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

[kibuc]

3 minutes ago, Cattle Prod said:

I'm going through the thought experiment of "what will happen in a gold revaluation event".

(...)

One I'm struggling with is miners as a proxy for physical gold.

Option 1: Gold gets declared a strategic metal. Mexico, South Am and Africa all nationalise their reserves overnight. The West slaps 95% "windfall" tax on profits.

Option 2: I don't know.

[Calcutta]

15 minutes ago, Cattle Prod said:

Here's hoping every western politican is watching this in fear, and are calling the council to cut down all the lamp posts in their area.

Round here they sold them for scrap years ago. 

[JMD]

On 12/05/2022 at 11:13, sancho panza said:

I jsut had a quick look at TLT on my very basci unsophisticated chart set up and I think you may early with that topping call.I've seen some experienced traders buying that dip for a while and getting a kicking.some calls might be the trade there

I think the issue ref DH for me-sat in oilies cheap,goldies cheap,comms cheap-is that we haven't got much to lsoe if he's wrong.If he's right then it's likely that he's right because we see a sectoral shift to value.Big tech may bounce but likely next trip up in S&P will be on the back of value regrading.

AS you say,can't beleive what we're seeing in terms of delusion from the MSM and their chimps in gubbermint.As someone joked th other week,'Biden reduces the SPR to lwoer prices and then refills it at even higher prices'...

Good point ref China.I think your $150 buck call on oil could be on the lwo side Planit given that point.I'm still fimrly in the camp that oil hasn't topped yet pre BK roll over-could be wrong but that's where our moeny is.Personally,I think $200 is possible as that's totally in line with 08 in real terms and the supply situation is way way worse now.

I'm wroking on my BK roll over lsit and will psot it up for laughs and feedback see if it pays out.

I agree and also have similar thoughts/plans. My portfolio was bought mostly at the 2020 lows (luck not skill!), and so my buy averages are low. However I am still looking out for that 'BK opportunity' - I would then sell/trim  'only' 20% of portfolio during any potential pre-BK melt-up phase and look to subsequently reinvest the cash after the BK crash... aiming to buy back in at lower prices, or buying other 'bargain' reflation stocks.                                                                                                                                                                But very much a personal risk and reward balance, ie selling stocks bought at low prices limits the potential reward element, and at same time increases the risk element. Important therefore to have a thought out strategy.

[Axeman123]

37 minutes ago, sancho panza said:

...Despite Viyathmaga’s claims to technocratic expertise, most of Sri Lanka’s leading agricultural experts were kept out of crafting the agricultural section of the platform...

It is like a religion or a cult, total rejection of anything not on message. How much human suffering for a few men's smug ego?

34 minutes ago, Cattle Prod said:

One I'm struggling with is miners as a proxy for physical gold...

You have hit the nail on the head. The only real historical comparison is post 1929 in the US, where miners went to the moon. As you say a lot has changed since then though, the biggest change that I see is the arrival of Idiocracy. Even a decade ago we could have said "if gold is a strategic metal, countries will want as much new supply entering their economy/borders as possible. The best way to get that outcome is by letting the experts in the industry get on with it, with profit to both motivate them and attract private capital.". Somewhere along the line basic competence in our leaders became unreliable, the classic example being oil windfall taxes being seriously discussed at a time when we all need the industry to invest and explore. Ultimately we have to gamble, based on our best guess. I certainly wouldn't want to store six figures in physical at home!

[Democorruptcy]

1 hour ago, Harley said:

IB?   II? 

Sorry, yes II not IB. I remember reading there was some sort of delay because a paper shortgage meant ABRDN couldn't send voting forms out about the takeover.

[Bricormortis]

Barclays warns of 5 point GDP hit to Eurozone and EURO sub parity with the Dollar IF Russia turns off the gas.

LINK

[Sidd]

1 hour ago, kibuc said:

Option 1: Gold gets declared a strategic metal. Mexico, South Am and Africa all nationalise their reserves overnight. The West slaps 95% "windfall" tax on profits.

Option 2: I don't know.

Maybe i am reading this wrong, but this seems dire for mining stocks. Every force is against them at present, they are not even participating in the bounce. Will they actually ever reach the projections made?

 

Why am I still holding them? Am i missing something?

[JMD]

On 12/05/2022 at 12:49, ThoughtCriminal said:

There are economic bombs ready to blow up everywhere you look, but this is a big one.

 

 

Structural reforms?... Perhaps France and Germany will offer the EU a new grand vision of environmental sustainability and (of course Putin) security, focused on drastically cutting emissions and energy use. In effect a command economy, based upon a massive pivot toward rental goods which might cost more but last longer (cars, domestic products, etc). Politically it will effectively become 'Fortress Europe'... Along with ramped up human/capitol/'public health'?, etc controls... which will also help prepare/solve for future mass migration problems into Europe, once the food shortages hit the poorer nations.

[Barnsey]

4 hours ago, Boon said:

On a pure fundamental level I do agree that BTL is gonna be fecked - the UK market alone is way bigger than anything else. 

However, does that make it too big to fail? My own gut feeling is that yes, it is and there will be some kind of solution to kick the can down the road again.

At a certain interest rate I think this will be real pain but unlike someone gambling on a crypto the media will have great sympathy for someone who was essentially gambling on interest rates remaining low. 

Definitely a transfer from private to big business, can see Lloyds for example giving their BTL customers the option to sell as they'll be a big player in the sector going forward.

Telegraph screaming a negative equity housing crash is upon us, I'll take the under. Stagnation, yes.

[belfastchild]

2 hours ago, DoINeedOne said:

 

The cars burning reminds me of my own childhood ;-)

During the hunger strike riots loads of vans and lorries were being hijacked and set on fire/used as barricades.
One morning a Tayto crisp lorry was hijacked. It was driven to the barricade and the front was set on fire.
The rear opened and what only can be described as a line of ants carrying off boxes of Tayto suddenly appeared.
Within about 30 secs two masked lads with handguns appeared and told the long line of kids to go back and throw the boxes into the inferno now in the back of the lorry.
'We arent thieves' they shouted.

Those poor lambos... then again maybe they were the crypto ones...

Was out for lunch in Belfast today. Had avocado and eggs on toast with coffee. 11 quid. Dont think Ive ever had that in a cafe here before (or anywhere). Enjoyed it thinking it might be one of the last times we see that sort of thing, possibly ever. Im sure I remember seeing it on the menu a year or so ago for around 6-7 quid.

[kibuc]

1 hour ago, Sidd said:

Maybe i am reading this wrong, but this seems dire for mining stocks. Every force is against them at present, they are not even participating in the bounce. Will they actually ever reach the projections made?

 

Why am I still holding them? Am i missing something?

This is obviously an exaggerated example (or is it?) but it's worth remembering that the threat of nationalisation or government meddling is not just Ayn Rand's imagination, it's been happening throghout history and is in fact happening in front of us right now, even in jurisdictions considered "safe". Geographical diversification only helps mitigate it if it's not the entire world tha goes crazy.

That being said, gold isn't anywhere near as much at the forefront of general public's mind as petrol or natgas are at the moment. It's easy to get popular support for taxes on big bad oiliers who are profiting from our misery, much more difficult to explain to people why miners raking it in at $8000 gold are the bad guys. I guess the endgame would include dropping all and any pretences of justification and simply grabbing that money anyway because it's there and the govt wants it and needs it, but there should be plenty of money to be made between now and then.

[JMD]

On 12/05/2022 at 12:59, kibuc said:

I've got to say DH comes across much more sensible and much less arrogant in those podcasts than he does in his tidbits on twitter.

If this action in silver continues I'll definitely look into selling my goldies and polymetalic miners (which have held up relatively well) and double down on those beaten up silver diggers because the upside is impossible to ignore.

Very interesting Kibuc. I am always looking to buy more silver miners (I've got loads of the goldies). However im not a trader, so any long term hold prospects (prospectors?!) you might be able to share would be much appreciated. 

[BurntBread]

46 minutes ago, Sidd said:

Why am I still holding them? Am i missing something?

Well, I'm holding miners because of their leverage to PM prices (and I'm bullish on gold because of negative real rates, and on silver for industrial reasons, a la Lyn Alden and DB), but then you know that. 

I definitely see the miners as at high regulatory risk, specifically of nationalisation. Luke Groman however thought that they may be allowed to keep (for example) the first $5000/oz for gold, with the rest being taken by the governments. I don't think that is an unreasonable scenario, since governments don't have the expertise to do the mining themselves. That would still leave the miners in a very good position. David Hunter of course said, "miners will be the new internet stocks of the cycle." I still take what he says very seriously, and I am happy (and even expect) to "watch & learn".

It's also interesting to see the crypto space facing its first test in a hostile economic environment. The main reason people trust gold is that it has weathered these storms again and again over the last 5000 years. I wouldn't trust crypto until it's been through a few cycles. I did think about a small allocation at the end of 2020, and I came to the conclusion that there were three reasons for owning it:

(1) To knowingly ride a speculative bubble ... but then you really need an exit strategy.

(2) Because you believe in the need for a parallel, decentralised financial system, for libertarian ethical reasons ... but then you should transact in crypto, rather than buy-and-old.

(3) As a form of insurance against some extreme economic scenario ... but that scenario has to be one where fiat collapses, people have forgotten about gold and silver, the internet works fine, and people who have real resources want to sell them to geeks with nothing but computer code. That doesn't seem like a sensible scenario to insure against.

I could be very wrong on all of that, but I just have to follow what I'm comfortable with, and at the moment, that is a reasonable allocation in miners and none in crypto.

[snaga]

32 minutes ago, BurntBread said:

Well, I'm holding miners because of their leverage to PM prices (and I'm bullish on gold because of negative real rates, and on silver for industrial reasons, a la Lyn Alden and DB), but then you know that. 

I definitely see the miners as at high regulatory risk, specifically of nationalisation. Luke Groman however thought that they may be allowed to keep (for example) the first $5000/oz for gold, with the rest being taken by the governments. I don't think that is an unreasonable scenario, since governments don't have the expertise to do the mining themselves. That would still leave the miners in a very good position. David Hunter of course said, "miners will be the new internet stocks of the cycle." I still take what he says very seriously, and I am happy (and even expect) to "watch & learn".

It's also interesting to see the crypto space facing its first test in a hostile economic environment. The main reason people trust gold is that it has weathered these storms again and again over the last 5000 years. I wouldn't trust crypto until it's been through a few cycles. I did think about a small allocation at the end of 2020, and I came to the conclusion that there were three reasons for owning it:

(1) To knowingly ride a speculative bubble ... but then you really need an exit strategy.

(2) Because you believe in the need for a parallel, decentralised financial system, for libertarian ethical reasons ... but then you should transact in crypto, rather than buy-and-old.

(3) As a form of insurance against some extreme economic scenario ... but that scenario has to be one where fiat collapses, people have forgotten about gold and silver, the internet works fine, and people who have real resources want to sell them to geeks with nothing but computer code. That doesn't seem like a sensible scenario to insure against.

I could be very wrong on all of that, but I just have to follow what I'm comfortable with, and at the moment, that is a reasonable allocation in miners and none in crypto.

if crypto fails, that has to be bullish for gold? what else is there?

[jamtomorrow]

3 hours ago, Cattle Prod said:

- Physical gold in your possesion - fine

- Sprott physical gold - should be fine? 

How about something like BullionVault as a halfway house? I set up a dedicated SIPP for this purpose a few years back, with 30% of my pension savings in it. Bit of carrying cost, but not too bad if you shop around.

[Axeman123]

3 minutes ago, snaga said:

if crypto fails, that has to be bullish for gold? what else is there?

The recent crypto mania started right around the August 2020 gold peak. When crypto makes its next leg down to 20k or whatever I imagine gold will wake up.

[AWW]

I wonder how many people who sold on a -2% day are now buying back in on a +2% day...

[JMD]

21 hours ago, Cattle Prod said:

I really hope they don't start that, who cares of they lose money in their 20s? It doesn't matter ffs.

I think it was @sancho panza who said he got stung in the dotcom bubble. I didn't because I had no money but I surely would have. It's a bloody great lesson to learn early, and if the end up like Sancho I think they'll be doing very well in life. 

It doesn't matter, youngsters. Lick your wounds, and move on to your next set of dreams with a few well earned scars.

I'm confused, what's the problem here, I thought the young wanted 'experiences'! (financial bankruptcy or otherwise)...  am I evil for saying that? (I am an energy investor so I guess I must be).

[JMD]

21 hours ago, Axeman123 said:

I think a lot of them aren't trying to be "rich"; just to solve for X, if X= (the price of a life like your parents had) - (the value of your labour). For a lot of them it won't be the loss of the £10k or whatever that hurts, but the loss of the dream of it turning into a million by the time they are 50 to rescue them from a life of renting and working til they drop etc. For some people that hope is probably their only life raft, as they see it.

On the subject of the crypto crash, it appears contagion has just started. Tether was always my pick for the pin that would pop this crypto bubble, and like the smaller Terra, Tether has now experienced a partial peg failure (ie its price temporarily fluctuated away from it's alleged USD peg. It clearly isn't just me that thinks this could be the start of a problem, another crypto company just spent 200 million USD to prop them up! Terra imploding now seems to be priced in, with a decent bounce off the lows, if Tether goes the same way expect real fireworks.

 

Plus their parents generation only had 'dirty betting shops' and boring old nags to wager upon, whereas the young have their futuristic sexy tech to speculate with. All very progressive I'm sure, but with nearly 20,000 cryptos in the 'investment race', I bet the real chances of success are smaller than predicting the next Grand National winner! 

[DurhamBorn]

I think on crypto the young will buy the dip,probably with wages and loans,then be cleaned out of their capital and leaving them with just debts to pay or a smashed credit score so they cant even build a life the next decade.Of course some might do really well out of bounces,but they seem to buy wanting to be millionaires and to just hold.Its  horrific really that they are buying,well nothing really.Hopefully most will just lose a smaller amount and learn.

[JMD]

21 hours ago, Axeman123 said:

Now the FT is looking into Tether. The funny thing is that none of this is new, people were trying to draw attention to Tether running a fractional reserve and acting as a self-appointed crypto central bank over a year ago. No-one cared while everyone was getting rich. Now the tide is going out...etc.

https://www.ft.com/content/5887ef43-d43a-4608-a1ac-aacc99f076b9

"Tether has refused to disclose details on its $40bn hoard of US government bonds for fear of revealing its “secret sauce”, even as one of the world’s most important crypto assets comes under strain from heavy selling pressure. Paolo Ardoino, Tether’s chief technology officer, said on Thursday that the group cannot provide information on which organisation is providing custody of its Treasuries holdings, nor where the assets are stored or which firms handle trading on its behalf"

EDIT: and another one just now

https://archive.ph/otEW6

Grant Williams did a deep dive expose on Tether last year, exposing it's risks, etc...      Warning very long article...                                                  https://www.grant-williams.com/download/?utm_source=ONTRAPORT-email-broadcast&utm_medium=ONTRAPORT-email-broadcast&utm_term=FE+-+BRONZE+-+GDPR+OPT-IN&utm_content=Whoops+Apocalypse%3F+–+Sell+In+May%3F+–+Peak+Performance+–+Japan+Winner&utm_campaign=13052022

[Harley]

3 hours ago, Bricormortis said:

Barclays warns of 5 point GDP hit to Eurozone and EURO sub parity with the Dollar IF Russia turns off the gas.

LINK

As opposed to the projected 8 point hit a sub USD parity prior to the Russian action? 

[kibuc]

1 hour ago, JMD said:

Very interesting Kibuc. I am always looking to buy more silver miners (I've got loads of the goldies). However im not a trader, so any long term hold prospects (prospectors?!) you might be able to share would be much appreciated. 

I don't want to step into the territory of providing advice as I have neither the qualifications nor the track record required. I've used that recent drop to narrow down my portfolio from 17 all the way to 10, with 2 still in the why-do-I-hold-such-garbage, looks-mediocre-but-reacts-to-silver-spot-like-a-rabbit-on-extasy category, while the remaining 8 passin at least the initial check, from medium to very high conviction. I think if you look back at my posts you'll be able to see at least some of those names and an explaination why I like them.

[Innkeeper]

4 hours ago, DoINeedOne said:

A young fella i know mum and dad run a brewery pub, he does the stupid maths telling people they took over £3000 at the weekend of course he thinks its all profit 

Mum told him they not sure if they will still be there next year as brewery are increasing costs and rent, taxes going up, staff costs, electric and gas etc.. hardly making any profit

 

Also when i lived in Spain i got to know a estate agent guy who focused on bars and cafes

In Spain most places including apartments didn't have reference checks like we do here in the UK

You pay 3x monthly rent 1/3 is the deposit, 1/3 is the first months rent and then 1/3 is the estate agents fee, so you can see why estate agents don't really care about checks as they get their money upfront

Anyway the bar guy said so many brits come over wanting to live the dream thinking owning a bar or cafe is easy within a few months they disappear we take back the property and rent it out to the next idiots 

The average time that a landlord or manager spends in charge of a pub in England  is less than two years.  Typically a brewery or pub company will offer a tenancy for three years with a discounted rent of up to 30% for the first 12 months or perhaps longer to allow the newcomer to ‘build up the business’.   If the poor sap that takes the tenancy is quite good at the job they’ll make an OK living at the discounted rent but once it reverts to the standard terms they’ll be f***ckd.  This situation leads to the owner telling everyone that ‘ the brewery has jacked the rent up just as I was doing well’.

 In fact in most cases they’ve simply lost the discount.

 

[JMD]

21 hours ago, Libspero said:

No.

I have a rusty nail.  It’s worth a penny.

Tomorrow someone on the internet is going to buy a rusty nail for £41bn. So I value mine accordingly.  I’m a £41bnaire.

The day after another one sells for a penny.    I just lost £41bn.

No wealth was created or lost during this process unless you bought or sold.

You sound a bit cynical. You see it's mostly about belief...     You cite a rusty nail, well 'For want of a nail, the shoe was lost...', etc. (so goes the proverb)