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

[DurhamBorn]

1 hour ago, Hancock said:

Cant really add much to this thread, but as it was the sole reason to start putting money away in my pension this is what ive got and what % the share are up or down.

I no SIPP until about June 2017 think ive put circa £75K in and its now worth £105K. 

Been waiting on about £20k in invoices that will be dumped in there, should have had it prior to Xmas and the plan was to put it all in gold and silver.

Now im not sure to wait for a BK, and will hopefully have £50k to spend on it, as i can see things go onwards and upwards from here and their being no market crash ... as once people are out they'll be spending like drunken sailors.

Looks like quite a good selection to hold for the next 10 years .... but tempted to flog ITV as their product is crap, but presumably with people soon to be spending like no tomorrow advertising charges will go up.

Lovely portfolio there a real model reflation one ,really glad the thread helped you get sorted,the Scottish play is on the move now as well  ,we wont live long enough for a profit in it ,but iv grown fond of the damn thing.

[leonardratso]

cna is the counter to balance the exuberant bullishness,  it comes up bit then tanks hard to keep you watching and waiting... forever......

[DurhamBorn]

Have to laugh at the MSM, they have zero idea do they.None of that is driving the market what they think it is,zero,zip,nothing.Unlike those bozos i hope the one lesson people learn from this thread is markets are never linear.Whats driving markets is the liquidity in the pipes,once thats in something will force it out with a lag.

Its like those "economists" worrying the BOE is monetizing government deficits.OF COURSE IT IS,and if they werent we would be heading back to the stone age,thats how western economies work,for better or for worse.They needed a route into the economy because the banks were off the table.

 

[Hancock]

30 minutes ago, DurhamBorn said:

Lovely portfolio there a real model reflation one ,really glad the thread helped you get sorted,the Scottish play is on the move now as well  ,we wont live long enough for a profit in it ,but iv grown fond of the damn thing.

Yes have to take my hat off to you and thankyou you for giving me the bollocks/ intelligence to start investing money in shares again, thanks to your reasoning and simplifying of things.

Last time i owned shares before this SIPP was prior to the 2007 crash .... i sold the lot just months before the crash and have been like a rabbit in the headlights ever since, waiting for pwopertee prices to crash.

Should add it was April 2018 that i opened this SIPP with a few grand and as of tonight, the SIPP/ISA and Junior ISA are worth £120k ... not bad for someone who works about 500 hours a year!

Hope it all crashes again soon as within a few months should have added another 40-50k in cash. But is it upwards from here?

 

[leonardratso]

3 minutes ago, Hancock said:

Yes have to take my hat off to you and thankyou you for giving me the bollocks/ intelligence to start investing money in shares again, thanks to your reasoning and simplifying of things.

Last time i owned shares before this SIPP was prior to the 2007 crash .... i sold the lot just months before the crash and have been like a rabbit in the headlights ever since, waiting for pwopertee prices to crash.

Should add it was April 2018 that i opened this SIPP with a few grand and as of tonight, the SIPP/ISA and Junior ISA are worth £120k ... not bad for someone who works about 500 hours a year!

Hope it all crashes again soon as within a few months should have added another 40-50k in cash. But is it upwards from here?

 

some kind of workaholic.

[Hancock]

1 minute ago, leonardratso said:

some kind of workaholic.

Always been work shy mate, in general i hate almost everything about it.

Work wise is my motto!

[leonardratso]

durr, left myself a note to buy NYSE:CAT - i just found it in my pocket from last year sometime, i also wrote $150 on it, just went to check, pah $196 now, should empty my pockets more often....

[Loki]

18 minutes ago, DurhamBorn said:

Have to laugh at the MSM, they have zero idea do they.None of that is driving the market what they think it is,zero,zip,nothing.Unlike those bozos i hope the one lesson people learn from this thread is markets are never linear.Whats driving markets is the liquidity in the pipes,once thats in something will force it out with a lag.

Its like those "economists" worrying the BOE is monetizing government deficits.OF COURSE IT IS,and if they werent we would be heading back to the stone age,thats how western economies work,for better or for worse.They needed a route into the economy because the banks were off the table.

 

https://www.zerohedge.com/economics/why-2020s-wont-be-roaring-20s

 

Link presented without comment.

 

Well apart from 

 

So on the plus side, at least it's one hack who isn't stealing your line, on the downside, he's literally comparing now to the 1920s.  Even just from reading Contrarian Investment Strategies (Not quite finished yet) I know that comparing the 1920's recession to other recessions is foolish. 

[AWW]

5 hours ago, Errol said:

Nobody sane 'rotates' out of gold.

Exactly. I've sold loads of physical silver when it's made good gains. I've never sold any gold.

[Democorruptcy]

2 hours ago, leonardratso said:

<insert ticker> is the counter to balance the exuberant bullishness,  it comes up bit then tanks hard to keep you watching and waiting... forever......

I noticed the -67.2% in the table and it made me proud to be part of the record holder.

[Nomad]

Interesting article,https://www.theguardian.com/business/2021/jan/06/ftse-100-stock-market-bubble-risk 

[leonardratso]

15 minutes ago, Democorruptcy said:

I noticed the -67.2% in the table and it made me proud to be part of the record holder.

i just kept buying a little bit every now and then, got it down from -70 odd % to -23% now, im hoping to meet it in the middle somewhere, might even get the fees paid if it overshoots.

Having said that i started a new low ball tranch of <gods own share> on t212 and thats 18% up, it wont cover the losses on the -23% one, but every little helps.

[geordie_lurch]

A good article on the Guardian (for a change) and loved this bit about Tesla

Grantham cited shares in the electric car maker as an example of the market bubble. “As a model 3 owner, my personal favourite Tesla tidbit is that its market capitalisation, now over $600bn, amounts to over $1.25m per car sold each year versus $9,000 per car for General Motors. What has 1929 got to equal that?”

https://www.theguardian.com/business/2021/jan/06/ftse-100-stock-market-bubble-risk

[planit]

6 hours ago, 5min OCD speculator said:

oh dear......another valuable lesson 'hate the fed but don't fight the fed....or the ticker'

yes I know it's had a good run but highlights how fickle 'Mr Market' can be and things can turn very quickly.....

This was caused by a mining accident, 2 people died and 3 more managed to get out. Mining is still dangerous. I saw it late and sold half at 110p not sure if it will fall further but I will buy back in as I like this share. The part of the mine closed is the one producing the highest grade.

 

 

[wherebee]

11 hours ago, Hancock said:

Im looking to move from AJ Bell to Interactive Investor to save on fees and they seem to have more selection.

 

Interactive investors are great, but much more complex than some platforms.  Quite unforgiving, and their helpdesks whilst very good are very understaffed so you can wait a while if you hit a problem.

I was trying to sell an investment which couldn't be sold due to me not being in the jurisdiction any more (some regulatory catch 22) and it took a month.  

You'll also need to be careful when putting stock names in - as they are in so many markets you can easily get an ADR or a similar named company on the wrong exchange.  I always triple check, and then check again.  Watchlists are your friend so you can move fast if you need to.

[DurhamBorn]

5 hours ago, Cattle Prod said:

This is important, but the author is missing why. Though credit to him for highlighting the importance of Canadian pipelines. Yes, Alberta will now look west, rather than south. But this only means that the US will have to go back into the Middle East for medium-heavy crude. That, or regime change Venezuela. Mark my words.

Then, when that lesson gets learned, again, probably in 4 years time but hopefully sooner (mid term elections?) the Canadian crude will look south, like the eye of Mordor. But with the leads and lags, it'll be expensive.

For anyone who wants to play Canada for the above Enbridge Pembina Pipeline,TC Energy Corp etc,DYOR not advice etc.Repsol has also been signing long term heavy crude contracts and Shell are building two LNG trains.

[jamtomorrow]

18 hours ago, Cattle Prod said:

As long as it's staying in the right sectors, I think slicing is good and sensible. You'll never get the full amount in or out at the top or bottom, and ladders seem to be the best way to at least get some in. I read a very good post from that Trader Ferg chap about a money gripping nuts in a coconut, too greedy to let go, and couldn't get his hand out. It reminded me of getting out of Bitcoin $15,000 dollars ago, but so what? Some of that went into K&S, and I've just rolled my options out to December, doubled the size with the shorter duration profits, and took my initial investment off the table. Free ride, no panic, no greed, no fomo.

https://traderferg.com/avoiding-the-monkey-trap/

Avoiding The Monkey Trap

The monkey trap involves making a hole in a coconut large enough to fit the monkey’s hand through, but not large enough to pull it back out with a handful of nuts.

The trap relies on greed because the monkey refuses to let go of the nuts to free himself which results in him being captured or killed.

 

As you probably could have guessed, I’m using this as an analogy for getting killed in a bull market as a result of being greedy and unwilling to leave any gains on the table.

 

 

A plan for hopping off this train (once things start to get a bit crazy)

The first strategy I plan to use is scaling out slowly. There will be no binary decision where I plan to sell everything at once.

These cyclical sectors are inevitably going to overshoot the mark, so selling out slowly is the best way to ease the pain that hindsight bias will bring i.e. selling at 5x and watching it go to 10x.

 

 

To have a good outcome in a market that goes parabolic we need to accept we will get out early and be ok with it. 

This means leaving money on the table- maybe even a lot of it… which is fine.

 

Otherwise, you risk one of two alternatives:

• Trying to catch the top, which dooms you to ride it down the other side.
  
  Similar to thinking you can watch the entire show and still leave before everyone, it’s not going to happen.

 

• Or risking Druckenmiller’s fate in the Tech Boom of getting out early and then jumping back in at the top.

“I didn’t learn anything. I already knew that I wasn’t supposed to do that. I was just an emotional basket case and couldn’t help myself. So, maybe I learned not to do it again. But I already knew that.” – Stanley Druckenmiller

 

Or take the other famous example of Issac Newton losing his shirt

“I can calculate the motion of heavenly bodies, but not the madness of people‘

 

If you think you can remain objective in a crazy bull market, get out early, and sit on the sidelines, just remember these two examples.

 

Technical considerations for exiting?

For this, I’m going to use the uranium sector and Andrew Weekly’s guide to illustrate. Andrew has put together this slide deck which has a number of primary and secondary considerations for when to start exiting the trade which I think is smart.

 

Primary exit considerations

1. Two to three consecutive years of term contract volume in excess of 170mlbs annually.

2. Spot price exceeds the term price by $20/lb or more during the excess of the ~$50/lb incentive price.

3. Spot price exceeds $90/lb.

4. Market listings reach ~150 aspiring hopefuls.

5. Spot & SWU price high-level convergence or spot exceeds. 

 

Secondary exit considerations

1. Annual production + near term (2-3 yrs) in-construction buildout is confirmed to match current consumption at incentive price or higher.

2. Nuclear reactor accident at any time during the cycle.

3. Broad stock market crash during mid-late $50+/lb uptrend.  

 

While I like these exit considerations, I wouldn’t let them make up more than 50% of my scaling out. 

The reason being is that I believe it’s highly likely this rally overshoots all reasonable assumptions. 

As I see this being Soro’s theory of reflectivity on steroids with the addition of:

• Social media
• Smartphones
• Everyone connected 24/7
• Notifications and commission-free trading
• Stimulus cheques in the hands of Robinhood traders

 

 

Behavioral considerations for exiting?

This is where it becomes more art than science. 

Examples might be; 

– A friend you mentioned the sector to a while ago reaching out and asking how to invest in it = sell 10% 

– Hear it being discussed at a BBQ or party = sell 10% 

– Taxi driver/ plumber mentions it = sell 10% 

– See it mentioned on news/magazine cover = sell 10% 

– Have dozens/hundreds of @uraniumtothemoon types joining twitter and trolling anyone recommending caution = sell 10% 

 

As a thought experiment, just think back to the crypto boom and how many of the above examples occurred to you personally?

 

I remember clearly heading to a New Years’ festival with a good friend and a number of his friends.

And when my friend introduced me as, ”someone who trades for a living” the group’s eyes lit up. Two of them stated they planned to do the same with crypto and everyone nodded their heads in approval.

But, when I was asked for my opinion and shared my thoughts (quite hesitantly, it was NYE and I did not want to talk about crypto)- mainly how I thought that crypto was a bubble and wouldn’t end well… the room’s mood changed.

The reception to this statement was the same I imagine as kicking the family’s dog off the balcony.

There was silence then someone said; “What sort of trader was I, missing returns like this“, and finally they all concluded I was just sour I’d missed it.

We left it at that and after a few beers, the guys seem to have forgotten everything about their trading aspirations and my ”lack of vision for the future”.

That was the 30th of December 2017.

I figured even if I was in bitcoin I would have been out before $10,000 applying the above rules.

 

 

I like to do this whole exercise ahead of time as I do think it will be far harder to rationalize exits when the euphoria has taken hold. 

Just remember…

People quickly forget how crazy things get. And I am aware I might (which is why I’m mainly writing this post as a reminder to myself).

Just take these projections below. They all seemed possible at the time and only with hindsight bias do we write them off as crazy.

 

 

 

History will repeat itself in the Uranium market as everyone becomes an overnight expert about the supply deficit and drives prices to crazy levels in what is a tiny and illiquid market. 

 

 

It will be essential to go in with a plan, otherwise, the odds are we’ll become a victim of our own ”monkey trap”.

So, my advice is: Mentally prepare to leave some nuts on the table.

 

Cheers, 

Ferg

Good post.

Won't be exiting my Bitcoin position any time soon though. I'm up 450%, so I must be mad, right? Especially since I had my hand trapped inside the coconut for at least 2 of the last 3 years - you'd think I'd be glad to pull it out.

Well that's one of things this community has helped me get clear in my head: a Bitcoin position might be better thought of as insurance, not investment, for the reason that success for Bitcoin will be *very* bad news for the fiat-denominated non-yielding parts of my permanent portfolio. The cash part will become worthless, and who knows how it will affect the PMs.

Looking at it that way, I can then interpret BTC price action as market perception of an insured event (the event in this case being hyperbitcoinization).

I'm happy with the price I paid for that insurance. I wouldn't be so happy with today's prices, and I certainly wouldn't want to be shopping for insurance during a market panic.

I'd also be quite happy to see BTC dwindle to zero. That would mean the market perceives the risk of hyperbitcoinization as zero. I doubt any of us curl up sobbing in the shower thinking about what we spent on home insurance every time we remember the house hasn't burnt down. This doesn't seem much different to me.

[Innkeeper]

4 minutes ago, jamtomorrow said:

Good post.

Won't be exiting my Bitcoin position any time soon though. I'm up 450%, so I must be mad, right? Especially since I had my hand trapped inside the coconut for at least 2 of the last 3 years - you'd think I'd be glad to pull it out.

Well that's one of things this community has helped me get clear in my head: a Bitcoin position might be better thought of as insurance, not investment, for the reason that success for Bitcoin will be *very* bad news for the fiat-denominated non-yielding parts of my permanent portfolio. The cash part will become worthless, and who knows how it will affect the PMs.

Looking at it that way, I can then interpret BTC price action as market perception of an insured event (the event in this case being hyperbitcoinization).

I'm happy with the price I paid for that insurance. I wouldn't be so happy with today's prices, and I certainly wouldn't want to be shopping for insurance during a market panic.

I'd also be quite happy to see BTC dwindle to zero. That would mean the market perceives the risk of hyperbitcoinization as zero. I doubt any of us curl up sobbing in the shower thinking about what we spent on home insurance every time we remember the house hasn't burnt down. This doesn't seem much different to me.

Great post and has made me see BTC in a different light.  I was going to take a small position at the end of last year and didn’t.  Like you I’m not happy at the current prices so hopefully a decent crash will occur at some point.  Thing is, when and how deep?  Crypto continues to confound along with Big Tech stock but both are increasingly seen as safe havens and fundamentals not applying to decisions.

I’m happy with my PM/commodities positions but I could do with that insurance.....

[nirvana]

50 minutes ago, jamtomorrow said:

I doubt any of us curl up sobbing in the shower thinking about what we spent on home insurance every time we remember the house hasn't burnt down. This doesn't seem much different to me

I would agree if Bitcoin moves opposite to the markets BUT IT DOESN'T! It tracked nasdaq until november.......

when the markets next crash aka BK, buttcoin will crash as well 

Insurance is generally a scam  Years ago when the private fire brigade used to put out house fires, they wouldn't 'water your house' unless you had the certificate displayed outside.....

With insurance you're protecting yourself against 'other idiots'.......if you're not an idiot yourself you don't need it...accidents ARE avoidable 

[geordie_lurch]

Bitcoin got to over £27,800 earlier this morning

[Hancock]

5 hours ago, wherebee said:

Interactive investors are great, but much more complex than some platforms.  Quite unforgiving, and their helpdesks whilst very good are very understaffed so you can wait a while if you hit a problem.

I was trying to sell an investment which couldn't be sold due to me not being in the jurisdiction any more (some regulatory catch 22) and it took a month.  

You'll also need to be careful when putting stock names in - as they are in so many markets you can easily get an ADR or a similar named company on the wrong exchange.  I always triple check, and then check again.  Watchlists are your friend so you can move fast if you need to.

Cheers good to know.

Im pretty much a sit and hold kind of guy as i just cant be bothered chasing the tops and dips; flogged my ITV last night at a 50% profit, but theyre my only sell in 2020/21.

[DoINeedOne]

49 minutes ago, geordie_lurch said:

Bitcoin got to over £27,800 earlier this morning

And to think i bought 10 Bitcoins at $100 each years back

Then sold them at $130 because it was pissing me off for some reason, still makes me laugh when people say but you would had XYZ i very much doubt i would be still holding today as i didn't understand it 

 

But just think of all the people who had bitcoins back then but lost access to there computers an wallets 

 

And then apparently there was this guy wonder how he is feeling today every time he has a pizza

currently them 10,000 would be £278,000,000 but again doubt anyone would held till now 

[Shamone]

9 minutes ago, DoINeedOne said:

And to think i bought 10 Bitcoins at $100 each years back

Then sold them at $130 because it was pissing me off for some reason, still makes me laugh when people say but you would had XYZ i very much doubt i would be still holding today as i didn't understand it 

 

But just think of all the people who had bitcoins back then but lost access to there computers an wallets 

 

And then apparently there was this guy wonder how he is feeling today every time he has a pizza

currently them 10,000 would be £278,000,000 but again doubt anyone would held till now 

https://www.google.co.uk/amp/s/www.independent.co.uk/life-style/gadgets-and-tech/news/bitcoin-value-james-howells-newport-landfill-hard-drive-campbell-simpson-laszlo-hanyecz-a8091371.html%3famp

[Chewing Grass]

2 minutes ago, Shamone said:

https://www.google.co.uk/amp/s/www.independent.co.uk/life-style/gadgets-and-tech/news/bitcoin-value-james-howells-newport-landfill-hard-drive-campbell-simpson-laszlo-hanyecz-a8091371.html%3famp

So if there a finite number of bitcoins, a lost bitcoin is permanently lost so logically all the others must then go up in value.

How many bitcoins have been digitally lost over the years or are they recreated if not used for X amount of time?

[Hardhat]

Hmmm... is the reflation thread becoming a Bitcoin thread a sell signal ...