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

[Popuplights]

On 31/08/2020 at 16:12, M S E Refugee said:

I have turned £50000 into £80000 on the practice mode of the CFD's on Trading 212 by trading Apple and Tesla.

Not a clue what I am doing but I can see how people are getting carried away when it's this easy.

 

Now it's time put your cock on the block and risk 50k of your own, real money!!

[Popuplights]

2 hours ago, Democorruptcy said:

Latest Hussman downdate:

https://www.hussmanfunds.com/comment/mc200901/

Very long way of saying " this suckers gonna blow soon"

10 hours ago, geordie_lurch said:

RSBB under 1035 now and pretty much everything else of mine all red today - time to get some fresh air I think 

I'm still drying my eyes mate. Same same.

[Loki]

7 minutes ago, Popuplights said:

I'm still drying my eyes

Glad it's not just me

[Talking Monkey]

3 hours ago, Cattle Prod said:

Bought a long dated QQQ put today, the stock split madness was the last straw. Reckon there is 25% max upside left in a blowoff top, so I hope to add more.

"AAPL is up one Exxon in the last 48hrs" - Zerohedge tweet today.

looking at the last few days it is pure euphoria, I reckon apple will get close to 3 trillion  before it blows. Watching zoom go up 40% today was unbelievable, it added 37 billion, pure mania

[Sugarlips]

2 hours ago, Noallegiance said:

*Shudder*

I know these are 64Tr$ questions but I may as well ask as I can’t be the only one who can comprehend the DB roadmap but is still not yet properly positioned (aside from my $20k play fund which is up 50% since March - thanks all).

What’s everyones thoughts on the BK event? Seems most here are buying oilies for the reflation period but how will they perform during the deflationary bust?

will the Robin Hooders be smart enough to run to defensive stock when it finally goes bang or just try to exit the market altogether?

for those of us still hovering over the ‘buy XOM’ button, is now as cheap as they’ll ever be? Will conservative stocks run when the 1929 moment occurs or get bashed short term along with everything else?

Is the plan just ignore the noise and fear just keep averaging in in tranches from here?

[Popuplights]

Just topped up my wife's ISA, ready for the bargains

[Jesus Wept]

32 minutes ago, Sugarlips said:

I know these are 64Tr$ questions but I may as well ask as I can’t be the only one who can comprehend the DB roadmap but is still not yet properly positioned (aside from my $20k play fund which is up 50% since March - thanks all).

What’s everyones thoughts on the BK event? Seems most here are buying oilies for the reflation period but how will they perform during the deflationary bust?

will the Robin Hooders be smart enough to run to defensive stock when it finally goes bang or just try to exit the market altogether?

for those of us still hovering over the ‘buy XOM’ button, is now as cheap as they’ll ever be? Will conservative stocks run when the 1929 moment occurs or get bashed short term along with everything else?

Is the plan just ignore the noise and fear just keep averaging in in tranches from here?

 

14 minutes ago, Popuplights said:

Just topped up my wife's ISA, ready for the bargains

You are me AICMFP...!

@Sugarlips - my plan is just to build cash and wait. I have been so tempted to buy more big oil etc (at what looks like bargain prices) and even get back into silver - but when this sucker blows - and it will - I want to be able to maximise my opportunity. 

Don’t get me wrong ..... I am feeling the FOMO !!! however as DB says ‘the market wants to make as many people suffer as possible’ .......

The time will come. Patience my friend.....

Mind - I could be wrong.....  and I’ll probably see Silver go to $300/oz before it sees $20 and RDSB £60 before £9......

But I reckon I’ll sleep better.......

Ps: last time I felt like this was February 2000 when I sold all my tech stocks —(including the biotech CAT)..... and May 2007 when I STR’d.
 

You know it’s close when somewhere in the dark recesses of your mind you think.... I could throw £40k at some TESLA...... just for a few days to make a quick killing.... I’ll  be ‘in and out’ before the market can react...... (admit it .... you’ve thought the same? Haha ! )

[Popuplights]

9 minutes ago, Vendetta said:

You know it’s close when somewhere in the dark recesses of your mind you think.... I could throw £40k at some TESLA...... just for a few days to make a quick killing.... I’ll  be ‘in and out’ before the market can react...... (admit it .... you’ve thought the same? Haha ! )

Hmmmmm. I could be in and out before labor Day.....

[wherebee]

17 minutes ago, Popuplights said:

Hmmmmm. I could be in and out before labor Day.....

my great grandfather on my mothers side lost everything in the Stockmarket crash of 29, which I understand involved bank and shipping shares.  He went mad and was put away for the rest of his life, my great grandmother died somehow (!) and my grandmother was fostered by the neighbours, and had to go into service.  They were comfortable middle class before then.  She then met and married my grandfather whilst picking fruit in the fields of Kent in the early 30's.  They worked like bastards for the rest of their lives.

So no, I am not going to jump in to join you, thanks

[wherebee]

6 hours ago, Errol said:

Higher. Much higher. What will gdx and gdxj be when gold is rising upwards above $5000 an ounce?

Oh, I agree.  It could go much higher.

Or it could go lower

Or it could stay flat

 

but whatever it does, I don't think it's got the long term income potential of the oil companies who are trading, as far as I can see, at incredible lows especially when inflation adjusted.

Plus, if I keep taking a little bit off the top to buy these other shares whilst they are depressed, that surely has to be a better way of diversifying risk?  Say I own 1000 shares for 30k, and  GDXJ goes to 500 (500k), and I then own 1/10th of my initial holdings (50k), but on the way up have taken profits which average out at 350 and invested them in 350k worth of oil/telecoms across countries and sectors.  My belief is that that will serve me better in the future re regular income than having kept all in the GDXJ.  I 'lost' 100k of theoretical profit (which would all be taxed in one year under aussie rules) in exchange for 350k across a wide sector which at 5% div will generate 17k a year....tax free assuming my other income is not huge.

I dunno, really.  I guess that's the point. 

[DurhamBorn]

4 hours ago, Talking Monkey said:

looking at the last few days it is pure euphoria, I reckon apple will get close to 3 trillion  before it blows. Watching zoom go up 40% today was unbelievable, it added 37 billion, pure mania

Zoom added a Vodafone,or a Telefonica and BT combined ,market cap larger than most of the European telecom sector put together.

Whats incredible though to macro eyes is this all shows the dollar liquidity the Fed has pumped into the pipes and in the end it always ends up back at the start of the chain.It also shows how the US trounces everyone by having the reserve currency.A reason the FTSE 100 of today is full of junk compared to decades ago.

[BurntBread]

6 hours ago, Sugarlips said:

I know these are 64Tr$ questions but I may as well ask as I can’t be the only one who can comprehend the DB roadmap but is still not yet properly positioned (aside from my $20k play fund which is up 50% since March - thanks all).

What’s everyones thoughts on the BK event? Seems most here are buying oilies for the reflation period but how will they perform during the deflationary bust?

will the Robin Hooders be smart enough to run to defensive stock when it finally goes bang or just try to exit the market altogether?

for those of us still hovering over the ‘buy XOM’ button, is now as cheap as they’ll ever be? Will conservative stocks run when the 1929 moment occurs or get bashed short term along with everything else?

Is the plan just ignore the noise and fear just keep averaging in in tranches from here?

Given the similarities, it would be interesting to know how the market behaved on a sector-basis in 1929 and through the 1930's. I am guessing that even if oil was hammered, it recovered a lot more quickly, and to a greater extent, than stocks further downstream in the supply chains. However, I don't know, and I need to have a dig around and see what long term data there is out there.

Personally, I've been losing money hand-over-fist on oil stocks, and every time they go down, I think: gosh, I thought they were cheap before, but they look really cheap now ... and I buy some more.

Maybe after the big kahuna I'll be eating rice and beans for the rest of my life. However, I eat rice and beans most of the time now, and I've not borrowed any money, so I'm going to sit tight, with a bit of cash on the side in case there are any bargains.

My main problem with this thread (and no criticism to anyone here: thank you all for fantastic discussion and insights) is that I'm spending far too much time thinking about what I should be buying next; while I should be thinking more about my work, which is actually bringing in a salary, rather than just about washing its face.

I'm not a wealthy person, but this thread has broken down my aversion to investing, helped me find a couple of quid in old isa's, and turned me into a (still thankfully reluctant) gambler. It's been an experience, and may turn into even more of an experience if there's a 1929 event. Still, for the present, I'm still above water thanks to MOS, FRES, DRAX, BHP, Royal Mail and a few others. Thank you all!

[Jesus Wept]

47 minutes ago, BurntBread said:

Given the similarities, it would be interesting to know how the market behaved on a sector-basis in 1929 and through the 1930's. I am guessing that even if oil was hammered, it recovered a lot more quickly, and to a greater extent, than stocks further downstream in the supply chains. However, I don't know, and I need to have a dig around and see what long term data there is out there.

Personally, I've been losing money hand-over-fist on oil stocks, and every time they go down, I think: gosh, I thought they were cheap before, but they look really cheap now .........

Yeah - would be interesting to see.

I am banking on all stocks/commodities taking a massive hit over a 10day period and then the bubble stocks will continue to slide for a good 6-12 months with the occasional bounce....

The money has to go somewhere after investors have covered their margin calls etc..... they’ll have it sat in cash for a while but then it will rotate into the quality OPTIMiSM et al.... stocks and back into PMs etc...

I hope....

If the market collapsed 30% tomorrow we might see RDSB and BP down by another 20% for a brief period.... hitting intra day lows of £8 and £2 or lower. 
 

When everyone is heading for the exits the values can really hit the depths. 
 

In March RDSB hit £9.60 and BP £2.21 o think..., it could  reach new lows....

[wherebee]

25 minutes ago, Vendetta said:

Yeah - would be interesting to see.

I am banking on all stocks/commodities taking a massive hit over a 10day period and then the bubble stocks will continue to slide for a good 6-12 months with the occasional bounce....

The money has to go somewhere after investors have covered their margin calls etc..... they’ll have it sat in cash for a while but then it will rotate into the quality OPTIMiSM et al.... stocks and back into PMs etc...

I hope....

If the market collapsed 30% tomorrow we might see RDSB and BP down by another 20% for a brief period.... hitting intra day lows of £8 and £2 or lower. 
 

When everyone is heading for the exits the values can really hit the depths. 
 

In March RDSB hit £9.60 and BP £2.21 o think..., it could  reach new lows....

I'm keeping a stash on the sidelines for this view, despite having an itchy trigger finger....

[kibuc]

11 hours ago, DurhamBorn said:

https://electrek.co/2020/09/01/tesla-tsla-5-billion-capital-raise/

As we mentioned yesterday and now Tesla has done just that,raising $5 billion "at market" by selling more shares.In affect Tesla is raising money for free and equity is willing to hand over $10 notes for 50c back down the road.Its nuts,but just another fantastic contrarian signal that we are at the end of the cycle.

Is 5 billion a lot? Or is trillion the new billion? Is a company valued at 50 million big and successful, or perhaps the opposite? That bubble removed all my comprehension of anything with more than a few zeros. Darn, I live in a world where a million is serious money.

[Democorruptcy]

9 hours ago, Popuplights said:

Very long way of saying " this suckers gonna blow soon"

Looking at IG FTSE is 80% clients Long, DOW 67% Short.

[Barnsey]

UK house prices have hit a record high, and highest monthly gain for 16 years??? Banks withdrawing high LTV products to cope with demand. Just when I thought the stars had aligned...

Really quite mad though isn't it? The low paid renters are the ones suffering, but I can't help thinking (as we're now starting to see over the pond) that the job losses will move up the chain to white collar middle classes as reality refocuses on the global demand issues.

[leonardratso]

tesla has destroyed many shorters, im hoping they covered and get to destroy tesla on the way down.

unless of course......

[Castlevania]

2 hours ago, Democorruptcy said:

Looking at IG FTSE is 80% clients Long, DOW 67% Short.

So expect the FTSE to fall and the Dow to continue rising.

[JMD]

10 hours ago, Vendetta said:

Mind - I could be wrong.....  and I’ll probably see Silver go to $300/oz before it sees $20 and RDSB £60 before £9......

But I reckon I’ll sleep better.......

Ps: last time I felt like this was February 2000 when I sold all my tech stocks —(including the biotech CAT)..... and May 2007 when I STR’d.

Vendetta, i too am waiting for the BK, so agree with your thoughts on this. But now we are approaching the tipping-point (are we?; darn, already doubting myself in same paragraph!) i can see how smart/brave/committed(all 3?)... you need to be, to sell your investments and wait for things to 'unwind' (British understatement), before jumping back into the markets.

Having described my somewhat conflicted position, can i be nosey Vendetta? I believe you recently said that you have now sold much/all of your stocks and pm's - apologies if i've got that wrong? But the bit above intrigues me - are you saying you timed the markets right on those two occasions? 

btw what does 'STR'd' mean?

 

[JMD]

DB recently recommended the book - 'The New Total War of the 21st Century'. Physical book is expensive, but you can get the pdf for just $12 using the below link. Link was originally posted by another contributor on here, I have used the link and confirm it works, also have started reading it and it is well worth the $12. 

https://www.strategicstudies.org/ISSA Store.htm#!/The-New-Total-War-of-the-21st-Century-PDF-ebook/p/206749218/category=0

[JMD]

1 hour ago, Cattle Prod said:

This is an excellent, thought provoking point. Tech is currently a vortex, sucking in cash from everywhere else, bleeding companies like Shell or XOM of investor support. I can image fund managers being under severe pressure to put more in tech "bloody amateurs are kicking your asses". They will not be the last out. What industries even have the scale to absorb the amount of money gone into tech, that will have to come out again? It's trillions of dollars, and I agree, OPTIMISM, and commodities in general would cover it. As I said, AAPL went up by an XOM in 48 hrs. The sector rotation will exceed the market cap of the OPTIMiSM industries by multiples, I think:

 

Nudging $22 Trillion, as of 9th July, up 13% since then, so just shy of 25 trillion dollars. It was around $6.6 Tn in 2000, and with an ~80% dotcom style bust you would 'lose' $20 tn of capital from the Nasdaq. A modest 50% is $12.5 Tn. Jump in if my thinking is flawed guys, but this money is not 'lost', right? Derivatives will cancel each other out, but this 25 Tn is the the actual stock value as I understand it, and for every loser in a market there is a winner, and the money will have to find a home. Some will sit as cash for a while as Vendetta says, but the bargains in OPTIMiSM will be screaming at them all the while.

So where did the money go after 2000? We know the next bubble was housing, but that was debt based. Did it filter into the commodity run from 2002-2008?! Vertical blue line is Nasdaq peak. Thomson Reuters Commodity Index:

WTI:

To play Devils Advocate, and to check my own bias, what other areas could possibly absorb this wall of money in the coming years?

Sorry if I'm teaching you to suck eggs, and I'm sure @DurhamBorn has modelled these money flows, but it's a bit of a staggering thought to me. Say you're Warren Buffet, I'm guessing you're not going to be the last one to jump the Apple ship. Where are you going to put the >$100 billion dollars you have in there? Maybe he's already given us the answer with Barrick and the Japanese acquisitions, I will watch his future filings with interest.

Here is what the entire US energy sector was worth in April:

Apple vs an odd selection of oil and gas companies

I can't find a better source, I might have to work out the market cap myself.

Edit: this will do, the ratio of the Nasdaq to the S&P 500 Energy index. It only goes back to 2002, unfortunately, when the Nasdaq could buy 8 energy sectors. At the oil peak (vertical blue line), it could buy 3 energy sectors. It can now buy 46.6 energy sectors 

 

CP, great analysis and charts btw - however, perhaps i misunderstand your question (and i am maybe the least qualified to answer it here) - but its my understanding that it is 'wealth' that cannot be created/destroyed (not money). Money after all is created all the time by the Fed! How wealth is measured (by the wealthy) changes over time and is a clever and dark art!

Where did the 'money-flow go' (excuse my clumsy terminology) is a different question... i thought it went into derivatives? I suppose compare the $70trn total world stock market value  vs  the $1000trn derivatives market. Derivatives is 'funny-money' i know so can't compare directly (but many tax-havens and other places to filter/hide cash), the phrase 'inmates in charge of the asylum' springs to mind, perhaps there is no real sense to be made of it all!

(btw, i'm here to learn so do await other expert opinion on this subject)

[JREWING]

1 hour ago, JMD said:

 

btw what does 'STR'd' mean?

 

Sold to rent.

 

[MrXxxx]

12 hours ago, Sugarlips said:

s the plan just ignore the noise and fear just keep averaging in in tranches from here?

Averaging down when you are close to the bottom is not a problem but doing the same when you are nearer to the top is not so good...Problem is, we don't know where the bottom is I.e was it March?...if you are holding RR., after yesterday you know this isn't the case!

[Talking Monkey]

1 hour ago, JMD said:

CP, great analysis and charts btw - however, perhaps i misunderstand your question (and i am maybe the least qualified to answer it here) - but its my understanding that it is 'wealth' that cannot be created/destroyed (not money). Money after all is created all the time by the Fed! How wealth is measured (by the wealthy) changes over time and is a clever and dark art!

Where did the 'money-flow go' (excuse my clumsy terminology) is a different question... i thought it went into derivatives? I suppose compare the $70trn total world stock market value  vs  the $1000trn derivatives market. Derivatives is 'funny-money' i know so can't compare directly (but many tax-havens and other places to filter/hide cash), the phrase 'inmates in charge of the asylum' springs to mind, perhaps there is no real sense to be made of it all!

(btw, i'm here to learn so do await other expert opinion on this subject)

Really got me thinking that bit in bold JMD