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


spunko

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3 hours ago, MrXxxx said:

I don't want to derail your focus @JMD, but why do people buy silver/gold paper ETF's with not return and running costs of ~ 0.3-0.6% per annum, when they can get exposure to the same commodities through silver/gold miners and get a dividend return of ~2-3%+?

No problem, and no derailment at all. In fact i have always divulged my plans on here, in expectation/hope of extra comment/learning from the experienced investment fraternity we have on the thread.

I am not a trader, so its all long term 'prosaic investing' for me... mainly this means investing like a crocodile, i.e. setting a price i'm happy with and then waiting (lurking in the weeds!) for the market (prey!) to come to me. This has worked well for me with the PM's, energy and telecoms. I am now waiting patiently for the BK. However, this still allows me to try the basics, as mentioned often on here, such as laddering in/out, taking profits and pivoting/compounding, oh and 'arbitrage' (see below).  

But to answer your question - my 'physical silver' ETF plan was to buy 'big', sell half and take profit. Then let the remainder ride, but pivot into gold as/when the GSR was in my favor. I bought at approx. 100/1 GSR, so in theory if i can sell at a much lower average GSR (i will ladder out), i could 'collect 3x the gold' (compared to just buying the gold from the outset). Ok, perhaps this is not a pure arbitrage play, but it will suffice for me.

Btw, I have also got those pm miners you mention, as i am very addicted to divis!

 

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2 hours ago, wherebee said:

because, take GDXJ as an example, you get a bucket of small miners which spreads risk.  Small miners do go bust.  If you buy each one, you pay a fee for each purchase.  If you buy one small miner, you might lose everything.

GDXJ means that if gold goes to da moon, you profit across all of those.  I bought GDXJ years ago as a bit of an insurance, sold 70% of holdings at around 45 in 2020, from memory, and had bought at 25.  That's a nice return, and had all that insurance as well for the period.  If the collapse had come when we were out of Australia, we could have seen GDXJ up to 100 or more, in my view.  They also gave small dividends on the way.

I also hold PSLV, which is showing a loss, because they hold real silver and help with the silver squeeze on the rigged market.

I agree 100% with what you say.

But alongside my pm miners, i also have a 'physical silver' etf strategy - where i will attempt to play the GSR, and so 'pivot across' from my 100/1 (personal buy point) silver gsr, to say 33/1 (personal average sell point) silver gsr, if/when it ever gets to those lower ratios.

I set this trade up couple years back, so not sure if this strategy is that relevant/possible to do today, as the gsr is not as high now. 

 

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Just a thought but the silver price action and some of the drop in miners ie POLY could be China related.

 

There are huge dislocations with regards to power and also Evergrande. 

There could be a drop in silver demand if factories are shutting down and all the companies surrounding the industry might have taken positions that need unwinding if they change outlook.

With regards to Evergrande the fallout seems mainly hidden at present, wouldn't be surprised if there were margin calls with companies [in China] that own POLY stock etc.

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33 minutes ago, JMD said:

No problem, and no derailment at all. In fact i have always divulged my plans on here, in expectation/hope of extra comment/learning from the experienced investment fraternity we have on the thread.

I am not a trader, so its all long term 'prosaic investing' for me... mainly this means investing like a crocodile, i.e. setting a price i'm happy with and then waiting (lurking in the weeds!) for the market (prey!) to come to me. This has worked well for me with the PM's, energy and telecoms. I am now waiting patiently for the BK. However, this still allows me to try the basics, as mentioned often on here, such as laddering in/out, taking profits and pivoting/compounding, oh and 'arbitrage' (see below).  

But to answer your question - my 'physical silver' ETF plan was to buy 'big', sell half and take profit. Then let the remainder ride, but pivot into gold as/when the GSR was in my favor. I bought at approx. 100/1 GSR, so in theory if i can sell at a much lower average GSR (i will ladder out), i could 'collect 3x the gold' (compared to just buying the gold from the outset). Ok, perhaps this is not a pure arbitrage play, but it will suffice for me.

Btw, I have also got those pm miners you mention, as i am very addicted to divis!

 

Thanks, I can understand the arbitrage approach you are taking on the GSR, but would you not be better doing the same thing by buying individual gold and silver miners and doing the same?...I know some mine both but most have a major bias in their mining.

I ask this question[of all] not to challenge your approach perse, but to see if I can get a counter opinion to my own. I have gone through the 'arguments' of physical 'in hand' vs 'physical' ETF, gold/silver vs gold/silver miners etc, and settled on the best way to get exposure to PM's was larger [no junior] individual miners for the reasons given in my initial post i.e. getting a divi/return rather than having to pay a OCF/TER...happy for anyone to 'pull' this apart and get me thinking again [I think!]. :-)

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Government doubling down on it's plans. There is going to be such a shortage of electricity in the future people won't be able to afford heating. I predict the country will be voting in a pro-fossil fuels government in 4 years time.

 

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Sorry, I have posted too much this morning but everything seems to be going crazy.

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9 minutes ago, MrXxxx said:

Thanks, I can understand the arbitrage approach you are taking on the GSR, but would you not be better doing the same thing by buying individual gold and silver miners and doing the same?...I know some mine both but most have a major bias in their mining.

I ask this question[of all] not to challenge your approach perse, but to see if I can get a counter opinion to my own. I have gone through the 'arguments' of physical 'in hand' vs 'physical' ETF, gold/silver vs gold/silver miners etc, and settled on the best way to get exposure to PM's was larger [no junior] individual miners for the reasons given in my initial post i.e. getting a divi/return rather than having to pay a OCF/TER...happy for anyone to 'pull' this apart and get me thinking again [I think!]. :-)

I would be interested in others opinion and answers to your question.

My take is that you are probably correct about choosing the pm miners (i believe $1-5bn cap is the current sweet spot?), along with their leverage etc, they should give the better return compared to the physical underlying precious metal. However it is higher risk (which miners to select?), and more work (when do you sell, etc?). 

So being just an amateur, i decided to split investment 50/50 between the miners and the physical.  

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27 minutes ago, planit said:

Sorry, I have posted too much this morning but everything seems to be going crazy.

No apology needed. This is a necessary forum for me. It helps sift through the noise.

 

China on the up militarily whist inside their borders implodes.

Global shortages (guess what happens when you shut the world for a year?).

America now seemingly completely lost it's identity.

Energy crises worldwide.

Volcanoes.

Protests worldwide.

Formerly glorious football clubs in disarray and going under.

Car dealerships selling from stock.

Cost of living soaring.

House prices ................ what comes after nosebleed levels?

 

There's nowhere to look that isn't FUBAR.

 

I hope everyone here has a solid family/friends unit.

 

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6 minutes ago, Noallegiance said:

No apology needed. This is a necessary forum for me. It helps sift through the noise.

 

China on the up militarily whist inside their borders implodes.

Global shortages (guess what happens when you shut the world for a year?).

America now seemingly completely lost it's identity.

Energy crises worldwide.

Volcanoes.

Protests worldwide.

Formerly glorious football clubs in disarray and going under.

Car dealerships selling from stock.

Cost of living soaring.

House prices ................ what comes after nosebleed levels?

 

There's nowhere to look that isn't FUBAR.

 

I hope everyone here has a solid family/friends unit.

 

I love the smell of napalm in the morning.

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4 minutes ago, Noallegiance said:

I hope everyone here has a solid family/friends unit.

Most people forget about this. I was looking at buying woodland etc but made friends with someone who has as I can make beer, lots of it, very quickly ;-)

Covid and my personal vax stance has had some impact with friends but most dont give a shit now, particularly as they have welcomed me teaching their kids how to cook on a campfire in the garden.

I spent a fair bit of time during lockdown saying hello and talking to neighbours and getting to know who will be useful and who wont. (cant beleive I typed that out IRL - thats what reading Dimitri Orlovs five stages of collapse will get you).

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17 hours ago, Animal Spirits said:

TIC data shows Mainland China US treasury holdings generally falling since Feb but picking up again in July, this also coincides with the peak in yields on a number of long term government bond yields during Spring (which as already mentioned are on the rise again).

https://ticdata.treasury.gov/Publish/mfh.txt

China's holdings have been in a down trend since 2013. Depending on your viewpoint this could be for geopolitical reasons or a reflection of a deflationary trend in trade (maybe both).

A simplified example of USD/China money flow:

USD > Chinese commerical banks >  PBOC (Swap USD for Reserve asset) > China US treasury holdings increase

WOlf St has a good update on UST holdings once in a while.Last one here 17 Aug 21

https://wolfstreet.com/2021/08/17/who-bought-the-5-trillion-piled-on-top-of-the-monstrous-us-national-debt-in-15-months/

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16 hours ago, Bobthebuilder said:

I bought BP too early, bought a couple more chunks during 2020, but my timing was bad. I am just about evens here with them as of today. Some others here caught the bottom and will be well in the green.

Just hold em Bob,our first ladder was £4.90 in BP or something like that from late 2019 as we were seeking yield.Ave price circa £3(I'm not particualrly sure) and I'm well Happy with that.If you'd offered our current protfolio + entry prices five years ago,I'd have bitten your hand off.

It's more realistic to measure performance by the FTSE 100/pension funds rather than the more switched on traders on here,who let's be honest,are very switched on and not afraid to buy big red days when the pros in teh city are flapping like crows.

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22 minutes ago, Noallegiance said:

No apology needed. This is a necessary forum for me. It helps sift through the noise.

 

China on the up militarily whist inside their borders implodes.

Global shortages (guess what happens when you shut the world for a year?).

America now seemingly completely lost it's identity.

Energy crises worldwide.

Volcanoes.

Protests worldwide.

Formerly glorious football clubs in disarray and going under.

Car dealerships selling from stock.

Cost of living soaring.

House prices ................ what comes after nosebleed levels?

 

There's nowhere to look that isn't FUBAR.

 

I hope everyone here has a solid family/friends unit.

 

And yet we still wait for the `Black Swan` event to trigger a BK...don't those who control world finances consider any of these good enough then, or are they going for `The mother of all` crashes?!

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3 hours ago, planit said:

 

  • We have much more visibility with regards to Covid and the recovery

Do we? The visibility of the government in direction is about as clear as a Victorian pea-souper from where I’m standing. U-turns are becoming a weekly occurrence.

https://www.gov.uk/government/publications/proposal-for-mandatory-covid-certification-in-a-plan-b-scenario/proposal-for-mandatory-covid-certification-in-a-plan-b-scenario
 

Far more shit to come with underhanded movements going on behind the scenes. I’ve taken my profits and am watching from the sidelines.

 

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9E2CDB0C-295E-4359-846C-584B8DB09CEE.thumb.jpeg.4b51afd688697c3c0d0af8134b7ea70f.jpeg

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3 minutes ago, MrXxxx said:

And yet we still wait for the `Black Swan` event to trigger a BK...don't those who control world finances consider any of these good enough then, or are they going for `The mother of all` crashes?!

Perhaps Black Swan is more the straw that broke the camel's back, or the last snowflake to fall and set off the avalanche.

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15 hours ago, Heart's Ease said:

Agree and yes in 2018 when it was well over £5 I'd have snatched your hand off. Also see WICAO buying Shell at £26 in c.2014. If I'd had the money I'd have done that too 

He'd have had some exposure to FANG stocks that would have compensated alongsdie the £7 in dividends that would have flowed to 2020.

iirc he was a passive investor and they're still doing well as long as they have S&P 500 exposure.

2 hours ago, moneyscam said:

I hold BP and would agree with your analysis. The only other factor I would add is that BP pays divis in $ so any depreciation of £ versus $ (as is currently happening) is another boost to UK based BP shareholders.

This is a key aspect MS for me.

Vod/BATS/BP/RDSB/Glaxo etc etc are all effectively $ hedges with interantional sales to cover for the UK/£ tanking.

Within an ISA you get the income tax free.......

1 hour ago, planit said:

Nice example of costs inflation predicted by DB - shipping, raw materials, labour all rising faster than retail prices.

 

Fast-fashion retailer Boohoo warns on profit margins as costs jump

Capital spending to be higher than forecast as UK group works on a new US distribution centre

 

image.thumb.png.27aae2e91b68118d8ee91b8e847bfbff.png

I'm going to go all Karl Deninniger here but margin compression is the only result of rising costs for retailers.

Private Equity will rinse a few before they go under and leave banks/bond holders with teh losses but for the equity holders,I just can't see the upside here.

btw keep the psots coming.I come on here as it like a news aggregator and saves me a lot of time.

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2 hours ago, moneyscam said:

I hold BP and would agree with your analysis. The only other factor I would add is that BP pays divis in $ so any depreciation of £ versus $ (as is currently happening) is another boost to UK based BP shareholders.

You see, this is something I would never have considered if I hadn't visited this forum!

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Quite frankly, I haven't got a clue what's going on right now and what's next.  Nor does the data.  I'll spend this afternoon trying to drill down as I'm holding too much cash and need to de-risk but I doubt I'll be any the wiser.  I need a strategy, or rather validate/revise the one I have. 

Tbh, I haven't made out well like some (who I genuinely congratulate).  Sure I have 70%, etc gains on this and that but they were small holdings and I'm carrying big losses from the dividend plays I bought in the years running up to Covid.  Things that made sense at the time like CARD (-68%), Centrica (-28%), HSBC (-40%), Micro Focus (-63%), Stagecoach (-33%), TUI (-38%), BATS (-8%), BT (-14%), BP (-10%), Carnival (-53%), GOG (-58%), Imperial (-21%), and so on.  Sure some have done OK by covering losses and more such as Evraz (16%), Investec (24%), RDSB (70%), RMG (105%), United (21%), Admiral (49%), Drax (62%), Ferrexpo (66%), GSK (38%), Glencore (47%), Sainsbury (34%), Severn (25%), SSE (29%), and VOD (complicated).  I tend to hover around break even to down say 10% overall but I've banked some profits or exited early on some on the way and some of these losers are now small holdings.  I'm probably being a bit hard as the purpose of these stocks was to generate income rather than gains (although they were bought before I started looking more systematically at company fundamentals and only had access to a few markets).  A kind of proxy annuity since they'll be even worse for me atm.  But they do bring my overall position down.

I've done far better using my new system on a wider range of markets but have suffered from not being consistent enough, like turning my back on things due to work or holidays and missing a couple of big moves.  I've also diversified well, although the PMs and bonds haven't done much (but crypto has).  Maybe I just need to keep plugging at a sensible asset allocation with some sensible systems behind them and trust the plan.  It's hard though when others are either posting gains or fear about a BK.  I'm probably going to focus on some momentum plays and eff the fundamentals (like most out there beyond here) to keep me from doing anything silly!  Feck all else to do atm other than try to de-risk all the other things as much as possible.

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Yadda yadda yadda
1 hour ago, belfastchild said:

Most people forget about this. I was looking at buying woodland etc but made friends with someone who has as I can make beer, lots of it, very quickly ;-)

Covid and my personal vax stance has had some impact with friends but most dont give a shit now, particularly as they have welcomed me teaching their kids how to cook on a campfire in the garden.

I spent a fair bit of time during lockdown saying hello and talking to neighbours and getting to know who will be useful and who wont. (cant beleive I typed that out IRL - thats what reading Dimitri Orlovs five stages of collapse will get you).

In extremis they're all useful even if just as a source of protein.

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Yadda yadda yadda
2 hours ago, planit said:

Government doubling down on it's plans. There is going to be such a shortage of electricity in the future people won't be able to afford heating. I predict the country will be voting in a pro-fossil fuels government in 4 years time.

 

image.png.3565c414feb4367e92b605e3e2cc097f.png

Sorry, I have posted too much this morning but everything seems to be going crazy.

Plunging people into poverty and adding more strain to the electricity network. Geniuses.

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1 hour ago, planit said:

Nice example of costs inflation predicted by DB - shipping, raw materials, labour all rising faster than retail prices.

 

Fast-fashion retailer Boohoo warns on profit margins as costs jump

Capital spending to be higher than forecast as UK group works on a new US distribution centre

 

image.thumb.png.27aae2e91b68118d8ee91b8e847bfbff.png

Exactly and everyone passes it on to the next link in the chain with one huge difference.The energy company gets all the uplift as do most early in the chain.Down the line they cant pass on as easy without losing sales so lose all margin .

 

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1 minute ago, Yadda yadda yadda said:

Plunging people into poverty and adding more strain to the electricity network. Geniuses.

Completely agree except my brain automatically added a 'fucking' due to the level of incompetence:

 

Quote

Plunging people into poverty and adding more strain to the electricity network. Fucking geniuses.

 

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