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

[goldbug9999]

30 minutes ago, DurhamBorn said:

If your ordinary and dont work for the state,or get welfare from it you have little chance of getting on.

This is the telling point, its the productive sector of the economy - private enterprise, which is rewarded the least in our current system. 

[Harley]

7 minutes ago, goldbug9999 said:

This is the telling point, its the productive sector of the economy - private enterprise, which is rewarded the least in our current system. 

A ship with too many barnacles makes little progress and presumably will ultimately sink.

[BurntBread]

8 minutes ago, PrincessDrac said:

Do you think we are at the bottom with Gold and Silver.

Nobody knows.

If I were to try to channel the spirit of the thread, I think the conclusion would be that gold and silver, and more pertinently the PM miners, may go either up or down form here in the short term. However, in the event of a BK, PM miners are expected to be temporarily below their current valuations (David Hunter suggests a possible 30% fall), before beginning a long (and bumpy) ride up again to new highs. DB has a target price for silver of $200 to $250 per ounce by the end of the decade. David Hunter has said similar, and has mentioned a figure for gold of $5000 per ounce, again later in the cycle.

All that is conjecture, though.

[Harley]

27 minutes ago, PrincessDrac said:

I'm long on Gold and Silver now.

I bought some Fres stock yesterday. Probably my last buy at £9 a share. I hope they don't fall further as they dropped to 8.83 after my purchase.

Heads up as they have a 10% withholding tax on the dividend payout.

They go ex dividend soon. I think the 20th of this month.

Gold and Silver seem to be on the rise. If next week the inflation figures in the US are notching up. So the bond yields start also ticking higher to compensate.

Gold and Silver then falls. Where does this end. I'm long on PM's. Hoping to match inflation figures. Yet my miners, Fres, Poly, CEY, HOC are all on their asses.

Do you think we are at the bottom with Gold and Silver.

Next week may well spell out the answer to my question.

 

I was looking at UST 30Y yields today and was going to post they look a bit toppy on a technical and chart pattern basis.  I haven't looked at the shorter end yet but Farber said he liked the 10Y.  PM miners sre getting interesting for me as value plays and several commentators are bullish.  Someone just bought a large chunk of Barrick.  But everything could/would get wacked in a BK.  The metals are a harder read.  Bitcoin could be due a pullback, although I see it as complimentary (a bit like the gold:silver ratio).  PMs could do one more big drop as a shake out but surely remain a good long term play, if held correctly!

[Bricormortis]

I work on the assumption that PM miners go down 80 to 90 % in a BK based on I am a pessimist and they are muvverfuckers. They will do much worse than the underlying metal which I expect to get whacked 50%  but be one of the first things to rebound.

[sancho panza]

Interesting exchange on Twitter

Price of wood has been mentioned on here a lot lately.

 

here's a close up of the chart

 

[sancho panza]

On 09/04/2021 at 13:07, DurhamBorn said:

@sancho panza its incredible how that article says the same thing as the macro showed.I think the very first post on this thread or the original one i said the economy cant produce enough for the claims on it,and thats exactly what that article is saying.They are seeing the same thing through energy being the primary source of growth.

My roadmap has shown how they would proceed because the only way they will see is to inflate.Each individual country needs to get ahead of the curve now,and the market doesnt understand that yet.

Here in the UK the huge problem they have is that massive parts of spending are inflation linked,and that defeats the purpose,so benefits and state wages and pensions need putting up less than inflation and even better less than inflation that is already understated.

I would say the key thing to think about here is this.

"poor" people in this country get to consume incredible amounts of "stuff" they havent swapped effort for.So do the rich.

You can see how this plays out as certain workers,for instance council managers,the police etc force through higher and higher wages and pensions and take more and more from the private worker,or saver.

Money has pretty much now lost any hope of holding value,and that value is actually someones labour.Its supposed to save the getting up at 5am,the going to work when ill,the putting up with wanker bosses,getting soaked in the car park,missing your sons football game,your daughters nativity play,your partners hospital appointment

Most blame central banks,i blame government,but both are needed to carry on the theft.

My model shows they need around 65% inflation to stop western governments going bust.Most of that theft then comes from bonds then cash as they run rates way behind.Of course that also hits many other areas,pension schemes etc so divis have to be cut.

That is why i measure success or failure on that 65% number.If i increase my assets from last Feb before the crash (first crash maybe) by 65% or more thats success,less is failure against the system and cycle.

 

What I find intriguing is that you(and other Macro commnetators like DH) and Dr Tim have reached similar conclusions through very diffferent methods/reasoning.

For me the harderst adjustment of the last decade has been learning that CBs will be mad enough to do the things that mad people shouldn't be allowed to do.And that when I was sat there looking at the bloating of CB balance sheets worldwide,the BoJ buying ETF's(wtf!!!),the BoE printing £250bn in 2020 tax year whilst govt issued £270bn new detb etc etc and thinking it was mad,I wasn't insane,I was normal,rational and possessed of my faculties.

I've done some hard thinking about alcoholics/bullies/druggies and their enablers thsi last week and I've been trying to work out who's worse.In my view,the enabler ie the BoE shares a dsiproportionate responsibility for where we are.Politicians will always chase easy solutions,the CBers are meant to be more educated and ahem........'independetn' than that.

 

What was the point the point of all that hot air about BoE independecne in the late 90's if they were never going to excercise it?

 

[Hancock]

27 minutes ago, sancho panza said:

Interesting exchange on Twitter

Price of wood has been mentioned on here a lot lately.

 

here's a close up of the chart

 

Price of land will have to come down, to compensate.

[Hancock]

43 minutes ago, sancho panza said:

What was the point the point of all that hot air about BoE independecne in the late 90's if they were never going to excercise it?

So politicians don't have to take the blame when things inevitably goes tits up ... see SAGE/Covid for a more recent example of needing somewhere to pass the blame.

We live in a cover your arse society on steroids, and Brits have created an economy on needing to cover ones arse.

The work i do, could, in a once in a lifetime extreme case, be a matter of life and death for hundreds of people if not done correctly.

But it doesn't matter if dozens die, just so long as i've the paperwork in place to show all was good and any fuck up is nowt to do with me or the company i work for. But i'm good at paperwork, and know how the job should be done, which usually differs from how i'm being told to do it ... as the people telling me how to do the job have never actually got their hands dirty and done it!

So too play games, i like to send a few emails to make sure the companies and the clueless cunts on the beach have their backside hanging out like a fucken baboons!

See Deepwater Horizon for a lesson in failing to cover ones arse.

[Noallegiance]

37 minutes ago, sancho panza said:

What was the point the point of all that hot air about BoE independecne in the late 90's if they were never going to excercise it?

 

The question I would ask is 'Why are they not exercising it?'

Whilst I disagree with the  course of monetary action taken over the last several decades, if I came to you and and gave you a "choice" between cake or death, which would you "choose"?

For any reader, to complete the thought process:

Of course, there is no choice to be made. The course of action leading to the two available paths of cake or death has already happened and cannot be undone.

Cake, it is. Until the cake runs out.

Independence of any individual or body is irrelevant when choice is removed. It's the poisonous beauty of socialism.

Governments are, in my opinion, entirely at fault for our economic predicament.

A market of individuals could never create such an all-encompassing mess.

[JMD]

6 hours ago, DurhamBorn said:

To save democracy longer term they need to abolish the welfare state and replace with a Universal Basis Income alongside a land value tax.It needs to be set lower than welfare benefits now so that you can only live a very frugal living on it.The thing that stops it coming in is housing.To counter that the state needs to build lots more housing with shared facilities.The state should pay zero rent to private landlords.

The state is making people poor by choosing who it gives resources too.An example only today.My neighbour has retired from the police,looks very young,55? and has used a pension lump sum to give his daughter a 50% deposit on a house.He will be getting a massive tax payer funded pension now.

If your ordinary and dont work for the state,or get welfare from it you have little chance of getting on.

Yes paying taxes into a system that then pays huge amounts straight back out to masses of unproductive/unemployed people, is one glaring example of so many, of why for me I consider that the 'social contract' has been broken, and why I think that democracy itself has now failed. First prorogation, then lockdowns, what next? (rhetorical question, we all kinda know what's coming)                                                                     DB, you mention land-value tax policies - I think these could be operated to make land speculation unattractive, is that what you mainly meant? That is to say I don't think they would raise much in terms of being a wealth tax because the wealthy would find ways of 'hiding' property, for example tracts of land could be utilised as working farms/forestry(for lumber) and put in trust for next generation to inherit. Anyway isnt most wealth of the rich held in stocks and company ownerships?                                                                            Collecting all taxes is a difficult problem to crack. But if we do get more authoritarian government (not wanting this, but think it inevitable), and the West collectively for example were to make all foreign bank accounts transparent along with operating strong capitol controls, I wonder would such government oversight of the money flows coming in/out of the country stop most tax evasion, by pulling the rug from beneath offshore tax shelters?

[sancho panza]

Prices are rising,if we get a debt deflation running alongsdie it,we're fubar.

 

https://wolfstreet.com/2021/04/09/producer-prices-blow-out/

 

 

 

and herein lies the rub.Great journalism from WOlf here,'noone on Wall St is goingto dismiss 50% yoy earnings growth as base effect'...............and yet they do it with inflation..

https://wolfstreet.com/2021/04/08/get-ready-for-a-wild-base-effect-highlighted-forcefully-when-it-suits-them-as-with-inflation-silenced-forcefully-when-its-awkward-as-with-corporate-earnings/

This phenomenon is the “base effect.”

Fed Chair Powell brought it up when he was dismissing future inflation. Inflation dipped on a month-to-month basis for three months last spring, as energy prices collapsed and prices of some services, such as hotel and flight bookings, swooned. So year-over-year CPI growth will jump over the coming month, in part because of this base effect. And Powell is going to dismiss this jump in inflation, and he will be using the term “base effect” to do so.

But you guessed it, no one will blame the “base effect” for the approaching massive year-over-year jumps in corporate revenues and earnings.

Q1, Q2, and Q3 2020 were rough for many companies. Revenues were down or had vanished, and profits had collapsed or had turned to losses. Going forward, these companies will report their year-over-year growth rates in revenues and earnings, and some of those growth rates are going to be between huge and ginormous, but from the much lower base in the same quarter last year. This too is the base effect.

Unlike Powell who is already dismissing future inflation with a mention of the “base effect,” no one on Wall Street is going to use “base effect” to dismiss 50% year-over-year revenue growth, or 90% year-over-year earnings growth even if revenues and earnings are still far below where they had been in 2019.

[JMD]

5 hours ago, BurntBread said:

Nobody knows.

If I were to try to channel the spirit of the thread, I think the conclusion would be that gold and silver, and more pertinently the PM miners, may go either up or down form here in the short term. However, in the event of a BK, PM miners are expected to be temporarily below their current valuations (David Hunter suggests a possible 30% fall), before beginning a long (and bumpy) ride up again to new highs. DB has a target price for silver of $200 to $250 per ounce by the end of the decade. David Hunter has said similar, and has mentioned a figure for gold of $5000 per ounce, again later in the cycle.

All that is conjecture, though.

I know silver is more speculatiion and gold is more insurance, so each has different purpose in a portfolio. But if many financial commentators estimate silver doing 10x and gold only 3x, are there some here that just own gold miners for leverage and don't bother owning the actual metal (physical gold or etf)? Or perhaps have other different strategies in regards their PM asset allocation for this cycle? 

[JMD]

2 hours ago, sancho panza said:

What I find intriguing is that you(and other Macro commnetators like DH) and Dr Tim have reached similar conclusions through very diffferent methods/reasoning.

For me the harderst adjustment of the last decade has been learning that CBs will be mad enough to do the things that mad people shouldn't be allowed to do.And that when I was sat there looking at the bloating of CB balance sheets worldwide,the BoJ buying ETF's(wtf!!!),the BoE printing £250bn in 2020 tax year whilst govt issued £270bn new detb etc etc and thinking it was mad,I wasn't insane,I was normal,rational and possessed of my faculties.

I've done some hard thinking about alcoholics/bullies/druggies and their enablers thsi last week and I've been trying to work out who's worse.In my view,the enabler ie the BoE shares a dsiproportionate responsibility for where we are.Politicians will always chase easy solutions,the CBers are meant to be more educated and ahem........'independetn' than that.

 

What was the point the point of all that hot air about BoE independecne in the late 90's if they were never going to excercise it?

 

SP Please don't begin to dought your sanity (after all even Felix Zalauf in the video I posted yesterday said he struggled to see the sense in CB actions), although I think it also wrong for you to attempt to character trait our politicians as mad. What I mean is aren't they just technocrats pulling the levers of a systemically failing system? Although when we do eventually get effective leadership I predict and fear it will come with lots of 'unwanted baggage'.                                                                                                                                                      As for the 'independant BofE' government arms length narrative, the story there reads more like a penny dreadful... After all who is it that appoints the BofE governor? It is a political choice and usually made by the chancellor of the exchequer!! And yet the governor's paid 500,000, compared to 100,000 for the chancellor, hmmm not quiet madness, but I do grant you that the power dynamic looks positively schizophrenic.

[Harley]

I never saw the BoE as independent.  That's not how things work.  Always, look at what they do, not what they say.

[Harley]

3 hours ago, JMD said:

I know silver is more speculatiion and gold is more insurance, so each has different purpose in a portfolio. But if many financial commentators estimate silver doing 10x and gold only 3x, are there some here that just own gold miners for leverage and don't bother owning the actual metal (physical gold or etf)? Or perhaps have other different strategies in regards their PM asset allocation for this cycle

Two key dynamics for me:  I see PMs as part of a hard asset class so look for other assets to complement them such as other metals, crypto, land, physical assets, etc.  Look at Gates and farmland.  Turns out I'm under 25% invested in hard assets so wish to increase my holdings but maybe other than in PMs.  Second is the move to some miners becoming value plays.  I've never been an investor in miners given my poor trading record but this is now a major area I'm looking at.  Maybe this will get easier as more miners increase their divs to make them attractive to me.

[Harley]

3 hours ago, JMD said:

Yes paying taxes into a system that then pays huge amounts straight back out to masses of unproductive/unemployed people, is one glaring example of so many, of why for me I consider that the 'social contract' has been broken, and why I think that democracy itself has now failed. First prorogation, then lockdowns, what next? (rhetorical question, we all kinda know what's coming)                                                                     DB, you mention land-value tax policies - I think these could be operated to make land speculation unattractive, is that what you mainly meant? That is to say I don't think they would raise much in terms of being a wealth tax because the wealthy would find ways of 'hiding' property, for example tracts of land could be utilised as working farms/forestry(for lumber) and put in trust for next generation to inherit. Anyway isnt most wealth of the rich held in stocks and company ownerships?                                                                            Collecting all taxes is a difficult problem to crack. But if we do get more authoritarian government (not wanting this, but think it inevitable), and the West collectively for example were to make all foreign bank accounts transparent along with operating strong capitol controls, I wonder would such government oversight of the money flows coming in/out of the country stop most tax evasion, by pulling the rug from beneath offshore tax shelters?

Apparently, a lot of "old money" land is still not registered at Land Registry.  No legal need to do so unless transacted, etc.  There's a guy/group on the web all over the subject. 

[spygirl]

12 hours ago, goldbug9999 said:

This is the telling point, its the productive sector of the economy - private enterprise, which is rewarded the least in our current system. 

Thats Brown for you.

 

[Hancock]

5 hours ago, Harley said:

I never saw the BoE as independent.  That's not how things work.  Always, look at what they do, not what they say.

This is a 100% real, actual photo of what they do.

[DurhamBorn]

The difference this time is China.India will want closer military ties and access to modern weapons.Boris off to India because he sees huge fossil fuel enabled growth while it looks like Ellesmere Port Vauxhall plant might shut due to the 2030 no ICE sales 

They make out India is very protectionist,and it is,try affecting its onion prices,but not so for BP,they are growing a very big business over there.

Energy and weapons are what India needs.

https://www.telegraph.co.uk/business/2021/04/11/global-britain-must-push-lucrative-trade-deal-india/

 

[Talking Monkey]

17 hours ago, DurhamBorn said:

To save democracy longer term they need to abolish the welfare state and replace with a Universal Basis Income alongside a land value tax.It needs to be set lower than welfare benefits now so that you can only live a very frugal living on it.The thing that stops it coming in is housing.To counter that the state needs to build lots more housing with shared facilities.The state should pay zero rent to private landlords.

The state is making people poor by choosing who it gives resources too.An example only today.My neighbour has retired from the police,looks very young,55? and has used a pension lump sum to give his daughter a 50% deposit on a house.He will be getting a massive tax payer funded pension now.

If your ordinary and dont work for the state,or get welfare from it you have little chance of getting on.

DB isn't the end of the Welfare State and some basic if not very basic UBI baked in. The current welfare system looks to be creeping towards an eventual tipping point of rapid collapse, in parallel  more and more potential workers becoming superfluous to requirements. Might be a decade or so away but defo looks to be in our lifetime. One of the key questions is how basic and frugal would that existence be relative to today's average welfare state lifestyle. 

[DurhamBorn]

1 hour ago, Talking Monkey said:

DB isn't the end of the Welfare State and some basic if not very basic UBI baked in. The current welfare system looks to be creeping towards an eventual tipping point of rapid collapse, in parallel  more and more potential workers becoming superfluous to requirements. Might be a decade or so away but defo looks to be in our lifetime. One of the key questions is how basic and frugal would that existence be relative to today's average welfare state lifestyle. 

Its nearly certain yes,only the timescale is in question.All the local factory jobs near me pay around £20 a week more before get to work costs than a single mother with two kids gets.Thats not sustainable and was masked by eastern europeans flooding in.Low paid factories now really struggle to get decent workers.They get people,but they dont give a toss if they get sacked etc,so spend half the time at the bog on their phones.They call the toilets in most factories now the "Facebog" .If you have a paid house the equation isnt as bad,but when that goal is hard to reach on low wages less and less people try.Brown pretty much destroyed this country and most of the problems were caused by him in a few short years.

[NogintheNog]

1 hour ago, Talking Monkey said:

DB isn't the end of the Welfare State and some basic if not very basic UBI baked in. The current welfare system looks to be creeping towards an eventual tipping point of rapid collapse, in parallel  more and more potential workers becoming superfluous to requirements. Might be a decade or so away but defo looks to be in our lifetime. One of the key questions is how basic and frugal would that existence be relative to today's average welfare state lifestyle. 

I agree with this, UBI introduced at some point with Central Bank Digital Currency to get it. Programmable £, with a time limit to use and a central government ledger/blockchain. All money in the economy visible to HMRC. Cash money phased out within a short period after introduction. Banks die.
Possible laws enacted on crypto and gold/silver to hinder use as monetary alternatives.
Paid per head with a bonus if you have children or a disability. No requirement to look for work but subsistence living. You want more? Find some work!

Basically communism. Ref China.

[Talking Monkey]

17 minutes ago, NogintheNog said:

I agree with this, UBI introduced at some point with Central Bank Digital Currency to get it. Programmable £, with a time limit to use and a central government ledger/blockchain. All money in the economy visible to HMRC. Cash money phased out within a short period after introduction. Banks die.
Possible laws enacted on crypto and gold/silver to hinder use as monetary alternatives.
Paid per head with a bonus if you have children or a disability. No requirement to look for work but subsistence living. You want more? Find some work!

Basically communism. Ref China.

That potential curb on holding physical gold and silver is worrying. I realise one has to hedge but the bastard government might neutralise the hedge. 

[Lightscribe]

47 minutes ago, NogintheNog said:

I agree with this, UBI introduced at some point with Central Bank Digital Currency to get it. Programmable £, with a time limit to use and a central government ledger/blockchain. All money in the economy visible to HMRC. Cash money phased out within a short period after introduction. Banks die.
Possible laws enacted on crypto and gold/silver to hinder use as monetary alternatives.
Paid per head with a bonus if you have children or a disability. No requirement to look for work but subsistence living. You want more? Find some work!

Basically communism. Ref China.

A lot sooner that most would think. China’s already introduced digital currency, the west won’t be far behind (after all who wants to carry around that filthy virus-ridden anonymous cash anymore?)

https://www.forbes.com/sites/enriquedans/2021/04/07/chinas-digital-currency-is-about-to-disrupt-money/?sh=2b96b2f01665

Next up, digital ID rollout

https://www.weforum.org/events/global-technology-governance-summit-2021/sessions/scaling-up-digital-identity-systems

World Bank paper

http://documents1.worldbank.org/curated/en/199411519691370495/Technology-Landscape-for-Digital-Identification.pdf