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Credit deflation and the reflation cycle to come.


DurhamBorn

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Don Coglione
6 minutes ago, leonardratso said:

barrick didnt do so bad today compared to EGO & NGD, infact the dog SBGL went up., are we looking at the same thing ? ABRD?

Barrick tends to move in smaller increments, as befits its market cap. Today was a huge move down. SBGL has been massively whacked over the last month, such is the way of the second tier miners. As picked up originally on HPC, I have followed TGZ; price doubled over six months, then also got whacked in the last month - to be fair, I can't see why they deserved the over--performance prior to the whacking, I try to follow the fundamentals but admit to being a rank amateur compared to others who contribute here

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2 hours ago, Democorruptcy said:

100% of a smallish amount of money allocated to shares, or 100% of everything and All In?

Which share?

All In, with kitchen sink on top. I'm taking a gamble to rapidly rise capital before the shit hits the fan. Otherwise it won't really matter to me if infrastructure/goldies/whatever do a 5- or 10-bagger in the new cycle, as my base capital will be too small to make it a life-changing event.

And it's Wesdome. It's getting crushed today but it's been good to me so far, taking me from my -30% hole in Feb back to green and beyond. It might be forming a double-top, reverse-cup-and-handle or a two-mexicans-and-a-horny-brasilian pattern indicating a pullback, but the fundamentals seem to be there and I like the risk/reward ratio with this one.

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49 minutes ago, Ponty Mython said:

Anyone into INFA here (as tipped on HPC)? Appears to fit the profile of this thread and has had a fun day today; for clarity, I have dipped in and out.

On another note, what did Barrick do to upset the market gods today? I had always seen it as a relatively safe play amongst the miners,

My INFA went up as much as my New Gold went down today - bonkers!

Calling Viceroy... the DOW is creeping steadily up towards 26000 again... will it then be Off To The Races Time again, against all the price/earnings fundamentals as MA predicted..? What do your tea leaves say because mine haven't a clue...

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Napoleon Dynamite

The The 'central bank tightening into a self-reinforcing downturn' quote from https://thefelderreport.com/2018/07/25/why-it-might-be-a-good-time-to-revisit-ray-dalios-1937-analog/ made me think of this thread. 

It's something he said in 2015: http://uk.businessinsider.com/ray-dalio-fed-tightening-is-like-1937-2015-3 so arguably it was a bad prediction.  But this thread is about what rather than when, so in that context it's still interesting.

1937 vs Today

D9DSxjET.png
 

 

 

 

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sancho panza
7 hours ago, janch said:

@SP  I'm the most untechy person you could hope to meet and I've done away with a landline.  I use a mobile for phone and a "dongle" for internet and "freeview" for TV so no games or streaming.  I doubt I'll have a fixed line again.

That's what worries me with the heritage fixed line telecoms like BT.I don't understand the products and methods enough,but to me there's a huge scope for mobile to render them obselete.

7 hours ago, Nicolas Turgeon said:

Going back to gold for a minute, New Gold Inc (NGD) are on my list of ones to watch and they seem to be down 17% today off the back of their q2 results.
Time to average in if you're holding these?

There are lots of cheap stocks across the goldies,I'd use this market to spread your risk and not to average into a struggling company

Decl-I hold New Gold

6 hours ago, Lavalas said:

I saw the New Gold result this morning and considered whether I should bail at a (smaller) loss first thing today. Ended up deciding to keep the faith in the bigger picture. Didn’t anticipate a 17% drop though. Be interested to hear others thoughts on them now.

These sort of drops come with territory Lavalas.Just got to keep your risk spread wide.

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sancho panza
4 hours ago, Barnsey said:

Some predictions and generally very useful insight, this guy seems pretty good at what he does:

Extrapolating Growth

https://www.hussmanfunds.com/comment/mc180725/

 

Hussman has been bearish for a while.Regularly featured on Mish Shedlock

20/9/17

https://www.themaven.net/mishtalk/economics/three-massive-bubbles-in-17-years-when-will-this-one-bust-a-60-decline-coming-qMsxaJCKlUSImECJGRx6Uw/

'Three Massive Bubbles in 17 Years: When Will This One Bust? A 60% Decline Coming?

The markets are so overvalued now that Hussman expects a 60% decline from here.

There’s an apocryphal story that in 1787, during the journey of Empress Catherine II to Crimea, Prince Grigory Potemkin, the governor of the region, erected fabricated villages along the Dnieper River, which would be disassembled after she passed by, and rebuilt again downstream overnight.

When one examines the collapses of the tech bubble and the housing bubble, it’s evident that one of the central elements of those collapses was the gradual recognition by investors that the overvalued pieces of paper they were holding were actually little Potemkin Villages; temporarily glorious and impressive on the surface, but backed by much less than investors had imagined was there. What sort of “catalyst” is needed for a Potemkin Village or a Ponzi scheme to disappoint? Only the gradual or sudden discovery of the reality behind it: the recognition that there is no “there” there.

Market returns don’t just emerge from nowhere. They are driven by the sum of three factors: growth in fundamentals, income from cash distributions, and changes in valuations (the ratio of prices to fundamentals). For example, the 10% annual total return of the S&P 500 since 1960 also derives from growth in S&P 500 revenues averaging 5.7% annually since the 2000 peak, dividend income averaging about 3.0% annually, and a much steeper increase in the S&P 500 price/revenue ratio contributing 1.3% annually (taking the current price/revenue multiple to the same level observed at the 2000 market peak).

Consider these drivers today. Combining depressed growth prospects with an S&P 500 dividend yield of just 2.0%, the likelihood is that over the coming 10-12 years, even a run-of-the-mill reversion of valuations will wipe out the entire contribution of growth and dividend income, resulting in zero or negative total returns in the S&P 500 Index on that horizon, with an estimated interim market loss on the order of -60%.

Here are the facts: over the past several decades, due to a combination of demographic factors and persistently slowing productivity growth, the core drivers of real U.S. GDP growth have declined toward just 1% annually, with a likely decline below that level in the coming 10-12 years. Indeed, in the absence of any recession, U.S. nonfarm productivity growth has averaged just 0.8% annually since 2010 and 0.6% over the past 5 years, while the U.S. Bureau of Labor Statistics estimates labor force growth of just 0.3% annually in the coming years (which would be matched by similar growth in employment only if the unemployment rate does not rise from the current level of 4.3%). Add 0.6% to 0.3%, and the baseline expectation for real GDP growth is just 0.9%. Nominal growth is likely to be similarly weak.

While S&P 500 earnings growth has slightly outpaced revenue growth over the past two decades because of rising profit margins, recent record profit margins have now stagnated and have begun to retreat, resulting in the likelihood that earnings growth will match (at best) or even lag, overall economic growth in the years ahead. At the same time, the valuation measures we find most reliably correlated with actual subsequent S&P 500 total returns now average between 150-170% above historical norms that they have approached or breached by the completion of every market cycle in history. For a review of the historical reliability of these measures and popular alternatives, see the table in Exhaustion Gaps and the Fear of Missing Out

Let’s be clear. It has taken the third financial bubble in 17 years to bring the total return of the S&P 500 since the 2000 peak to just 4.8% annually, all of which we expect to be wiped out over the completion of the current market cycle. Even if investors are lucky, and valuations reach yet another bubble extreme 10-12 years from today, the annual total return of the S&P 500 between now and then is likely to be even lower than the 4.8% return since 2000, because the underlying economic drivers have deteriorated further. In my view, it’s substantially more probable that investors 10-12 years from now will find the S&P 500 Index at a lower level than it is today, with the average portfolio struggling to get back to zero from deeply negative interim losses.

What If?

It’s very difficult to present a fresh look each week on the same topic. I salute Hussman for his ability to do just that.

Even if he is only half-right on the duration and strength of the decline, public union pension plans in states like Illinois will be broke.

State of Denial and Hubris

In his article, Hussman present a total of seven charts to make a compelling case.

Most people ignore Hussman because they don’t like his message. Certainly, it’s not the message Wall Street wants you to hear. Importantly, Wall Street can repeat its message way more than those in the Hussman camp.

 

Some know full well the stock market is in a bubble but they expect they will get out on time. A few might manage. In aggregate, it’s impossible.

“Don’t Worry There is No Bubble”

Many of my readers think the “Fed won’t allow another major stock market decline”. But if the Fed could prevent bubbles from popping why did we have two crashes already?

That’s the message Wall Street wants people to believe. It’s also the message people want to believe.

I don’t know when this bubble will burst, nor does anyone else. But the bigger the bubble the louder the pop.'

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Democorruptcy
1 hour ago, kibuc said:

All In, with kitchen sink on top. I'm taking a gamble to rapidly rise capital before the shit hits the fan. Otherwise it won't really matter to me if infrastructure/goldies/whatever do a 5- or 10-bagger in the new cycle, as my base capital will be too small to make it a life-changing event.

And it's Wesdome. It's getting crushed today but it's been good to me so far, taking me from my -30% hole in Feb back to green and beyond. It might be forming a double-top, reverse-cup-and-handle or a two-mexicans-and-a-horny-brasilian pattern indicating a pullback, but the fundamentals seem to be there and I like the risk/reward ratio with this one.

Good luck with that, win or lose, I like your style!

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sancho panza
1 hour ago, leonardratso said:

barrick didnt do so bad today compared to EGO & NGD, infact the dog SBGL went up., are we looking at the same thing ? ABRD?

https://uk.investing.com/indices/arca-gold-bugs-components

HUI components in the red to 3% today

New Gold  -20%

Couer/Hecla/Eldorado  -8%

Goldcorp/Barrick/Agncio  -6%

 

Newmont led the board at  +0.91%

Just cause they're cheap don't mean they won't drop some more.

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1 hour ago, Thorn said:

My INFA went up as much as my New Gold went down today - bonkers!

 

I got 1500 worth of INFA at .35p, been a nice run that looks as if it will continue ... any thoughts  on where it could end up ... seen predictions of 15p on certain boards.

Will keep mine until they get bought out which i presume will happen at some point.

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sancho panza

@Barnsey might be 2018 after all

https://wolfstreet.com/2018/07/26/gm-fiat-chrysler-ford-signal-problems-slash-guidance/

'It’s confession time among the Detroit automakers: GM, Fiat Chrysler, and Ford all got ugly, in unison, in one day, something we haven’t seen since the Financial Crisis.

Not since the Financial Crisis have we seen earnings warnings by the three Detroit automakers balled up like this, all in one day, in unison.

But this isn’t the Financial Crisis. This is as good as it gets. The economy is growing. GDP in Q2 is projected to rise, depending on who is doing the projecting, between 2.8% and inexplicably 4.5%. Deliveries of new vehicles in the US peaked for the big three Detroit automakers in 2015 and have edged down since then, but they have raised prices on their profitable and hot trucks, SUVs, and crossovers, and in dollar terms, sales and profits in the US were solid – until now.

So these ugly outlooks hailing down on the good times are rattling nerves and leaving folks to wonder what will happen to the automakers when the times are no longer this good.'

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2 hours ago, Thorn said:

Calling Viceroy... the DOW is creeping steadily up towards 26000 again... will it then be Off To The Races Time again, against all the price/earnings fundamentals as MA predicted..? What do your tea leaves say because mine haven't a clue...

"The Dow keeps pushing higher to test the critical level of 25800 trading at the time of this post. Keep in mind that 25800 is a Weekly Bullish Reversal (i.e. needs to close above that number at the end of the trading week). Nevertheless, the Directional changes start next week warning of a choppy period ahead.  This cluster of Directional Changes indicates choppiness/volatility ahead rather than a trend per se in one direction.
 
We still see July as a possible reaction high with a retest of support into September/October. November can be a wild time. That is why we also planned the WEC for November in the midst of this chaos.
The Monthly Bullish Reversal to be concerned about stands at 26620. So unless that is elected at the end of the month, then we still should see a July high form temporarily.
 
The overwhelming majority fear a trade war and/or rising interest rates. Many mutual funds have liquidated positions on those fears yet the market has held despite all the selling. This means that they will be forced to buy new highs and we are NOT at the end of this Bull Market. Yes, it is possible that the consolidation would extend into 2020. All that will do is extend the cycle into 2032 and make it far more explosive on the upside. Keep in mind that the rise in taxes has been systemic. Governments NEVER look long-term. All they do is look at what they need right now with no long-term consideration. The EU and IMF are pushing itself to triple its inheritance taxes which will cause a total collapse in real estate and further undermine the banking system. They will not review this austerity policy which was directed by Germany because of its fear of hyperinflation. Europe was suppose to kill the dollar. The have succeeded in not just failing to beat the US economy, they have fallen now even to third place behind China. Trump will have his hands full as the dollar rises on the failure of everyone else."
 
Here is his latest podcast from 26 July, listen from 14mins: https://www.macrovoices.com
 
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4 hours ago, sancho panza said:

@Barnsey might be 2018 after all

https://wolfstreet.com/2018/07/26/gm-fiat-chrysler-ford-signal-problems-slash-guidance/

'It’s confession time among the Detroit automakers: GM, Fiat Chrysler, and Ford all got ugly, in unison, in one day, something we haven’t seen since the Financial Crisis.

Not since the Financial Crisis have we seen earnings warnings by the three Detroit automakers balled up like this, all in one day, in unison.

But this isn’t the Financial Crisis. This is as good as it gets. The economy is growing. GDP in Q2 is projected to rise, depending on who is doing the projecting, between 2.8% and inexplicably 4.5%. Deliveries of new vehicles in the US peaked for the big three Detroit automakers in 2015 and have edged down since then, but they have raised prices on their profitable and hot trucks, SUVs, and crossovers, and in dollar terms, sales and profits in the US were solid – until now.

So these ugly outlooks hailing down on the good times are rattling nerves and leaving folks to wonder what will happen to the automakers when the times are no longer this good.'

Q2 GDP released today predicted to be as high 4.8%, this is going to be the peak figure you'll see until the next cycle, Q3 released just before mid terms, oops.

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2 hours ago, Barnsey said:

Another gem of an article from Mish, re: oz housing bubble bursting

https://www.themaven.net/mishtalk/api/amp/mishtalk/economics/mortgage-prison-sydney-home-prices-suffer-largest-annual-decline-since-2008-tZlmCh8jK0aWzie4NHh-Tg

Global recessionary stars really lining up now after a couple years of false dawns...

One about a "slowdown" in US house prices, by slowdown the mean prices falling.

https://www.bloomberg.com/news/audio/2018-07-26/us-housing-market-appears-headed-for-broadest-slowdown-in-years

Does feel like the start of something happening.

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2 hours ago, Banned said:

One about a "slowdown" in US house prices, by slowdown the mean prices falling.

https://www.bloomberg.com/news/audio/2018-07-26/us-housing-market-appears-headed-for-broadest-slowdown-in-years

Does feel like the start of something happening.

Just like the UK, prime areas falling first (Smart money), whilst the rest of the country remains reasonably buoyant for now (dumb money).

So, taking a step back and trying to look at where we are, to recap:

- US Q2 GDP out today will likely be amazing, but the peak, and temp boost stocks until Oct-ish

- US avg home price now 8.4% above 2007 peak

- Facebook share price saw the biggest 1 day fall in history, another FANG, Netflix, also fell considerably a few weeks back.

- Yuan continuing to weaken (13 month low), no end in sight of trade war between US and China 

- In UK, households spent more than they earned for first time in 30 years (!), debt fuelled spending soaring since 2016 to record levels

- Gold and Silver continuing to take a bit of a hit

- ECB looks like it'll never raise, despite wanting to, GDP forecasts cut

- Yield curve already flattening again despite Trump's critisms of Fed aggressively raising

- US loan covenant protections now at record weakest level

- Japan still stuck in a rut

- Momentum building for US-Iran conflict Aug/Sep

Otherwise all hunky dory! 

 

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On 25/07/2018 at 22:46, sancho panza said:

Vodafone @ 175.........

Despite the negative press,looking longer term,5G could wipe out domestic landlines.Maybe one of the techies herein could advise.

https://uk.finance.yahoo.com/news/vodafone-apos-vittorio-colao-bows-123216292.html

Tough competition in Spain, Italy and India and foreign exchange swings marred Vittorio Colao’s final quarterly update as chief executive of Vodafone.

The world’s second-largest mobile phone operator saw a 4.9pc dip in revenues to €10.9bn (£9.7bn) in the three months to June, partly because of a switch to a new accounting standard, IFRS 15, which forced it to change the way it books income from phone contracts.

Organic service revenue, excluding that and other one-offs, M&A and currency swings, was up 0.3pc, though that was a slowdown from 1.4pc in the previous quarter.  

Mr Colao, who will hand over to chief financial officer Nick Read in October, said competition in Italy had “intensified” thanks to the low prices offered by French competitor Iliad, which entered the market in May.   

“Iliad has launched very low price offers which are getting some traction in the market,” he said. “We believe these are levels where it’s not easy to make money in the long term.”

Service revenues also fell in Spain, where Vodafone cut prices to remain competitive, and India, where it is in the process of merging with rival Idea Cellular.

But Germany was strong, with 2.4pc growth in service revenue bolstered by an extra 46,000 broadband customers.  

Mr Colao said the group’s overall performance gave him the confidence that it would meet its expectations of 1pc to 5pc growth in earnings before interest, tax, depreciation and amortisation for the full year.

The performance was not a big surprise to investors and analysts after Vodafone warned of a weak first quarter earlier in the year. Shares in the company were down 1.5pc to 175p in noon trade.

George Salmon, an analyst at Hargreaves Lansdown, said Vodafone was struggling to differentiate itself amid a tough price war in the telecoms industry but that there were some “silver linings” in the results.

He added: “Emerging market growth is strong, driven by Egypt, Turkey and South Africa, while more European customers are electing to take on multiple services from the group.

“Bundling TV, phone and broadband together is Vodafone’s solution to the age-old problem of customer retention, so investors will be keeping a keen eye on progress in from here on.”'

 

 

https://uk.finance.yahoo.com/news/spain-awards-5g-frequencies-telefonica-170110107.html

MADRID (Reuters) - Spain on Wednesday awarded 5G frequencies to Telefonica, Vodafone and Orange at an auction, the economy ministry said in a statement.

Telefonica invested 107 million euros to get 50 MHZ in spectrum, Orange paid 132 million euros for 60 MHZ and Vodafone paid 198 million euros for 90 MHZ.

5G is more than 20 times faster than 4G and it is expected to boost the "internet of things", which describes a wide-range of objects that are connected to the internet and can collect and exchange data to perform functions such as operating autonomous vehicles, controlling the heating at home, managing maintenance in factories or monitoring energy consumption.

 

Probably not.

Theres a lot goign for a bit of wire or fibre over EMF.

 

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Solzhenitsyn

Just took a look to see how my Infrastrata investment was getting along. Doing very nicely. Strong chart. up 176% since I flagged in over on the other site. Just a shame I only allow myself to put a maximum of 1% of my portfolio in any of these AIM minnows. Hope some of you are making money on this too.

INFA.thumb.JPG.806a6b8520edc307b4315a0654464d12.JPG

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15 minutes ago, Solzhenitsyn said:

Just took a look to see how my Infrastrata investment was getting along. Doing very nicely. Strong chart. up 176% since I flagged in over on the other site. Just a shame I only allow myself to put a maximum of 1% of my portfolio in any of these AIM minnows. Hope some of you are making money on this too.

INFA.thumb.JPG.806a6b8520edc307b4315a0654464d12.JPG

Got 1500 quids worth at .35p for that i thank you!

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19 minutes ago, Solzhenitsyn said:

Just took a look to see how my Infrastrata investment was getting along. Doing very nicely. Strong chart. up 176% since I flagged in over on the other site. Just a shame I only allow myself to put a maximum of 1% of my portfolio in any of these AIM minnows. Hope some of you are making money on this too.

INFA.thumb.JPG.806a6b8520edc307b4315a0654464d12.JPG

I had an account with £50 in. It was the minimum opening balance but I’d changed my plans and so it was just sitting there. I put it on Infratrata. So good news is that I’m up by 122%, my bigger success to date percentage wise. Sadly though it’s only £115 (after fees). Thanks for the tip though. I considered putting more on at 0.45... maybe in 6 months I’ll regret not putting more on at 0.70 :D

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Don Coglione

Thanks to Solzhenitsyn from me also. The project seemed to stack up, I bought in at 0.35, flipped at 0.48, then bought back in at 0.43. Since then there have been some strong director buys and a few credible new appointments, sufficient for me to buy in again today at 0.71. It seems clear to me that this project is very much needed (and very much in keeping with the thrust of this thread) - let's hope that INFA is the company to deliver it...

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Solzhenitsyn
2 minutes ago, kibuc said:

Aren't you guys worried it might get smashed in the broader sell-off? That's the main reason I've been holding off so far.

A broader sell-off could be years away though. Yield curve for instance looks like it could be 6-months away from inverting at least - then typically have a delay between timing of inversion and recession. The economy is in a bad way, but the markets still look strong, for now. We have no way of knowing the timing, but just to be cautious and looking out for it. That's a lot of potential growth to miss out inbeteween. Think of it this way. Had you bought in a .25p, you'd now have a close to 200% buffer against any future falls (price is 0.73 as I type).

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2 minutes ago, Solzhenitsyn said:

Think of it this way. Had you bought in a .25p, you'd now have a close to 200% buffer against any future falls (price is 0.73 as I type).

Had I bought in a .25p, I would have been a much happier bunny :) 

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