Credit deflation and the reflation cycle to come.

[Errol]

Gold Market Update - the 7-year bearmarket phase is over...

https://www.clivemaund.com/gmu.php?art_id=68&date=2018-10-14

[Majorpain]

1 hour ago, Errol said:

Gold Market Update - the 7-year bearmarket phase is over...

https://www.clivemaund.com/gmu.php?art_id=68&date=2018-10-14

Probably slightly premature, but PM's were never going to stay hated forever.  3 weeks to US Midterms, they will hold it together till thats out the way surely?

[sancho panza]

8 minutes ago, Majorpain said:

Probably slightly premature, but PM's were never going to stay hated forever.  3 weeks to US Midterms, they will hold it together till thats out the way surely?

Very much my view.Hence cut some shorts last week.I think we'll get a relief rally possbily into Christmas and the NY....but the floorboards are beginning to creak.....

[Viceroy]

For those interested, the most recent overview from Armstrong on his private blog;

'The spectacular decline in the New York Stock Exchange last week seemed like a crash at first to most people, but a closer look reveals some global risks that are bubbling up on the surface. Closer analysis reveals that the US financial market crash was not really about interest rates or even a trade war with China. There have been the chorus of bears who have kept calling to the end of this high-altitude flight which they have refused to really acknowledge has been the most hated bear market in all recorded history. What is at stake here is total confusion. The primary disturbing underlying concerns have been the confrontational attitude of Democrats and their outright support of civil unrest, which they even fully know means more violence. They are preaching that they will raise taxes on the rich dramatically, lower everyone's healthcare costs, and create more jobs all simultaneously. By attacking the "rich" (defined as household income of $250,000) means they will target small businesses and that will not therefore create jobs. The only way to raise taxes and regulations on the "rich" and create more jobs requires governments to hire and that would only further the economic crisis ahead. 

We encountered a Superposition situation on the Weekly Level in the Dow which elected two long-term term Weekly Bullish Reversals against a Short-term Weekly Bearish. This tends to imply that we are not looking at a major crash just yet. The critical support lies at the 21600 level in the Dow and ONLY a closing on a monthly basis beneath that area would alter the short-term trend.

 

The NASDAQ peaked in August, the S&P500 in September, and then the Dow the week of October 1st. This clearly demonstrates that the domestic players were backing off and the new highs in the Dow were being driven by foreign capital inflows fleeing somewhere else and seeking safety.

 

When we look at the Euro, the US dollar peaked (Euro low) on August 15th, 2018.  However, the Euro has been unable to exceed even the breakout line and it has fallen back within the previous Downtrend Channel. This is technically a weak posture and resistance is forming at 11583 level and the Euro must rally back above this level to see a bounce back to the 119-120 zone. However, that requires a restoration of confidence in Europe which is also difficult to find.

 

In Europe, the European Central Bank continues the dangerous attempt to stifle reality by using cheap money to destroy the bond market. In the process, we have the steady undermining of the Merkel government in Europe ensuring she will eventually be thrown out with the dirty laundry and that will start the undermining of confidence in the EU as the refugee crisis has been the driving force. Meanwhile, Italy is in a confrontation with the EU which is applying Germany austerity which has undermined the Southern European economies, created the refugee crisis, and produced the lost generation of youth with unemployment at almost three times that of the US Great Depression.

The other economic areas, especially emerging markets, are coming under pressure and remain hopeless insofar as reversing the future. They took advantage of low interest rates to sell debt - particularly to pension funds, and they denominated that debt in US dollars to make the sales. So as the interest rates rise with the US dollar, Emerging Markets are simply tottering on the edge of a cliff with no hope of avoiding the fall. While Brazil has its political problems, its share market peaked in February 2018. It has staged a rally to retest the former highs, which is more of a reflection of the difference in the posture between Public (i.e. Government) and Private assets on a global scale.

The key is US interest rates, which are above 3 percent and this level now ends the 'low interest rate period'. We are now looking at the Fed raising rates that will reach 5%+ by 2020. They Fed is keenly aware of the pension crisis on the horizon. Then there is the US-Chinese trade war which has been escalating, yet will do more harm to China's economy than the United States.  

 

 It we bounce today on Monday in the DOW, and just exceed Friday's high, then the risk will be of a decline into the end of the week.

[Hardhat]

First 25 silver coins arrived from CoinInvest today.

I had to laugh as I held one in my hand, thinking how all this stuff I read online every day has now become reality...

[Wheeler]

10 hours ago, Hardhat said:

First 25 silver coins arrived from CoinInvest today.

I had to laugh as I held one in my hand, thinking how all this stuff I read online every day has now become reality...

Mine arrived yesterday too so that’s my Christmas presents sorted.

[Harley]

3 hours ago, Wheeler said:

Mine arrived yesterday too so that’s my Christmas presents sorted.

Smart.

I've asked Santa for this one:  https://www.coininvest.com/en/accessories/racing-bike-gold/

But as mr ousey says "Good down hill but going up hill is a killer"!

[Sasquatch]

Now in possession of a lovely shiny 'Two Dragons' gold britannia as below:

https://www.bullionbypost.co.uk/gold-coins/two-dragons/2018-two-dragons-one-ounce-gold-coin/

Not sure I'll be buying many more though. I suspect it will be easier to sell on silver britannia's in the future.

[Harley]

I assumed Coininvest was OK for all coins so was surprised when I saw (just a quick look):

https://www.royalmintbullion.com/Products/Sovereign/Gold/UKB18SVT

versus

https://www.coininvest.com/en/gold-coins/sovereign/sovereign-elizabeth-gold-coin-2018/

OK, a rather large amount to put down but the Royal Mint price compares well and UK postage is included for free.

Is Coininvest really only advantageous for VAT free silver?

[RickyBacker]

28 minutes ago, Sasquatch said:

Now in possession of a lovely shiny 'Two Dragons' gold britannia as below:

https://www.bullionbypost.co.uk/gold-coins/two-dragons/2018-two-dragons-one-ounce-gold-coin/

Not sure I'll be buying many more though. I suspect it will be easier to sell on silver britannia's in the future.

Nice buy, I've had my eye on this for a while hoping that the price would come down a little. May just bite the bullet as the price didn't move much even with the drop in spot.

[Wheeler]

1 hour ago, Harley said:

I assumed Coininvest was OK for all coins so was surprised when I saw (just a quick look):

https://www.royalmintbullion.com/Products/Sovereign/Gold/UKB18SVT

versus

https://www.coininvest.com/en/gold-coins/sovereign/sovereign-elizabeth-gold-coin-2018/

OK, a rather large amount to put down but the Royal Mint price compares well and UK postage is included for free.

Is Coininvest really only advantageous for VAT free silver?

Main advantage is for VAT free silver but the price for gold is also competitive. For example looking at a single 2018 QE2 sovereign:

coininvest £228 + postage

ATS Bullion £236 + postage (or collect for free if you are in London)

Royal Mint £238 postage free

The free postage would be quite valuable if you are ordering sovereigns by the kg !

[UnconventionalWisdom]

Doesn't provide much additional info but good to see others talking about a debt collapse/deflation.

 

https://dailyreckoning.com/pillars-debt-danger-of-collapse/

[sancho panza]

Wolf-Germany's in trouble.

https://wolfstreet.com/2018/10/16/us-china-trade-war-hard-brexit-exports-germany-zew/

'

US-China Trade War, “Hard” Brexit Give Germany Inc. the Willies

by Wolf Richter • Oct 16, 2018 • 25 Comments

No economy is as dependent on a trade surplus as Germany.

The Center for European Economic Research (ZEW) named names and pointed fingers: Its Indicator of Economic Sentiment for Germany in October dropped by 14.1 points, to a level of negative -24.7, matching July 2018, both the lowest levels since August 2012, when the Eurozone was still trying to not dig itself deeper into its euro debt crisis. The indicator has been in the red since April:

The indicator, which measures expectations for the German economy, is far below (47.5 points below!) the long-run average level of +22.8.

ZEW sees three reasons for the plunge in “economic and export expectations,” in order of priority:

1. “Above all” the “intensifying” US-China trade war. “The resulting negative expectations on German exports are now beginning to show in the actual development of exports.”
2. “The danger of a ‘hard Brexit,’ which is becoming ever more likely.”
3. “Last but not least,” political uncertainty in Germany: “The situation of the governing coalition in Berlin is perceived to have become more unstable.”

No economy is as dependent on its trade surplus as Germany: Ifo expects Germany’s trade surplus to account for 7.8% of GDP in 2018 (by contrast, the ballooning trade deficits in the US subtract from US GDP). In Germany, anything that threatens this surplus – including the US government’s impatience with endlessly ballooning US trade deficits – gives these financial experts the willies, as we’re seeing now. '

[sancho panza]

2 hours ago, UnconventionalWisdom said:

Doesn't provide much additional info but good to see others talking about a debt collapse/deflation.

 

https://dailyreckoning.com/pillars-debt-danger-of-collapse/

Great read.I think student loans here will only really start constricting growth as rates rise and the generation that owes £30k-£50k gets to start it's 25-54 raising kids era.Gonna be brutal in the US and UK.

'Overall Household Debt.

The state of household debt, which literally takes into account the combined debt within a given household, continues to flash red. According to a 2017 household financial survey by the Fed, “About one-quarter of U.S. adults have no retirement savings. And 41% say they would not have enough savings to cover a $400 emergency expense.”

The overall level of consumer debt has hit a new record. It’s now $618 billion higher than it was at its prior peak at $12.68 trillion during the third quarter of 2008 – right before the onset of the financial crisis.

Credit Card Debt.

The total of U.S. credit card loans has increased by $45 billion this year to a massive $829 billion total.

Despite cheap rates for banks, the average credit card interest payment rate is 15.5%. It was at 12.5% only five years ago. And, yet people keep borrowing.

The total revolving credit card debt now stands at a record of $1.04 trillion, higher than its last 2008 peak.

Borrowers have paid a painful $104 billion in credit card interest and fees in just the last year. That figure is up 11% from the prior year, and up 35% over the past five years.

 

Student Loan Debt.

During my meetings in Washington and with even media figures, student debt continues to be a central topic of concern. The fact is, student loans cannot be given bankruptcy status and therefore are much more complex when evaluating the U.S. economy.

Currently, the amount of student loans grew to $1.41 trillion in the second quarter of 2018. That figure has nearly tripled since the beginning of the financial crisis. Student loan debt is now the second highest consumer debt held.

That crippling amount of debt makes it harder for graduates to find jobs that will help them alleviate the costs of their education. It also means that those with student loans will have less money to deploy into the economy — which will impact economic growth overall.

 

Auto Debt.

Total auto debt in the U.S. has shot up to $1.24 trillion. That figure is up $48 billion from just a year ago.

The reason this sector is so important now is that a lot of loans being given are of the subprime variety. Subprime loans were the exact kind of high rate loans that caused the last financial crisis — only last time they were given to mortgage borrowers.

Auto loan delinquency rates are already higher now than they were during the financial crisis.'

[Hardhat]

I've got a student loan and I can't tell you how much I resent paying it...

[Majorpain]

27 minutes ago, Hardhat said:

I've got a student loan and I can't tell you how much I resent paying it... 

Its structured so its more of a graduate tax that the majority will never pay off, RPI +3% was outrageous and I got shot of mine ASAP.  I was only paying £3K a year however!

[Band]

2 hours ago, Hardhat said:

I've got a student loan and I can't tell you how much I resent paying it...

Get as much debt s possible to pay it off then go bankrupt ... get rid of any assets or put them in a trust whilst planning this.

[Cosmic]

1 hour ago, Majorpain said:

Its structured so its more of a graduate tax that the majority will never pay off, RPI +3% was outrageous and I got shot of mine ASAP.  I was only paying £3K a year however!

My sister asked me a few months ago about paying hers off as she savings (£0 housing costs due to being in the services), she was paying £1000 a year to stand still on the debt in her 30s... hell of a drag and I don't thinks he was paying £9k PA to attend either!

[Barnsey]

Stagecoach has just dropped below the 150p mark for anyone interested

[sancho panza]

1 hour ago, Barnsey said:

Stagecoach has just dropped below the 150p mark for anyone interested

Just had a butchers.Lot of debt relative to market cap.£200mn of goodwill/intangibles on the balance sheet and total equity of £200mn.

However...

Revenues flat over four years but share price down 60%.

Revenue is 3.7 times market cap

[sancho panza]

1 hour ago, Banned said:

Get as much debt s possible to pay it off then go bankrupt ... get rid of any assets or put them in a trust whilst planning this.

That's a strategy.

It is criminal that we charge our young folk 6.5% and RBS less than 1%.Risk markets are distorted beyond belief.

[Gordie Lastchance]

12 minutes ago, sancho panza said:

Just had a butchers.Lot of debt relative to market cap.£200mn of goodwill/intangibles on the balance sheet and total equity of £200mn.

However...

Revenues flat over four years but share price down 60%.

Revenue is 3.7 times market cap

I hope DB gets a "call of nature" at his new job and takes his phone into his cubicle to give us his current take. Back in the summer, he spoke highly of Stagecoach and I'm sure bought in. I think it suited his premise that the transports will do well in the next cycle. 

[sancho panza]

9 minutes ago, Gordie Lastchance said:

I hope DB gets a "call of nature" at his new job and takes his phone into his cubicle to give us his current take. Back in the summer, he spoke highly of Stagecoach and I'm sure bought in. I think it suited his premise that the transports will do well in the next cycle. 

Different sectors run on different metrics.I have zero/no experience of this sector.The share price/revenue trends indicate value.Balance sheet computer says 'no'.Revenue/market cap computer says 'yes'.

It's a low margin business but one that appears relatively stable.

I'm here to learn too.

[sancho panza]

Housebuilders getting pummelled again.

Other interesting roll overs occuring

Intercontinental Hotels/LSE/Ashtead/Easyjet/Ferguson/Hargreaves/Schroders/Whitbread

Also noticeable that luxry goods manufacturers have topped out eg l'Oreal/LVMH/Burberry

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

 

[UnconventionalWisdom]

35 minutes ago, sancho panza said:

That's a strategy.

It is criminal that we charge our young folk 6.5% and RBS less than 1%.Risk markets are distorted beyond belief.

It also says a lot about our society that not that many people actually know that's what young people are forced to pay (if so, where is the uproar). They just don't care about the future. Eventually, everyone with a brain will give up if the odds stack up even further against them.