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

[Majorpain]

1 hour ago, MrXxxx said:

Just to clarify your last point, with US/Cdn shares you still have to pay tax (15%) even if you keep them in an ISA and have filled in the w8 BEN form?

Its US only, and it reduces the withholding tax but doesn't eliminate it.

[DurhamBorn]

3 hours ago, Thorn said:

Crazy times out there.

Alongside having some Canadian/US pm miner shares in a SIPP, does anybody have a view on holding some Hochschild, Fresnillo and the Smith and Williamson Global Gold fund - from a US/UK taxes point of view are they ok to hold in an ISA?

All look fine to me.,and fine for ISA or SIPP.

[SillyBilly]

Sold all my silver shares today for a very good profit to offset my (paper) losses in oil. I was under in First Majestic from some large 2017 investments which I have now crystallised at good gains. I am edging toward the view that this rally is premature with more bad news to come and a lower lower. Stocks on Q2 earning still way, way overvalued and gold and silver will follow them down in the short term before rubber banding. If I am wrong I will use the money cashed in to put a deposit on a house down early next year. If I am right, I will have a large pot to buy even more oil and gold at a much lower bottom than March. So happy either way.

[spygirl]

https://www.foreignaffairs.com/articles/united-states/2020-05-29/pandemic-financial-crisis

[NogintheNog]

3 hours ago, NogintheNog said:

HOC and Fresnillo are both listed on the London exchange, so there is NO tax liability once wrapped in an ISA provided you buy the UK shares. Not sure about the Smith and Williamson Global Gold fund but pretty sure if it's UK based again no tax to pay in an ISA wrapper. W-8 BEN form is for US shares inside a UK ISA/SIPP. I have some American listed miners in my ISA, and have done the form so I only loose 15% tax instead of 30% on US dividends.

Sorry, missed out a very important NO in the above!!!

[MvR]

2 hours ago, Cattle Prod said:

I hold both in my SiPP along with Polymetal as the only silver exposed equities available to me in it, fwiw. Ill defer to my betters @Harley @MvR on the charts, but it lookd to me like Fres has broken out of a big and technically clean 4 year bullish wedge. Dyodd etc 

Thanks CP.. it's nice to have something to offer in return for the wealth of macro and industry inside knowledge you and others share on here  

 I agree it looks like a nice bottom is forming and the low may be in. Here's my analysis on the weekly chart.

( click on image to make it more readable )

The bullish divergence is very significant particularly because it's on the weekly, and likely signifies the low, or at least a good buy point. Note we did have a similar divergence this time last year, which turned out not to be the very bottom. These signals aren't perfect, but they are good enough.

Price normally takes a couple of attempts to break into the red cloud area, and can pullback to the blue Kijun-Sen or green Tenken-Sen after the first attempt before having another go. Once in the cloud, price tends to consolidate for a while, bouncing from top to bottom, until it breaks above it.

Again this can take a few attempts, and usually you need to wait or the purple Chikou span to at least get into the cloud before price breaks out properly. Generally you need the cloud in the future to turn green too, signifying a major trend change. Once price is above the cloud, a pullback and retest of the top of the cloud often occurs, then it's away. 

Not a trading recommendation of course, but personally I'd be accumulating here with ladders down to 600, and if those don't fill, adding some on pullbacks over the next year.  No need rush in at this point, at least accord to this analysis.

[DurhamBorn]

1 hour ago, spygirl said:

https://www.foreignaffairs.com/articles/united-states/2020-05-29/pandemic-financial-crisis

Superb article.maybe they read page one here a few years ago.Its really incredible how the cycle is unfolding already as expected.The irony is it always had to be so.The CBs have to monetize and governments have to invest.They will worry about inflation later,and boy will they worry then.

[leonardratso]

how about this fund, its isa/sipp good i think, i held this years ago and knew it as YFGGIA, looks like its changed name,

i think i may have sold it out at maybes £1.80 yonks ago, ;

https://www.trustnet.com/factsheets/o/aee1/investec-global-gold-i-acc-gbp

ocf : meh - seen worse,  amc not the cheapest.

 

 

[sancho panza]

6 hours ago, JMD said:

Bad enough, but I wonder how accurate those figures are, i.e. could the government debt be a lot higher? And I suspect that the banking debt is much higher, at least for those domestic Chinese banks, never mind the secret 'shadow banking' system! 

CHina has done a lot of the heavy lifting stimulus wise psot 08.If you think Londiniums hosuing market is mental,don't look at Shanghai.

The Chinese implosion will be epic and possibly thestart of WW3

5 hours ago, janch said:

I know a few pages back you were thinking about why we won't just "turn Japanese" and I think you've answered your own question!  Thanks as I was not sure either.  Velocity seems to be a very important factor which is often missed and you've explained it.

The printing last time 2008 just sat in assets (houses in UK) and didn't flow elsewhere.  The Japanese are more cautious and saved it.

I consdier all theses,.The Japanese situation remains an outlier for a number of reasons not least the demographic problems,the high doemstic savings rate (and the tendency to save domestically),the fact they were first into a substantial credit deflation,their being a net exporter and a few other things I can't rememebr.

For me the most likely outcome here is the DB/Rosenberg thesis.Rising price inflation meeting credit deflation.

One issue we've had for sometime is that the wya govts measure inflation is woeful eg exclusing hosue prices,not including purchasing pension provision (ie how much do you have to invest for £1 of penion).Leaves large room for margin of error.

[Harley]

On 31/05/2020 at 20:51, Loki said:

You really think so Harley? In line with the next drop David Hunter etc say is due in September, a sector rotation as durhamborn thinks is possible, or something else?

I'm not talking cataclysmic, etc.  We may well start with the Chancellor starting to fund his largesse.  The Treasury needs to strike when CV momentum is with it which means soonish.  Emergency budget?  An incremental start possibly, although kitchen sinking is a real possibility.  Regardless, would be a siren call for those listening.  

The markets will do what the markets do and my horizon is 3 to 5 years out so I would rather pick the target asset allocations and equity sectors now and average in.  Maybe too much bouncing around for me to time things other than as trades.

[Loki]

2 minutes ago, Harley said:

The Treasury needs to strike when CV momentum is with it which means soonish.

That's a very good point, market psychology. Isn't this week the final two minutes clap?

[sancho panza]

Pensions timebomb.

 

https://www.ft.com/content/a96c54a1-4a7b-4e05-8257-f985cb2861f3

New Jersey teachers and CHicago municpal get mentions

 

 

 

 

last thing genius learns is simplicity

[Harley]

21 hours ago, JMD said:

What target sectors overseas are you looking at?

I'll pull out my list tomorrow but I posted it way back (pre-CV!).

[Harley]

14 hours ago, MrXxxx said:

As always comments/thoughts welcome, DYOR/not financial advice etc.

I hold PMs in many forms as diversity is strength.  I own a variety of ETFs to reduce institutional risk.  All are physical rather than synthetic, although, per their prospectus', physical may not always be so all the time.

[Harley]

8 hours ago, sancho panza said:

The key to moving velocity higher is to take demand away from consumers and put in the hands of those who will spend.

And/or inflation fears.

[Harley]

8 hours ago, sancho panza said:

Rising wages possibly,but I suspect the consumer is the patsy this time around.Cost of living is going higher.

I can't see generally rising wages but I can see more government help (bread) for the masses.  Food subsidies, etc.  Client state v2.

[DurhamBorn]

@sancho panza its something we have avoided talking about,but it looks huge doesnt it this pensions problem.State workers have fantastic pensions compared to the private sector and it simply cant last.The problem is will they simply keep pushing back the pension age to try to deal with it.?If so then that also hits hard the private sector who for a growing percentage the state pension is hugely important.The way the government have handled every problem for 40 years is to tax the ones working hard to  hand to the rest.That is at breaking point.Councils could be ground zero,because council tax is already a hugely destructive tax for ordinary workers and more and more of it is simply going to council pensions.

[M S E Refugee]

7 hours ago, DurhamBorn said:

@sancho panza its something we have avoided talking about,but it looks huge doesnt it this pensions problem.State workers have fantastic pensions compared to the private sector and it simply cant last.The problem is will they simply keep pushing back the pension age to try to deal with it.?If so then that also hits hard the private sector who for a growing percentage the state pension is hugely important.The way the government have handled every problem for 40 years is to tax the ones working hard to  hand to the rest.That is at breaking point.Councils could be ground zero,because council tax is already a hugely destructive tax for ordinary workers and more and more of it is simply going to council pensions.

 cost salary expenditure based on an assumed 2% increase in payscales effective from 1 April 2020 (included in contingencies) and an increase in the Employers pension contribution rate from 14.5% to 18.8 %.

This is an excerpt from my local Council budget,my own employers pension contribution has been going in the opposite direction over the past few years.

[MrXxxx]

1 hour ago, M S E Refugee said:

 cost salary expenditure based on an assumed 2% increase in payscales effective from 1 April 2020 (included in contingencies) and an increase in the Employers pension contribution rate from 14.5% to 18.8 %.

This is an excerpt from my local Council budget,my own employers pension contribution has been going in the opposite direction over the past few years.

I think all the DB pensions will follow a similar direction to the USS DB pension, the largest private scheme in the UK. That is, they will offer a pseud DB scheme upto an annual salary ceiling (currently £55k pa), with anything over this going into a DC pension. I call it a pseudo DB as the final pension is not based on the final years salary, but a running average across all of the contribution years indexed for inflation.

You can understand the logic of this approach as it allows the pension provider to calculate a maximum liability figure for the DB part of the scheme, and the DC part is of no concern to them.

[Agent ZigZag]

Whilst it is said that politics follows the economic landscape and not only are we at the end of a business cycle we are also coming to the end of a whole cycle. What concerns me at the moment is the goings on in The USA. I think it is important that Trump is re elected as his failure to do so may lead to a different future economic path dictated by politics that may affect our financial investment decisions today.

[Bricks & Mortar]

9 hours ago, Harley said:

I can't see generally rising wages but I can see more government help (bread) for the masses.  Food subsidies, etc.  Client state v2.

Unless the extra bread is in the form of UBI, or something else paid universally to workers and layabouts alike; I think I'll have to pay higher wages to convince the workers to leave the house.

It's not the labour shortage - employers bidding war that would lead to big wage rises though. 

[Harley]

10 hours ago, Harley said:

I'll pull out my list tomorrow but I posted it way back (pre-CV!).

@JMD the sectors I'm considering/buying, not all equal, DYOR:

Chemicals
Forestry & Paper
Industrial Metals
Mining
Beverages
Food Producers
Household Goods
Tobacco
Food & Drug Retailers
Health Care Equipment & Services
Pharmaceuticals & Biotechnology
Aerospace & Defense
Alternative Energy
Oil & Gas Producers
Oil Equipment, Services & Distribution
Software & Computer Services
Technology Hardware & Equipment
Fixed Line Telecommunications
Mobile Telecommunications
Electricity
Gas, Water & Multi-utilities

[Harley]

30 minutes ago, Bricks & Mortar said:

Unless the extra bread is in the form of UBI, or something else paid universally to workers and layabouts alike; I think I'll have to pay higher wages to convince the workers to leave the house.

It's not the labour shortage - employers bidding war that would lead to big wage rises though. 

Various subsidy, etc schemes to reduce living costs.  I still remember the trickered (subsidised) items in a supermarket in Tahiti or wherever to address the unaffordable high importation(!) costs. But as with all government intervention (as we currently see), there will be winners and losers either deliberately or unintended.  Many remaining companies may try to automate.  We may see a more bifurcated market with the very large companies (government favoured and economies of scale) and the artisans.  Middle class companies (and workers!) may get squeezed.  Maybe builders will be able to hire from a bigger pool (unemployed architects and building controllers!!!), charge higher prices (can't automate) or, sorry but worth thinking about, go bust (rising material costs and people having no money).

[jamtomorrow]

10 hours ago, Harley said:

I can't see generally rising wages but I can see more government help (bread) for the masses.  Food subsidies, etc.  Client state v2.

This - the arse is about to drop out of labour's bargaining power, for good. The only velocity coming to the consumer side from there will be non-wage flows i.e. refinancialisation or Government-enforced recycling of wealth.

Effectively, the economy is about to split in two, irreversibly.

[Talking Monkey]

7 minutes ago, jamtomorrow said:

This - the arse is about to drop out of labour's bargaining power, for good. The only velocity coming to the consumer side from there will be non-wage flows i.e. refinancialisation or Government-enforced recycling of wealth.

Effectively, the economy is about to split in two, irreversibly.

Thats the way it looks to me a sustained decline in Labour's bargaining power, tech and automation will see to that I think