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Credit deflation and the reflation cycle to come.


DurhamBorn

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3 hours ago, Barnsey said:

S&P might be going up, but if oil closes down yet again today (day 10) it'll be the longest streak of daily red closes in history!!! This as USDCNY heads back up towards 7. The signs are becoming Vegas sized billboards.

Barnsey,do me a favour and connect the dots above for those of us scratching our heads re the significance of dropping oil and rising USDCNY please.

Is it inflation related?

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1 hour ago, sancho panza said:

Barnsey,do me a favour and connect the dots above for those of us scratching our heads re the significance of dropping oil and rising USDCNY please.

Is it inflation related?

Falling forward demand for oil as actual contraction (or loss of growth occurs), USD strength - hawkish FED, rates are going up despite recent stock market wobbles, the FED is going to carry on regardless.

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2 hours ago, sancho panza said:

Barnsey,do me a favour and connect the dots above for those of us scratching our heads re the significance of dropping oil and rising USDCNY please.

Is it inflation related?

No problem, oil has fallen into a bear market, and if it closes red today, will be worst losing streak *on record* (just think about that for a second), suggesting the global recession is pretty much here and about to go bang. Just a few weeks ago many were predicting $100, WTI has dropped below $60, I believe DB was expecting $20, many estimates looking for at least a fall to $40.

As for USDCNY reaching 7, it's a key psychological level, if broken all hell breaks loose in emerging markets, worse than we've already seen (MSCI emerging markets index futures down 5% in last 2 days this week), also correlated to Gold of late, so keep a close eye on how the two are inversely related until the "yuan peg" ends.

Also, 10/2yr yield curve has resumed flattening after yesterday's FOMC meeting

https://fred.stlouisfed.org/series/T10Y2Y

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11 hours ago, DurhamBorn said:

S+P might go to 3300+ in a blow off top.The industrial's,Semi-conductors and the PM miners should be the big winners from here until the bear really gets going. 

I will keep a close eye on them in the near future thanks, the market flipping between fear and greed is making my head spin! 

11 minutes ago, Barnsey said:

No problem, oil has fallen into a bear market, and if it closes red today, will be worst losing streak *on record* (just think about that for a second), suggesting the global recession is pretty much here and about to go bang. Just a few weeks ago many were predicting $100, WTI has dropped below $60, I believe DB was expecting $20, many estimates looking for at least a fall to $40.

As for USDCNY reaching 7, it's a key psychological level, if broken all hell breaks loose in emerging markets (much worse than we've seen already), also correlated to Gold of late, so keep a close eye on how the two are inversely related until the "yuan peg" ends. 

Midterms are out the way, next few months would be ideal for Trump if the blame for the next crash could be placed on another (any) country... 

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5 minutes ago, Majorpain said:

Midterms are out the way, next few months would be ideal for Trump if the blame for the next crash could be placed on another (any) country... 

Interestingly, his arch nemesis, Maxine Waters, will head the house financial services committee in January, very pro Dodd-Frank. Going to get very heated, and this'll be after the Dec hike and into January buyback blackout period :ph34r:

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8 minutes ago, Barnsey said:

Interestingly, his arch nemesis, Maxine Waters, will head the house financial services committee in January, very pro Dodd-Frank. Going to get very heated, and this'll be after the Dec hike and into January buyback blackout period :ph34r:

That would be "low IQ" Maxine. xD

Gets to oversee the banks at long last, the perfect fall-guy for Trump to pin the blame for their crashing on!

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Democorruptcy

SSE was on the back foot on Friday after the energy firm said its merger with npower will be delayed as the two parties renegotiate terms following the government's introduction of a price cap. SSE and npower owner Innogy SE said late on Thursday that they are working together regarding potential changes to the terms of the proposed combination.

Discussions are expected to take place over several weeks, with an update on progress provided by mid-December. As a result, completion of the merger will be delayed beyond the first quarter of next year, but the companies said all work to seek to achieve the formation and listing of the new company will continue.
 

https://www.hl.co.uk/shares/shares-search-results/s/sse-plc-ord-50p/share-news

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6 hours ago, Barnsey said:

Interestingly, his arch nemesis, Maxine Waters, will head the house financial services committee in January, very pro Dodd-Frank. Going to get very heated, and this'll be after the Dec hike and into January buyback blackout period :ph34r:

Can someone explain what the buyback blackout is and who governs it...thanks.

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A bit corny but maybe an inverse head and shoulders on the S&P, giving us that nice run up in December after maybe a bit more of a fall here:

Capture.thumb.PNG.52faf9ff03d1a849d0bba3a752b82213.PNG

Or completion of a double top at strong resistance!!!

Bit of a hunkering down with a rotation from equity and precious metals into long and short (mainly US) bonds today.

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Talking Monkey
20 hours ago, DurhamBorn said:

S+P might go to 3300+ in a blow off top.The industrial's,Semi-conductors and the PM miners should be the big winners from here until the bear really gets going.

Hi DB is that a potential blow off before Christmas, I'm guessing if it doesn't happen by say January it is not going to

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Bobthebuilder
30 minutes ago, Harley said:

A bit corny but maybe an inverse head and shoulders on the S&P, giving us that nice run up in December after maybe a bit more of a fall here:

Capture.thumb.PNG.52faf9ff03d1a849d0bba3a752b82213.PNG

Or completion of a double top at strong resistance!!!

Bit of a hunkering down with a rotation from equity and precious metals into long and short (mainly US) bonds today.

A Santa rally would be nice. Im amazed how well my port has held up so far. looking to cash in some bubble at xmas, if we get that far.

 

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14 hours ago, Barnsey said:

S&P might be going up, but if oil closes down yet again today (day 10) it'll be the longest streak of daily red closes in history!!! This as USDCNY heads back up towards 7. The signs are becoming Vegas sized billboards.

Thanks for mentioning oil.  It reminded me that I'm not covering the commodity space (used to years ago to great effect).  The WTI chart is a lesson in a cascade fall with numerous suckers rallies.  Now some 21% off its high!  Something to pin to the wall to remind me to never get too clever!

Capture.thumb.PNG.1230b923a2b60156f797a6afc841b7f0.PNG

Need heating oil to catch up as I've a half empty tank!

So wish I had been watching and bought an inverse ETF (the x3 one is 35% up since early October).  Lesson learnt!

And they were yapping about $100 oil.  Classic DYOR data versus talking heads.

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57 minutes ago, Harley said:

Thanks for mentioning oil.  It reminded me that I'm not covering the commodity space (used to years ago to great effect).  The WTI chart is a lesson in a cascade fall with numerous suckers rallies.  Now some 21% off its high!  Something to pin to the wall to remind me to never get too clever!

Capture.thumb.PNG.1230b923a2b60156f797a6afc841b7f0.PNG

Need heating oil to catch up as I've a half empty tank!

So wish I had been watching and bought an inverse ETF (the x3 one is 35% up since early October).  Lesson learnt!

And they were yapping about $100 oil.  Classic DYOR data versus talking heads.

Just confirmed WTI settles down for 10th consecutive day, a new record losing streak since contract was launched 35 years ago, yes 35 years!!!

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10 hours ago, onlyme said:

Falling forward demand for oil as actual contraction (or loss of growth occurs), USD strength - hawkish FED, rates are going up despite recent stock market wobbles, the FED is going to carry on regardless.

Thanks both for the explanations.

10 hours ago, Barnsey said:

No problem, oil has fallen into a bear market, and if it closes red today, will be worst losing streak *on record* (just think about that for a second), suggesting the global recession is pretty much here and about to go bang. Just a few weeks ago many were predicting $100, WTI has dropped below $60, I believe DB was expecting $20, many estimates looking for at least a fall to $40.

As for USDCNY reaching 7, it's a key psychological level, if broken all hell breaks loose in emerging markets, worse than we've already seen (MSCI emerging markets index futures down 5% in last 2 days this week), also correlated to Gold of late, so keep a close eye on how the two are inversely related until the "yuan peg" ends.

Also, 10/2yr yield curve has resumed flattening after yesterday's FOMC meeting

https://fred.stlouisfed.org/series/T10Y2Y

 

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9 hours ago, Majorpain said:

That would be "low IQ" Maxine. xD

Gets to oversee the banks at long last, the perfect fall-guy for Trump to pin the blame for their crashing on!

I've said for a while That I beleive Trump wil taek the credit fro dropping Wall St to ensure a win in the rust belt coem 2020.

 

36 minutes ago, Barnsey said:

Just confirmed WTI settles down for 10th consecutive day, a new record losing streak since contract was launched 35 years ago, yes 35 years!!!

Wow...impressive.

6 minutes ago, Thorn said:

http://truecontrarian-sjk.blogspot.com/2018/10/investment-success-doesnt-come-from.html

Bear markets tend to be badly misunderstood.

 

If you were to ask most investors about bear markets then they would give wildly inaccurate responses based upon their emotional memories rather than fact. For example, the bear market of 2007-2009 was the most severe since the Great Depression. It began with the Russell 2000 completing a double top with nearly matching highs on June 1, 2007 and July 9, 2007. Many other U.S. equity indices topped out later as they often do, with the S&P 500 reaching its highest intraday point on October 9, 2007 while the Nasdaq did likewise on October 31, 2007. The U.S. stock market experienced several sharp plunges during the first part of its bear market and rebounded sharply after each one. By the middle of August 2008, roughly 14-1/2 months after the Russell 2000 had ended its uptrend, most investors had no fear of an extended downtrend and thought that we were still in a bull market. This was true even into early September 2008. Only after the huge collapse from the 1303.04 intraday peak for the S&P 500 on September 3, 2008 through its November 21, 2008 intraday bottom of 741.02--a total plunge of more than 43%--did investors finally wake up and realize what was happening which of course was far too late to be able to sell at favorable prices. Not that this stopped anyone, as we had all-time record outflows from most U.S. equity funds during the lowest points in the fourth quarter of 2008 and the first quarter of 2009 when for two weeks the S&P 500 was trading below its November 2008 bottom.

The Russell 2000 Index and VIX have been demonstrating classic signs of a sharp "surprise" recovery for stock markets worldwide.

 

The Russell 2000 Index consists of U.S.-headquartered companies 1001 through 3000 in total market capitalization. This is in contrast to the much more widely-followed S&P 500 Index which represents companies 1 through 500 in total market capitalization. While almost no one tracks the Russell 2000 unless they own it in the form of a fund such as IWM, it is important because it serves as a valuable leading indicator. In 2007 and 2018, as well as in past bear-market preludes including 1929 and 1972, mid- and small-cap U.S. stocks began to decline more substantially than their larger-cap counterparts as a warning that a major bear market was beginning. Look at how the Russell 2000 or IWM behaved after August 31, 2018 versus the S&P 500 or SPY over the same period of time. Indeed, I had pointed this out in my last update and some readers dismissed it as being unimportant--just as they had done in prior bear markets. The Russell 2000 following its high on August 31, 2018 has dropped far more than the S&P 500 until recent days when it has been more energetically recovering from intraday lows and reversing its previous underperformance to outperform most other U.S. equity indices. If this outperformance continues then it will confirm that a rebound is imminent and will likely intensify. At some unknown future point the Russell 2000 will start underperforming again over a period of weeks and this will tell us that it is time to do some selling in preparation for the next downward wave. Since we are likely in a severe bear market for U.S. equities, any downward wave could become the "big Kahuna" and must therefore be respected. However, since everyone now is worried about a big drop, we will end up with some big up days instead until once again investors have lost their fear of potential significant losses. While we will surely have some sharp short-term pullbacks whenever investors are becoming overconfident, we will not likely resume the bear market until some point in early 2019--and perhaps later in 2019 if it takes time for investors to become fully complacent once again.'

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8 hours ago, Cattle Prod said:

For once, I managed to hold off and avoided the suckers rallies Harley pointed out. I'm tempted to say "I'm learning something" but we'll see! There was waves of negative sentiment this week that just got me excited again. I'm not calling a bottom, but oil tends to be V shaped and very hard to catch. So I'm just happy to have a position open. Particularly into the weekend, I look forward to Monday to see what they've cooked up.

Going to bounce $5 rather quickly I'd imagine 

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9 hours ago, Cattle Prod said:

$100 oil is guaranteed, and $200 is probable, in the reflation. I still expect c.$90, maybe over $100 oil early next year, most likely pricking a blow off top in equities and other bubbles.

I've opened a long Brent position today, and will be holding till next year, I'm delighted to have this opportunity. I thought I was out. I'll staircase down as necessary.

The fundamentals of supply and demand have not changed. Paper oil is exiting the market, as it needed to. It was too unbalanced. They have bought the oversupply narrative, and are running for the exits. It has shocked me how stupid and reactive these people are. But people are people, and are like a herd of cattle.

Oversupply. What we have just seen is the world, ie Saudi Arabia and OPEC, pumping at full capacity. Its never happened before. There is no spare capacity, currently. One bomb in KSA and you'll have $100 oil tomorrow. Trump/US has pressured KSA to pump along with selling SPR oil and effectively lifting sanctions on Iran to engineer this. Just look at the decline curve! It's nigh on perfect.

In the meantine, Permian depletion rates are approaching new production. When those lines cross, you get a plateau, then irreversible decline.  As I ssid before, the price of oil is perception of supply (and to a lesser extent, demand). Traders currently perceive US oil production to be jumping 400kbpd per month (it will be revised down retrospectively), Saudi turning on the taps and Trump reversing on Iran. For the US as the new limitless supply, perceptiom is driven by the Permian. A single play in crap rock in West Texas, that has never made any money. Markets...

No one has even mentioned that the Saudi minister has openly admitted, for the first time ever, that they have no spare capacity. When that is perceived by all those yahoos in clown suits in Chicago, New York and London, you will have triple digits.

Technicals are turning (e.g oil behaves well with RSI), so I'm in. As DB says, its become hated again. 

DYODD, I'm just stating what I'm doing as I've commented on this before.

Thank you for an interesting post. Not that I'm personally going to open a position, however, out of curiosity what did you buy?

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18 hours ago, Talking Monkey said:

Hi DB is that a potential blow off before Christmas, I'm guessing if it doesn't happen by say January it is not going to

By late spring id guess.A lot depends on if the Fed give out less hawkish vibes and that spurs things up and then the Fed tighten again into that.I fully expect the PM miners to run very hot through the last stages of the equity bull and as it moves through the early stages of the bear.Usually the industrial and semi conductor sectors experience a final blow out run.I think thats likely along with the PMs.

The UK market is interesting as we have already been smashed down (huge falls in sterling terms in many stocks) so we might see some sectors do ok (having already fallen hard over several years) while others tank.

Stair case in to decent quality companies with good free cash flow is how im doing things at the moment.Most of what im slowly buying is down 50%+ from highs.Outside of the PM miners id be happy if i ended up under water 15% when things turned back around at some point.

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18 hours ago, Cattle Prod said:

$100 oil is guaranteed, and $200 is probable, in the reflation. I still expect c.$90, maybe over $100 oil early next year, most likely pricking a blow off top in equities and other bubbles.......

Yes, it's guaranteed given it's finite and shale is a very short term fix.  US oil independence, don't make me laugh.

But one has to get the direction and timing right.  Fact is the heads have been saying $100 oil before and during this fall and listening to them would have cost people.  Makes you wonder if it was deliberate.

But then it's about time lazy didn't pay but hard work with the DYOR did.  Volatility is my friend.  It pays the bills.  The turn will come as it always does and I hope I'll be there, data permitting.  It certainly looks close.

This one is personal as I use heating oil so am looking for any hedges I can as I see large price increases to come.  I may well be about to be given the golden one in this particular area given the recent price action.

Indeed I've just had my first buy signal for a producer on Friday.  An unconfirmed weekly and I got a contradictory daily one for an airline so may hold off just a bit but yes, there will be a turn.

I'm working other hedges too such as in the renewable space.

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18 hours ago, Cattle Prod said:

No one has even mentioned that the Saudi minister has openly admitted, for the first time ever, that they have no spare capacity.

Those in the know have known this for quite a while.  So he can easily admit it now, indeed would lose all creditability if he continued to say anything else.  Plus the drilling techniques have become more extreme to seek out marginal reserves.  Plus existing reserves have been massively overstated for years.

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17 minutes ago, Cattle Prod said:

I like your point about heating oil. It's like @sancho panza haggling over a shirt while handling the swings in investing just fine!  I didn't think much about the hedge, but I bought a nice second hand plugin hybrid last week. I have enjoyed saving £10 on petrol as much as any investment win.

Hedging commodities is hard.  Futures are a short term fix.  I know through trading oil warrants for several years.  The convention is to buy the producer equity but that technically may not be that good, hence the need to look for other hedges.  My first stop regarding heating is to reduce consumption through insulation, etc, then the use of economic complementary tech (bio and air source), then financially invest in renewables, of which there now some interesting investment vehicles.  Hot water is small fry and vehicles at least seem to be making an effort.  You need the same heat though!  Tough one.

PS: bio includes buying the woodland!  Planted a few hundred trees last year!

PPS: Maybe I need to have a discussion with my heating oil supplier to understand how they buy and hedge so I buy at the right time!  

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