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

[TheCountOfNowhere]

There she blows....

 

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[Iamcynical]

My shares are taking a royal beating but I've been making myself feel better by making money 'for today' by shorting various stocks.  That derailed today though when I watched cineworld get a 80%+ pump and figured I could make my move ready for the dump.........Did it fuck happen.  Shares rose beyond 150%.  They are fucking closed for christs sake   I need to step back and remove the logical part of my brain.

[TheCountOfNowhere]

 

[reformed nice guy]

1 hour ago, NogintheNog said:

Sorry to disappoint you, but...

If someone had said to me a month ago you can buy BP at £3.50 a share, how much do you want? I probably would have tipped £25K maybe £30K in, it would have looked a bargain. With the ground shifting below our feet though, that trade has well and truly passed us by. I've been buying it and Shell/Total all the way down, but so far the falling knife syndrome is getting very painful. I would have hit another ladder today in RDSB at £9.50, but that's now reset to £8.55. Bought TOT in my SIPP on Monday and I'm already best part of 15% down on that. That would have been a £2K allocation, if it hits the next target I might go for £3K's worth.

No mechanics, just fear factor!

I do a similar mechanism. 

10-15% drops, using the "law of round numbers". What I mean is that at certain levels there is often a sharper drop ie if 10% took a share to 105 then I would set my ladder at 100.

Im still just over 20% in cash with plenty of ladders to go, particularly in American shares.

[Talking Monkey]

2 hours ago, sancho panza said:

Reasonable and proportionate response as ever K.As we've seen new highs in most major currencies,it seemed logical that all we needed for a new dollar high would be some weakness.With the printing that's been promised,it's hard to see how the dollar won't deflate when normal life resumes which it has done after every pandemic in human history.

I'm still amazed we've seen near $1700 gold without a weak dollar.We've held our small company positions but have added some more Tier 1/2 exposure on Friday but missed the big sell off eg  paid $14 for Newcrest isntead of $12.

 

I was having a look at TLT its really not helped if used as a hedge dont understand why it is falling, any idea SP

[BearyBear]

SP500 at the 2018 low...

[Harley]

2 hours ago, NogintheNog said:

Sorry to disappoint you, but...

If someone had said to me a month ago you can buy BP at £3.50 a share, how much do you want? I probably would have tipped £25K maybe £30K in, it would have looked a bargain. With the ground shifting below our feet though, that trade has well and truly passed us by. I've been buying it and Shell/Total all the way down, but so far the falling knife syndrome is getting very painful. I would have hit another ladder today in RDSB at £9.50, but that's now reset to £8.55. Bought TOT in my SIPP on Monday and I'm already best part of 15% down on that. That would have been a £2K allocation, if it hits the next target I might go for £3K's worth.

No mechanics, just fear factor!

Ta but I was asking how you set a price such as £8.55.

[Harley]

44 minutes ago, BearyBear said:

SP500 at the 2018 low...

Just another 10 years to go!

[DurhamBorn]

2 hours ago, Harley said:

I sense (speculate) the US Administration is close to doing something profound which, despite the overall negative reaction so far, will startle most people.  It'll make the last bankers bailout seem pocket money.  They'll double, probably a lot more, down.  You can do masses when people perceive us to be in a more of a war footing.  MMT, UBI, regulation, and all. Trillions.

The Fed is making huge mistakes here Harley.They simply arent up to this because they are looking at things from an economic angle when the dollar is showing there is systemic risk of the entire system collapsing.Powell is a lawyer and they lack any macro people who see this for what it is,a huge deflation.The longer they wait,the more they will need to QE.Yesterday its about $2 trillion,today its $3 trillion,one more day $5 trillion.If they wait a week or more they will end up printing $30 trillion before the deflation is over.

Macro position is 100% clear here.They need to QE $3 trillion today,inject straight into markets through treasury and corporate paper purchased.The world is screaming for $s.

They need to fend off the systemic risk,then let government punch liquidity into any area it wants.They can roll back measures once velocity starts to move in the next cycle.Right now they have a choice.Inflation of 50% to 100% over the next cycle,or a complete collapse of the economy,80% private sector unemployment,industries in complete wipe out.

The economy can survive this,but it needs a few things.CBs to QE huge amounts,government to direct it to companies and individuals.

I was looking over my deflation calls and i said oil would go under $20 in the bust.I didnt expect it yet,but the oilies are where i expected them to be if that hit,actually around 12% below.

Fed is failing,but will act,its just when,history will rip them to shreds though for the way they have handled this cycle.

Once in a lifetime equity prices here,some will fail no doubt about that.Being positioned mostly in the right sectors should see a very nice return by the late 20s.

Interesting today i was only down 1% mainly due to telcos,tobacco and the likes of Royal Mail.Crazy but my last RM buy is up 30%.

I also suspect the US will withdraw all support for the Saudi's and let Iran and Russia know it if they carry on pumping oil.

Velocity will be the story of the next cycle.Expect to hear it in 4 or 5 years being called "The Roaring 20s" and we all know what came after the last one.

[Talking Monkey]

20 minutes ago, DurhamBorn said:

The Fed is making huge mistakes here Harley.They simply arent up to this because they are looking at things from an economic angle when the dollar is showing there is systemic risk of the entire system collapsing.Powell is a lawyer and they lack any macro people who see this for what it is,a huge deflation.The longer they wait,the more they will need to QE.Yesterday its about $2 trillion,today its $3 trillion,one more day $5 trillion.If they wait a week or more they will end up printing $30 trillion before the deflation is over.

Macro position is 100% clear here.They need to QE $3 trillion today,inject straight into markets through treasury and corporate paper purchased.The world is screaming for $s.

They need to fend off the systemic risk,then let government punch liquidity into any area it wants.They can roll back measures once velocity starts to move in the next cycle.Right now they have a choice.Inflation of 50% to 100% over the next cycle,or a complete collapse of the economy,80% private sector unemployment,industries in complete wipe out.

The economy can survive this,but it needs a few things.CBs to QE huge amounts,government to direct it to companies and individuals.

I was looking over my deflation calls and i said oil would go under $20 in the bust.I didnt expect it yet,but the oilies are where i expected them to be if that hit,actually around 12% below.

Fed is failing,but will act,its just when,history will rip them to shreds though for the way they have handled this cycle.

Once in a lifetime equity prices here,some will fail no doubt about that.Being positioned mostly in the right sectors should see a very nice return by the late 20s.

Interesting today i was only down 1% mainly due to telcos,tobacco and the likes of Royal Mail.Crazy but my last RM buy is up 30%.

I also suspect the US will withdraw all support for the Saudi's and let Iran and Russia know it if they carry on pumping oil.

Velocity will be the story of the next cycle.Expect to hear it in 4 or 5 years being called "The Roaring 20s" and we all know what came after the last one.

Kin hell DB thats quite a jump in QE required if Powell waits a day either do 3 Trillion today or will need to do 5 Trillion if wait till tomorrow. I dare not think what happens to markets over the next 24 hours if he comes out with a half assed response today

[dgul]

30 minutes ago, DurhamBorn said:

The Fed is making huge mistakes here Harley.They simply arent up to this because they are looking at things from an economic angle when the dollar is showing there is systemic risk of the entire system collapsing.Powell is a lawyer and they lack any macro people who see this for what it is,a huge deflation.The longer they wait,the more they will need to QE.Yesterday its about $2 trillion,today its $3 trillion,one more day $5 trillion.If they wait a week or more they will end up printing $30 trillion before the deflation is over.

Macro position is 100% clear here.They need to QE $3 trillion today,inject straight into markets through treasury and corporate paper purchased.The world is screaming for $s.

They need to fend off the systemic risk,then let government punch liquidity into any area it wants.They can roll back measures once velocity starts to move in the next cycle.Right now they have a choice.Inflation of 50% to 100% over the next cycle,or a complete collapse of the economy,80% private sector unemployment,industries in complete wipe out.

The economy can survive this,but it needs a few things.CBs to QE huge amounts,government to direct it to companies and individuals.

I was looking over my deflation calls and i said oil would go under $20 in the bust.I didnt expect it yet,but the oilies are where i expected them to be if that hit,actually around 12% below.

Fed is failing,but will act,its just when,history will rip them to shreds though for the way they have handled this cycle.

Once in a lifetime equity prices here,some will fail no doubt about that.Being positioned mostly in the right sectors should see a very nice return by the late 20s.

Interesting today i was only down 1% mainly due to telcos,tobacco and the likes of Royal Mail.Crazy but my last RM buy is up 30%.

I also suspect the US will withdraw all support for the Saudi's and let Iran and Russia know it if they carry on pumping oil.

Velocity will be the story of the next cycle.Expect to hear it in 4 or 5 years being called "The Roaring 20s" and we all know what came after the last one.

I'm reminded of Churchill's:

Quote

You can always count on the Americans to do the right thing, after they have exhausted all the other possibilities.

 

[DurhamBorn]

4 minutes ago, Talking Monkey said:

Kin hell DB thats quite a jump in QE required if Powell waits a day either do 3 Trillion today or will need to do 5 Trillion if wait till tomorrow. I dare not think what happens to markets over the next 24 hours if he comes out with a half assed response today

Thats what happens when you have lawyers in charge of the Fed.The quicker they act the less it takes.$30 trillion if they wait much longer,might stop the falls with $3 trillion now that the government can then target.This virus is simply doing what the debt was always going to do,kill the host.They need to monetize nearly all of it.People can discuss the morals of that in the future,and they will write books and books about it,but right now they print that amount,or the western way of life collapses,China rules the world,and WW3 will be the end result.

The ECB has been terrible as well of course.They should be buying up government debt and corporate paper in the trillions.

Something new i think is the middle east.I doubt Trump will forget the Saudi's pumping oil trying to kill US shale.They will get cut adrift very soon,or Iran will blow up their oil plants and the Yanks will do nothing.

[headrow]

1 hour ago, BearyBear said:

SP500 at the 2018 low...

Bounced right off it.

[Talking Monkey]

2 minutes ago, DurhamBorn said:

Thats what happens when you have lawyers in charge of the Fed.The quicker they act the less it takes.$30 trillion if they wait much longer,might stop the falls with $3 trillion now that the government can then target.This virus is simply doing what the debt was always going to do,kill the host.They need to monetize nearly all of it.People can discuss the morals of that in the future,and they will write books and books about it,but right now they print that amount,or the western way of life collapses,China rules the world,and WW3 will be the end result.

The ECB has been terrible as well of course.They should be buying up government debt and corporate paper in the trillions.

Something new i think is the middle east.I doubt Trump will forget the Saudi's pumping oil trying to kill US shale.They will get cut adrift very soon,or Iran will blow up their oil plants and the Yanks will do nothing.

One of the things I thought was if using back channel comms the US would in fact give a go ahead to Iram or Yemen to go batter their oil fields. The turmoil the Saudi's caused by their actions is unforgivable they literally shoved the teetering world economy under a bus. The untold misery from the economic fallout due to what they did is huge 

 

[DurhamBorn]

Just now, Talking Monkey said:

One of the things I thought was if using back channel comms the US would in fact give a go ahead to Iram or Yemen to go batter their oil fields. The turmoil the Saudi's caused by their actions is unforgivable they literally shoved the teetering world economy under a bus. The untold misery from the economic fallout due to what they did is huge 

 

It wont be forgot,they have signed their death warrant,100% certain.In the recovery cycle its likely they will be shut out,giving oil an even bigger leg up.

The key here,however hard is to focus ahead.We knew this was coming,positioning isnt a science,we will end up under shooting on the oilies,might have to go into a turn down 20%ish maybe even 30% if it continues,but that will prove nothing once oil turns.There will be volatile movements even after a turn.We will of avoided 2/3s of the falls though,that would be a very good result.

After this though the world will reflate,everyone chasing the same resources.The reflation will be epic.

[Bricks & Mortar]

4 hours ago, sancho panza said:

I think there'll be sensible debate about whether we might have been better to deal with consequences of the pandemic rather than trying to prevent it.

On it.  There's a bit in The Big Short, where Brad Pitts character says, "for every 1% unemployment, 40,000 people die."
BBC did a whole fact-checking radio show, and delved into much academic research.  Upshot was, is roughly true, across many academic studies, but they don't all agree on the exact method to use or the exact number.

So, when Mnuchin predicts 20% unemployment, up from what, 4% now... that's 16 times 40K = 640,000 deaths from the unemployment and social conditions associated with it, that would be in the US.

Need to wait to see what the virus does, and whether Mnuchin's prediction comes true.

EDIT TO ADD - academic papers can be searched with keywords "mortality after unemployment"
https://www.sciencedirect.com/science/article/abs/pii/S027795361100044X?via%3Dihub

[Loki]

@DurhamBorn i won't quote both your recent posts out of forum courtesy but they are superb thanks

[headrow]

8 minutes ago, DurhamBorn said:

It wont be forgot,they have signed their death warrant,100% certain.In the recovery cycle its likely they will be shut out,giving oil an even bigger leg up.

The key here,however hard is to focus ahead.We knew this was coming,positioning isnt a science,we will end up under shooting on the oilies,might have to go into a turn down 20%ish maybe even 30% if it continues,but that will prove nothing once oil turns.There will be volatile movements even after a turn.We will of avoided 2/3s of the falls though,that would be a very good result.

After this though the world will reflate,everyone chasing the same resources.The reflation will be epic.

All the oil that Saudi is pumping out of the ground , is it being sold or is it just going into storage?

[DurhamBorn]

8 minutes ago, headrow said:

All the oil that Saudi is pumping out of the ground , is it being sold or is it just going into storage?

Into Europe mostly,they are trying to hit Russia.Repsol,Shell,Bp and Total will be buying as they can make big bucks on the downstream side to help cushion the upstream.Of course at some point those integrated oilies will refuse to buy and start using their own oil.Shell have already hired most of the tankers to store crude.The Saudi's will then have to send the oil to China.

[Harley]

1 hour ago, DurhamBorn said:

Macro position is 100% clear here.They need to QE $3 trillion today,inject straight into markets through treasury and corporate paper purchased.The world is screaming for $s.

I'm expecting that plus.  I'm thinking 10's of trillions, enough to change the nature of money.  And someone has to buy the corporate debt which is likely to implode taking everything down with it otherwise?

1 hour ago, DurhamBorn said:

Once in a lifetime equity prices here,some will fail no doubt about that.Being positioned mostly in the right sectors should see a very nice return by the late 20s.

Any views on which industries on the list I posted?  I intend getting back to that with my own thoughts.  I'm currently thinking of shortlisting 25 industries on the basis of:

. Resilience in the face of a retrenched consume (limited purchasing power)

. Beneficiaries of government Capex (e.g. infrastructure) spending

. Beneficiaries of or resilience to high inflation (e.g. pricing power)

. Beneficiaries of or resilience to high interest rates

. Others?

Not to be confused with the subsequent specific company evaluation criteria such as debt service levels, cash flows, historic share price action, etc.  Nor the current CV (I'm looking at the next 5 to 10 years+).

. First pass has pulled in too many:

. Water Utilities

. Water Transportation

. Waste Management Services

. Tobacco

. Security Systems & Services

. Scientific & Technical Instruments

. Schools

. Retail Drugs

. Paper & Paper Products

. Oil Well Services & Equipment

. Oil & Gas Operations

. Oil & Gas Integrated

. Non-Metallic Mining

. Natural Gas Utilities

. Miscellaneous Capital Goods

. Metal Mining

. Medical Equipment & Supplies

. Major Drugs

. Jewelry & Silverware

. Iron & Steel

. Insurance Property & Casualty

. Insurance Life Insurance

. Insurance Accident &Health

. Healthcare Facilities

. Gold & Silver

. Forestry & Wood Products

. Fish & Livestock

. Electric Utilities

. Crops

. Construction Raw Materials

. Construction & Agricultural Machinery

. Communications Services

. Coal

. Chemicals Plastics & Rubber

. Chemical Manufacturing

. Biotechnology & Drugs

. Aerospace & Defense

1 hour ago, DurhamBorn said:

Velocity will be the story of the next cycle.Expect to hear it in 4 or 5 years being called "The Roaring 20s" and we all know what came after the last one.

Sancho and I have long talked about this.  As I said then, they have assumed V is fixed but that was a myopic financiers view.  V is all about emotion, sentiment, etc and we now have that in spades with more to come as expanded but cheapened money chases a reduced supply chain (beyond just CV).  And yes, I've often considered the lest few (many) years to rhyme with the roaring 20's.  The select few dancing on increasingly thin ice!

[Errol]

Purchased my first RDSB at £9.78 today. Shell wasn't one of the companies I owned before (obviously), so I owe the purchase mostly to DurhamBorn and this thread.

I'm staggered at how low these companies are falling. Amazing.

[Bobthebuilder]

I suppose everybody has heard the rumours of London being shut down on Friday, maybe the wrong thread to post it but rumours are only pharmacists and supermarkets to remain open, public transport to be shut down. Only a rumour mind.

[Harley]

3 hours ago, JMD said:

May be guilty of combining some sectors but there is obvious company overlap and I do prefer to identify themes rather than adhere to strict sector lines.

Thanks for the feedback.  Yes, I think a dual approach is worthy: work mechanically through the industry list but then take a step back and look how well themes have been covered.

[Castlevania]

What’s lead to the smashdown on Mosaic? Down 27%. K&S was up earlier in Germany.

[BadAlchemy]

6 minutes ago, Errol said:

Purchased my first RDSB at £9.78 today. Shell wasn't one of the companies I owned before (obviously), so I owe the purchase mostly to DurhamBorn and this thread.

I'm staggered at how low these companies are falling. Amazing.

Me too. I bought probably my last little tranche of RDSB for 9.41 today. Don't be jealous though as I paid over twice that for my first lot!

Interesting to read that David Hunter bloke who believes this is not actually THE 'Big Kahuna' but that we'll have a melt up to 4000 in the S&P and then the Almighty Crash after that. Makes me think...  what could be bigger than this !? 

The thinking here though is that this IS the big one...? Seems to me to hinge on whether the Fed now print $20 trillion or stop at $3 trillion as to which way it goes...? Do they even have a clue what they are facing and what they need to do, I wonder...