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Credit deflation and the reflation cycle to come.


DurhamBorn

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47 minutes ago, sancho panza said:

Ergo,even though I don't own any check out HUI/GDX-have a feeling someone mentioned you can't buy them in the UK..

I've bought GDX through AJ Bell.

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11 hours ago, Barnsey said:

Highly likely 

Although this is if we see a sustainable, meaningful ongoing rise, not sharp panic rallies like yesterday, which were very common in the 2008-09 crash.

https://www.bloomberg.com/amp/news/articles/2018-12-26/richmond-fed-factory-gauge-falls-by-record-misses-all-forecasts

The 22-point drop from the prior month was the most in data going back a quarter century.

What's key about the Richmond Fed factory gauge is that the ISM usually follows it pretty closely, arguably the best recession indicator. So we're looking at a revision sharply downwards in the new year.

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Another U.S. centric point I'll make for those that say stocks aren't the economy, in 2018, Americans have more personal wealth tied up in stocks than their property, and this even exceeds the only other 2 occasions this was the case, 1968 and 1999.

Thanks go to Danielle Dimartino Booth formerly of the Dallas Fed for that stark reminder.

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2 hours ago, Barnsey said:

Another U.S. centric point I'll make for those that say stocks aren't the economy, in 2018, Americans have more personal wealth tied up in stocks than their property, and this even exceeds the only other 2 occasions this was the case, 1968 and 1999.

Thanks go to Danielle Dimartino Booth formerly of the Dallas Fed for that stark reminder.

Interesting stat there Barnsey,although could be due to the fact that stocks are more levitated than hosuing.Away from the major urban areas,hosuing hasn't really done a lot.

1 hour ago, azzuri82 said:

Anyone else read Denninger re: yesterday's rally, why it happened, and what's likely to happen over the next couple of weeks?:

see - https://market-ticker.org/akcs-www?post=234758

 

 

Thanks for posting.When KD had a wappy a few years back and stopped posting,I got out of the habit of reading him.

It reminds me of the oft made point about the way govts can change solvency ratios amongst pension funds so they have to buy more govt bonds.

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Mish post from the other day which gives an insight.

 

https://moneymaven.io/mishtalk/economics/499-out-of-500-s-p-500-stocks-rose-today-Gybxpr2N80qkLafhaJ9QlA/

499 out of 500 S&P 500 Stocks Rose Today

Every stock in the S&P 500 rose today with the exception of Newmont Mining (NEM).

In light of the above, let's do a short-term comparison of Newmont mining vs. the S&P 500.

image.thumb.png.484c24ae75455786f253a8d9a62ed6b2.png

That's just a short-term pattern. There is no reason to believe it will hold.

That aside, I was rather impressed with gold today in the face of a rising dollar and rising interest rates.

Mike "Mish" Shedlock'

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11 hours ago, sancho panza said:

German industry rolling over

image.png.4ff49acf99aee58783c5346e7630d468.png
image.png.dd3f588bd88ae03d6492d588d0be46a8.png
image.png.276ee03cb39add6a48e1b0ef532efb70.png
image.png.fa7ebaf30533f8e7fcd2b49d6a6b69ca.png

image.png.9d2d826b049b19b15e186555649bea42.png

I'll definitely get some exposure to DAX when the time is right, not for a while but could prove wise given their huge investment in robotic automation to offset demographic crisis.

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Democorruptcy
1 hour ago, Barnsey said:

I'll definitely get some exposure to DAX when the time is right, not for a while but could prove wise given their huge investment in robotic automation to offset demographic crisis.

May 2019 might see some wobbles in the EU?

Quote

 

The next European elections will take place in May 2019, less than two months after Brexit day, and never before have the elections been labelled so decisive by so many European leaders.

During his successful run for the French presidency, Emmanuel Macron cast himself as the leader of the anti-populist, pro-EU forces. His opponents are eager to join the battle. Matteo Salvini, Italy’s deputy prime minister and leader of the anti-EU League party, declared that the elections would be “a referendum between the Europe of the elites, of banks, of finance, of immigration and precarious work” versus “the Europe of people and labour”.

Hungary’s nationalist prime minister, Viktor Orbán, has said the vote will be a chance to say goodbye “not simply to liberal democracy … but to the 1968 elite”.

https://www.theguardian.com/world/2018/dec/28/how-rising-populism-could-shake-up-european-elections

 

 

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Germany should be getting ready for the violence and internal warfare that will eventually come from diversity.

Diversity = weakness and inevitably leads to massive violence and the destruction of empires.

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Bayer's a weird one. $40 billion takeover of Monsanto has gone badly wrong due to pending court cases - looks like it could end up taking both companies to the verge of bankruptcy.

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Ok. Some week. Still think there’s a crash ahead. But it’s fundamentals versus ‘Plunge Protection Crew’.

So I am going to hold on very tight to the Goldies and IBTL and watch for overall falls in the New Year with things rolling over the top of their hills even more...then switch into reflation assets when they start to turn up for sure...Once again thanks to DB for all this field craft which he has been sharing like a Navajo guide or something.

What does everybody else’s tea leaves tell them folks...?

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4 minutes ago, Thorn said:

Ok. Some week. Still think there’s a crash ahead. But it’s fundamentals versus ‘Plunge Protection Crew’.

So I am going to hold on very tight to the Goldies and IBTL and watch for overall falls in the New Year with things rolling over the top of their hills even more...then switch into reflation assets when they start to turn up for sure...Once again thanks to DB for all this field craft which he has been sharing like a Navajo guide or something.

What does everybody else’s tea leaves tell them folks...?

That I REALLY hope the plunge protection team and the other central banks keep doing a BANG ON job until I am back in Australia.

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Hi all, hopefully relevant to this thread...

I've seen IBTL mentioned on here quite a bit. I'd like to get a better understanding of the motives for buying it.

I suppose the obvious reason is exposure to the Dollar instead of Sterling. I'm assuming there's more to it that just the currency side though. Is it related to the probability of the Fed cutting rates again?

There was a link posted a few pages back about the yield curve. As I (barely) understand it, to lower interest rates the Fed would buy treasury notes to reduce the yield (fixed coupon). I think when that happens the whole yield versus time to maturity thing come into play and as such the price of longer dated treasuries - i.e. those in IBTL - would rise. So buy IBTL because lower rates force the price up?

That last part sounds a bit tenuous to me though. Am I over thinking it and it's just a currency hedge?

Side note on PMs - if I pretend I don't own any eldorado then my small miners portfolio turned green today for the first time.

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On 27/12/2018 at 14:58, Barnsey said:

This chart from the always excellent Sven Henrich (@northmantrader on Twitter), says it all really...

IMG_20181227_145623.thumb.jpg.5dedd4791ad1d688fdc68571fb0c1a15.jpg

For the benefit of non-experts could you explain what it means? I assume you mean the red and black lines next to the photo have dropped through the blue line. 

Firstly red and black seem always very close together but what are they? I found out SPX means S&P stock market index (per month) but why are there two together?

Secondly the blue lines seem almost but not quite connecting previous peaks/troughs but why?  The 2018 red and black lines haven't gone down any more than they have lots of times previously. Either they will continue to fall, or they will go back up again and if so the blue line will need to be redrawn a bit. How does that help? Why does it matter anyway I thought there was a "past performance is no indication of future results" thing with the stock market?

I followed the DB thread carefully ever since TOS and have learnt a lot from a real-world point of view and agree that all this debt just can't go on. Beyond that even though I opened an HL account I don't feel like putting any money into it at all. If there's a big crash then even I can get the message, buy cheap things in the right industries, but not just now the way nobody seems to know what's going on and anything seems likely day to day. 

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9 hours ago, 0x80 said:

Hi all, hopefully relevant to this thread...

I've seen IBTL mentioned on here quite a bit. I'd like to get a better understanding of the motives for buying it.

I suppose the obvious reason is exposure to the Dollar instead of Sterling. I'm assuming there's more to it that just the currency side though. Is it related to the probability of the Fed cutting rates again?

There was a link posted a few pages back about the yield curve. As I (barely) understand it, to lower interest rates the Fed would buy treasury notes to reduce the yield (fixed coupon). I think when that happens the whole yield versus time to maturity thing come into play and as such the price of longer dated treasuries - i.e. those in IBTL - would rise. So buy IBTL because lower rates force the price up?

That last part sounds a bit tenuous to me though. Am I over thinking it and it's just a currency hedge?

Side note on PMs - if I pretend I don't own any eldorado then my small miners portfolio turned green today for the first time.

The main reason to own treasuries is that they will likely rise by around 20% in a debt deflation.That alongside maybe 60%+ falls in the S+P.They wont default,so you will get your capital back when you need it from the most liquid asset in the world.You have to remember when someone has £300 million they lose the lot if the bank goes down.In a debt deflation return of capital becomes the no1 priority for most of the big money.As always it depends on an individual and how they want to structure their assets.

A lot of my miners are now green,the question is can they now follow through.Eldorado needs to probably flog some assets.Sinking capital into Greece only for the government to then stall the mines has cost them hard.Thats why its a sector where you want a good spread of companies.If gold does run the ones that 3x will make up for the odd one cut in half (or more).

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9 hours ago, 0x80 said:

Hi all, hopefully relevant to this thread...

I've seen IBTL mentioned on here quite a bit. I'd like to get a better understanding of the motives for buying it.

I suppose the obvious reason is exposure to the Dollar instead of Sterling. I'm assuming there's more to it that just the currency side though. Is it related to the probability of the Fed cutting rates again?

There was a link posted a few pages back about the yield curve. As I (barely) understand it, to lower interest rates the Fed would buy treasury notes to reduce the yield (fixed coupon). I think when that happens the whole yield versus time to maturity thing come into play and as such the price of longer dated treasuries - i.e. those in IBTL - would rise. So buy IBTL because lower rates force the price up?

That last part sounds a bit tenuous to me though. Am I over thinking it and it's just a currency hedge?

Side note on PMs - if I pretend I don't own any eldorado then my small miners portfolio turned green today for the first time.

Yeah, your understanding is correct. If you buy a 20y treasury yielding 3% per annum now and in one year’s time, expected future interest rates have fallen so that the equivalent interest rate on a 19y treasury is 2% then the value will have gone up. You’ll be collecting 3% per annum for the next 19 years when current market participants are willing to accept 2% for the next 19 years. 

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11 hours ago, wherebee said:

That I REALLY hope the plunge protection team and the other central banks keep doing a BANG ON job until I am back in Australia.

Do you own the Yellow metal???

v AUD

Screenshot at 2018-12-29 10:58:44.png

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Clueless Imbecile

Just wondering what people think about bonds & bond funds...

I've dabbled in PMs, PM Mining stocks and "reflation" stocks with a small percentage of my investment pot, based in inspiration from what's been discussed on this thread. However...

My main strategy is still similar to what Tim Hale describes in his book "Smarter Investing". I've got the low-cost equity index-tracker funds in my ISA, but the rest of my pot is in cash savings (earning little or no interest). If I'm following the strategy described in Tim Hale's book, then I guess I should be investing most of that cash in bond-funds (possibly some government bonds and some corporate bonds).

The thing that's holding me back is that I've been reading comments (for a few years now) suggesting that bonds are currently in a bubble and offer poor value. If I've understood it correctly, ZIRP & QE have inflated bond-prices thus reducing the yield (at least for fixed-interest government bonds), therefore making bond markets in general relatively expensive.

I suppose my options for bond investing are:

1) UK government bond fund

2) Overseas government bond fund (e.g. IBTL for US treasuries)

3) UK corporate bond fund

4) Overseas corporate bond fund

Are bonds still suitable for balancing out an equity portfolio?

I could just keep the rest of my pot in cash savings in the hope of investing it into the stock markets after a stockmarket crash, but the problem is; the crash might be a long time coming or might not be as severe as expected (or might not happen), and in the meantime my cash is being erroded by inflation. Not sure what to do?


Cheers,
Clueless Imbecile

Disclaimer: I am not an expert. Anything I post here is just my opinions, which may not be factually correct. My posts are intended purely for the purpose of debate and are not to be taken as advice. If you act on any of the above then you do so entirely at your own risk. I do not accept any liability.

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1 hour ago, Clueless Imbecile said:

Just wondering what people think about bonds & bond funds...

I've dabbled in PMs, PM Mining stocks and "reflation" stocks with a small percentage of my investment pot, based in inspiration from what's been discussed on this thread. However...

My main strategy is still similar to what Tim Hale describes in his book "Smarter Investing". I've got the low-cost equity index-tracker funds in my ISA, but the rest of my pot is in cash savings (earning little or no interest). If I'm following the strategy described in Tim Hale's book, then I guess I should be investing most of that cash in bond-funds (possibly some government bonds and some corporate bonds).

The thing that's holding me back is that I've been reading comments (for a few years now) suggesting that bonds are currently in a bubble and offer poor value. If I've understood it correctly, ZIRP & QE have inflated bond-prices thus reducing the yield (at least for fixed-interest government bonds), therefore making bond markets in general relatively expensive.

I suppose my options for bond investing are:

1) UK government bond fund

2) Overseas government bond fund (e.g. IBTL for US treasuries)

3) UK corporate bond fund

4) Overseas corporate bond fund

Are bonds still suitable for balancing out an equity portfolio?

I could just keep the rest of my pot in cash savings in the hope of investing it into the stock markets after a stockmarket crash, but the problem is; the crash might be a long time coming or might not be as severe as expected (or might not happen), and in the meantime my cash is being erroded by inflation. Not sure what to do?


Cheers,
Clueless Imbecile

Disclaimer: I am not an expert. Anything I post here is just my opinions, which may not be factually correct. My posts are intended purely for the purpose of debate and are not to be taken as advice. If you act on any of the above then you do so entirely at your own risk. I do not accept any liability.

It's a tough one. I too have read Tim Hale's book and threw it out afterwards as QE has changed everything, there are unprecedented changes ahead IMO, too risky to be complacent in index funds and bonds, you're going to have to work much harder for any decent returns ahead and think more dynamically. A range of multi-decade factors coming to a point, unfortunately all at the same time, if you believe that we're coming to the end of a 40/80yr debt super cycle like I do.

I have a pessimistic contrarian bias so really not in a position to recommend any course of action, but I would say the rules of play for past 40 years or so are about to be turned upside down.

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