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

[Loki]

2 minutes ago, sancho panza said:

 

China has done a lot of the heavy lifting post 08 iirc Paul Hodges had a great post on it.

By this do you mean it has done a lot to hide the post 08 aftermath? 

[UnconventionalWisdom]

10 hours ago, Tdog said:

Of course there will be another recession, my point is the new paradigm is the lengths theyll go to to kick it into the future. Imho the so called recession in 07/08 was kicked into the future and wasnt allowed to run its course thanks to QE/ZIRP and bank bailouts ... as will the coming one. Hence this thread.

The cover up for the last recession was, as you point out, QE and ZIRP. Once that gets out of control, theres no more debt or borrowing that can help as everyone is already stretched too much. Then the assets fall and lending becomes even more difficult, which means assets fall even further in a vicious cycle. In this scenario, i dont think they have many other options left to fight the economic downturn. An increase in productivity is needed that will only be achieved through gov spending as noone can borrow enough and everyone doesnt want to spend. 

Of course, some believe debt can be continuously increased leading to a further increase of the everything bubble. 

[Chewing Grass]

Got letter from UK Bank Plc saying they were upping the rate on their cards by 0.5% so thought I'd dig out average card rates by year.

Stuck for UK graph but US on looks similar if 1-2% higher than UK.

Merry Xmas wage slaves.

[Errol]

Huge Bets That Gold Could Triple to $4,000 Trade in New York

The gold options market saw $1.75 million in block trades betting the precious metal could almost triple in more than a year, surpassing the record.

Around noon in New York, 5,000 lots for a gold option giving the holder the right to buy the precious metal at $4,000 an ounce in June 2021 changed hands. The bets were sold at $3.50 an ounce.

“It’s like 18-month term life insurance; what will the world look like if gold is at $4,000,” Tai Wong, the head of metals derivatives trading at BMO Capital Markets, said in an email. “They are hoping for a quick violent move,” he said, referring to the people who bought the call options.

https://www.bloomberg.com/news/articles/2019-11-27/huge-bets-that-gold-could-triple-to-4-000-trade-in-new-york

[Talking Monkey]

28 minutes ago, Errol said:

Huge Bets That Gold Could Triple to $4,000 Trade in New York

The gold options market saw $1.75 million in block trades betting the precious metal could almost triple in more than a year, surpassing the record.

Around noon in New York, 5,000 lots for a gold option giving the holder the right to buy the precious metal at $4,000 an ounce in June 2021 changed hands. The bets were sold at $3.50 an ounce.

“It’s like 18-month term life insurance; what will the world look like if gold is at $4,000,” Tai Wong, the head of metals derivatives trading at BMO Capital Markets, said in an email. “They are hoping for a quick violent move,” he said, referring to the people who bought the call options.

https://www.bloomberg.com/news/articles/2019-11-27/huge-bets-that-gold-could-triple-to-4-000-trade-in-new-york

Kin hell that is quite some bet, 18 months for it to triple

[Thorn]

54 minutes ago, Talking Monkey said:

Kin hell that is quite some bet, 18 months for it to triple

By then I reckon Freddos will be going for a fiver.

 

[Loki]

9 hours ago, Errol said:

Huge Bets That Gold Could Triple to $4,000 Trade in New York

The gold options market saw $1.75 million in block trades betting the precious metal could almost triple in more than a year, surpassing the record.

Around noon in New York, 5,000 lots for a gold option giving the holder the right to buy the precious metal at $4,000 an ounce in June 2021 changed hands. The bets were sold at $3.50 an ounce.

“It’s like 18-month term life insurance; what will the world look like if gold is at $4,000,” Tai Wong, the head of metals derivatives trading at BMO Capital Markets, said in an email. “They are hoping for a quick violent move,” he said, referring to the people who bought the call options.

https://www.bloomberg.com/news/articles/2019-11-27/huge-bets-that-gold-could-triple-to-4-000-trade-in-new-york

It was @DurhamBorn 

[kibuc]

9 hours ago, Errol said:

Huge Bets That Gold Could Triple to $4,000 Trade in New York

The gold options market saw $1.75 million in block trades betting the precious metal could almost triple in more than a year, surpassing the record.

Around noon in New York, 5,000 lots for a gold option giving the holder the right to buy the precious metal at $4,000 an ounce in June 2021 changed hands. The bets were sold at $3.50 an ounce.

“It’s like 18-month term life insurance; what will the world look like if gold is at $4,000,” Tai Wong, the head of metals derivatives trading at BMO Capital Markets, said in an email. “They are hoping for a quick violent move,” he said, referring to the people who bought the call options.

https://www.bloomberg.com/news/articles/2019-11-27/huge-bets-that-gold-could-triple-to-4-000-trade-in-new-york

Why not just buy the metal instead? 

[dgul]

1 hour ago, kibuc said:

Why not just buy the metal instead? 

Because if you believe that the gains will be enormous, this allows you to have enormous*enormous gains.

If, say you think gold will go to $5,000, then this trade will give them $1,000 gain for every $3.50 invested, or about 300x return.  If you just invested in the metal today then the return would be about 3x.  Of course, the options are worthless if gold ends the period at $3,999, but that's the nature of the investment.

Or, put another way (which is almost certainly how the investors think), they're not really interested in investing in gold, but really just are hedging for a crazy future.  So, for every $1,500 investment they make, they put $3.50 into these options (which might end up worthless, but if they're not they've got an amazing return), and they've still got $1,496.50 to invest in their traditional 'investment stuff' (which will probably give a reasonable return, but if they collapse in value for some reason the gold options will ensure that their portfolio isn't too hammered). 

[kibuc]

20 minutes ago, dgul said:

Because if you believe that the gains will be enormous, this allows you to have enormous*enormous gains.

If, say you think gold will go to $5,000, then this trade will give them $1,000 gain for every $3.50 invested, or about 300x return.  If you just invested in the metal today then the return would be about 3x.  Of course, the options are worthless if gold ends the period at $3,999, but that's the nature of the investment.

Or, put another way (which is almost certainly how the investors think), they're not really interested in investing in gold, but really just are hedging for a crazy future.  So, for every $1,500 investment they make, they put $3.50 into these options (which might end up worthless, but if they're not they've got an amazing return), and they've still got $1,496.50 to invest in their traditional 'investment stuff' (which will probably give a reasonable return, but if they collapse in value for some reason the gold options will ensure that their portfolio isn't too hammered). 

$1.75mil  / $3.5 = 500 000 ounces in play.

To realize all your gains, you'd have to spend $2bil and then dump $2.5bil worth of gold on the market.

Damn.

Or perhaps you could just sell your options at 80c a dollar

[Harley]

Fyi, TradingView is offering a Black Friday discount on their sub today and tomorrow.  Lots of trader bells and whistles but also a good charting package for most markets.  Runs in desktop browser and via app on phone. 

[BearyBear]

Another Black Friday offer, free delivery with orders over 1000GBP on Coininvest.

[Castlevania]

35 minutes ago, kibuc said:

$1.75mil  / $3.5 = 500 000 ounces in play.

To realize all your gains, you'd have to spend $2bil and then dump $2.5bil worth of gold on the market.

Damn.

Or perhaps you could just sell your options at 80c a dollar

Pretty sure you can cash settle

[DurhamBorn]

7 hours ago, Loki said:

It was @DurhamBorn 

I expect between $6000 and $10,000 by the end of the next cycle around 2028,deflation first though.

[Loki]

9 minutes ago, DurhamBorn said:

I expect between $6000 and $10,000 by the end of the next cycle around 2028,deflation first though.

Interesting how that date ties in with the next solar minimum around 2030 (the usual cycle) and potentially the beginning of a grand solar minimum.

[Noallegiance]

1 hour ago, DurhamBorn said:

I expect between $6000 and $10,000 by the end of the next cycle around 2028,deflation first though.

Damn I'm gonna be nearly 50.

This is the longest most painful wait ever.

[CVG]

23 minutes ago, Noallegiance said:

Damn I'm gonna be nearly 50.

This is the longest most painful wait ever.

The trick is to get rich slowly!

[Loki]

1 hour ago, Noallegiance said:

Damn I'm gonna be nearly 50.

This is the longest most painful wait ever.

Exactly my thought

I'll be getting on for too old to have kids

[leonardratso]

its the get rich never or get get broke slowly method.

[Bobthebuilder]

3 hours ago, Noallegiance said:

Damn I'm gonna be nearly 50.

This is the longest most painful wait ever.

Speaking as someone in their 50s, dont worry, you will be too before you know it. Life is what happens when your busy making plans.

[dgul]

10 hours ago, kibuc said:

$1.75mil  / $3.5 = 500 000 ounces in play.

To realize all your gains, you'd have to spend $2bil and then dump $2.5bil worth of gold on the market.

Damn.

Or perhaps you could just sell your options at 80c a dollar

The people selling the options don't own the gold -- they're just selling options.

So the situation is 'someone buys $2.5bln on open market -> sells to option holder for $2bln (private trade) -> option holder sells $2.5bln on open market'.  Ie, no net trade in physical gold.

In reality, the option seller would just send the $0.5B to the option holder, and not muck about with physical.

[leonardratso]

if you want to get rich quick or get broke even faster i suggest bitcoin, its nowhere near as volatile as it once was, but its still kicks like a mule when it comes/goes.

[sancho panza]

1 hour ago, dgul said:

The people selling the options don't own the gold -- they're just selling options.

So the situation is 'someone buys $2.5bln on open market -> sells to option holder for $2bln (private trade) -> option holder sells $2.5bln on open market'.  Ie, no net trade in physical gold.

In reality, the option seller would just send the $0.5B to the option holder, and not muck about with physical.

I suspect the author is referencing some futures trades which are cash settled.

If this is an option on the underlying then the option seller would have to deliver the physical.

Depending on the delta(amount the option nmkves versus the underlying) a move to $2500 could make the trader a lot of cash depending on the spread.

 

 

[dgul]

9 minutes ago, sancho panza said:

I suspect the author is referencing some futures trades which are cash settled.

If this is an option on the underlying then the option seller would have to deliver the physical.

Depending on the delta(amount the option nmkves versus the underlying) a move to $2500 could make the trader a lot of cash depending on the spread.

The option is at $4k.  So a phenomenal bet really.

[they'd get nothing if it doubled!]

[DurhamBorn]

9 hours ago, Loki said:

Exactly my thought

I'll be getting on for too old to have kids

I wouldnt base having kids on money,just have them anyway,i had 3 before 26 years old and best thing i ever did.