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Credit deflation and the reflation cycle to come.


DurhamBorn

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UnconventionalWisdom
2 hours ago, DurhamBorn said:

Most here are experienced,but for anyone considering the PM miner space right now,its crucial to get a good spread.I would say 6 minimum,and between 6 and 10 better .I like to buy half from stocks that have been hit very hard from their highs,and also stocks showing good technical strength already.I also try to keep spread across different countries as well.The last time i entered the sector i had some losses from Eldorado of around 60%,but Majestic returned 500%,Sibanye 200% ,Harmony 200% etc.Even in a bull some companies have mine failures,country problems etc that drag them down.My rubber band list at the moment has Harmony number 2 and New Gold no 1 and if i was buying now id still buy it,but at a smaller size than others.

Just wondering DB what's the advantage of spreading over a few gold miners to mitigate risk compared with going for an etf such as gdx or gdxj? 

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2 minutes ago, UnconventionalWisdom said:

Just wondering DB what's the advantage of spreading over a few gold miners to mitigate risk compared with going for an etf such as gdx or gdxj? 

Think its because they are no longer available on most trading platforms thanks to EU rules, correct me if I am wrong 

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The only reason Sibanye and Harmony are doing well is that the Rand is going down the pan right? Yet another emerging market currency weakening against the USD. My biggest holding in miners is Harmony (for some reason I can't remember) and recently bought into Sibanye again!?. Might be a good idea watching the Rand price more than anything else with these 2 miners? Any gold mines in Venezuela, Iran, Turkey??

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27 minutes ago, harp said:

The only reason Sibanye and Harmony are doing well is that the Rand is going down the pan right? Yet another emerging market currency weakening against the USD. My biggest holding in miners is Harmony (for some reason I can't remember) and recently bought into Sibanye again!?. Might be a good idea watching the Rand price more than anything else with these 2 miners? Any gold mines in Venezuela, Iran, Turkey??

Its always been like that for the SA miners harp,they are hugely geared to the rand as most of their costs are Rand based being deep level high labour mines.Frank Abbot the CFO of Harmony is very experience at hedging and will be hedging this Rand weakness now forward a couple of years and if gold then runs up as well profits will shoot up.Works both ways of course,but they will be very happy about the Rand,at least once they get the pay talks out of the way that are ongoing at the moment.

2 hours ago, UnconventionalWisdom said:

Just wondering DB what's the advantage of spreading over a few gold miners to mitigate risk compared with going for an etf such as gdx or gdxj? 

For some GDXJ would be fine,but i like to have a spread that i think will outperform and where i can sell each one at different times etc.

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Democorruptcy
3 hours ago, DurhamBorn said:

Harmony and Sibanye were getting 520k rand a kilo for gold a month ago,and thats just a very small profit,today they are getting close to 600k rand a kilo.Harmony would go from about £30 mill profit to £340 mill on those numbers.I would expect they will be hedging forward with this rand weakness a lot of production ,came just in time for them really,both up a lot today in rand and dollar.

How does that work?

Their currency drops about 20% for a 1,100% rise in sterling profits while gold has gone nowhere.

 

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That story about the Aberdeen couple with the flat had quite a journalistic scoop attached. 

"Experts say firms are trying to cash in because they know that buyers who use Help To Buy can afford to purchase more expensive homes than they could without the scheme" 

It's lucky experts are on the case as ordinary people never knew about this. 

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13 minutes ago, Funn3r said:

That story about the Aberdeen couple with the flat had quite a journalistic scoop attached. 

"Experts say firms are trying to cash in because they know that buyers who use Help To Buy can afford to purchase more expensive homes than they could without the scheme" 

It's lucky experts are on the case as ordinary people never knew about this. 

I though they were purchasing the same home that would have been tens of thousands cheaper if it weren't for HTB for a more expensive price ... but then again i'm not an expert.

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19 minutes ago, Democorruptcy said:

How does that work?

Their currency drops about 20% for a 1,100% rise in sterling profits while gold has gone nowhere.

 

They turn over $2 billion a year,at rand gold at 520k a kg they make about $30 million as their all in costs are around 510k rand a kg,at 600k rand a kg their profits turn from 10k rand a kg to 90k rand a kg so their profits go up 9x,they also have some hedges in place on the $ based costs for the Asia mine.The rand is down from 11.55 to 15.43 so over 35%,gold is only down 12%.

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38 minutes ago, Funn3r said:

That story about the Aberdeen couple with the flat had quite a journalistic scoop attached. 

"Experts say firms are trying to cash in because they know that buyers who use Help To Buy can afford to purchase more expensive homes than they could without the scheme" 

It's lucky experts are on the case as ordinary people never knew about this. 

The experts are idiots.

It is actually:  "Experts say firms are trying to cash in because they know that buyers who use Help To Buy can afford to purchase more expensive pay more for the same homes than they could without the scheme"

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Alifelessbinary
2 hours ago, DurhamBorn said:

Its always been like that for the SA miners harp,they are hugely geared to the rand as most of their costs are Rand based being deep level high labour mines.Frank Abbot the CFO of Harmony is very experience at hedging and will be hedging this Rand weakness now forward a couple of years and if gold then runs up as well profits will shoot up.Works both ways of course,but they will be very happy about the Rand,at least once they get the pay talks out of the way that are ongoing at the moment.

For some GDXJ would be fine,but i like to have a spread that i think will outperform and where i can sell each one at different times etc.

For those who are interested you can still trade GDX and GDXJ at AJ Bell. They have followed the market down over the last few months, as you would expect for a tracker, but the volatility is much lower than if you had a concentrated basket of holdings.

The wild swings of late have been slightly too fruity for me, so i’m happy with the greater diversity that GDXJ presents, in the knowledge that it rounds both the lows and the highs. I just don’t have the time available to research the market close enough to adopt an active approach, but this thread continues to be a brilliant resource into the area. 

If you have the conviction to concentrate into a small selection of shares and if the approach is successful the returns can be astonishing. IF!

 

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On 04/09/2018 at 06:50, Barnsey said:

Great listen which ties into many of the ongoing topics we discuss, an hour long but flew past for me, will probably revisit

 

Barnsey,I listened to this on the way home from work tonight and have to say it's one of the best interviews I've heard.First 20 discusses a few things eg Debt deflation,banking leverage.About 20 minutes in he gets onto velocity both as cause and effect, then moves onto how we're getting increasingly less growth for each new dollar of debt etc.Disucsses Fed and CB policy in depth and at length.

Discusses my favourite Fed Chair-Volcker and how he questioned the validity of the Phillips Curve and then railed against a lot of the tosh the Neo Classicals spout regarding paying people to dig holes as opposed to making capital work through an economy productively.

I also thought the interviewer did a super job of getting full value out of Lacy,clearly very well researched.

It was an absolute revelation.I'll be subscribing from hereonin.Incredible listen.many thanks for posting.

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Democorruptcy
1 hour ago, DurhamBorn said:

They turn over $2 billion a year,at rand gold at 520k a kg they make about $30 million as their all in costs are around 510k rand a kg,at 600k rand a kg their profits turn from 10k rand a kg to 90k rand a kg so their profits go up 9x,they also have some hedges in place on the $ based costs for the Asia mine.The rand is down from 11.55 to 15.43 so over 35%,gold is only down 12%.

Where are you getting their $2bn turnover from, is that an average over several years?

I can see the maths behind your figures but I was looking at it thinking, if their currency has dropped 35% they have something that's depreciated, like say UK housing in USD terms in recent times, you can buy more UK house for your bucks. Re the rand drop, for the same amount of USD's they now need to produce 1.35x the gold they produced before, to get the same amount of USDs (to produce more, their costs must increase). If the payment for the goods has dropped 35% and the valuation of the goods has dropped 12%, it doesn't seem like good news to me. Maybe it's this moorish Aldi special Bourbon with honey, that's confusing me.

 

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9 minutes ago, Democorruptcy said:

Where are you getting their $2bn turnover from, is that an average over several years?

I can see the maths behind your figures but I was looking at it thinking, if their currency has dropped 35% they have something that's depreciated, like say UK housing in USD terms in recent times, you can buy more UK house for your bucks. Re the rand drop, for the same amount of USD's they now need to produce 1.35x the gold they produced before, to get the same amount of USDs (to produce more, their costs must increase). If the payment for the goods has dropped 35% and the valuation of the goods has dropped 12%, it doesn't seem like good news to me. Maybe it's this moorish Aldi special Bourbon with honey, that's confusing me.

 

The reason they gain is because almost all of their costs are in Rand.SA miners use a lot of Labour.The best way to think of it is if they need 510k rand a kg to pay all costs and are getting 520k rand a kg they are left with 10k rand a kg of profits left to convert/leave as dollars.Today they are left with 90k rand a kg to conver/leave as dollars.They only need to covert back to rand enough to pay their costs because they are selling in $.The leverage is huge.Of course even better if they hedge the rand price now and then gold recovers as well.

The turnover is 1.5 million oz of gold ,uranium and 3 million oz silver.x spot

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11 hours ago, Barnsey said:

The genius of it all, as prices reverse, they can blame it on the "Democratic vote of the people" along with the US trade wars triggering a global recession, nothing to do with artificially low interest rates and props. Good to see the negative sentiment building rapidly on HTB though.

Interesting Sky article today:

https://news.sky.com/story/sky-data-poll-public-ready-for-change-as-uk-economy-is-unfair-and-not-working-11490328

Of interest are some of the reforms the public are in favour of, supporting a reflationary path ahead:

  • Establishing a publicly owned investment bank (55%)
  • Greater government borrowing and investment (52%)

https://www.ippr.org/research/publications/prosperity-and-justice

Page 156 onwards of report VERY interesting cc: @DurhamBorn @sancho panza lots of content regarding being at the end of the consumer debt cycle and needing to find another way forward

Cheers Barnsey.I'll have a look later.

Lacy Hunt also talked about the wrong sort of debt and how consumers are loaded up and will struggle to take more on .

He said we need to get velocity and savings back up jsut like in the 50's.Talked Demogrpahics as well and it's effect on aggregate demand.Thus consumer cycle is going to be over.It's just when is the issue

 

10 hours ago, harp said:

That's for the previous year.My money says they've peaked(well a small proportion of it) last year.Looking forwards,transactions are down and keeping going.The reliable price indices..LSL/LCP Acadata are pointing downwards too.

Woodford has made some bad bets over the last few years.

 

My post referred to the price action yesteday btw.Today was up.

7 hours ago, DurhamBorn said:

Most here are experienced,but for anyone considering the PM miner space right now,its crucial to get a good spread.I would say 6 minimum,and between 6 and 10 better .I like to buy half from stocks that have been hit very hard from their highs,and also stocks showing good technical strength already.I also try to keep spread across different countries as well.The last time i entered the sector i had some losses from Eldorado of around 60%,but Majestic returned 500%,Sibanye 200% ,Harmony 200% etc.Even in a bull some companies have mine failures,country problems etc that drag them down.My rubber band list at the moment has Harmony number 2 and New Gold no 1 and if i was buying now id still buy it,but at a smaller size than others.

Super post.I'm a confirmed pray and sprayer but it still hurts when one of the troops gets wounded.It's hard not to take it personally.

The PM miner space isn't for the feint hearted and I remember some early losses in the tech bubble that ended up ten bagging and then some.I'm in for the long term,but this experience has confirmed that I prefer the bigger players.

Recently got stopped out on Reckitt only to watch RB fall back near my entry point.Didn' set my stop wide enough,.Sh3t happens.I try and learn from my mistakes,especially if they've been expensive.

 

 

4 hours ago, UnconventionalWisdom said:

Just wondering DB what's the advantage of spreading over a few gold miners to mitigate risk compared with going for an etf such as gdx or gdxj? 

Personally,I hate buying the overpriced stuff eg Newmont/Agnico/Wheaton/Newcrest.Can't help buying cheap but as most know that cheap can be bad.

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On 04/09/2018 at 22:08, UnconventionalWisdom said:

Do you not think its wise to add a bit before the recession? If everyone rushes to PMs they'll jump up in price. I'm making small purchases in silver just in case a sudden recession doesn't see the usual drop in PMs. Silver's price is near to its extraction cost, difficult to see it go down much more in price. 

Not really in honesty, the way I see it to have a cash pile ready for investment in a recession puts you in the best possible position and will give you an embarrassment of good investment options. Could even buy me a nice house in cash, just don't know. I have enough to make it interesting in silver if it goes to the moon now, that'd be great....but ultimately I expect silver to go down too hence not adding more. If am wrong, I move on, I don't obsess about missing the millions anymore (bitcoin, Amazon, AIM stocks, all wasted energy on "what ifs" ) - I am sure there will be plenty of excellent companies out there which will be whacked in the hunt for liquidity.

 

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For the silver I want to see a quick drop below the 2015 low of 13.63 to take all the stops and then a solid move up to close above that level to trap all the breakout sellers.

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3 hours ago, Banned said:

I though they were purchasing the same home that would have been tens of thousands cheaper if it weren't for HTB for a more expensive price ... but then again i'm not an expert.

When I sold my 2 bed flat to rent a year and a half ago the new build 2 bed flat was 100K more expensive than what we sold our flat for! less than half a mile away..

Our flat was on a quiet back road, the new flats are on the old hospital wing land, overlooking a 3 lane 50mph road on one side and what's left of the hospital on the other.

 

How will they sell these flats alongside old flats with such a huge difference in price?

 

Also who sells off hospital land with a growing population? How did we have more capacity years ago with less people employed (tax take) than we do now when the economy is doing so well? :wanker:

Its almost like they are telling us lies.. O.o

 

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1 hour ago, sancho panza said:

I also thought the interviewer did a super job of getting full value out of Lacy,clearly very well researched.

Sorry but having the surname hunt must be a curse at school

Lacy Hunt

Lazy Cunt..

Jeremy hunt

Jeremy cunt.. and he is one as well! so school must have rounded him as a person..:D

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9 minutes ago, macca said:

Sorry but having the surname hunt must be a curse at school

Lacy Hunt

Lazy Cunt..

Jeremy hunt

Jeremy cunt.. and he is one as well! so school must have rounded him as a person..:D

Had a Mr Hunt for a teacher, was more commonly known as Waddock.

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7 hours ago, sancho panza said:

 

Cheers Barnsey.I'll have a look later.

Lacy Hunt also talked about the wrong sort of debt and how consumers are loaded up and will struggle to take more on .

He said we need to get velocity and savings back up jsut like in the 50's.Talked Demogrpahics as well and it's effect on aggregate demand.Thus consumer cycle is going to be over.It's just when is the issue

What worries me Sancho is when I read articles like this from the Economist:

https://amp.economist.com/finance-and-economics/2018/05/26/central-banks-should-consider-offering-accounts-to-everyone?

Helicopter money for people who've loaded up on debt irresponsibly and defaulted to start spending again and maintain their lifestyle, whilst the government tracks/controls what they spend it on.

Perhaps a small sideshow alongside huge sustainable investment plans or will they rely on the tapped out consumer yet again at lower lows? Probably buying equities to save the stock market too instead of letting it rebalance. All I can say is that Powell is probably one of the most balanced candidates to have steering the ship right now. 

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35 minutes ago, Barnsey said:

What worries me Sancho is when I read articles like this from the Economist:

https://amp.economist.com/finance-and-economics/2018/05/26/central-banks-should-consider-offering-accounts-to-everyone?

Helicopter money for people who've loaded up on debt irresponsibly and defaulted to start spending again and maintain their lifestyle, whilst the government tracks/controls what they spend it on.

Perhaps a small sideshow alongside huge sustainable investment plans or will they rely on the tapped out consumer yet again at lower lows? Probably buying equities to save the stock market too instead of letting it rebalance. All I can say is that Powell is probably one of the most balanced candidates to have steering the ship right now. 

The one thing they can’t tackle with this fake economy is inequality, falling standards of living.. 

They can keep coming up with more ideas to keep the trickle up economics going but all they will get is more trumps and more Brexits.. 

At some point the global Ponzi scheme has to fail.. As people don’t want to play anymore.. 

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7 hours ago, Gloommonger said:

Had a Mr Hunt for a teacher, was more commonly known as Waddock.

I used to work for a guy whose last name was Hucker. Everyone called him mother. 

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Bricks & Mortar
2 hours ago, Barnsey said:

 

1 hour ago, macca said:

They can keep coming up with more ideas to keep the trickle up economics going but all they will get is more trumps and more Brexits.. 

Very ,much agree.  It worries me too.   Because despite Maccas point being very true, and having been obvious for a long time now, it hasn't stopped them so far.

I tend to think, they'll have to crank the printing presses, and the question for the governments/central banks, (I tend to think of these as the same thing, and the extension for Carney means he's onside with whatever they've decided) -The question is whether to take the money and spend it themselves, or drop it from a helicopter.

I know which I'd choose, and I expect they're the same.

But if I'm wrong, its time for an emergency rethink.  Car manufacturer shares, anyone?

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3 minutes ago, Bricks & Mortar said:

 

Very ,much agree.  It worries me too.   Because despite Maccas point being very true, and having been obvious for a long time now, it hasn't stopped them so far.

I tend to think, they'll have to crank the printing presses, and the question for the governments/central banks, (I tend to think of these as the same thing, and the extension for Carney means he's onside with whatever they've decided) -The question is whether to take the money and spend it themselves, or drop it from a helicopter.

I know which I'd choose, and I expect they're the same.

But if I'm wrong, its time for an emergency rethink.  Car manufacturer shares, anyone?

100% they take it and invest it.The system isnt set up to pass direct to consumers and the west isnt interested in sucking in more imports of consumer goods.They will print and it will go direct into the economy.They need velocity up and handing to consumers doesnt do that.The seeds are already sown for the reflation ahead.

Nice example today of when a disinflation cycle starts to end and a company with lots of capital assets passes the top of their investment cycle.Go Ahead group up around 15%,top riser on the market.The city expected a dividend cut,but as always were looking the wrong way.Investment can fall going forward so net cash goes up,just as inflation will start to increase income as well.Top sliced some for a 35% profit as holding a bit heavy and put into Vod.

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Democorruptcy
10 hours ago, DurhamBorn said:

The reason they gain is because almost all of their costs are in Rand.SA miners use a lot of Labour.The best way to think of it is if they need 510k rand a kg to pay all costs and are getting 520k rand a kg they are left with 10k rand a kg of profits left to convert/leave as dollars.Today they are left with 90k rand a kg to conver/leave as dollars.They only need to covert back to rand enough to pay their costs because they are selling in $.The leverage is huge.Of course even better if they hedge the rand price now and then gold recovers as well.

The turnover is 1.5 million oz of gold ,uranium and 3 million oz silver.x spot

OK so their input costs haven't gone up because they pay them in Rand, it's not the squeezed margin scenario of say UK retailers.

The Rand price of gold has gone up say 10% in a month. This is because their currency has depreciated, so their people move to gold for a store of value. So their profit margin has increased from 10/510 to 90/510 from 2% to 18% per kilo.

Re their turnover of gold, gold hasn't really moved in USD, their output generates more in Rand but they get paid less USD because the Rand has dropped more against the USD (-35%) than their profit margin has increased (+16%). So per kilo they now make a profit of 90 Rand which is now 6 USD instead of 8 USD due to the Rand dropping from 11.5 to 15 per USD. Before they made a profit of 10 Rand per kilo which was just less than 1 USD at the then 11.5 Rand per USD. 

Am I starting to see the light?

 

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