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Credit deflation and the reflation cycle to come.


DurhamBorn

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14 hours ago, Cosmic Apple said:

If we get an up early-mid 2019 in those assets (mainly GDX, GDXJ) I'll take profits and wait for the dip. If it doesn't dip I'll still have skin in the game.

The danger, imho, is we go off to the printy printy races to early and there is no dip...

Well Russia and China think gold and silver is going up.. they are buying tons of it.. 

 

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6 hours ago, macca said:

Well Russia and China think gold and silver is going up.. they are buying tons of it.. 

 

No.

They backing out of dollar denominated/influenced assets.

 

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5 hours ago, Barnsey said:

Another good example of supposedly clever people overthinking things and getting it wrong.

'Sudden, severe stock sell-offs sparked by lightning-fast machines. Unprecedented actions by central banks to shore up asset prices. Social unrest not seen in the U.S. in half a century. '

Why try and beat machines?

Why not just ban automatic trading? They could come up with some BS like central bank testing of trading platforms.

The eraltiy is that, now ther's been a flash crash, some platforms will be traine to spot it and buy into the market.

Things adapt.

 

 

 

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9 hours ago, Barnsey said:

Thing is, the economy is going to roll over anyway in 2019 (housing already is), so it's all about creating stimulus room with rates now, and little to do with the mainstream narrative.

Basically doing what we (UK) should have done post 2008 to allow a financial tool to be used when you need it I.e.now?

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1 hour ago, MrXxx said:

Basically doing what we (UK) should have done post 2008 to allow a financial tool to be used when you need it I.e.now?

Powell is not a QE fan, having opposed it's extended use, however I'm pretty sure the US is going to do everything it can to prop things up when SHTF next year, even share purchases like Japan, slowly destroying $ in process over a number of years.

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https://www.thisismoney.co.uk/news/article-6427491/Supersized-mortgages-back.html

Quote

Some banks are lending as much as six times borrowers' salaries – rates branded 'irresponsible' and 'alarming' before the housing crash a decade ago.

Britain's super-sized mortgages revealed

Most banks currently have a maximum loan-to-income ratio of between x4 and x4.75 a homeowners salary. 

However, some mortgage providers are offering as much as SIX times borrowers' salaries:

  • Darlington Building Society x6 
  • Barclays x5.5
  • Santander x5.5
  • Sainsbury's x5
  • Virgin x5   

SOURCE: Moneyfacts 

 

Families are already a record £25billion in the red – equivalent to more than a fifth of the annual NHS budget.

With house prices soaring by a third in just five years, to an average of £233,000, mortgages are helping to push up debts to levels never seen before.

This week, Darlington Building Society launched a mortgage offering professionals up to six times their salary. It last offered loans for up to six times' income in 2007, just before the housing crash.

Barclays and Santander are also offering loans of up to 5.5 times income to high earners, while Clydesdale Bank offers the same rate for some newly-qualified professionals.

 

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UnconventionalWisdom

Piece on cost of gold vs production costs. Suggests we can't have a big, sustained crash in gold prices because, unlike most bubbles, the increase in the cost of energy needs to be factored in. 

https://srsroccoreport.com/analysts-totally-wrong-about-gold-top-gold-miners-production-cost-still-provides-floor-in-the-market-price/

While the debate on the dynamics of the gold market continues, at least the top gold miners production cost provides us with a floor price.  Or rather, a basic minimum price level.  I get a good laugh when I read analysts suggesting that the gold price will fall back to $450-$700.  For the gold price to fall back to $450, then we would need to lose 95+% of global gold mine supply.

Due to two factors of rising energy prices and falling ore grades in the gold mining industry, COSTS WILL NEVER go back to where they were a decade ago.  Again, the only way for that to happen is if a large percentage of gold mine production was shut down. 

 

 

Barrick-Newomnt-Production-Cost-vs-Gold-Price-768x548.png

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On 25/11/2018 at 16:31, Barnsey said:

When you say this DB are you suggesting that central banks will avoid stagflation?

The widely held view amongst macro contrarians (after a stimulus driven false bounce around 2021) seems to be a painful stagflationary period taking us up to 2025-27, ultimately leading to a monetary reset and possibly even de-dollarisation or at least some significant moves away from USD.

No stagflation,we will be in full on reflation.I see a massive currency collapse at the end of the next cycle and a disaster the like we havent seen before.The east will be a basket case.

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Talking Monkey
1 hour ago, DurhamBorn said:

No stagflation,we will be in full on reflation.I see a massive currency collapse at the end of the next cycle and a disaster the like we havent seen before.The east will be a basket case.

DB just to check I've got that right the East will be a basket case, i'm guessing the west will get a real good kicking in that collapse, or would the investment in infrastructure/green energy etc over the next 7-8 years see us ok. Then again how much infrastructure can actually be put in place in 8 years

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Bobthebuilder
4 minutes ago, Talking Monkey said:

DB just to check I've got that right the East will be a basket case, i'm guessing the west will get a real good kicking in that collapse, or would the investment in infrastructure/green energy etc over the next 7-8 years see us ok. Then again how much infrastructure can actually be put in place in 8 years

I think a lot of manufacturing will return from China. Whos gonna pay £14 for a model railway wagon from China when you can buy a better quality one from Wales for £9. (silly example but you get my point).

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On 25/11/2018 at 01:50, Barnsey said:

If you ploughed everything in now, you might see a temporary drop of max 35% across Gold, Silver, GDX and GDXJ but like you say the potential upside could be much, much greater.

Need to allow for currency movements.  Need to view PMs in GBP if that's what your bills are in!

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14 hours ago, spygirl said:

Another good example of supposedly clever people overthinking things and getting it wrong.

'Sudden, severe stock sell-offs sparked by lightning-fast machines. Unprecedented actions by central banks to shore up asset prices. Social unrest not seen in the U.S. in half a century. '

Why try and beat machines?

Why not just ban automatic trading? They could come up with some BS like central bank testing of trading platforms.

The eraltiy is that, now ther's been a flash crash, some platforms will be traine to spot it and buy into the market.

Things adapt.

 

 

 

I was thinking the exact same thing when I read that.  Definitely one would think that with some flash crash there would be plenty of opposing sides/ algos / strategies ready to profit somehow.  

I know nothing about quants and high frequency trading (as probably 99.999% of people) though.  I do wonder if in the future it's likely the programs will gain increased autonomy wider complexity in so far as getting to the stage where 0% of humans understand the machines decisions.  Maybe ban if in order then

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6 minutes ago, Dogtania said:

I was thinking the exact same thing when I read that.  Definitely one would think that with some flash crash there would be plenty of opposing sides/ algos / strategies ready to profit somehow.  

I know nothing about quants and high frequency trading (as probably 99.999% of people) though.  I do wonder if in the future it's likely the programs will gain increased autonomy wider complexity in so far as getting to the stage where 0% of humans understand the machines decisions.  Maybe ban if in order then

My take on it all (starting about 2008) is something like the big investment banks saying 'we don't care, we make money either way, but if you like we'll play along with asset prices not crashing -- but you're going to have to feed us'

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14 hours ago, Bobthebuilder said:

I think a lot of manufacturing will return from China. Whos gonna pay £14 for a model railway wagon from China when you can buy a better quality one from Wales for £9. (silly example but you get my point).

Its not prices, althought CHinese labour - the sor you can use for prductive, complex tasks, is more expesnive than the UK now.

Its he fact there's no qualit ythere. None at all. Unless you are making smething that relies on capital plant then you need to avoid CHina.

And theres a massive workign age population crash happening now.

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29 minutes ago, spygirl said:

Its not prices, althought CHinese labour - the sor you can use for prductive, complex tasks, is more expesnive than the UK now.

Its he fact there's no qualit ythere. None at all. Unless you are making smething that relies on capital plant then you need to avoid CHina.

And theres a massive workign age population crash happening now. 

Someone who worked on the refit of the Type 45 destroyers, with Chinese steel in places, remarked they looked in worse condition after 3 years than some of the 30 year old 100% British Type 42's.  Shaving a couple of % off the initial price to add on massive costs down the line is also a favourite tactic in construction!

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34 minutes ago, Majorpain said:

Someone who worked on the refit of the Type 45 destroyers, with Chinese steel in places, remarked they looked in worse condition after 3 years than some of the 30 year old 100% British Type 42's.  Shaving a couple of % off the initial price to add on massive costs down the line is also a favourite tactic in construction!

Simple.

Everything is done for political expediency/aims rather than following engineering process and QA.

Some princlings is major of some arsend of nowhere.

Thats where the steel plan goes, no economic or availability of skills come into it.

Princlings declares they are world beating production. Then they will be world beating production, no matter how much fails QA.

China manages the made of value destroying of the USSR but mixes with the most fucked up level of corruption.

Say what you like about the the USSR, you never saw the comrades lugging suitcases out of the USSR. OK they probably could not . but the point stands).

 

 

 

 

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4 hours ago, Majorpain said:

Someone who worked on the refit of the Type 45 destroyers, with Chinese steel in places, remarked they looked in worse condition after 3 years than some of the 30 year old 100% British Type 42's.  Shaving a couple of % off the initial price to add on massive costs down the line is also a favourite tactic in construction!

It's why nations should always retain domestic steel production - it is of vital security importance. In the event of war you simply have to have the skills domestically.

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Re-visiting the topic of Gold direction, as I don't want to have misled anyone previously (especially as I'm not personally in gold at this point), am I right in thinking that if this is indeed the 80 year deflationary bust, that PMs will fall initially in the sell off, however, if this is more of a standard (if there is such a thing) downturn, at least to start off with, that PMs will rally as safe havens?

Not necessarily due to liquidity issues, but just through sheer widespread panic deflation, this would cause a short term decline in gold/silver/miners?

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On 24/11/2018 at 08:43, Majorpain said:

Bit late that for that, i dread to think how much of the UK economy is based on "low monthly payments".  Housing, cars, TV's, phones, holidays, pets.....

Absolutely.We used to make stuff,now we jsut borrow money to buy junk and leverage our credit cards on our overleveraged hosuing marklet

On 24/11/2018 at 12:44, Barnsey said:

Caveat emptor DYOR not trading advice etc etc (seriously!)

My current expectations (which could change/adapt) based on a multitude of sources, along with the discussions we've had on here:

-Short term rally in $SPX and Gold following more dovish tone from Fed at Dec hike meeting and temporarily weaker DXY, confirms 2nd shoulder peak of current H&S pattern, during which time $TLT hovers around 112

-$SPX falls to 2100 in early 2019, possibly Spring, during which Gold heads to $1000, possibly $850. Silver $10. $TLT up to 150. If this is the big one, then will follow through to 1500 after summer, otherwise Fed intervention will accommodate a prolonged zig zag down well into 2020/1 just like 2000. Due to the huge corporate BBB bond risk, and lack of interest rate ammo, could well end up being another 2008 or worse.

-At the point where the Fed reverses course significantly (next Summer), this is the time to buy PMs and miners, along with a very small stash of Bitcoin *if* the future is somewhat protected and the price is in the low $100s.

-Late 2019 into 2020, start to buy back into FTSE 350 reflation stocks *only* when at or exceeding previous crash lows in areas such as telecoms, energy/renewables, transport, A.I., defense, value retail, consumer staples, healthcare

-Hold a balanced diverse reflation portfolio (with modest expectations) 2020 onwards, this is the blurry/scary part, looking to sell *everything* when reckless QE driven inflation causes a tipping point of social unrest, ultimately ending in some kind of global conflict to complete the Strauss-Howe fourth turning, 2025-27.

I say blurry as seeing many predictions of Kondtratiev Winter concluding 2021-22, so perhaps the few years of high inflation to follow will be the start of the new Kondtratiev wave which crosses the end of the fourth turning. Also seeing a lot of pushback on the reflation theory due to demographics, but surely huge debt deflation begets inflation?

I need a lie down xD

Some brave calls,but in gerenral

Agree,rally into Chriggy

Down in New year

Not sure the fed will reverse.US labour market is tight.

I think late 19/20 will eb buying time too.

On 25/11/2018 at 17:18, Barnsey said:

Expect a more dovish tone from Powell at FOMC meeting on 19th Dec, setting the scene for a rate pause as housing already rolling over quite significantly. A pause of 6 months or so and then abrupt policy reversal in the summer is well within expectations due to the dramatic pace of the unfolding deflationary bust early next year.

I'm not so sure.Powell was picked to undo the damage the neo Classicals had done imho.Trump wasn't daft.First non neo classical in charge of teh Fed for decades.

 

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On 26/11/2018 at 14:07, UnconventionalWisdom said:

Piece on cost of gold vs production costs. Suggests we can't have a big, sustained crash in gold prices because, unlike most bubbles, the increase in the cost of energy needs to be factored in. 

https://srsroccoreport.com/analysts-totally-wrong-about-gold-top-gold-miners-production-cost-still-provides-floor-in-the-market-price/

While the debate on the dynamics of the gold market continues, at least the top gold miners production cost provides us with a floor price.  Or rather, a basic minimum price level.  I get a good laugh when I read analysts suggesting that the gold price will fall back to $450-$700.  For the gold price to fall back to $450, then we would need to lose 95+% of global gold mine supply.

Due to two factors of rising energy prices and falling ore grades in the gold mining industry, COSTS WILL NEVER go back to where they were a decade ago.  Again, the only way for that to happen is if a large percentage of gold mine production was shut down. 

 

 

Barrick-Newomnt-Production-Cost-vs-Gold-Price-768x548.png

Gold rarely drops below production cost as you allude and production costs have risen over the last decade.

21 hours ago, Bobthebuilder said:

I think a lot of manufacturing will return from China. Whos gonna pay £14 for a model railway wagon from China when you can buy a better quality one from Wales for £9. (silly example but you get my point).

 

2 hours ago, Eventually Right said:

Potentially interesting blog post for those of us holding First Majestic:

http://angrygeologist.blogspot.com/2018/11/first-majestic-reserves-who-needs-them.html

Thanks

1 hour ago, Barnsey said:

Hmm...

autos.thumb.jpg.11367925b8021d1e73f7b19dda5777f8.jpg

Thanks to @M_McDonough on Twitter

Wolf had a post on car production t'other day.Tis a bit of a leading indicator imho

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