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

[Kudukid]

15 hours ago, DurhamBorn said:

Hi Kudukid,

 

Durhamborn,

Thank you very much for the detailed reply, much appreciated. 

I have been long PMs for probably too long and too much and I am amazed how long the plates have been spinning but if what we think is going to happen happens, the future is Orange

very interesting about the oilies, my next chunk is definitely going that way.

Thanks again and all the best for 2020.

[MrXxxx]

8 hours ago, DurhamBorn said:

The key amount is the starting amount ie how many times your annual pension they offer you.

The local government scheme only offers around 18 times and so its far better to stay in the scheme.

There might be a calculator online somewhere that do

Thanks DB.

I am sure that you could set-up a function cell in Excel to do the calculations...will do when I get it working.

[MrXxxx]

7 hours ago, Harley said:

Sure, will do, no probs.  Out and about tomorrow but will try later in the day.  Suffice to say for now the three bottom charts are the (slow) stochastic, the MACD, and the RSI.  You can internet search them but I'll explain more, especially the interaction between the first two and price and the potential clues they can give.

Thanks Harley,

just found this site whilst doing a search for MACD that explains it quite well:

https://www.babypips.com/learn/forex/macd

...all I have to do now is to remember it!

One last question on figure in that webpage, I understand the line figure (two sampling periods for the average?) and the histogram below it (rate of change between two averages?), but what is the figure at the top with red/green bars?

[DurhamBorn]

2 hours ago, MrXxxx said:

Thanks DB.

I am sure that you could set-up a function cell in Excel to do the calculations...will do when I get it working.

Yes it would be interesting and probably worth a thread on here as it would help a lot of people.

[Harley]

2 hours ago, MrXxxx said:

....One last question on figure in that webpage, I understand the line figure (two sampling periods for the average?) and the histogram below it (rate of change between two averages?), but what is the figure at the top with red/green bars?

Just a quick one while I can.  I think you are referring to the red and green bars in the price chart above the MACD chart.  That's just another format for showing price as apposed to the typical line chart.  Nothing to do with MACD.  Some people prefer that format as it shows the upper and lower price range for the period (day, week, month  etc) represented by the bar with green showing an overall up for the period and red a down.  Most chart software will let you change the price chart to this format.  Many other such formats available like candlesticks. Gotta go now and collect my big screen TV for the new trading room I'm building!  On sale plus 6% off via Perkbox!  Last year's model naturally!

PS:  Important to understand these indicators to better understand their limitations but it's how to interpret them and the interplay between them that really matters. Later!

[Bobthebuilder]

Not to off topic i hope but i have decided to future proof my house. As deflation is probably over for now and inflation likely i am making improvements that will likely see me out.I fitted a new a rated boiler over xmas and sorting new doors and windows, had a full re wire last year, Velux in the loft and new insulation.

Seems like a good time to do it.

[DurhamBorn]

42 minutes ago, Bobthebuilder said:

Not to off topic i hope but i have decided to future proof my house. As deflation is probably over for now and inflation likely i am making improvements that will likely see me out.I fitted a new a rated boiler over xmas and sorting new doors and windows, had a full re wire last year, Velux in the loft and new insulation.

Seems like a good time to do it.

I did similar.New combi,all new plastic pipes etc,double glazing all done over last 4 years,Need to do the insulation,but the loft is a bit full of crap and a lot of boards.Iv got water butts outside i use for my pond and watering plants etc.Spent today taking bits of my spare Peugeot apart as well change a few bits i picked up from my mate for free who was breaking one.

[JMD]

Happy new year All. I eventually got a response back from Sprott who were offering a 'free PM miner analysis'. Pretty uninspiring stuff - especially I think for the experts who visit this blog, however will post in case some find it of some use.

The miner selection is my own (not invested in all of course, just a selection for experimental purposes). I received Sprott reply last week with following caveat: 'Sprott Rankings are numerical, 1-10, with 1 being best. Note that the criterion is risk-adjusted reward, so that higher risk companies may still enjoy a more favorable ranking than lower risk companies, although they may be less suitable for individual portfolios. Comments and rankings are “snap shots in time” subject to rapid and unannounced change, based on news or market conditions.'

Btw, the headings are my own and realise some miners are under wrong categories... also, please excuse the clumsy formatting, I hope it is just about readable?!

 

Gold                                                                                New Gold ngd, 6 - balance sheet and operational challenges                                                            Wesdome wdo, 6 - well run, very fully priced                 Kirkland Lake kl, 5 - priced for perfection, but delivering                                                                         Rio2 rio, 6                                                                       Hotchschild hoc, 5                                                            Yamana auy, 6 - low inside ownership, high G&A         Harmony Gold har, 5                                                   Alamos agi, 5                                                                  Kinross kgc, 5 - capital allocation challenges, but cheap                                                                               Pan African Resources paf, no opinion                        Agnito Eagle Mines aem, 4 - superb, not cheap, rapid free cash growth, major capital spend passed  AngloGold Ashanti ang, 5                                    Goldfields, gfi, 5                                                              NovaGold Resources ng, 6 - uneconomical, lots of optionality, well backed                                                 Eldado Gold ego, 6 - low inside ownership, high G&A, poor capital allocation, but cheap                                         Sibanye Gold sgl, 6 - great leverage, marginal, political risk                                                             Barrick Gold gold, 5 - best of the " biggies". First stop for generalist investors, in gold space                               Newmont Goldcorp nem, 5 - improving, too many tier 2 operations, Nevada consolidation with Barrick helps greatly                                                            International Tower Hill Mines thm, 6 - very low grade       PolyMetal International poly, 3                                                       Compania de minas Buenaventura bvn, 5 - sleeper, cheap, political risk         Petropavlovsk pog, no opinion                                                                          OceanaGold ogc, 6 - big price run up                                                               B2Gold bto, 4 - tier 1 asset, great free cash flow, great mine builders              McEwen Mining mux, 6 - Great CEO, implementation challenged                   Superior Gold sgi, 6                                                                                           Guyana Goldfields guy, 6 - cheap, troubled                                                      GoldResource Corp goro, 7

 

Silver                                                                               Pan American Silver paas, 4 - core silver name, big price run up, huge upside, big political risk                                                                     Endeavour Silver exk, 6 - great silver leverage, unprofitable, small mines       Hecla Mining hl, 7 - low inside ownership, high G&A                                      Coeur Mining cde, 6 - good following, low inside ownership, high G&A           Alvino Silver and Gold Mines asm, 6 - good following, small mines                 First Majestic Silver fr, 5 - recent price run up, great silver leverage, cult stock, marginal at these prices                                                                          Great Panther Mining gpl, 7 - bankruptcy possible                                           Fortuna Silver Mines fvi, 5 - cheap, well run, cash short, Lindero implementation challenges                                                                        Alexco Resource axu, 6 - small mine, needs capital, great environmental unit                                                                                                             Fresnillo fres 5 - very cheap, but opaque                                                          Silvercorp metals svm 5 - opaque                                                                     Impact Silver ipt 6                                                                                              SSR Mining ssrm 5 - great implementation and balance sheet, tired mines?   Santacruz Silver scz 6                                                                                              

 

Gold Juniors                                                                   Compass Gold cvb, no opinion                                                                         Ariana Resources aau, 7                                                                                   Cartier Resources ecr, 6 - interesting discovery, good team, not cheap           Mirasol Resources mrz, 6 - recidivist prospect generator, management and focus changed                                                                                      Amarillo Gold Corp agc, 6                                                                                 Vista Gold vgz 6                                                                                                De Grey Mining deg, 7                                                                                       Brixton Metals bbb, 6                                                                                         Integra Resources Corp itr, 5                                                                             Pure Gold Mining pur, 5                                                                                     Minaurum Gold mgg, 6                                                                                      Auryn Resources aug, 6 - great team, massive expenditures, will need cash  Minerals nak, 6 - big, uneconomic, social risk, low inside ownership                Affinity Metals aff, no pinion                                                                               Jubilee Metals jlp, 6                                                                                           Abraplata Resource abra, no opinion                                                                Altamira Gold Corp alta, 6                                                                                 Marathon gold Corp moz, 6                                                                               Premier Gold Mines pg, 5 – improving                                                              Novo Resources Corp nvo, 6 - market cap excessive, relative to data             Teranga Gold Corp tgz, 6                                                                                  Silver Lake Resources 5                   

 

Silver Juniors                                                                  Silver Bull Resources svb 6                                                                                            Silver Mines ltd svl 6 - marginal, but only Aussie silver play                    Kootenay Silver ktn 6                                                                                         Arizona Silver Exploration azs 6                                                                      Defiance Silver def 7                                                                                         American Gold Silver Corp usas 7                                                                 Bear Creek Mining bcm 6 - huge, marginal deposits, political and social challenges, tired management                                                                      Excellon Resources exn 6 - small mine                                                             Aftermath Silver aag 7 - me too silver                                                               Southern Silver Exploration ssv 6                                                                     Silver One Resources sve 6                                                                              Discovery Metals dsv 6

[MrXxxx]

10 hours ago, Harley said:

Just a quick one while I can.  I think you are referring to the red and green bars in the price chart above the MACD chart.  That's just another format for showing price as apposed to the typical line chart.  Nothing to do with MACD.  Some people prefer that format as it shows the upper and lower price range for the period (day, week, month  etc) represented by the bar with green showing an overall up for the period and red a down.  Most chart software will let you change the price chart to this format.  Many other such formats available like candlesticks. Gotta go now and collect my big screen TV for the new trading room I'm building!  On sale plus 6% off via Perkbox!  Last year's model naturally!

PS:  Important to understand these indicators to better understand their limitations but it's how to interpret them and the interplay between them that really matters. Later!

Cheers Harley, that's exactly what I was referring to, and its no wonder I was confused!....not now thought :-)

[King Penda]

2 hours ago, Bobthebuilder said:

Not to off topic i hope but i have decided to future proof my house. As deflation is probably over for now and inflation likely i am making improvements that will likely see me out.I fitted a new a rated boiler over xmas and sorting new doors and windows, had a full re wire last year, Velux in the loft and new insulation.

Seems like a good time to do it.

Doing my hovel now but for different reasons the end result however is the same 

[Bobthebuilder]

45 minutes ago, stokiescum said:

Doing my hovel now but for different reasons the end result however is the same 

Indeed, and money spent now for the longer term is probably a good decision.

[Bricks & Mortar]

Yup, gotta home improvement plan too.  Mine's held back for the forseeable, in casse the worst of the deflation might be yet to come.  I'll be doing the work myself,  and its my fallback for a quiet spell in my building business.  Have a plan for new roof, insulation upgrade, new ceiling, new kitchen and new flooring with underfloor heating.  Been saving up all kinds of bits and pieces to go into it.  Probably do the lot for a couple grand, with a fair old bit of my own labour.

[Loki]

Deflation is over? 

I was expecting more than a 'blink and you'll miss it' event 

[King Penda]

6 minutes ago, Bricks & Mortar said:

Yup, gotta home improvement plan too.  Mine's held back for the forseeable, in casse the worst of the deflation might be yet to come.  I'll be doing the work myself,  and its my fallback for a quiet spell in my building business.  Have a plan for new roof, insulation upgrade, new ceiling, new kitchen and new flooring with underfloor heating.  Been saving up all kinds of bits and pieces to go into it.  Probably do the lot for a couple grand, with a fair old bit of my own labour.

Good that you have the skill

[Bricks & Mortar]

14 minutes ago, Loki said:

Deflation is over? 

I was expecting more than a 'blink and you'll miss it' event 

I was expecting more than that too.  Still am, mostly.
The main thing giving me doubt is the Fed repo money.  The Fed says it's definitely not QE, (but they could just be trying to avoid it boosting the markets too much).  Quite a few financial commentators declaring that it's raising the Fed balance sheet, i.e looks, walks and quacks like QE, (but they could just be trying to ramp the market).
And I don't see consistency in reporting about it.  One writers thinks its this, one thinks its that.  I don't see common consensus.  I don't believe so much money has ever been put out on such short terms before. 
I'm sure it must have some implication for our debt deflation theory.  Maybe it'll mitigate it a little?  Maybe head it off at the pass and we'll go straight to inflation?  Or maybe they'll declare the crisis over, and all the loans will run out end of January... and BOOM!

[Loki]

3 minutes ago, Bricks & Mortar said:

I was expecting more than that too.  Still am, mostly.
The main thing giving me doubt is the Fed repo money.  The Fed says it's definitely not QE, (but they could just be trying to avoid it boosting the markets too much).  Quite a few financial commentators declaring that it's raising the Fed balance sheet, i.e looks, walks and quacks like QE, (but they could just be trying to ramp the market).
And I don't see consistency in reporting about it.  One writers thinks its this, one thinks its that.  I don't see common consensus.  I don't believe so much money has ever been put out on such short terms before. 
I'm sure it must have some implication for our debt deflation theory.  Maybe it'll mitigate it a little?  Maybe head it off at the pass and we'll go straight to inflation?  Or maybe they'll declare the crisis over, and all the loans will run out end of January... and BOOM!

Great post - I hadn't even consciously noted the inconsistent views on Repos! 

I was being serious, but not to doubt this thread - my very modest portfolio was up by £25 today.  I think durhamborn has called it, I was just surprised to see deflation being over mentioned off-offhandedly without anything big in the news or this thread lighting up with a 'happening' 

[sancho panza]

On 28/12/2019 at 23:53, Sound Money said:

I don’t care what your method is as long as it keeps working 😂

74% up for me on the miners over 1Y. SBGL being my best and NGD being the worst of course.

Ive started averaging into oil stocks. I prefer monthly dollar cost averaging to ladders only because it’s simpler for me to work out/track, and I want to continue buying even if they have already turned up.

But does anyone recommend any gas company plays? I’m only buying big well known oil companies so far. Shell, Exxon, chevron, BP, total. And also some XES that was mentioned. I won’t take them as financial advice, just a cue to look at them in more detail

In august I bought first ranche of fcg picks.In a rare act of good timing on my part theyve gone up since so beware.

DVN 18

CLR 17

CXO 19

XEC 18

ECA 18

EQT 17

CNX 19

AR 18

ERF 21

SRCI 18

 

dyor natch

On 29/12/2019 at 18:57, Cattle Prod said:

https://www.thetimes.co.uk/article/bp-boss-bob-dudley-says-a-green-future-is-years-away-xtt2d0h95

Bob Dudley echoing my comments on natural gas vs coal. It's so bleedingly obvious. Good to hear it start to be discussed in a mainstream newspaper, but of course he's only sticking his head above the parapet finally because he's retiring. It needs to be discussed openly before we back ourselves into a dangerous corner.

About natural gas, has snyone managed to buy Gazprom yet? If so please advise how. I'm toying with Chesapeake, though they may go bust first so dyodd. A nice backdoor to gas is beaten down shale oil players as they turn into gas fields. The Permian is going to produce a lot more gas in coming years, Eagle Ford already is a gas dominant play.

Edit: another one I mentioned before is Energean, though I see they are already up 40% ytd. Id be interested to hear if our technicals folks like @Harley still think it has room to run.

Super read.Very much echoes the general thesis on this thread about selling of energy stocks being overdone

On 29/12/2019 at 21:13, DurhamBorn said:

Yeah i was thinking people piping from the Permian would be good plays.I guess the Appalachian plays mainly sell to the north east and dont sell LNG as i assume most of the shipping places are in the south.I went for South Western as its balance sheet seems decent even though they all losing money and i wanted to get some exposure to the area/sector.The shippers could do really well though,i used to buy the ETF SEA in the past but cant now thanks to the EU,but might go through the companies.Im not sure if @sancho panza has run his scores over that those companies or not.SEA did have 20% in Maersk though so probably better buying the energy plays.

SEA etf is getting canned apparently.Maersk is 20% of the etf iirc.Also remember these scores are from the summer,so chart score could be out of date.

Maerks 19

ENAv 18SFL18

TGP 17

SSW 19

rest all under £1bn market cap

GOGL 18

GHT 17

KNOP 18

CMRE 18

On 29/12/2019 at 23:58, Noallegiance said:

Something has been nagging me for months. Having meditated tonight, questions popped into my head while lying in bed that finally get to the heart of the niggle:

Are we and our sources simply a product of having found eachother out of a sense of being hard-done-by? Are we finding rationalisation for what irks us? Or are we actually going to be proven more right than we are wrong about the last quarter-century+ of financial crazy?

Thought provoking post.

I think I feel a sense of anger about the working people/savers have been shafted since the millenium (even though some might argue that I've ebenfited from those policies.)

The reason I come here is for the generally honest discussion of where we are, where we're going and how readers might protect htemselves and their families if they can.It's benefited from having so many contributors from disparate parts of life with hugely varying experiences of it.

I lvoe teh fact that it's free and it's infintely better advice and education than you can pay for on the whole.Surprising what can be achieved through collaborative efforts.

I also really enjoy the sincerity with which most people post,some of it's made me laugh,some has made me a touch sad.

[sancho panza]

Copper showing signs of life.Alongside the yellow stuff.Some real raliies off long time lows in FRES,HOC,FCX over lat 12 months to name a few.

Recent highs in PM miners of course,all occuring without a weak dollar.I dont know whetehr it's shrewd institutional money offloading AAPL and changing tack but something looks to be occuring.

I mena how else explain 2 year highs in XAU at the same time as S&P hitting new highs?

[sancho panza]

Nat gas,oil services still struggling for a bid, while big oil,jsut sat there looking good value.

[sancho panza]

Potash..I mean who's going to need food in 20 years with a growing world population?

[DurhamBorn]

15 minutes ago, sancho panza said:

Potash..I mean who's going to need food in 20 years with a growing world population?

Id rather it stayed down a little longer),im still buying.

[sancho panza]

reposting from short thread.

[sancho panza]

hattip Steve Kaplan

https://www.marketwatch.com/story/watch-gold-in-2020-says-one-of-wall-streets-most-influential-stock-market-investors-2019-12-24?mod=home-page

Gold has a chance to be an interesting investment in the coming year, says Blackstone investment luminary Byron Wien:

‘Watch gold in 2020. It has a chance to be an interesting investment.’ Byron Wien

 

That is how the veteran investor, whom U.S. News & World Report report described as a modern-day cult figure on Wall Street and one of the most influential investors, described the outlook for the yellow metal in the coming 12-month stretch, during a CNBC interview, ahead of the release of his well-read list of market surprises.

Wien didn’t provide further clarity on his gold estimates or the precise direction of gold trading in 2020.

However, his comments came as the precious commodity was on pace to enjoy one of its strongest daily gains since late November and its highest finish since early last month, rising past a psychologically significant level above $1,500 an ounce. Gold for February delivery GCG20, +1.53% was most recently trading up $14.20, or 1%, at $1,503.10 an ounce on the Comex exchange.

Gold has gained 17.3% so far this year, based on the most active contract, according to FactSet data. That is a relatively healthy run-up for the metal considering that stocks, which tend to move in the opposite direction of gold, have been trading near all-time highs.'

 

https://www.newsmax.com/finance/streettalk/fidelity-peter-lynch-energy-stocks/2019/12/23/id/947111/

Investment guru Peter Lynch said he believes that savvy investors should be stocking up on oil, energy services, and natural gas shares.

While Lynch recently told Barron’s that he believes renewable energy sources may be the long-term future, he reminds investors that natural gas and oil will be a necessary bridge to this.

“You wouldn’t know it from the stocks, but oil is 25% higher than a year ago,” said the vice chairman of Fidelity Management & Research.

 

“Why have these stocks gone down? Everybody’s assuming the world’s not going to use oil for the next 20 years, or five years, or next year. The private-equity money wants out. The banks want to cut back their lending. They can’t do an initial public offering,” he said.

Lynch still holds one of the greatest track records — an astonishing 29% annualized return from 1977 until 1990 while managing Fidelity Magellan — nearly double what the S&P 500 index produced in the same period.

Lynch wouldn’t disclose specific company names, but touted small-cap oil and natural gas companies.

“Energy services is awful; that could have a major turn in the next year or two,” he said. “Oil is interesting. Look, longer term, solar, windmills really work. But you need natural gas and oil to bridge to this,” he said.

“Everybody’s assuming the world’s going to not use oil for the next 20 years, or next year. China might sell five million electric vehicles next year, but they might also sell 17 million internal combustion engines. They don’t have old cars to retire. There are no electric airplanes. Near term, liquid natural gas and liquid petroleum gas might replace diesel fuel for trucks,” he said.

“I’m buying companies that I don’t think will go bankrupt. They’ve got to be around the next 18 to 24 months, or I have no interest,” he said.

He also offered more general investing advice.

“The one thing I want everybody who is buying individual stocks to get is that they have to understand the story, the five reasons something is going to go right for the company. If you can’t convince an 8-year-old why you own this thing, you probably shouldn’t own it,” he said.

 

“Don’t invest in a company before you look at the financials. If you made it through fifth grade, you can handle the math.”

Meanwhile, Bloomberg explains that this year has been one of moderate gains for the price of oil, but it has been bleak for producers.

West Texas Intermediate crude is heading for an annual increase of more than 30%, but the best performance among the global oil majors has been Chevron Corp., which has posted a gain of just 10%. The S&P 500 Energy Index has almost entirely decoupled from oil in 2019 and is on course to underperform crude by the most since the shale revolution began a decade ago.

 

In the broader U.S. energy space, the best performers in 2019 have been pipeline operators, refiners, and companies with big assets outside the shale sector. The worst have been shale-heavy producers, especially those with high levels of debt and spending, or more assets that are more gassy -- gas prices are down for a third year.

With energy now such a small share of the broader market, many fund managers are unwilling to devote time to studying individual stocks, according to Jennifer Rowland, an analyst at Edward Jones & Co. Chevron is the go-to stock for energy exposure due to its large index weighting and commitment to financial discipline, she said.

“Pick Chevron, maybe one other, and to heck with the rest of the space,” she said, describing the mindset of energy investors in 2019.

 

[sancho panza]

Interesting to see a Wall St player reference Minsky.

https://www.marketwatch.com/story/as-stock-indexes-hit-record-heights-guggenheims-minerd-says-were-near-a-minsky-moment-and-silly-season-in-risk-assets-2019-12-23?mod=home-page

'Why is Scott Minerd seeing shades of 1998 in today’s stock market?

The chief investment officer at Guggenheim Partners says the Fed has likely managed to extend the U.S. economic expansion in its record-setting 11th year but warns that problems are lurking in a market that has become accustomed to freely flowing liquidity in the financial system.

Minerd explains that a so-called Minsky moment may be at hand. Economist Hyman Minsky, who died in 1996, espoused a view that a period of distortions in the financial system eventually ends very badly.

Minerd explains further: “Thus, while the Fed has prolonged the expansion, the reality is that it is also the start of silly season in risk assets. By heeding the lessons of the past we continue to position defensively so that we can preserve capital and be prepared to take advantage of opportunities when asset prices inevitably reset.”

The Guggenheim manager says one clear sign that markets are on the verge of cracking resides in the spread between high-yield debt and relatively safer government debt, with tightening spreads indicating that investors are more willing to take on greater risk for comparably less compensation in the form of yields.

“Investors are not being adequately compensated for the outsize risk they are taking on in the current market,” Minerd says. Notably, in his view, “risks are building in various areas of the fixed-income credit markets, particularly in corporate credit.”

Minerd’s comments come as Vanguard’s global chief economist and head of investment strategy, Joe Davis, has reiterated a cautionary perspective that considers stocks vulnerable to a correction next year.

“Financial markets run the risk of getting ahead of themselves,” the Vanguard strategist told Bloomberg News, noting that he foresees a 50-50 chance of a correction in 2020, as compared with a consensus estimate of 30%. A correction is traditionally defined as a drop of at least 10% from an asset’s recent peak.

[Thorn]

10 hours ago, sancho panza said:

 

Thought provoking post.

I think I feel a sense of anger about the working people/savers have been shafted since the millenium (even though some might argue that I've ebenfited from those policies.)

The reason I come here is for the generally honest discussion of where we are, where we're going and how readers might protect htemselves and their families if they can.It's benefited from having so many contributors from disparate parts of life with hugely varying experiences of it.

I lvoe teh fact that it's free and it's infintely better advice and education than you can pay for on the whole.Surprising what can be achieved through collaborative efforts.

I also really enjoy the sincerity with which most people post,some of it's made me laugh,some has made me a touch sad.

Definitely think we all sound a bit like Old Soldiers... but the collective Radar of all posting here is now teaching me a ton of stuff I would never have been able to find anywhere. I wouldn't ever have expected to know anything about why potash will matter or anything else. As somebody here said recently- SBGL. Thank you all again and keep it up.

And today's news on Yahoo finance saying BAT don't care about the US ban on flavoured vaping? Didn't DB predict this- that only the Big Boys would withstand the inevitable coming regulation?