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

[JMD]

13 hours ago, sancho panza said:

It's that sort of glossing over the detail that allows him to find sanctuary in the swissie when there are clear structural problems with the way the SNB are managing it,given the relatively small size of the swiss economy and recent problems with their euro peg. Simialrly,he makes a broad statement that equities are no good with inflation running at 4%+ which again right and wrong to a degree-some things do well, some things do badly.

I do agree with the broad brushes of his thesis eg dark poltical times/price inflation etc and welcome any questions that test my own position JMD.

SP, for a respected but alternative economic view, well worth listening to the Lacey Hunt/Grant Williams podcast, where he is convinced of continued deflation. I don't subscribe to that theory, but as you say worth testing ideas.

Harley linked to it recently...  https://ttmygh.podbean.com/e/teg_0006/

[MvR]

29 minutes ago, JMD said:

MvR, congrats and much respect on the pm call. I wonder do you have thoughts on physical platinum, which to me does look very cheap. It is i think more of a commodity/industrial type precious metal, however i think at current price, it is also looking very attractive as a wealth-store - 'sorta positioning' between silver and gold, for those who want to buy these metals as hedge against financial repression, thesis of this thread, etc. 

(btw, why 'W'vR?, is that a subtle comment on the shape of the recovery?!)

No particularly strong opinion I'm afraid, as I don't follow platinum and don't know the macro picture.

Purely going by the chart of the October contract,  all I can say is it's still in a long term up trend, but also still a bit overbought shorter term.  I always start with a 50:50 chance up or down over a given period, and then look for indications that might push the odds one way or the other a little. In this case, there's nothing really strong leaping out, so I'd assume 55-60% chance of being up over the next month or so, and 55-60% chance of pulling back more first.

Sorry.. that's probably not much use to you!

Oh and I used to be Man vs Recession on TOS, hence she's WvR. ( or more accurately WvR3.  it's complicated .. ) 

[MvR]

38 minutes ago, Democorruptcy said:

I think I might have sold too early but can't resist taking profits. The direction was clear once Powell engaged reverse thrust pre-covid. Though looking at the 10 year yield in the last PM spike it's dropped a lot lower than that now but the PM prices aren't that much higher in proportion.

I'm the same taking profits. If you watch enough different stocks or markets, there are always other opportunities, with better odds than something that's already had a big up move. 

Longer term I'm as bullish as everyone else regarding PMs, and anyone not confident they'll be able to time it right or pull the trigger to re-enter after selling will likely do far better just holding through the dips for a few years and treating all this as noise.

[Castlevania]

38 minutes ago, MvR said:

I'm the same taking profits. If you watch enough different stocks or markets, there are always other opportunities, with better odds than something that's already had a big up move. 

Longer term I'm as bullish as everyone else regarding PMs, and anyone not confident they'll be able to time it right or pull the trigger to re-enter after selling will likely do far better just holding through the dips for a few years and treating all this as noise.

The alternative is to keep tabs on your stock sector allocation and rebalance i.e. sell from a sector where you have more exposure than you’re comfortable with and reinvest in those sectors where you’re underweight. My current broad sector allocation plan is:

40% PM Miners

20% Oil & Gas

10% Agriculture/Potash

10% Telecoms

10% Gambling stocks

10% Other

I sold a fair amount of my miners last week only because they’d heavily outperformed relative to everything else since early June and I had way more exposure than I was comfortable with. Reinvested into Telcos, Oil & Gas, Potash.

[MvR]

17 minutes ago, Castlevania said:

The alternative is to keep tabs on your stock sector allocation and rebalance i.e. sell from a sector where you have more exposure than you’re comfortable with and reinvest in those sectors where you’re underweight.

Absolutely.   Everything I post is from a trader's perspective, not an investor's.  Your method will probably make more money over the long term.  I need to take an income though. Whatever I make in my main income account each month is what I have to live on for the following month.  Where others see profits and hopefully a growing retirement fund, I see food, bills paid, car refuels etc.  Changes one's perspective and risk-profile somewhat.

 

[sancho panza]

anyone not confident they'll be able to time it right or pull the trigger to re-enter after selling will likely do far better just holding through the dips for a few years and treating all this as noise.

5 hours ago, MvR said:

Thanks SP ..  My thinking at the time was that we'd had a good run up, we were within 10% of David Hunter's target 2200-2400 + target range, and the Robin Hood crowd were piling into silver.  I figured it would be about 3 days after hearing about SLV trending on Robin Hood before they shook the tree..  1 day for the news to spread, 1-2 days to suck in more novices, and then a correction. 

Re: the options, as you know I'm generally a seller, not a buyer, but when I do buy options I buy them a good few months out at least ( aiming to double David Hunter's predicted timing since he often calls things a bit early ), and then sell near term options to capture some positive theta and neutralise the negative theta ( daily time decay ) of the long option. 

I did have 3  In-the-money March 2021 GLD calls, 170, 175 and 180 strikes, against which I sold 3 185 strike calls two weeks out at the same time I closed WvR's ISA positions. They helped a lot during the correction yesterday, and I closed these short calls out, along with one of the long call options, leaving me with 2 long March just-in-the-money calls.  I'll sell more calls against these, as GLD recovers. 

My MOS position is my old favourite, the Big Lizard ( short a call and put at the same strike, long a call at a slightly high strike) , rolled over each week to generate small returns with the odds in my favour, since I've no feel for timing in this sector.

I lvoe it when you tlak big lizards,positive theta and neutraliseing negative theta.It's envy and admiration We talked on the options thread about me selling my open positions a month back but I never got around to it as the kids have been a nightmare at bedtime of late and that's when I like to punt options around 1900.

Genuinely tempted to take it off and shovel it on Black Tesla puts in $50 ladders from $1000 till the money runs out.

edit to add,that's some wise advice right there

'anyone not confident they'll be able to time it right or pull the trigger to re-enter after selling will likely do far better just holding through the dips for a few years and treating all this as noise. '

 

[sancho panza]

2 hours ago, JMD said:

SP, for a respected but alternative economic view, well worth listening to the Lacey Hunt/Grant Williams podcast, where he is convinced of continued deflation. I don't subscribe to that theory, but as you say worth testing ideas.

Harley linked to it recently...  https://ttmygh.podbean.com/e/teg_0006/

I've been mening to lsiten to this but did Macrovoices first.Lacy Hunt is super.As someone who's gone from deflationista to stagflationista,I need to lsiten to a broad spread of ideas.

[Democorruptcy]

1 hour ago, MvR said:

Absolutely.   Everything I post is from a trader's perspective, not an investor's.  Your method will probably make more money over the long term.  I need to take an income though. Whatever I make in my main income account each month is what I have to live on for the following month.  Where others see profits and hopefully a growing retirement fund, I see food, bills paid, car refuels etc.  Changes one's perspective and risk-profile somewhat.

 

I'm similar as I don't have any income. Though I've never made a withdrawal from my ISA. I leave it there for tax purposes and spend other money, spread betting wins etc. I just like to know I've made some profit each year. The grey area is dividends, I always add those to the buy/sell profit. They are in limbo if I hold.

[MvR]

 

1 hour ago, sancho panza said:

I lvoe it when you tlak big lizards,positive theta and neutraliseing negative theta.It's envy and admiration We talked on the options thread about me selling my open positions a month back but I never got around to it as the kids have been a nightmare at bedtime of late and that's when I like to punt options around 1900.

Genuinely tempted to take it off and shovel it on Black Tesla puts in $50 ladders from $1000 till the money runs out.

I guess you've seen how long options act when price goes the wrong way, and how long it takes, if ever, for them to get back to their peak value.  If you sell some long calls, you can always get back if you change you mind, and in the meantime, being flat allows one to take a less emotional view on the situation. 

Generally speaking, with short options, I keep a position on unless there's a good reason not to. With long options it's the opposite. I stay out unless there's a good reason to be in.

The only long options I hold for a long time are at least 6 months out, and I sell short term calls against them, rolling them each week, creating something like stock with a covered call.  As with most of what I do, I sacrifice short term upside in return for positive theta ( time decay working in my favour ),  less volatility, and a better probability of success.

It's the tortoise vs the hare, and it's surprising how much ground the tortoise can cover in a year.

btw another good education source if I haven't mentioned it already Option Alpha at   https://www.youtube.com/user/bullzandbearz

[DurhamBorn]

1 hour ago, MvR said:

Absolutely.   Everything I post is from a trader's perspective, not an investor's.  Your method will probably make more money over the long term.  I need to take an income though. Whatever I make in my main income account each month is what I have to live on for the following month.  Where others see profits and hopefully a growing retirement fund, I see food, bills paid, car refuels etc.  Changes one's perspective and risk-profile somewhat.

 

Your posts are very important to the thread MvR and i really like having a superb trader like you adding them as they are.I like to see what you see over my macro eye and my road map.Iv always thought even when you dont act it pays to have a "feel" for things.That long end of the curve seems to be where the Fed is acting,forcing down re-financing rates for companies.The fact the Fed is forcing the long end below where inflation is likely to be across the cycle shows they are planning on letting the economy de-leverage with inflation over coupon.The market will start to listen in the end and then they wont be able to hold down that long end and re-financing rates will go to 7%+ on corporate.That will kill big growth companies as they suddenly need to fall 80% against discounted cash flow.

My road map had showed this as the likely scenario over 3 years ago when everything pointed the other way.The fact the Fed is now doing it takes away a massive amount of risk the road map is wrong.Main questions now are allocation across sectors and when.

[MvR]

21 minutes ago, DurhamBorn said:

Your posts are very important to the thread MvR and i really like having a superb trader like you adding them as they are.I like to see what you see over my macro eye and my road map.Iv always thought even when you dont act it pays to have a "feel" for things.That long end of the curve seems to be where the Fed is acting,forcing down re-financing rates for companies.The fact the Fed is forcing the long end below where inflation is likely to be across the cycle shows they are planning on letting the economy de-leverage with inflation over coupon.The market will start to listen in the end and then they wont be able to hold down that long end and re-financing rates will go to 7%+ on corporate.That will kill big growth companies as they suddenly need to fall 80% against discounted cash flow.

My road map had showed this as the likely scenario over 3 years ago when everything pointed the other way.The fact the Fed is now doing it takes away a massive amount of risk the road map is wrong.Main questions now are allocation across sectors and when.

Thanks DB, and thanks for your road-map which has allowed me to confidently inject some directional bias into my trading, lifting my annual return from 20% ish to over 50%.  You're changing people lives here with an eduction we'd never get anywhere else. 

Thinking about your point about the Fed forcing re-finance rates down for a short period before they take their hand of the scales reminds me of these figures I found a while back, comparing inflation to bank savings rates. If we had typical business finance rates going back this far, it would be interesting to see how they compared to inflation.

You can see how the super-cycle played out from 1982, and how close we are to another turn. Blue is inflation, green is savings rates.

[wherebee]

Well, I took the profits sliced from GDXJ last week and bought telefonica with them.  So that's my first bit of 'free' shares from the movements this year.  That's a long term hold for me - and thanks to all those posting information. One of the best discussions on DOSBODS.

[CVG]

7 minutes ago, wherebee said:

Well, I took the profits sliced from GDXJ last week and bought telefonica with them.  So that's my first bit of 'free' shares from the movements this year.  That's a long term hold for me - and thanks to all those posting information. One of the best discussions on DOSBODS.

Haha. I took the profits sliced from GDXJ a couple of weeks ago and bought ..... GDXJ!

[wherebee]

2 minutes ago, CVG said:

Haha. I took the profits sliced from GDXJ a couple of weeks ago and bought ..... GDXJ!

yeah, I thought about that but I think I need to diversify a bit more....

[janch]

14 minutes ago, wherebee said:

Well, I took the profits sliced from GDXJ last week and bought telefonica with them.  So that's my first bit of 'free' shares from the movements this year.  That's a long term hold for me - and thanks to all those posting information. One of the best discussions on DOSBODS.

I did similar.....I sold FRES/SLP last week and HOC today and then bought TEF.  Without this thread I'd be completely at sea so many thanks from me as well.

I've still got GDGB and PHSP ready for the PM bounce back.

[DurhamBorn]

33 minutes ago, MvR said:

Thanks DB, and thanks for your road-map which has allowed me to confidently inject some directional bias into my trading, lifting my annual return from 20% ish to over 50%.  You're changing people lives here with an eduction we'd never get anywhere else. 

Thinking about your point about the Fed forcing re-finance rates down for a short period before they take their hand of the scales reminds me of these figures I found a while back, comparing inflation to bank savings rates. If we had typical business finance rates going back this far, it would be interesting to see how they compared to inflation.

You can see how the super-cycle played out from 1982, and how close we are to another turn. Blue is inflation, green is savings rates.

I think thats the key point everything rests on.1982 was the end of an inflation and a long dis-inflation started with the business cycle simply being violent noise along the way.That chart shows how the 70s destroyed savings once inflation moved and the savings rate was below,exactly as now.I think the big story of the decade will be how pensions in draw down lose value as they fail to increase due to bond and tech weightings and the fees and draw down amounts take away 7% a year.Most portolios have almost no inflation hedge as they have tilted everything dis-inflation.

[leonardratso]

i top sliced the nice 25% of HZM that it rose today.

ill use that to buy lard.

[AWW]

1 minute ago, leonardratso said:

i top sliced the nice 25% of HZM that it rose today.

ill use that to buy lard.

That's a lot of lard. Are you planning to swim the channel?

[leonardratso]

nay, im just stacking it for the apocalypse, frozen lard will be more valuable than gold come the revolution.

[AWW]

Ha! And there I was thinking it was a typo for "land".

This thread really does throw up some leftfield investment ideas.

[DurhamBorn]

Just now, AWW said:

Ha! And there I was thinking it was a typo for "land".

This thread really does throw up some leftfield investment ideas.

Makes you think though doesnt it.If food goes up then higher calorie foods will go up more,how long does lard last?,is there an ETF 

[Moominpapa]

On 11/08/2020 at 00:31, sam1994 said:

I’ve been dropping in and out of this thread and following things. Unfortunately things for me at least seem to be getting even more confusing. 

The S&P is up, but when we look at DXY, it doesn’t seem to be. Just a weaker dollar. And those gains are in FAANG. Other sectors are still depressed. 

In an investment forum I am following, it’s been suggested that people ride out this uncertainty with TIIPS. These seem to be inflation protected bonds in the US. Obviously with the currency hedge and probably a lack of availability in the U.K., it isn’t feasible. Is there a UK equivalent? Gilts look awful but I’d like to park some cash but the concept of inflation protected (I know government stats are bollocks but still) seems too good to be true?

Not sure if you have been anwered or not but a fund you might be interest in is, otherwise you can purchase the individual shares. 

INXG iShares £ Index-Linked Gilts UCITS ETF GBP (Dist)

I am yet to find a TIIPS ETF hedge in GBP, if you find one please let me know.

On 11/08/2020 at 13:02, DurhamBorn said:

Governments cant do anything until the CBs print.The problem with banks (and insurers and others) is a derivative unwind would be so quick pumping liquidity into the pipes wouldnt be quick enough.The Fed is forcing down rates at the long end so that junk bonds also get cheaper to re-finance for companies.However they wont force rates down forever.If your the Fed you care about AT&T being able to re-finance,but you couldnt care less about a tech with 500 employees and zero profits.Thats why the big companies are rushing to re-finance and extend maturity while the window is open.

Once tech (and other sectors) cant access capital,they equity then falls and the chain reaction starts.

Fed isnt trying to stop an unwind,its trying to stop an unwind that takes down massive US corporates because they are needed to take on China etc.

 

I have been watching the FED closely, everyone thinks they are trying to save the equity markets, it really doesn't look like they are, it is as you say credit markets for the state and those massive corporates that they are worried about, it is just symptomatic that the liquidity is events coincide with equity sell offs. Not sure if the reason is to take on China or what but i'm suprised more people aren't even considering it.

[Jesus Wept]

27 minutes ago, janch said:

I did similar.....I sold FRES/SLP last week and HOC today and then bought TEF.  Without this thread I'd be completely at sea so many thanks from me as well.

I've still got GDGB and PHSP ready for the PM bounce back.

I did similar too - top sliced 33% of my silver holding after a 60% rise and bought more BP and some potash in SDF and MOS as well as some ‘cheeky’ bitcoin exposure in ARGO (ARB blockchain). 
 

Diversify into high yield big cap MPOT companies with potentially high future dividends. 

I will have some BATs and IMB and some more telcos in time. Might take some more silver profits. 

 

[Bear Hug]

4 minutes ago, leonardratso said:

nay, im just stacking it for the apocalypse, frozen lard will be more valuable than gold come the revolution.

I thought you may be just bulking up with "eat out to help out", not actually buying and storing lard

[leonardratso]

11 minutes ago, Bear Hug said:

I thought you may be just bulking up with "eat out to help out", not actually buying and storing lard

i dont need to bulk up, i need to bulk down, so i doubt ill be binging on govt junk food, besides, its too hot to be bothering with high cholesterol low value junk. ill stick with the tried and tested staples of yesteryear.

high cholesteral, high calorie artery blocking stent destroying sludge is where its at.