.

It has to be by design that everything is being ramped up to 11, although I am surprised that its not been nipped in the bud before a second lockdown kicked in.  Risk to anyone under 60 is vanishingly small, and the case numbers have been significantly muddied by false positives and the amount of testing.  Cancers, surgery backlog and mental health problems are stacking up.

Either the government advisors are completely inept or there is another aim on the agenda (21?).

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No need to grab wealth,or do huge bail ins really.The CBs have already told people how they are going to do it,run rates below inflation for the whole curve apart from maybe the very end.Thats it.Nobody is listening though.

In affect the CBs are telling everyone with massive investments in government debt etc you are going to hand some of that to the economy through government spending.Its the opposite to the last cycle from 82.Thats why highly rated growth companies are running out of road,and why passive investing is setting up for big inflation adjusted losses,ones that wont bounce back.

Invest in real assets that create velocity or we will inflate it away by handing to government to do in QE.Its as simple as that.People are looking as dis-inflation carrying on for 30 years when it is in its final few months.

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1 hour ago, jamtomorrow said:

Finally found time to watch this. That was a good interview, really probed the most important questions. 4 takeaways for me:

1. PM lows in the bust. Was interesting to hear David's response to this question. The idea that metal markets respond fastest to inflation expectations makes sense - we definitely saw some of that in March. Solidifies my intention to HODL physical thru the bust.

2. Industrials. The last time industrials had a decade (the 70s), "tech" was in its infancy. Which got me thinking: are there some companies we regard as "tech" (today), but which might turn out to be "industrials" when we look back 10 years from now? The world of the 2020's is going to need a lot of semiconductors to power an industrial cycle. Why won't those companies have just as much pricing power as a telco? Case against is of course current overvaluations, but worth watching in the bust?

3. The limits of David's model. I enjoy David's intellectual honesty, and get the sense he's really wrestling with what his model is telling him about the run-up to 2030. This is clearly an area of great uncertainty. I see reasons to think the collapse could get underway sooner than his model says, because the US suddenly loses the exorbitant privilege of reserve currency status as increasing numbers of market participants change their behaviour in expectation of collapse.

4. What comes next. David rightly reminds us that moralising about making difficult changes to the monetary system now to head off a greater catastrophe later this decade is not something the USG would ever do. It's something China could do though. I'm wondering more and more whether that's China's game here. It would explain the recent commodity stockpiling and seemingly retrograde trend towards increasing social control - they'll need both to pull off a phoenix move.

Wow top post!  You clearly thought that one through and took time to succinctly write it down.  Much appreciated and to think about regarding #2 in particular.  Rhyming but not repeating and all that!

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Here it is in plain view.Remember this thread has always said they will print back all the dis-inflation?,well they are even saying it now

 

https://www.ft.com/content/e1e59faa-5005-4e1c-9d54-b1a8d4de9586


"The centrepiece of the Fed’s new approach is the move to an average inflation target, which will allow it to overshoot the US central bank’s 2 per cent target to compensate for persistently low inflation, which has been weighing on the US and other economies in recent years."

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14 minutes ago, DurhamBorn said:

No need to grab wealth,or do huge bail ins really.The CBs have already told people how they are going to do it,run rates below inflation for the whole curve apart from maybe the very end.Thats it.Nobody is listening though.

In affect the CBs are telling everyone with massive investments in government debt etc you are going to hand some of that to the economy through government spending.Its the opposite to the last cycle from 82.Thats why highly rated growth companies are running out of road,and why passive investing is setting up for big inflation adjusted losses,ones that wont bounce back.

Invest in real assets that create velocity or we will inflate it away by handing to government to do in QE.Its as simple as that.People are looking as dis-inflation carrying on for 30 years when it is in its final few months.

I think anything they do will be as much about pacifying the international markets (creditors) as anything that is really necessary.  Also to "demonstrate" to the domestic plebs that this thing really was serious and that their actions were indeed proportionate (despite the increasingly emerging data, the real data that is, not their twisted stuff)!  All in, yet another kind of "virtue signalling"!

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