Credit deflation and the reflation cycle to come.

[Barnsey]

3 hours ago, DurhamBorn said:

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.

Can I just prod you a little more to expand on why they won't do the same this time? What you're saying is very much in line with the proposals from the IPPR inequality report yesterday (a little too idealistic perhaps) but what concerns me is that direct investment will take some time to develop whilst the everyday working person loses much of their wealth (perceived or otherwise) at rapid pace, possibly much more severely than a decade ago.

I really want you to be right DB but having seen not 1 but 3 rounds of QE since the last "crash", each one implemented at the slightest sign of panic, it's going to take real long term sight and strength from government to follow the path you predict. I'm very concerned that they are going to go "nuclear" with anything they can to prevent the huge wealth destruction for yet another tightening cycle, I really hope my pessimism is misguided. 

[Castlevania]

3 hours ago, Democorruptcy said:

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?

 

Their costs are largely in Rand, whilst their income is in USD. As a simplified example let’s assume that a few months ago it cost them the same to produce an ounce of gold as to sell it. This at a price of USD1300 for an ounce of gold with USDZAR at 12. So they receive 15,600 ZAR for each ounce of gold but it costs them the same to produce. Fast forward to today and now they only get USD1200 for an ounce of gold. However USDZAR is now 15. So they receive 18,000 ZAR per ounce, whilst their costs are still 15,600 ZAR. They now make a profit of 2,400 ZAR as opposed to zero before. Or in USD terms $160 an ounce despite a lower gold price in USD.

[Yellow_Reduced_Sticker]

Silver just dipped to $10.96...

https://www.bullionvault.com/silver-price-chart.do

@leonardratso   @DurhamBorn  @sancho panza

What time shall I pick ya's up on me multi-tandem-push-bike...

so we can hit the high street with our begging bowls!

 

 

[dgul]

10 minutes ago, Yellow_Reduced_Sticker said:

Silver just dipped to $10.96...

https://www.bullionvault.com/silver-price-chart.do

@leonardratso   @DurhamBorn  @sancho panza

What time shall I pick ya's up on me multi-tandem-push-bike...

so we can hit the high street with our begging bowls!

 

 

£

But silver does indeed look quite sick.  Not sure when (if) it'll change direction.

[UnconventionalWisdom]

45 minutes ago, Yellow_Reduced_Sticker said:

Silver just dipped to $10.96...

https://www.bullionvault.com/silver-price-chart.do

@leonardratso   @DurhamBorn  @sancho panza

What time shall I pick ya's up on me multi-tandem-push-bike...

so we can hit the high street with our begging bowls!

 

 

Production cost is $10.50...surely the silver price can't go much lower. 

[dgul]

20 minutes ago, UnconventionalWisdom said:

Production cost is $10.50...surely the silver price can't go much lower. 

That price is wrong but hasn't been fixed (in thread) -- spot silver is just under $14.2, ie just under £11.  But it is sick.

[Bear Hug]

Are we getting closer to buying time on Fresnillo? 

[Bear Hug]

BBC: Supermarket giant Asda is to end a scheme which refunded shoppers if the items they bought cost more than in rival stores.

Quote

The Asda Price Guarantee was launched in 2010, promising a basket of shopping at the chain would be 10% cheaper than at the UK's other large grocery chains.

If not, Asda would offer customers a voucher worth the difference in price.

Rival Tesco dropped its Brand Guarantee scheme in June, while Sainsbury's ended its Brand Match programme in 2016.

The Asda Price Guarantee will come to an end on 3 October, and shoppers will have 28 days from then to redeem any remaining coupons.

Is this how reflation starts?  Of course, being quite frugal, I have rarely triggered any price guarantees on my receipts.

[UnconventionalWisdom]

54 minutes ago, Cattle Prod said:

Do you mean that is the 'lifting' cost, as in to get an ounce out of the ground, point forward? Or the all in cost of an oz from the get go?  If the miners are anything like the oilies, they won't stop producing at cost all in cost. If anything, they'll try to produce more to compensate for lost cashflow. In oil with point forward economics you pump like hell if you're above operational costs (as low as $8 a barrel in the north sea), even if you're below the all in cost per barrel of the asset more like $50 a barrel.

I'm guessing silver OPEX is lower than $10.50 so I wouldn't expext production to slow down, or stop. Speed up, maybe.

I'm seeing a loss of sentiment on this thread, which I'd consider strong hands. There is blood on the streets, which is of course is a good sign. We mustn't bleed out though.

I'd like to see a technical bottom in GDX, GDXJ and SIL. They may just trace out double bottoms, if NFPs force down the dollar tomorrow. But the bottom in late 2015 took weeks, or even months, to itll be a rocky road I think. I also noticed that the miners were shook out another 10% or so after the metals bottomed. If it was easy, everyone would be doing it.

I took the figure from here:

https://www.americanbullion.com/what-is-the-current-cost-to-produce-an-ounce-of-silver-today/

It states production cost so I'm assuming that's the total cost as opposed to just extraction. Although the article states silver production cist isn't simple to calculate. Most silver is extracted as a by-product of other materials and costs vary from mine to mine due to varying access difficulties. 

[Bricks & Mortar]

 

10 minutes ago, UnconventionalWisdom said:

I took the figure from here:

https://www.americanbullion.com/what-is-the-current-cost-to-produce-an-ounce-of-silver-today/

From the linked article:  Nowadays, most of the world’s new silver comes from mines that focus on other metals. For example a zinc mine in Mexico may pull out 65% zinc, 25% silver, and 10% lead. Since this mine would categorize as a “zinc mine,” the silver production is referred to as “byproduct metal.”

Sounds like supply is inelastic.  Like, they keep turning out silver, as long as the zinc price stays up.

[Bobthebuilder]

I must admit, i am finding Bullion Vaults monthly charges a bit steep. Am i doing something wrong? 

Fantastic thread peeps, daily reading, loving it.

[azzuri82]

Look at this piece on Ghost Chinese cities and in particular the build quality, absolute shit! Makes our modern slave boxes look like they were built by artisan craftsmen!:

 

[leonardratso]

yay, end of day PMM's collapsed somewhat, but to be honest im prepared to go to zero and beyond, or was that infinity and beyond. The low amount  in PMMs i have at the mo wont be killing anyone..

[Barnsey]

53 minutes ago, azzuri82 said:

Look at this piece on Ghost Chinese cities and in particular the build quality, absolute shit! Makes our modern slave boxes look like they were built by artisan craftsmen!:

 

Been a big fan of Serpentza for a while, I'm amazed they still let him stay in the country after his years of criticism.

[sancho panza]

16 hours 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. 

Lacy lay out in his interview why reflating this bubble would be done in a different way.Deleveraging first,then savings rates up,then growth.

At the moment if you gave Heli money to all and sundry many would spend it.With what's coming,many wil just save it and clear debt-thats what happens in debt deflations.Previous attempts at reflating have left velocity down,real wages declining and assets blowing higher.QE just doesn't work and with reference to your last point,Powell knows it along with a host of others who are looking at the evidence with an unbiased eye.WOlf had a good piece on how even the Fed Doves are talking about the everything bubble.

[sancho panza]

16 hours ago, macca said:

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.. 

Absolutely,The failure of QE is found in the declining real wages experienced by many median income households.

The last bit is the big problem the QEers have.Reminds me of Galbraith.

 

 

5 hours ago, Cattle Prod said:

Do you mean that is the 'lifting' cost, as in to get an ounce out of the ground, point forward? Or the all in cost of an oz from the get go?  If the miners are anything like the oilies, they won't stop producing at cost all in cost. If anything, they'll try to produce more to compensate for lost cashflow. In oil with point forward economics you pump like hell if you're above operational costs (as low as $8 a barrel in the north sea), even if you're below the all in cost per barrel of the asset more like $50 a barrel.

I'm guessing silver OPEX is lower than $10.50 so I wouldn't expext production to slow down, or stop. Speed up, maybe.

I'm seeing a loss of sentiment on this thread, which I'd consider strong hands. There is blood on the streets, which is of course is a good sign. We mustn't bleed out though.

I'd like to see a technical bottom in GDX, GDXJ and SIL. They may just trace out double bottoms, if NFPs force down the dollar tomorrow. But the bottom in late 2015 took weeks, or even months, to itll be a rocky road I think. I also noticed that the miners were shook out another 10% or so after the metals bottomed. If it was easy, everyone would be doing it.

I've already put my first tranche into the Goldies with at least two or more left to go.Look at the 40-50 year chart of Gold Fields,Barrick,Kinross,Newmont,we're in the midst off is an incredible opportunity.

HUI is at the same price as 2003..............when the yellow stuff was $300 and we're heading into an era of complete loss of faith in the CB's.

 

On another matter CP, what are your views on the big oil stocks? Would you hold/realtive value/buy/sell/view on pricing.? Only if you feel like it.I've always viewed big oil and big pharma as my go to trades for currency hedging/income if sterling hits the fan.

 

[sancho panza]

[invalid]

Last 12 months monthly average crude spot price with the 12 month average. I like charts in this format to smooth out the blips and show the trend. I have no idea where prices will be heading from here but even if they start to head back down I think its now inevitable that some inflationary pressure is there.

 

[invalid]

Perhaps this chart shows it better, its the year on year change of the 12 month average.

 

[DurhamBorn]

16 hours ago, Cattle Prod said:

Do you mean that is the 'lifting' cost, as in to get an ounce out of the ground, point forward? Or the all in cost of an oz from the get go?  If the miners are anything like the oilies, they won't stop producing at cost all in cost. If anything, they'll try to produce more to compensate for lost cashflow. In oil with point forward economics you pump like hell if you're above operational costs (as low as $8 a barrel in the north sea), even if you're below the all in cost per barrel of the asset more like $50 a barrel.

I'm guessing silver OPEX is lower than $10.50 so I wouldn't expext production to slow down, or stop. Speed up, maybe.

I'm seeing a loss of sentiment on this thread, which I'd consider strong hands. There is blood on the streets, which is of course is a good sign. We mustn't bleed out though.

I'd like to see a technical bottom in GDX, GDXJ and SIL. They may just trace out double bottoms, if NFPs force down the dollar tomorrow. But the bottom in late 2015 took weeks, or even months, to itll be a rocky road I think. I also noticed that the miners were shook out another 10% or so after the metals bottomed. If it was easy, everyone would be doing it.

The metals and the miners are in reversal range,but like you say trying to nail a bottom in the sector is a waste of time.The only indicator i use that is saying sell is the ALGO indicator that tracks momentum.The other 7 indicators are all pointing to a strong buy,so we will have to see if the ALGO turns last or not.I see the dollar 96.5 down to 92 in the next wave.The sentiment in the miners and the PMs is terrible at the moment and i like to see that.A lot of silver production is as a by-product mostly from copper miners.

[Hardhat]

AJ Bell a good platform to invest in GDX / GDXJ?

Bullion Vault, Royal Mint or physical for gold sovs / ozs?

[Castlevania]

3 hours ago, Hardhat said:

AJ Bell a good platform to invest in GDX / GDXJ?

Bullion Vault, Royal Mint or physical for gold sovs / ozs?

I use Goldcore for physical. Mainly as I can store it offshore.

[harp]

9 hours ago, DurhamBorn said:

The metals and the miners are in reversal range,but like you say trying to nail a bottom in the sector is a waste of time.The only indicator i use that is saying sell is the ALGO indicator that tracks momentum.The other 7 indicators are all pointing to a strong buy,so we will have to see if the ALGO turns last or not.I see the dollar 96.5 down to 92 in the next wave.The sentiment in the miners and the PMs is terrible at the moment and i like to see that.A lot of silver production is as a by-product mostly from copper miners.

9

Can you let us know when your ALGO turns please

[UnconventionalWisdom]

4 hours ago, Hardhat said:

AJ Bell a good platform to invest in GDX / GDXJ?

Bullion Vault, Royal Mint or physical for gold sovs / ozs?

I've got some gdxj on AJ bell in a lifetime isa. No problems. 

[Thorn]

There is no F-ing way people can just keep on Shopping and Borrowing. There isn’t space for any more Bigger Shinier PCP Cars out there- all the older ones are gone. 

More props my arse, I reckon.

I reckon its worth holding on very bloody tight to the old miners and pms, even if it’s a bit like wearing a tin hat under a table in the blitz at the moment.

So I’m tightening my chinstrap.

just sayin’.