Credit deflation and the reflation cycle to come (part 3)

[DurhamBorn]

10 hours ago, CannonFodder said:

Perhaps an unfair question but do you see the UK collapsing in an inflation - sterling down toilet - brain drain - printy public sector spiral before say the US lead the way. 

Its on the edge of my radar but my radar not as good as yours.

No,we have too many good points,but we will and are sailing close now.The state has a massive structural deficit and that will be exposed soon.They will go after more tax first though hence freezing allowances while inflation runs.Since Labour last got in we have been gutting the working middle class to hand to others in bennies and state wages.I see the main problems in the UK as the bennies,mostly around children and mild disability,and also councils.From those two most other problems flow.

On councils,my partner works for one in nurse responding,out of 46 responders 9 are on the sick,several others on and off the sick,the bosses are all at home and the service is collapsing,councils outside of the frontline workers are now local mafia that exist only to enrich the officers/managers.The police are now getting there as well,they exist to give themselves a huge pension for life at 55.

The economy tries to fight back with inflation to claw back for the private sector,but those living on savings and none inflation protected incomes lose up to everything.

[DurhamBorn]

10 hours ago, Hancock said:

Its also the majority of people with rock solid safe jobs in the so called private sector, such as the FCA, banks, building societies etc etc.. that are sat at home doing sweet FA.

Its why they can string this out endlessly as plenty are going to support being sat at home with the kids on full pay.

I despair at the thought of Liz Truss, she's an incompetent social climber and by being in govt by default means she supports lockdowns.

She will make the best PM since Thatcher i think,if she gets it.You have to look loyal to the government until the right moment.The Ides of March.

[DurhamBorn]

2 hours ago, jamtomorrow said:

That reads like a stagflation call for the UK @DurhamBorn. Is that what you're seeing?

I think we might see a year of it.There is plenty of liquidity at the moment,but the government keeps doing idiotic things.Companies will start to invest to capture the higher prices,but at the moment they arent so that will mean longer with inflation and no/low growth.The narrative of transitory inflation is holding back investment.It is transitory of course at some point,but the fact is we wont see the increases given back,by 2030 i expect 63% inflation compounded up.

Its a distribution cycle,thats clear now,however, im seeing more damage earlier than i expected,more front end,that should see lots of higher wage demands etc

[Harley]

3 hours ago, jamtomorrow said:

Bringing it somewhat back on topic ... is it just me, or is there still no 2FA at HL? Given we're nearly into 2022 - and in terms of WTF is going on with their IT, and therefore the general solidity of their platform - surely that's red flag territory?

Neither HL nor II.  Rediculous at this point.  II uses a texted code which is not very secure (SIM hijack).  AJB manages 2FA as do several other players.

[CannonFodder]

Thank you DB

Yeah i have experience of councils, large departments outsourced except for the directors eg Highways. These depts then run by private sector directors in new companies. Then there are 4 to 5 council directors left that dont actually do anything other than look busy qnd approve the monthly invoice. OF course that is beneath them so they take on contract management admin. ON paper the admin should be challenging payments but in reality on technical ability now outsourced so everything waved through as no understanding left

[Harley]

3 hours ago, JimmyTheBruce said:

Given the provenance of many posters on this site (myself included) one might suggest that timing crashes isn't our strong point 

I'd be interested to know people's approaches but fear some/most are like my old one of listening to talking heads.  I now listen to the data.  There are no short cuts other than luck.

[Bricormortis]

18 hours ago, BadAlchemy said:

This has cheered me up on a dark winter day with silver and the miners in the doldrums!....

https://silverseek.com/article/undersupplied-silver-follow-base-metals-deficit

A report from the 'Silver Institute', with some interesting charts and stats, predicting a supply deficit over the coming years in industrial metals. Mentions causes such as the push for EV/green infrastructure and risks from 'resource nationalism' in LTAM countries (e.g. see Peru and Hochschild), and lack of investment to replace old mines with new (sounding similar to discussions on here wrt oil/gas supply squeeze).

Interesting, and I did not know until now that silver supply (and price moves) correlates strongly with copper (and zinc/lead etc) as over 50% of it comes as a byproduct of mining those metals rather than from primary silver mines.

Long-ish article but  conclusion/summary as follows...

"Conclusion

A billion ounces of silver demand this year is expected to outpace silver supply leaving a 7-million-ounce deficit — the first in six years.

Last year due to covid-related mine closures, production from primary silver mines fell 11.9%, silver output from lead-zinc mines declined 7.4% and silver from gold mines shrunk 5.7%. Silver output from copper mines actually increased 3.5% (data from the 2021 World Silver Survey).

This year could be quite different. While mines are no longer closed due to covid and therefore are expected to regain 2020’s lost output, there are other challenges ahead. As we have identified, they include a steadily increasing supply-demand gap for copper, with a 3.8Mt deficit predicted by 2025; supply shortfalls in other base metals including zinc and nickel due to a lack of new projects; and resource nationalism in Peru, the world’s second-largest copper producer and the third-biggest miner of silver, behind #1 Mexico and #2 China. Major copper miners (with silver by-products) Chile and the DRC could also see resource nationalism affect silver production.

Continued supply constraints on silver, when combined with robust industrial and investment demand, are likely to power silver higher heading into the new year and beyond.

Richard (Rick) Mills
aheadoftheherd.com"

The following is edited extracts from a News letter from Silver Chartists written by David Brady of Global Pro Trader.

It provides an opinion on wher we are heading re metals and bonds, QE and the taper,  whilst I thought I should share it with you it is not to be taken as financial advice, please do your own research.

...Hedge Funds, are also known as the dumb money because they tend to be maximum long when the price peaks and extreme short when it bottoms out. They have now slashed their net long position by 45%in just 3 weeks.

Such a dramatic drop in such a short time is typically associated with a pending rebound in price. However, their absolute net long position at 81k contracts is double or more their positions at the previous lows of 1721 and each of three lows at 1675. This suggest a bounce is coming, but then we?re going lower again, perhaps to my ideal target just below 1675. My preferred positioning for the bottom would be a net long of 50k or lower, ideally the Funds go net short. We are still some distance from there which confirms my belief that we have not seen capitulation yet.

But we need to reach capitulation in order for a truly sustainable bottom to be in place and for the rally to new record highs.  Gold rebounded to 1837 in less than a month. That isn't capitulation. When capitulation occurs, the rally climbs a wall of worry because so many have been burned by previous failed rallies and don't trust any rallies going forward, not until we're near the next euphoric peak. Seeing is believing for them. The rapid rally off the low in August showed that there were still too many willing to jump in at a moment?s notice and drive the price up.

When we bottom, it will be a somber affair, initially. While not absolutely necessary, a drop below 1675 would almost certainly provide us with the capitulation that sets us up for record highs next.

In summary, the risk remains for a positively divergent lower low in price below 1675 prior to take off. However, the rally to new record highs in 2022 is inevitable imho.

Related to this he goes on to note the position of the banks in the US 10 year Treasury Bond....

...They have raced to get to their longest position since 2018 at the fastest pace on record.

This means that they are positioning a big rise in bond prices, which means a sharp drop in yields. The rapidity of their positioning also suggest that it is coming sooner rather than later. When bond yields plummet, real yields are likely to hit new record lows too.

This also coincides with the peak and dump in the DXY. All of which would be extremely beneficial to Gold.

What could cause such a sharp drop in bond yields? A crash in stocks and oil prices would do it..

 When I refer to fundamentals, I am referring to the only fundamentals that matter these days: Fiscal and Monetary Policy.

Starting with the latter, the latest blowout CPI numbers just provide more ammunition for the Fed to proceed with its plan to taper its QE. This a policy error in the making. Ive been warning that this would happen for months and here we are. The Fed will curtail its QE just as the economy is slowing and stocks are near all-time-highs. If the end of QT is any guide or the near 90% cut in QEin July 2020, this is going to hit stocks hard in the next few weeks. Oil will fall too on weaker demand concerns just as they increase production. The combination of the two will cause a temporary deflationary shock and force the Fed to do another about-face to monetary stimulus on steroids. It?s not if, its only when.

With mid-term Congressional elections coming in 2022 and a sharp drop in stocks and a slowing economy, you can bet the Democrats are going to throw the kitchen sink at it in terms of fiscal spending. Again, it?s just a question of when. The combination of massive fiscal and monetary stimulus will have the same effect as post March 2020, but more-so this time imho.

 As stated before, the risk remains for a marginal lower low below 1675. The worst-case is a drop to 1500 before higher, but that is a very low probability at this time. Only a break of 1675 increases it chances. Gold has done nothing in the past few weeks and is waiting for a catalyst one way or the other. It feels like the calm before the storm.

GOLD.... We need a break of 1880 and then 1920 on the upside to confirm the bottom is truly in. Whereas a break back below 1760 and then 1720 puts 1675 and below squarely in the market?s crosshairs. I do believe the markets are going to get a lot more volatile in the next 2-3 months until the Fed rides to the rescue for the last time. Then we get the final melt-up in everything but the dollar, prior to the collapse in 2023 for everything but precious metals and miners.

 The COT data suggests a short-term bounce in Gold, but with Banks still very much short Gold, the risk of lower prices remains.

However, the COT data in the DXY and Bonds suggest a peak in the dollar and yields is coming sooner rather than later, likely driven by a sharp drop in stocks. The Fed has got the ammunition it needs to pull the trigger on the taper but it is likely to be a policy error and backfire dramatically, hitting stocks hard, oil too. When the Fed is forced to ditch the taper and turn on the spigots again, then Gold, Silver, and the miners finally begin their rally to new highs. Perhaps even before that, as in October 2008. But ahead of that, the capitulation in sentiment that eluded us in August may still be ahead. As I?ve said before, we could bottom above or below 1675, but the rally to 2300+that follows is inevitable imho. 

 

[MrXxxx]

Just listened to the Macrovoice Lyn Alden podcast:

[https://macrovoices.podbean.com/e/macrovoices-299-lyn-alden-revisiting-inflationdeflation-signals/]

Well worth a listen if you want to get a Macro perspective for the new cycle we are just starting, and what area to focus/invest in.

[MrXxxx]

10 hours ago, Phil said:

The BK isn’t far away. If your fortunate to have no debt ( imo) fill dem der boots after. It’s very close. I can smell it

So what are you saying?...get into cash ready for the buying opportunity?

10 hours ago, wherebee said:

i've been anticipating a BK for 5 years.....

I can better that, I have been waiting fro a house price crash for the last 15!

[MrXxxx]

2 hours ago, planit said:

This combined with the fact most tech stocks seem to be in a bear market even though the S&P500 is still high leads me to believe there has been sector rotation over the last month.

Easily explained in a recent Macrovoices podcast, its the unbalanced % of the FANGS that are keeping it steady, make these a non-weighted % of the S&P and its going sideways/down.

[Yellow_Reduced_Sticker]

"Omicron and new restrictions raise prospect of Bank holding rates once more"

 

[Green Devil]

1 hour ago, Yellow_Reduced_Sticker said:

"Omicron and new restrictions raise prospect of Bank holding rates once more"

 

If it wasnt omicron it'd be something else.. 😂

[CannonFodder]

11 minutes ago, Green Devil said:

If it wasnt omicron it'd be something else.. 😂

Omnishambles....;)

Time for vigilance....

 

[Popuplights]

God. I hope my pension transfer hits my Sipp soon......

 

[MrXxxx]

1 hour ago, Green Devil said:

If it wasnt omicron it'd be something else.. 😂

Leaves on the rail?...that's always a good one!

[Hancock]

5 hours ago, DurhamBorn said:

She will make the best PM since Thatcher i think,if she gets it.You have to look loyal to the government until the right moment.The Ides of March.

Best or least shite! For me Major was the best PM in my life as he didn't create a bubble and the one that was created by Thatcher he allowed to crash without intervening, no kicking it into the future.

I really dont like her, but i am hoping to have left the country by the end of March so hopefully i'll never have to endure her.

According to Wiki she does claim to have one thing in common with Boris. "Truss has described both as being "to the left of Labour".

Lets make that 2. "She read Philosophy, Politics and Economics at Merton College, Oxford."

And she got the gig thanks to having an axe wound between her legs "Under David Cameron as Conservative leader, Truss was added to the party's 'A List'"
https://en.wikipedia.org/wiki/Liz_Truss#Early_life

 

 

[Hancock]

1 hour ago, Green Devil said:

If it wasnt omicron it'd be something else.. 😂

Dunno maybe we got to a stage where there was nothing else so it was created.

[Popuplights]

3 minutes ago, Hancock said:

Dunno maybe we got to a stage where there was nothing else so it was created.

Nah, we haven't had Zeta yet...

[Hancock]

1 minute ago, Popuplights said:

Nah, we haven't had Zeta yet...

I thought i'd Google it to make sure you were on a wind up!
https://en.wikipedia.org/wiki/SARS-CoV-2_Zeta_variant

 

[Popuplights]

21 minutes ago, Hancock said:

I thought i'd Google it to make sure you were on a wind up!
https://en.wikipedia.org/wiki/SARS-CoV-2_Zeta_variant

 

Lol! I just made it up🤪🤪🤪

[DurhamBorn]

If anyone works for the NHS or care etc the Blue Light Card is worth getting.Asda are knocking 10% off with it at the moment and booze is included.Just got 20 bottles of flavoured Vodka and Gin on the two for £20 offer and another 10% off so £9 a bottle,of course i also got 15 tins of corned beef £1.45 with another 10% off 

I think food will jolt even more upwards in the new year so the more you can save now and pull spending forward the better.

I also got in Bowes museum free with a child ticket to see Santa.I enjoyed the elves tight leggings but mostly the silver room and the silver swan ,incredible item,look at that silver 

[planit]

5 hours ago, MrXxxx said:

Easily explained in a recent Macrovoices podcast, its the unbalanced % of the FANGS that are keeping it steady, make these a non-weighted % of the S&P and its going sideways/down.

You are correct, S&P has outperformed S&P ex tech by 2% in the last month.

I wonder what it would look like if you rerun this only removing AAPL.

 

[sancho panza]

On 10/12/2021 at 13:43, Cattle Prod said:

I didn't say it wasn't.  M2 itself is a bubble, so I think it's useful to divide one by the other and compare it to other assets that haven't benefitted yet. For example, gold today, at ~$1790 is at the same level per unit of M2 as it was in late 2015 or mid 2018, when it was around $1100. Make of that what you will, but they were rather good times to be buying gold. Dyodd.

Is there any chance you can go back further?that's an absolutely fascianting stat,I've never thought of it like that.I have been rearanging our goldies of late and looking for some call options value in teh sector,this jsut draws me in.as ever dyor...

worth noting as well the noticeably good signal GLD ETF price over inventroy is signalling a low as wel.

I'd have a bash on the st louis but I'm back at work in 2 horus so only have time to catch up.

[sancho panza]

On 10/12/2021 at 19:42, CannonFodder said:

I think I first saw DH talking of the bust in next few months in 2016, that post above from 2017 implies there was a few years before.

Personally think bust happened in mar 20 and in rear view mirror, cycle changed then 

Could be wrong of course, could be a W shaped double bust

DH like a lot of us moves his forecasts and positioning with changes in the newsflow which is what good investors do.

I've been massively worng and massively right over the last 23 years.Sold the tech bubble early and bought ye olde world stocks then sat on them thru to 07/08 incl some banking positions that did incredibly well.

Thats to qualify my admitting that i thought the UK hosuing market was bonkers in 2002 and proceeded to get that wrong for 14/15 years where I finaly learnedmy lesson in following the price action and positoning for where CBs were headed not where I thought they should head.I've reflected at lenght on the madness of allowing my moral sense of superirority to affect how I invested and I can't reach any other conclusion than I was jsut intellectually arrogant without any grounds for being so.

So as a family,we paid for a decade of prosperity with a decade of penury relatively speaking.Since 2016 my Mum who does the books,says we've done nicely.

ALl Im trying to say is that tehse guys who put calls out there eg our own @DurhamBorn have got more guts than me.They put them out their for free(DH does haev a premium service I believe but puts so much out there that I'm not even tempted to sub to him...:-)  ) and the rear view mirror dwellers get to play kingmaker.

[sancho panza]

20 hours ago, Cattle Prod said:

@sancho panza has been warning of us what's happening at the coalface:

https://www.telegraph.co.uk/news/2021/12/11/tenfold-increase-patients-waiting-eight-hours-transferred-ambulance/

Time for local communities to get tighter, give old folks your number if they fall, do a first aid course and find out where the nearest defibrillator is. Because despite the government taking some of the highest taxes in history out of your pocket, they aren't going to help you. They have better things to spend it on, like Test and Trace, or piss ups in Downing Street.

 

To be hoenst,I suspect the amount of people waiting ten horus for an ambulance whilst lying on the floor is even worse.

18 hours ago, CannonFodder said:

I get private health care through work, first time ever they are putting in a policy excess to discourage folk, they absolutely rammed. So many giving up on nhs and going private, private overwhelmed. I do wonder if private health care a growth sector in uk going forwards.

It'll only get worse with teh vaxx manadte,loads of epople leaving the NHS at the mintue /retiring early.

I took out private last year as covid landed and they emptied the hospitals.Was always going to eb a disaster a year down the line.

18 hours ago, DurhamBorn said:

The government is finished now i think.Half of the public sector is sat at home on full pay,bennies worse than ever.BOE will be out of printing room in a few months and due to where government has directed liquidity GDP wont reach escape velocity.Its inflation with no growth here.Obvious to anyone this is the worst government in history by a long shot.Labour of course are a disaster as well,so the likely result is Boris gone and a Liz Truss PM.

It's strange at the minute watching UK politics the leader of the opposition appears to be Steve Baker the Tory MP.

Our only saving grace is we hevan't got Jacinda Arderne as PM.