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Credit deflation and the reflation cycle to come.


DurhamBorn

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https://moneymaven.io/mishtalk/economics/record-bearishness-on-gold-as-commercials-go-net-long-fifth-week-bJKbnSLlr0u8xX4wFmEoEg/

'Record Bearishness on Gold as Commercials Go Net Long Fifth Week

https%3A%2F%2Fs3-us-west-2.amazonaws.com
 

Commercial traders are net long gold by the most in 17 years as hedge funds go increasingly short.

Commercial traders are net long gold. What's going on?

Some of the commercial traders are market makes who take the other side of trades and are hedged. The other portion of commercial traders are the metal producers.

The metal producers (mining companies) are always net short. That is how they sell product.

Small speculators are also net long. Thus the big specs (hedge funds) are short gold futures in record amounts even though the size of the bar appears insignificant.

Open Interest

https%3A%2F%2Fs3-us-west-2.amazonaws.com
 

Long and Short Positioning

The lead-in chart shows commercials are net long and hedged funds net short by small amounts.

But commercials are producers or hedgers, while speculators generally aren't, so a look only at "net" positions is misleading.

Short Squeeze Material

The yellow highlights above constitute positions that are subject to a huge short squeeze.

One can also say longs may bail, but if that happened in isolation, the overall bearish sentiment against gold would be even higher.

Gold Weekly Chart

https%3A%2F%2Fs3-us-west-2.amazonaws.com
 

Gold sentiment is even more bearish than it was before a major blast higher starting December 2015.

Record bearish sentiment of this nature by hedge funds is seldom rewarded.

Mike "Mish" Shedlock'

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13 hours ago, DurhamBorn said:

It shows the mentality of people doesnt it.All wanting to sell for a holiday,spending etc,no talk of i want to compound the dividends up.I bought some at £3.52,il buy more at £3.18 and £2.82.If i was those workers id be keeping the shares because a lot of them will lose their jobs going forward and they might be pleased of money to pay the bills rather than a holiday.Shame one of us wasnt a postie,"Im buying silver miners with the money" xD

That looks like you don't necessarily expect a significant drop on 11th (from £3.45 currently). 

If anyone can think of any examples of what happens when a very large section of shareholders get an option to cash out (share sale by employees would have taken a tax hit if sold before 11 October 2018), please share.

I expect a fall but that could be already priced in by now.  No arbitrage and all that.

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11 hours ago, Admiral Pepe said:

This is very much the case. An ETF/OEIC tracking the FTSE All-World has 5% allocation to FAANGs, whereas an ETF tracking the S & P 500 it will be 15%. 

I recommend reading (if you haven't already) Investing Demystified. Or just watch his short videos on youtube :D 

 

Hi AP,

Yes, I have read it, in fact I mention it in my Library thread in the Investments section...some good points but I found it very repetitive/laboured to read and could have been half the size.

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quote : For their part, Daya and Heyneke concluded in a separate note last month that “as the global economy and financial system have become more systemically leveraged, their sensitivity to changes in the cost of global capital has increased; hence, we believe the next downturn may be more serious than previous ones.”

https://www.bloomberg.com/amp/news/articles/2018-10-06/increased-dollar-dependence-sets-world-up-for-liquidity-crunch

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1 hour ago, MrXxx said:

Hi AP,

Yes, I have read it, in fact I mention it in my Library thread in the Investments section...some good points but I found it very repetitive/laboured to read and could have been half the size.

Totally agree on the book. The videos are really a good summary

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30 minutes ago, Majorpain said:

https://www.bbc.co.uk/news/business-45780726

Is this the China bubble starting to unravel?  4 times they have tried to pump some more cash into the economy this year.

Certainly the momentum of negative factors are building, things have changed for the worse since their stock crash in 2015 with no sign of improving over the next few months.

Also worth noting that trading in Italian Banks has been halted this morning after 5% falls.

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I'm intending to buy some more silver this week, probably from coininvest**

Any opinions regarding ease/pricing of future re-sale between coins and bars? I accept with the latter there will be CGT considerations. My coin purchasing to date has been Britannias which I imagine will be relatively easy to sell on later (to a dealer or privately). 

** did a bit of googling and a bulk purchase from goldcore (500 no. monster box) appears to be 5% cheaper than coininvest. Am I missing something?!

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ashestoashes
5 minutes ago, Sasquatch said:

I'm intending to buy some more silver this week, probably from coininvest**

Any opinions regarding ease/pricing of future re-sale between coins and bars? I accept with the latter there will be CGT considerations. My coin purchasing to date has been Britannias which I imagine will be relatively easy to sell on later (to a dealer or privately). 

** did a bit of googling and a bulk purchase from goldcore (500 no. monster box) appears to be 5% cheaper than coininvest. Am I missing something?!

I was going to ask the same question, goldcore reviews seem ok, anyone based in the UK had experience with them ?

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1 hour ago, Barnsey said:

Also worth noting that trading in Italian Banks has been halted this morning after 5% falls.

http%3A%2F%2Fcom.ft.imagepublish.upp-pro

The fuse is lit, can the ECB defuse it this time?

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47 minutes ago, Sasquatch said:

I'm intending to buy some more silver this week, probably from coininvest**

Any opinions regarding ease/pricing of future re-sale between coins and bars? I accept with the latter there will be CGT considerations. My coin purchasing to date has been Britannias which I imagine will be relatively easy to sell on later (to a dealer or privately). 

** did a bit of googling and a bulk purchase from goldcore (500 no. monster box) appears to be 5% cheaper than coininvest. Am I missing something?!

They only sell by the tube and have a much smaller range of coins available. Yeah, they’re good. Based in Ireland so they don’t pass your details onto any government if you buy more than x amount in a year.

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ashestoashes
1 hour ago, Barnsey said:

Certainly the momentum of negative factors are building, things have changed for the worse since their stock crash in 2015 with no sign of improving over the next few months.

Also worth noting that trading in Italian Banks has been halted this morning after 5% falls.

I think vodafone have invested heavily in Italian silver mines 

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1 hour ago, Sasquatch said:

I'm intending to buy some more silver this week, probably from coininvest**

Any opinions regarding ease/pricing of future re-sale between coins and bars? I accept with the latter there will be CGT considerations. My coin purchasing to date has been Britannias which I imagine will be relatively easy to sell on later (to a dealer or privately). 

** did a bit of googling and a bulk purchase from goldcore (500 no. monster box) appears to be 5% cheaper than coininvest. Am I missing something?!

I bought a monster box from them and had no problems at all... Well I say that they actually sent me some queens beasts by accident and 12oz short but they sorted it out quickly and sent the missing ones.  All the coins were brand new 2018 brits.  I'll be using them again but someone did post a european website which came in very slightly cheaper a few pages back,  i'll probs pay the slight premium for a UK company though.

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Alifelessbinary

I thought the video below provided an interesting insight into the Hunt Brothers trying to corner the silver market in the 70's and the subsequent fallout.

I love the fact that  the brothers held shooting competitions among cowboys on their Dallas ranch, with the winners riding shotgun on aeroplanes delivering bullion to a high-security vault in Switzerland!

 

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Alifelessbinary
1 hour ago, Sasquatch said:

I'm intending to buy some more silver this week, probably from coininvest**

Any opinions regarding ease/pricing of future re-sale between coins and bars? I accept with the latter there will be CGT considerations. My coin purchasing to date has been Britannias which I imagine will be relatively easy to sell on later (to a dealer or privately). 

** did a bit of googling and a bulk purchase from goldcore (500 no. monster box) appears to be 5% cheaper than coininvest. Am I missing something?!

I think you're best off buying the coin most recognised in your country, so in the UK that's silver Britannias.

Buying silver is the easy part it's the selling (at the right price) which causes the problems. Based on Demorruptcy's graph it shows that in a bull market silver prices seem to peak and then crash fast. If silver prices do shoot up then 1oz coins are likely to be the best bet, as they'll be the most liquid. Most people can afford to buy a couple of ounces of silver, but if prices 5 bag only a select minority will be in the market for 100 oz bars.

Most dealers will buy back bullion coins, but are much more picky with specialised proofs and will rarely buy them even if they sold them. That seems to prove that they think the high premiums are only justified in one direction!

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sancho panza
On 07/10/2018 at 00:51, Admiral Pepe said:

and how long could you be waiting for a Vodafone or Centrica to rebound after a rout? One might not even see the day it could be that long. You're betting on a specific case, who knows how anything will pan out. Can you beat the market? Would you really want to be in a particular managed/active fund which could be holding onto dogs indefinitely? Can you really pick that active manager that can beat the market? Perhaps, perhaps not.

disclosure:

I hold a global world market fund, Vodafone, Centrica and two gold etfs

 

 

That's not my point.With any form of investing,you pick your poison.All I'm saying is that when a downturn starts,mechanical selling begets mechanical selling.We have a market here where as you allude,some ETF's are going to be doing a lot more selling than some others...possibly at the same time.

You also have the issue of withdrawals.When a property fund faces withdrawals -ass in 08-,it can shut the door on them for a while to sort out it's liquidity issues.With ETF's,I'm not sure how it would work out,but if people start heading for cash,I presume selling assets will fund it.


I think it's akin to the issue of FRB,where credit expansion beget credit expansion as balance sheets become firmer(on paper).The reality is that the amount of capital underpinning said balance sheet may not have strengthened as much as the balance sheet has if you get my drift.

As DB says,most of the time it';s not an issue.However,at the minute, there's a lot of FTSE 100 shares heading through long term trends lines heading south.S&P not so much.

In terms of being able to hedge downside risk,it does depend on whether you have the capital to buy the shares yourself,if you have then it's an option I guess.

 

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sancho panza
On 07/10/2018 at 11:39, DurhamBorn said:

My small business is online retail and iv used all the Parcel companies and i now use Parcelforce 90% of the time and sometimes APC.Their booking and tracking is now fantastic,they carry more sizes than most,and in 800 parcels this year iv only had 1 problem and that was more the customer.No other courier company does letters,or small packets.Thats the key.APC deliver my parcel for £7 only one in the street.Royal mail deliver probably 3 little parcels,6 packets and 15 letters into the same street.Thats why RM have such strong free cash flow compared to other couriers who mostly make close to nothing.

It's thin margins these days.I had to send some stuff to SA and used UPS.Super service for very little,tracked all the way.

By the way,when I was a posty in the 90's,those random leaflets delivered with the mail were worth 1.6 pence each.Some rounds had three per week being delivered to 500+ houses each week.In my postcode we had 50 rounds so circa £24 per round per week=£1248 per year virtually all profit.Obviously rural areas profit would be less

6 hours ago, confused said:

quote : For their part, Daya and Heyneke concluded in a separate note last month that “as the global economy and financial system have become more systemically leveraged, their sensitivity to changes in the cost of global capital has increased; hence, we believe the next downturn may be more serious than previous ones.”

https://www.bloomberg.com/amp/news/articles/2018-10-06/increased-dollar-dependence-sets-world-up-for-liquidity-crunch

I think that's very turue.That smaller IR hikes will cause way more damage than in the past.

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sancho panza
4 hours ago, Majorpain said:

https://www.bbc.co.uk/news/business-45780726

Is this the China bubble starting to unravel?  4 times they have tried to pump some more cash into the economy this year.

Well,we know it's leveraged to the hilt...........it will happen at some point.Eventually,monetary policy becomes redundant and the CB's are pushing on a string if demand drops off.They can make credit cheap,but they can't make punters load up on risk,..

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sancho panza
4 hours ago, Barnsey said:

Certainly the momentum of negative factors are building, things have changed for the worse since their stock crash in 2015 with no sign of improving over the next few months.

Also worth noting that trading in Italian Banks has been halted this morning after 5% falls.

On full time child care today so getting my news through here while the kids have a snooze.Thanks for the upodate.

https://www.investing.com/indices/investing.com-uk-100-components

Just checking the FTSE and there are some humdinging falls going on.

Quite a few more shares look likely to cross over long term indicators soon>Lot of housebuilders already have over last year,CRE was rolling over two years ago-eg Land Sec,General retailers too.some financials eg Prudential,Schroders,commodity stocks seem to be in the rolling over process.Interesting times.

 

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59 minutes ago, sancho panza said:

On full time child care today so getting my news through here while the kids have a snooze.Thanks for the upodate.

https://www.investing.com/indices/investing.com-uk-100-components

Just checking the FTSE and there are some humdinging falls going on.

Quite a few more shares look likely to cross over long term indicators soon>Lot of housebuilders already have over last year,CRE was rolling over two years ago-eg Land Sec,General retailers too.some financials eg Prudential,Schroders,commodity stocks seem to be in the rolling over process.Interesting times.

 

Same thing with housebuilders over in states since start of the year, very steep drop in past 2 weeks could be a strong sign.

Bought some more Centrica, will get some VOD soon as not far off my target. Possibly some Nat Grid. Can't really justify buying any others at the moment, RM tempting but unsure of how much potential downside. Would like some BT and SSE along with Stagecoach and Go Ahead but will pick them up in the crash. Also not sure about how much to put into Silver on bullionvault, average in monthly at low amounts I think from here.

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17 minutes ago, georgist said:

FTSE is looking kinda fooked lately, no?

6 month view somewhat vertiginous: https://finance.yahoo.com/quote/^FTSE

With strong USD and CAD both stepping up to rate rises and BoE unable to do anything this is feeling like UK is in a right pickle.

Strong USD may not be so strong going forward, belief creeping in that Sept hike might have been it, DXY 96 call still looking legit if housing market in States continues to head downward with increasing momentum, GS reigning in its online lending another sign of stress. Bear market shares to be found within the FTSE (mentioned on here repeatedly) but have to be very selective, otherwise I'm staying clear, far too much exposure to banking and services.

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