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

[Harley]

3 hours ago, DurhamBorn said:

Yes,because everyone thought it was going up,,,,apart from us 

"money" is priced against assets.The extra liquidity,the money stock has increased and at the same time assets got cheaper.With a lag that liquidity moves from fiat into assets/commods/goods.Dollar being the reserve moves against assets really not other currency.

Spot on - mainstream economic linear causative theories/models need updating for new variables to cover when we have moved, as now, to extremes in such things as wealth distribution (where the money moves to those with a relatively low marginal propensity to spend) - the models, etc were for more "normal" times and lose efficacy at these extremes - or economists are just providing a smoke screen for "theft" - all very 1920s to 30's (with the usual twist).

[Loki]

12 minutes ago, BadAlchemy said:

I topped up yesterday at 240p.

Fuckety fuck!

Some FOMO got to me. Do I get a prize for worst timing ever?

Same here, oh well.  It'll go up again.  I might buy some more, my SEISS landed today

[Harley]

19 hours ago, MrXxxx said:

Referring to the chart that (I think) you posted before, was last weeks bottom the bottom of the handle and it will fill upwards from here or was it a 'chink in the china' and will go lower before climbing out?

I'm not sure which post that was as I periodically drone on about this too much but, if it's a cup and handle, then hard to tell but if it is indeed the real handle then hopefully plenty of time to look for confirmation to bag any gains (I have an opinion!). 

[geordie_lurch]

I know a lot respect Lyn Alden and this new post by her as per @erewhon888 's post in the Crypto thread here giving more details on what I think a lot of people are missing in this thread - namely the digital central bank currencies that are coming:

https://www.lynalden.com/fraying-petrodollar-system/

As she says in the intro with emphasis mine...

Quote

...evidence shows that the global monetary system as currently structured is gradually re-aligning itself, and this fact will have important ramifications for investments over the long run.

This article explores some of those concepts, ranging from the fraying of the existing petrodollar system (for all of its stakeholders, both for US interests and foreign interests), to central bank digital currencies, to a total restructuring of the global monetary system.

Some might want to just skip to the following section...

• What the Next System Looks Like
  • Decentralized Energy Pricing
  • Digital Global Bancor
  • Digital Regional Bancors
  • Gold as a Reserve Asset
  • Bitcoin as a Reserve Asset

[Harley]

I think it was DB who made passing comment about staying closer to the "source" than the machinery manufacturers - was already on my mind because I have strayed into one agricultural machinery manufacturers with two others as potentials (the remaining 29 were RTU'd) - bad idea?

[Transistor Man]

A Whitty and Vallance style scenario:

All energy usage per person (world-wide) for the next 80 years, according to SSP2 “Middle-of-the-Road”:

.... per-person?..... is that possible?

A lot can change over decades, but still, a bit of an eye opener.

https://www.sciencedirect.com/science/article/pii/S0040162520304157

[jamtomorrow]

17 minutes ago, Transistor Man said:

A Whitty and Vallance style scenario:

All energy usage per person (world-wide) for the next 80 years, according to SSP2 “Middle-of-the-Road”:

.... per-person?..... is that possible?

A lot can change over decades, but still, a bit of an eye opener.

https://www.sciencedirect.com/science/article/pii/S0040162520304157

Presumably a good chunk of that is emerging markets "levelling up"? (aka mix effects)

Helluva thing when that runs into ECoE trends. "Dash for nuclear" anyone?

[Barnsey]

 

[sancho panza]

12 hours ago, Loki said:

Do you mean my 91 post? That was almost the lowest of the day (90.98 at one point I think ) and it's clearly making lower lows

Maybe Kaplan will be right in the phase after 88

Yeah I did,there's been a lot of talk of dollar bottoms except on this thread.kaplan normally has pretty good medium term timing(called the bottom in Dec18 perfectly,but I read his stuff and I jsut wonder what he's looking at when he's saying buy the dip in TLT.

6 hours ago, DurhamBorn said:

Yes,because everyone thought it was going up,,,,apart from us 

"money" is priced against assets.The extra liquidity,the money stock has increased and at the same time assets got cheaper.With a lag that liquidity moves from fiat into assets/commods/goods.Dollar being the reserve moves against assets really not other currency.

Absolutely,and that's before we start thinking about supply/demand equaitons in commodities which due to low prices this year will have a negative effect on supply going forward a ear or two depending how hard they are to get at.

If we look back at 08 and the run up to that,dollar weakness played the key role driving commodities higher and it also played the key role pushing them down that summer.

Given that whoever gets in is going to push USD liquidity into the system that is a net positive for commodities.I don't see how it can have any other effect.

[sancho panza]

4 hours ago, jamtomorrow said:

You'd be amazed how long they can carry on like that.

CRE premises near here managed by this lot has gradually emptied of tenants over the past *10 or 15 years*: https://fi-rem.com/

Huge number of empty units, plenty of prospective tenants, you'd think the invisible hand would find a price that puts the units to productive use. But no: landlord simply won't meet the market, and meanwhile the premises slip into dereliction.

The landlord can't accept a lower rent because then even the most compliant of auditors will make them run the rule over the rest of the portfolio, and that would bring the whole leveraged house of cards down. So they extend, pretend and, I suppose, hope something will turn up - epic-scale Micawberism.

And I imagine this will continue until such time as the premises are either too derelict to remain standing, and the property empire literally collapses, or "investors" (seems like they're positioned for pension money these days?) pull the money, either because they have a moment of clarity and get wind of the precariousness of their investment, or (more likely) because they want to chase rising yields in other asset classes.

Short answer: that local microcosm makes me think the wider phenomenon of over-optimistic valuations could conceivably carry on at least until yields/rates rise later in the cycle. That's assuming the buildings don't fall down first, or national regulators don't force them to revalue.

I wouldn't be amazed.I think there's a fair degree of 'if you don't open your eyes,you can't see it', going on in the UK(most likely Western world)banks.If corporations are making their monthyl interest payments,not too many questions are getting asked.

As I've said previously,the real weakness in the FRB system is that when the music stops it simply can't sustain itself without credit demand to keep asset prices up.

As you say JT,these LL's are unable to reduce rents because it would call into question the collateral base but also because on a cashflow basis,other tenants would likely seek reductions.

I'd suspect they've tested the market but baulk at where the price point is.

Simply waiting to go bust whilst the board keep getting paid.

Problem is that when the first bank moves to repo it's CRE loans,it could precipitate a rush.

[sancho panza]

2 hours ago, Transistor Man said:

A Whitty and Vallance style scenario:

All energy usage per person (world-wide) for the next 80 years, according to SSP2 “Middle-of-the-Road”:

.... per-person?..... is that possible?

A lot can change over decades, but still, a bit of an eye opener.

https://www.sciencedirect.com/science/article/pii/S0040162520304157

I rememeber an earlier chart psoted on here,showing coal demand dropped briefly around 2010 but is already back past where it is.

That coal forecast is simpyl incredible but goes to prove that if you're looking at Western Europe you're not looking East.

[sancho panza]

1 hour ago, Cattle Prod said:

I've been thinking about Kaplan. His methods are excellent, and his recent caution on GDXJ caused me to buy puts on SLV as insurance, which paid out. Worth every penny. He last noted some bottoming in GDXJ which was encouraging (I had challenged him that his targets were too low and didn't backtest well).

However a weakness I see in his method is that he puts a lot of weight on insider trades. By definition, this is derivative. It's ahead of most of the crowd, so works most of the time, but won't work if insiders are also missing the macro picture. I've said before that I thought he was a little zoomed in, and I don't think is looking at 40 year cycles. He's been wrong about the RUT being in a bear market since 2018, wrong about new highs on Nasdaq and S&P, while Hunter for example has been right. Incidentally, we are only 22% off Hunter's 4500 call, with enough juice in the momentum indicators to get us there.

Kaplan covers this timing issue with very conservative ladders. A tiny % of his net worth at widely spaced rungs. If a person is not copying his ladder approach, you can get burned. I'd say follow all his advice, or cherry pick carefully.That's what I do. He will be right, eventually. I don't think he'll bust on his shorts as I don't think he's leveraged.

I think he's been wrong on the dollar because he's not looking at liquidity flows, at least enough. I emailed him about this, and he referred back to micro indicators like selling/buying after the opening bell. 

What do I think - no view really. I can't model liquidity flows to get a sense of where the dollar is going to go, so DB's calls are good enough for me as a guide. I don't trade it, but as you say it impacts all asset classes. Yes, I think oil supply issues will be compounded by dollar weakness. Why wouldn't China and India chuck ever cheaper dollars away in return for oil? Conversely, the next bounce in DXY could trigger the next oil shakeout as Asia stops filling their boots.

The curve ball is the Luke Gromen view that not all oil is being sold in dollars anymore, and that none of us alive today have experience of this. If China can persuade suppliers to take Yuan for dollars, which they can print at will, that as a marginal buyer will cap the dollar value of oil. That's something I'm trying to understand better. My current view is that this works in times of oversupply, but in times of scarcity, suppliers will prefer dollars, and Asia will have to find dollars to pay for their oil. Or gold...

You've nailed it right there in bold CP.That's what I've been missing.I'm looking at the macro and wondering how he's seeing what he's seeing because he seems convinced-and for once I'm headed in the other direction completely.He doesn't do deep dives into the EIA demand/supply data,he watches the insiders.

Kaplan has great ideas(primarily what I use him for) but he's been very persistent in calling the dollar bottom of late,which I'm jsut not seeing,hence my open question.You're right as well on him calling the Bear market from the RUT turn being wrong and that he overly focuses on retail traders timing.

Now we're disuccsing it,he hasn't really come out with a sensible reason for the dollar turn either,except that he';s expecting a crash in the near term.

Appreciate the Luke Gromen mention as he's someone who has made some very astute observations in the past.As we've discussed on here many hundreds of pages back,this BK and the aftermath will likely,imho anyway,be the swansong for the USD as a reserve currency.

The game changer to the game changer would be if the Chinese went back a gold backed currency(poss crypto as well but I don't understand crypto)

 

 

[Yadda yadda yadda]

5 hours ago, kibuc said:

Hochschild Mining Chair Looks To Offload 12% Stake
https://www.morningstar.co.uk/uk/news/AN_1606930102504854000/hochschild-mining-chair-looks-to-offload-12-stake.aspx




In case anyone was looking for an entry

 

My 201p buy order expired unfulfilled on Tuesday. Just as well.

I see it bounced a bit.

[leonardratso]

im in HOC today with a massive market moving £12.50. I love these zero commission doss buys, cheaper than a packet of fags and a mars bar. Course the upside is limited, but the downside is £12.50 loss, whats not to love.

 

[geordie_lurch]

BT and National Express are both up around 6% today making them both up over 20% in my modest holdings and I'm thinking of taking some profits or top slicing as you lot call it - anyone have any compelling reasons not to?

EDIT - top sliced 15% or so off them both to have some more ammo when / if the BK comes

[Lightscribe]

https://www.reuters.com/article/cryptocurrencies-sp/sp-dow-jones-indices-to-launch-cryptocurrency-indexes-in-2021-idUSL1N2IJ0TG

Things will certainly be interesting next year (not that 2020 wasn’t enough obviously)

[Noallegiance]

19 minutes ago, Lightscribe said:

https://www.reuters.com/article/cryptocurrencies-sp/sp-dow-jones-indices-to-launch-cryptocurrency-indexes-in-2021-idUSL1N2IJ0TG

Things will certainly be interesting next year (not that 2020 wasn’t enough obviously)

The death knell for cryptos being controlled by futures.

Old playbook.

[Loki]

20 minutes ago, Lightscribe said:

https://www.reuters.com/article/cryptocurrencies-sp/sp-dow-jones-indices-to-launch-cryptocurrency-indexes-in-2021-idUSL1N2IJ0TG

Things will certainly be interesting next year (not that 2020 wasn’t enough obviously)

Am I right in thinking we won't be able to trade them anyway thanks to FCA crypto derivatives rule? 

[sancho panza]

2 hours ago, Cattle Prod said:

I note that DXY has just taken another dump into oversold territory and the gold and silver have not reacted. Could be another lower low needed in the metals.

I'm jsut looking at our PM holdings and msotly across the board still well ahead.

We sold some in late August/early Sept and I'm still waiting for a re entry point for the original capital(profits went into big oilies)

Think your right on another low needed.Besdies BVN,OR,EGO,OGC(risky) there's not much value out there.Even then,with the exception of OGC we're in much lower than today,so there's little incentive

As per my chart last night.I don't see gold givning mjuch up over the next  6 months at least.We know the new year is going to bring stimulus whoever gets in.

 

and for one last chart I inputted weekly ending Monday and got the following chart....golds drop showing in the weeklies puts a different perspective.

 

 

[DurhamBorn]

5 hours ago, Barnsey said:

 

Pipes are full Barnsey arent they now.They need to simply get it flowing out of financial markets into the real economy.They will now fire drop liquidity through government.Massive amounts are in the broad money  indicators now just waiting to move.I think we might see the lowest velocoty numbers in 2 years and the highest within a 12 month window.That move in velocity will move quicker than supply and kick in the cycle.

[AWW]

Not sure if this has been posted before - if it has, I haven't noticed it.

https://gbcmn.nationalgrideso.com

[Harley]

Been snowing here today so have been busy in the workshop, plus listening to these:

https://ppaca.player.fm/series/the-grant-williams-podcast/the-end-game-ep-12-fred-hickey

Love these guys and a great chat about gold miners, with recommendations.

https://ppaca.player.fm/series/palisades-gold-radio/kevin-muir-dont-fight-the-fiscal-stimulus

On message with this forum   Nicely summarised from a more trade POV.

Time to talk pizza because we've gone mainstream (actually the other way round)  on macro!

 

 

[Noallegiance]

I haven't read this yet, but lifting of intellectualness seems to be rife this week!

https://www.goldmoney.com/research/goldmoney-insights/inflation-roadmap 

 

[MrXxxx]

6 hours ago, Cattle Prod said:

No harm in taking a profit is my view, good for you. I sliced and rebalanced a couple of my oilies that were up over 40%.

Mmm this is the quandry I am in i.e. when to top slice...some of mine are between 60-100%...do I top slice or hold out for longer?...my thoughts are as follows:

1. If there is nothing else to buy at the moment whats the point of having the extra cash sitting there doing nothing?

2. Although up a fair chunk these have been bought pretty low and are still way below pre-Covid prices, so is it better holding out for the longer term?...I am aware from reading that this is often the downfall of many i.e. selling too early.

3. Could I be missing a selling at the peak opportunity where I could buy in again once they drop?

I find it a lot easier knowing when to buy than when to sell 9nice problem to have I know!)...whats the wisdom on this?

[DurhamBorn]

Selling is very difficult.My portfolio has made more in a month than anytime i can remember.Its tempting to sell some etc,and i have top sliced and re-allocated over on really strong runs.However if we are right and we are entering a re-flation cycle then its likely we will see increases,sharp pull backs,then on to higher levels,over and over.Its likely nobody will believe the rally is sustainable and most people will miss out on the gains.

I had priced 65% as the return id like over the cycle to equal the inflation i expect.Many stocks are up way over this already.

What should be remembered though is a hell of a lot of work went into portfolio rotation etc this last few years and into positioning.For myself i bought shares in March equal to 65% of my net worth.Buying into the teeth of the storm.I wobbled several times myself,its not easy losing a years salary a day at some points yet sticking to ladders etc.

Its no accident we have cleaned up this last month.We earned it.