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

[DurhamBorn]

44 minutes ago, 5min OCD speculator said:

I concur.......<currently out in the hills waiting for the shit to hit the fan> 

 

There was a sizeable war going on then...do we really think this is a good comparison!!?? 

There is a war going on now,and there is a new cold war starting,and nothing affects metals like real inflation.The comparison is 100% apt because its the last time the Fed tried to control the curve at the long end as i suspect they are about to start.The market expects the Fed messing around in the short end,but if they move to flatten the whole curve they are saying we will inflate until we dont have to,if you want security of capital then your going to pay society a rent in inflation for that

[reformed nice guy]

2 hours ago, Hardhat said:

I'm eyeing up Siemens as a potential buy - it's recovering from a covid slump but still at multi year lows, and I would have thought would do well in reflation scenario. Anyone hold / got an opinion on it?

I bought them for that reason and their Healthineers spinoff. Medical imaging will only grow in the future. It is currently a major bottleneck for a lot of medical issues and requires very large capital expenditure which *hopefully* should happen during a low rates environment.

It is also a likely recipient of loads of dough from the German government when times get tough

[jamtomorrow]

41 minutes ago, Cattle Prod said:

Velocity directly from the consumer's pocket, maybe. If (the vast vast majority of) people feel like they have a guaranteed income, they won't save a thing, and will spend every penny. Their life becomes backstopped, no more worries. Then velocity becomes a direct function of how much money the CBs/Govts print and spray.

That does seem like the "remorseless logic" endpoint of the automation era.

Kinda mind-blowing to imagine a future where reward for work is no longer a useful or viable way of sharing out resources in the economy. "Work" as a moral virtue is perhaps the most ingrained of all, and hard for many/most to look beyond.

[JMD]

4 hours ago, Hardhat said:

I'm eyeing up Siemens as a potential buy - it's recovering from a covid slump but still at multi year lows, and I would have thought would do well in reflation scenario. Anyone hold / got an opinion on it?

HardHat, as DB states above Siemens is a huge conglomerate, so returns might be low.

However, Siemens have been spinning off many of their divisions into separate subsidiaries. For example, maybe look at Siemens Healthineers (medical tech.) or Siemans Gamesa (energy renewables)... these may provide a more focused investment play.

Not advice, for info, only.

[janch]

Wow!  Just caught up.....amazing input from all for the past few days.  All very thought provoking so thanks to all especially @DurhamBorn

[JMD]

4 hours ago, jamtomorrow said:

Massive incentive and opportunity for automation to affect how this plays out.

As in: if you were about to embark on repatriating production capacity, why wouldn't you take the opportunity to automate it up the ass as you build out (relative to the automation level in, say, a Chinese equivalent)?

Cost of labour is one factor. Advances in automation another. And of course (and back, again, to the main point of this thread), ten years down the line, would you rather have your production costs governed by an inflated-away debt facility or the inflated-up wages of your workforce?

Smart capital could do well out of this, but can't see it doing much for jobs.

I agree with what you say. What investments are you looking at?

However Governments will have to resolve those 'employment problems' you mention, probably by finding ways of taxing those 'robots' to fund human UBI (a sort of 'furlough for life', I think it will be popular!). Or perhaps part-time working for all, or combination of both?

[janch]

BBC reporting first use of hydrogen for gas to homes in Scotland:

https://www.bbc.co.uk/news/uk-scotland-edinburgh-east-fife-52711346?intlink_from_url=https://www.bbc.co.uk/news/business&link_location=live-reporting-story

 

[jamtomorrow]

9 minutes ago, JMD said:

I agree with what you say. What investments are you looking at?

Nothing specific so far - I'm at the "what next" stage, having (thanks to this thread) gotten fairly well positioned for the reflation basics.

Hard to map the space out without getting bogged down in specifics. Like: a lot of heat being generated (but not much light?) in the race for self-driving vehicles, yet the important targets might be elsewhere (aka: self-drive has largely totemic importance).

I quite like *some* of the Softbank plays in this direction (deep learning, robotics), just a shame they have to ruin it with trash like WeWork.

[JMD]

4 hours ago, Cattle Prod said:

Let's hope the UK goes for that kind of investment. The government could easily encourage it by no longer subsidising companies by paying people to be inefficient via tax credits and working 16hrs a week for top ups etc. Just subsidise the people and be honest about it, and let the bad companies collapse, and the good companies thrive.

A thought experiment:

People are currently being conditioned to get paid for sitting at home, not much of a stretch now to citizen income. So everyone gets an income, while companies have to innovate and automate like hell as you suggest. Everyone is happy! That is until inflation means the government can't print citizen income any more, oops. And per this thread, inflation loving companies such as those we own will have done very well. So the holders of real assets will have done well, while most people will have done not anything except improve their artwork/gardening/protesting/drinking etc. Then the taps turn off, with inflation out of control. The asset holders run for the hills (in my case, that will literally happen), while the indolent mass will erupt. When hard work gives you purpose in life, the opposite gives you...Mad Max?!

My tongue is only slightly in cheek. I give the above scenario a lot higher chance of happening than I did three months ago.

CP I agree, recent times have shown how crazy things can get under only 'slightly' strained economic circumstances. And timing when to sell those assets might be a very nice problem to have. However, what i've been thinking about recently is the dilemma perhaps of what one would do with the proceeds of those sales?

Commenting on your thought experiment...

I know we may be talking/speculating 2028 or so re. collapse, etc. But for example, you mention literally running for the hills under a 'Mad Max' scenario - i'm not being sarcastic, because this is a genuine question I personally have - but mightn't you get bogged down slightly with all your (gold?) assets... unless, of course you have prepped for such a scenario... and the hill your running toward you already own (with its own homestead, etc)?!    

[Sasquatch]

Just now, Cattle Prod said:

Yes, you would have to have everything in place long before people realise what is going to happen. Capital controls don't take long to go into operation. @Harley is way ahead of the game on this one, and I am about 4-5 years about being where I want to be. But the key thing is: I don't need much. A bit of land, woods, access to fishing, a house with it's own water and heat, I'd live quite happily with very little money. If I have extra, I'll probably buy forestry. I'll always have gold and silver physical, I'll be passing it on to my son.

This is all very interesting. Our plan is a 3 to 4 year one but could be reduced to 2 to 3 years. We need to get moved (95% sure it will to Yorkshire or the east side of Cumbria). Need to get the new property up to spec and, as lots on here agree, it's possible to live quite modestly but well. We want to be on the fringe of a small relatively self supporting community (we have a few locations in mind). The working world holds very little interest for us now. Compared to the average Joe, I reckon we've worked the equivalent of 25 years in the last 15 years whilst we've been running our business. The time has come for this effort to be paid back.

[DoINeedOne]

5 minutes ago, Cattle Prod said:

Yes, you would have to have everything in place long before people realise what is going to happen. Capital controls don't take long to go into operation. @Harley is way ahead of the game on this one, and I am about 4-5 years about being where I want to be. But the key thing is: I don't need much. A bit of land, woods, access to fishing, a house with it's own water and heat, I'd live quite happily with very little money. If I have extra, I'll probably buy forestry. I'll always have gold and silver physical, I'll be passing it on to my son.

For me i need to work out where i want to be UK or abroad then start to research areas to slowly move to and put things in place

[Majorpain]

https://www.france24.com/en/20200518-live-macron-and-merkel-present-joint-covid-19-recovery-plan-for-eu

Quote

Macron and Merkel called for the creation of a 500-billion-euro ($543 billion) recovery fund able to offer grants to the countries and regions hardest hit by the coronavirus crisis.

The leaders of France and Germany also said they were proposing to authorise the European Commission to borrow money on financial markets in the European Union's name, while at the same time respecting EU treaties.

They are taking their time, but could there finally be some movement on common debt?    End of May for a proposal, agreement mid June when the wheels properly start falling off?  Nothing like a bit of staring into the abyss to speed things along.

Cunning way of getting round ECB minefield by borrowing straight from financial markets in EU name???!!

[JMD]

2 hours ago, jamtomorrow said:

That does seem like the "remorseless logic" endpoint of the automation era.

Kinda mind-blowing to imagine a future where reward for work is no longer a useful or viable way of sharing out resources in the economy. "Work" as a moral virtue is perhaps the most ingrained of all, and hard for many/most to look beyond.

Jamtomorrow, great point you raise there. I don't think these are 'mere' philosophical questions. Instead I think those are key questions to ask in order to help predict/frame the type of policies that may start to be implemented in say 10 years time.  

Yes, 'work' as a moral virtue might be a crucial civilising factor for most people, the absence of which may cause huge social problems. Then again, the removal of the money/reward system (removing moral hazard, etc) might make society more moral? These are deep questions. Will society degrade, or might it in-fact improve? I don't know, but I do know that such a transition will require very wise and very skilled leadership.     

Unfortunately, we don't have wise leaders, so we will probably go down the (depressing/dreary) transactional route. i.e. Perhaps our own Western governments will just end up implementing something similar to the Chinese 'social credit system'? 

[Errol]

7 hours ago, jamtomorrow said:

Massive incentive and opportunity for automation to affect how this plays out.

China is the world leader in automation, robotics and green energy technology. They are perfectly placed to benefit the most.

[Majorpain]

11 minutes ago, Errol said:

China is the world leader in automation, robotics and green energy technology. They are perfectly placed to benefit the most.

They can't, the resulting mass unemployment would be kryptonite to the CCP.  They don't keep all the unproductive state owned enterprises going for no reason, 1.4 billion people is a bit of handicap in that regard!

I think Japan is still the world leader in automation and robotics, FANUC is bombproof and they have some interesting factory assembly lines around.

[sancho panza]

On 17/05/2020 at 08:40, 5min OCD speculator said:

I don't see this happening.....

If you look at the DXY make up, its over 50% Euro.....the ECB are more likely to pursue NIRP than the FED...

the other major DXY components are YEN (again they like NIRP) and the shitty £ 

So I don't see the DXY going anywhere personally.....(check out another thread I just created for my views on 'Banana Britain' )

It's a real issue,Where do you go aside from the dollar.

Could be PM's are baout tog et a rocket under them.History says a weak dollar phase should be inbound but I'm struggling ewith the logic

DXY dropped Jan 06 to April 08

On 17/05/2020 at 10:08, jamtomorrow said:

This discussion making me wonder whether we're about to see simultaneous inflation and deflation on a grand scale. The mother of all Cantillon Effects, if you like.

CB-driven inflationary wave rolling over the markets right at the same time as debt deflation really gets its skates on in the so-called "real" economy.

Real economy looks nailed-on for falling turnover -> shrinking capital base -> mass deleveraging come Autumn. And I can't see how the CB wave gets to the real economy fast enough to hold it back.

Could it get *that* weird?

I think the chances of outright deflation a la Japanese are sub 5%.Chances of a move to outright inflation similar.It's odds on we're going to face credit deflation mixed with price inflation.ANd this is pecualir because we should be facing both price and credit deflation logically,but the pecualir aspects of globalisation unwining post covid make it more and more likely we'll see some price rises particualrly in commodities even without the dollar weakening.

On 17/05/2020 at 11:44, Barnsey said:

I expect this to gain MUCH more traction in weeks ahead as workers are forced back into their day jobs, just not good economic sense perhaps to maintain such a generous furlough scheme?

 

I don't really like to dwell on politics but aside from the fact they've handled it better than Rebecca Long Bailey/Corbyn would have done,I think the Tories have had a disastrous Covid.

This post says a lot.

[Jesus Wept]

8 minutes ago, Cattle Prod said:

What's that?!

A large group of automation companies 

Build robots ... automation etc.....

[sancho panza]

On 17/05/2020 at 16:39, kibuc said:

My problem with those companies is that they are either 

1. Shit

2. Too big

3. Not really silver miners

4. All of the above

I'm looking at Avino and I can see that they get more then half of their revenues from copper (more like 70% in Q1 2020). Great Panther and Coeur are a pinnacle of shit management, plus Coeur has a strong zinc & lead component. Endeavour literally run out of ore in their primary mine last year etc etc. First Majestic, PAAS and Fortuna are the only ones I'd feel comfortable holiding, and Fortuna is the only one from this list I actually hold at the moment.

But the market doesn't seem to care, and when silver popped up 5% on Friday, Avino rocketed up 30%. I can scream at the sky all I want, but maybe it's better to join the dumb marker than be clever and broke.

Edit: Apologies @DurhamBorn if it came across as a criticism of your list. Not my intention. I understand that you identified those companies as having the highest beta to silver, I just struggle to find a reason why the market would assign such a high leverage to silver to them as opposed to some other miners much more focused on silver.

It didn't come across as critiscism k we all know what you menat.

It is ironic though that the mulitbaggers of the silver/gold market will be the dog turd companies.When I started investing in PM;s in 2017,in my naevity I boguth Hecla and Couer and a few more.It was only as some of the more learned people on here taught me,I realsied they weren't the shares for me.Still I have a list that includes a lot of those DB mentioned for if we leave the gold miners with some profits and silver hasnt run.

It's like a dream team of dog turd snadwiches with a lot of beta to news of them not going bankrupt.

On 17/05/2020 at 17:35, Democorruptcy said:

If you haven't seen it the RICS market survey for April has some beautiful charts in it 

My concern is lack of supply holding prices up where I might be interested. 

 

Wait out DM,give it time to mature like a good wine.This downtunr has barely begun.

On 17/05/2020 at 18:30, DurhamBorn said:

I agree,all have problems,its just based on past moves compared to silver iv tracked them all for years and thats the beta up until now.I just assume there is a reason the market goes for them,probably because it feels they are battered down for all the bad reasons.I actually think HOC is very undervalued and will be adding that as well.Silver is difficult to target  through the miners and is a terrible sector,until we are in a bull.

I took some profits with sales of top laddeers in Gold fields,HMY and IAM at the start of trading.Sat out waiting the market out but we'll defo be buying back in by friday.HOC was one of my intended targets but the run has brought it into touch with my bottom ladders which made me hesitant.

Agreed on HOC.Looks good,Fres too.

[Errol]

.

 

[reformed nice guy]

On 23/11/2019 at 17:24, reformed nice guy said:

I had a good dive into automation a while ago with a focus on industrial automation rather than trendy "blue sky" companies that want to bring a paradigm shift. I settled for the following to hold for long term:

Kuka - originally German, now owned by Chinese, maker of industrial robotics

Honda

Fanuc - factory automation, CNC machines etc

Rockwell - a big American automation company

Stagecoach - Yup, they are currently trialling driverless buses in at least 2 locations in Scotland

This was the outcome from my research into automation and led me to stumble onto Fanuc

[sancho panza]

12 hours ago, kibuc said:

There's a bidding war going on for Guyana Goldfields, the latest offer from SilverCorp amounts to CAD 1.30 per share 

Guyana was trading at CAD 0.40 before the initial offer came in last month, and closed at CAD 0.94 on Friday.

Sadly,I got out at $0.64 and felt I was lucky.I waited for a counter bid that never came,sold,then it came.

11 hours ago, Cattle Prod said:

She's been so quiet lately, they put her on a coronavirus panel 

What they don't realise is that green energy cannot compete with oil and gas on an energy density basis, and never will (excepting nuclear which I count as a green energy). It has to compete on price. And low oil and gas prices are devastating for green energies. Greta should be praying for $200 oil, then you'll see the shift happen pronto.

On it's way.

[sancho panza]

8 hours ago, Cattle Prod said:

People are currently being conditioned to get paid for sitting at home, not much of a stretch now to citizen income. So everyone gets an income, while companies have to innovate and automate like hell as you suggest. Everyone is happy! That is until inflation means the government can't print citizen income any more, oops. And per this thread, inflation loving companies such as those we own will have done very well. So the holders of real assets will have done well, while most people will have done not anything except improve their artwork/gardening/protesting/drinking etc. Then the taps turn off, with inflation out of control. The asset holders run for the hills (in my case, that will literally happen), while the indolent mass will erupt. When hard work gives you purpose in life, the opposite gives you...Mad Max?!

 

A thesis similar to Paul Hodges one about Govts can't print babies any more in terms of the demogprapic problems the West faces.

Covid has been a real lesson in how quickly the EU countries overrode Schengen and put their borders up.It's plain for anyone to see.When this gets nasty we'll revert to the age old boundaries and alliances.

When the dolar has finsihed it's last run as the workd reserve,I think things will get unstable ever so quickly.

8 hours ago, jamtomorrow said:

Absolutely this. Automation could prove to be one hell of a cherry on top of the end-of-decade Big Kahuna.

Thinking about this within the inflation thesis (and asking the important question: what will make this rhyme rather than repeat?) ... does automation have implications for how velocity will work out this time? If an ever greater fraction of the production surplus is captured by capital (because automation), at what point does velocity fail to get airborne?

 

Velocity is a function of consumer psychology.Look at a lot of the great inflations and they started running when people feared the money in theri pocket would devalue before their next pay packet came in.Better to buy the cabbage this week rather than wait till next week and only be able to afford a half.

Once infaltion is out of the bag,they won't be able to get it back in this time.

4 hours ago, Cattle Prod said:

Yes, you would have to have everything in place long before people realise what is going to happen. Capital controls don't take long to go into operation. @Harley is way ahead of the game on this one, and I am about 4-5 years about being where I want to be. But the key thing is: I don't need much. A bit of land, woods, access to fishing, a house with it's own water and heat, I'd live quite happily with very little money. If I have extra, I'll probably buy forestry. I'll always have gold and silver physical, I'll be passing it on to my son.

I've thought about thsi a lot and on a tactical level,there are benefits and costs to being way from the main road so to speak

[sancho panza]

3 hours ago, Majorpain said:

https://www.france24.com/en/20200518-live-macron-and-merkel-present-joint-covid-19-recovery-plan-for-eu

They are taking their time, but could there finally be some movement on common debt?    End of May for a proposal, agreement mid June when the wheels properly start falling off?  Nothing like a bit of staring into the abyss to speed things along.

Cunning way of getting round ECB minefield by borrowing straight from financial markets in EU name???!!

Hard to see the Euro getting the bid here.

[nirvana]

Markets have gone nuts today........if this is a taste of things to come, it's worth 'buying every dip' hmmmmmmmm

Absolute BUSTER of a move! Posting more ladies for @Yellow_Reduced_Sticker 

 

[Chewing Grass]

Oooh look, just checked the Standard Life Aberdeen shares that I've never been arsed to sell.

They are worth exactly what they were 10 years ago and are at 40% of what they were 12 months ago.

Bag of shite.