Credit deflation and the reflation cycle to come.

[sancho panza]

1 minute ago, Cattle Prod said:

So Palladium has gone parabolic. I appreciate physical shortages, but I saw the same thing with silver not so long ago. I've started shorting it, as a hedge on my other PMs. Timing, as ever, is everything, and being perenially early means some pain. But apart from being massively overbought, I don't see the fundamental case with car sales dropping off and a recession ahead.

I trade via IG quite a bit at the mo,but hats off to you for picking on a commodity like Palladium,I stick to mundane stuff like UK housebuilders..............but if you want to beat the market,you've got to take a risk.

I had a brief look at cable the other day and a few other currencies,but my oh my,the whipsaws will kill you.

What's your take on the current oil price while you're around?

[sancho panza]

https://moneymaven.io/mishtalk/economics/recession-signal-getting-louder-5-year-yield-inverts-with-3-month-yield-8tUX3o-Iw0mC4AwUXLgnKA/

The yield curve is inverted in 11 different spots. The latest is 5-year to 3-month inversion.

The yield curve recession signal is louder and louder. Inversions are persistent and growing.

Let's compare the spreads today to that of December 18, the start of the December 2018 FOMC meeting.

Spread Changes

• Yellow: Spreads Collapsed Since October (1 Month to 5 Years)
• Pink: Spreads Remained Roughly the Same (7 Year)
• Blue: Spreads Increased (30-Year and 10-Year)

Something Happening

Something is happening. What is it?

Possibilities

 

1. The bond market is staring to worry about trillion dollar deficits as far as the eye can see
2. The bond market has stagflation worries
3. The bond bull market is over or approaching

My take is number one and possibly all three.

An in regards to recession the economy is weakening fast.

• Housing Starts: Yet Another Unexpected Thud, Down 11.2 Percent
• Home Resales: Existing Home Sales Down Again: -1.2% Month Over Month, -8.5% Year-Over-Year
• Industrial Production: Industrial Production Dives, Wiping Out a Strong December and Then Some
• Retail Sales: Shockingly Weak Retail Sales: Down 1.2% in December, Sharpest Decline Since 2009

Mike "Mish" Shedlock

[sleepwello'nights]

4 hours ago, Barnsey said:

So you know the truism: there are two types of CEO. those that fail and those that get out in time.

[sancho panza]

1 minute ago, Cattle Prod said:

Tricky one Sancho. I have the very same thesis on the supply side. Saudi overproduced to the point of damaging their fields, and backed off to around 9.5 as I suggested. Shale is creaking, but Permian still hasnt peaked. Signs of well density problems though. There is no other large supply on earth and we will see $200.

Under normal demand growth.

I'm seeing a bear market and recession much sooner than I thought, probably already started. So I'm largely out of oil hoping for a bear market price. Critical zone on S&P now and if it doesnt hold thats it. I'll hold cash and buy oil when theres blood on the streets.

If they manage to engineer a new high there could be another oil spike this year, but I dont have the conviction for it like I had last year or in 2017. I just have some juniors and divi majors. And am short the S&P. I see you like Hussman, I note he's held off on going short, just, so I should probably pull my horns in :-)

Thanks for the update re oil

 

Re Hussman-yes,I do,very much so.Been right more than most but unlike Harry Dent hasn't called 30 of the last two market crashes.

 

Re the S&P.I had a cracking year shorting last year.Took money off going into Dec as the markets seemed massively oversold by several measures.I mention this not to blow my own trumpet but more to qualify what and where I think we are.Like you, I've moved some shorts back on the table in Feb and have been in the red for a couple of weeks-which for me is quite normal as I ladder into my shorts just like I ladder into longs).It does appear like there's a real battle around some of the longer term moving averages which means market lacks direction to me..We've yet to see a defineable peak in the momo indicators I use .........

But...this bull is long in tooth...the fundamentals are much worse than they were in Aug/Sept when the Russell 2000/S&P/DJI peaked.I think the US may already be in recession(I don't really like using GDP as a measure because of it's flaws) looking at the way retail is collapsing and the hot money housing markets are peaking out.I'm looking at an S&P chart as I write and that post Christmas rally appears to be fading.

Decl-Currently short Boeing,Netflix,UK builders and finance co.s.Like you,long cash and some divi payers.Waiting to add ENI 

 

[sancho panza]

VIX at 15

[Majorpain]

59 minutes ago, Cattle Prod said:

So Palladium has gone parabolic. I appreciate physical shortages, but I saw the same thing with silver not so long ago. I've started shorting it, as a hedge on my other PMs. Timing, as ever, is everything, and being perenially early means some pain. But apart from being massively overbought, I don't see the fundamental case with car sales dropping off and a recession ahead.

To add: I meant actually parabolic, in a mathematical sense, rather than the hyperbole one that is bandied around. Its a true exponential curve (weekly shows it best) and such trends don't last in nature.

Supply/Demand problems, not speculation really.  If South Africa Labour unions go strike happy and take a big chunk of supply out its going to cause serious problems. 

Is it really worth more than gold though?  The market currently says yes....

[Harley]

5 hours ago, Barnsey said:

"I'm leaving so I can spend more time with.....my money"!

[Harley]

1 hour ago, Cattle Prod said:

And the S&P just got sold into the close, havent seen that in weeks! Calls for a can of Guinness 

Worryingly, my canary FTSE short ETFs did not give conclusive daily buy signals today.  Close but no cigar.  But then my holdings were a mixed bag of reds and greens. 

The weeklies are heading that way though.  Maybe my plan needs a bit more work, or we just have a bit of turbulence to contend with first before a clear move one way or another.

Anyways, nice to see technicals functioning in the current markets.  Been a while what with these "unconventional" central bank measures.

Cable's done well and now hitting resistance while gold in GBP is right at the daily support line, or worryingly kissing it from underneath.

All beginning to lure me out of the gym and back to the PC!

[Castlevania]

32 minutes ago, Cattle Prod said:

Yep, it currently is worth more than gold. As an industrial metal though, and I dont see that situation lasting. I see the exponential curve as a function of industrial consumers grabbing physical and paying premiums. I'm not sure they really need to, and that when they realise it, the curve will collapse.

I'm probbly well wrong on timing though, so I've started in small. 

It’s scarcer than gold.

[sancho panza]

1 hour ago, Cattle Prod said:

Sven heinrich has a great chart on BA ...he likes reconnects with the 5 year EMA. It's a neat view. BA hasn't reconnected for 2 years now and is +46% from it currently. A good one I think. Ive tended to short indices more thsn individual stocks due to the unpredictable manias (I'm looking at you Tesla) but maybe I'll dip a toe on Boeing.

It's hard being a contrarian as I'm a closet plane nerd and love their product, but price is price...

Thanks for the heads up.Very interesting piece.Think this sums up where we are

Ref BA,I have athing for companies which have shown little revenue growth over last several years but have seen steep rises in share price.BA is one,Check out L'Oreal too.Some of the big French fashion businesses look ripe for a downturn but you can lose your shirt on them......I'll get my coat.

https://www.investing.com/equities/boeing-co-financial-summary

https://northmantrader.com/2019/02/26/dow-wow/

'For now this remains the biggest jawboning based rally of all time.

The key test will come once the daily wedge pattern breaks.

Bulls need new highs, bears need a reversal back below key moving averages.'

 

 

[Lightscribe]

5 hours ago, Cattle Prod said:

Sven heinrich has a great chart on BA ...he likes reconnects with the 5 year EMA. It's a neat view. BA hasn't reconnected for 2 years now and is +46% from it currently. A good one I think. Ive tended to short indices more thsn individual stocks due to the unpredictable manias (I'm looking at you Tesla) but maybe I'll dip a toe on Boeing.

It's hard being a contrarian as I'm a closet plane nerd and love their product, but price is price...

I follow Sven Heinrich on Twitter, I liked this in the lastest Northmantrader tweet;

After all indices such as the $DJIA keep climbing week after week and are not too far from all time highs now:

Oh wait, that’s the wrong chart.  That’s the $DJIA chart from 2001 when optimism came back following the initial thumping in 2000. Did it mean anything? Was it predictive of higher prices to come? Did the relentless buyers knew what they were doing? The answer is of course a big fat no:

A recession was coming, but the signs were ignored at the time.

For weeks markets rallied relentlessly in early 2001. The worst was over, new highs were coming and slowing growth was ignored.

Are we looking to see a repeat here? From my perch it’s way too early to tell still, but I remain open to the possibility as long as this rally remains untested. Without a successful stress test of the rally and improving fundamental data I view this vertical and overbought rally with extreme caution.

 

 

[reformed nice guy]

The one year yield in US treasuries is now higher than the 7 year. Next the 10 year?

Why are people piling into the 1 year and how much does government mandated purchases by pension funds impact this?

[sancho panza]

Ted baker profit warning this morning,with possibly more bad news to come re HoF

'The retailer said the profit warning does not include the raft on one-off charges due to the investigation, nor the House of Fraser bad debts and and the acquisition of No Ordinary Shoes.'

 

Down 12%.....another £15 and I might buy.

https://www.investing.com/equities/ted-baker

https://www.retailgazette.co.uk/blog/2019/02/ted-baker-issues-profit-warning/

'Ted Baker has issued a warning that profits for the current financial year will be below market expectations at £63 million.

The fashion retailer attributed the lower profits to foreign exchange movements, IT upgrades and a write-down on the value of inventory.

For its financial year ending January 26, it forecast that profit before tax would be in the region of £63 million – lower than the £73.5 million reported last year.

The profit warning follows the retailer’s announcement in October that the second half of the year would be challenging as consumers cut back on spending.

It also comes after Ted Baker said in January that business was “as usual” while posting a 12.2 per cent rise in sales over the Christmas trading period, and that gross margins were in line with its expectations.

Chief executive Ray Kelvin is currently on leave of absence while an external investigation into allegations of inappropriate behaviour is conducted.

The retailer said the profit warning does not include the raft on one-off charges due to the investigation, nor the House of Fraser bad debts and and the acquisition of No Ordinary Shoes.

Ted Baker’s full results will be announced in March.

[Lavalas]

TfL have launched a consultation on their plans to run an on demand bus service trial. ViaVan and Go Ahead already have the contract for the trial...

https://www.transport-network.co.uk/TfL-to-trial-on-demand-bus-services/15685

[BurntBread]

On 26/02/2019 at 16:26, Barnsey said:

That's not a data set I've ever seen before ... and it occurs to me that that happens quite often when I read bearish articles.

I wonder if it's the chartists' version of p-hacking.?

[macca]

On 26/02/2019 at 18:43, spygirl said:

The uks biggest tax dodgers are working age people on benefits.

Benefits have gone from 0 to £69 billion of in work benefits since Gordon brown invented working tax credits.. That I agree.. 

housing benifit is £27 billion now I think.. since they privatised social housing.. 

But both are symptoms of Goverment policy that allows the super rich to avoid tax and pay wages that are not capable of the poor to sustain any decent living standards.. 

Thats why benefits are paid.. to stop the sheeple revolution and subsidise cooperate profits.. Who then in turn pay no tax! 

Bye bye public services.. 

[harp]

Didn't DB say last week PM's and miners would probably go down into May? Looks like this is happening? Even worse in GBP.

[spygirl]

20 minutes ago, macca said:

Benefits have gone from 0 to £69 billion of in work benefits since Gordon brown invented working tax credits.. That I agree.. 

housing benifit is £27 billion now I think.. since they privatised social housing.. 

But both are symptoms of Goverment policy that allows the super rich to avoid tax and pay wages that are not capable of the poor to sustain any decent living standards.. 

Thats why benefits are paid.. to stop the sheeple revolution and subsidise cooperate profits.. Who then in turn pay no tax! 

Bye bye public services.. 

Really???? Did Amzo nmake $11,200,000,000 profit ?

A bit gormless Momentum comment.

At the moment Amzon is being run for tomorrow. They dony make any money.

All thse amazon services are being funded by amazon equity owenrs.

[Errol]

23 hours ago, Cattle Prod said:

So Palladium has gone parabolic.

Something like 7 times rarer than gold, and even rarer than Platinum. It is the rarest of all the precious metals.

I have some ounces and it is quite different in look and feel to silver.

[DurhamBorn]

1 hour ago, harp said:

Didn't DB say last week PM's and miners would probably go down into May? Looks like this is happening? Even worse in GBP.

Yes a lot were very over bought and the cycles looked stretched.May is when i expect people to start to sniff inflation in the US and that should see the complex start to trend at last.However the $36 area in the GDX isnt a given and its possible we get to around $27 then a severe pull back and then start to trend much higher.Some very good profits were made in the last month in many of the miners and some of that will need shaking out.

[Don Coglione]

2 minutes ago, DurhamBorn said:

Yes a lot were very over bought and the cycles looked stretched.May is when i expect people to start to sniff inflation in the US and that should see the complex start to trend at last.However the $36 area in the GDX isnt a given and its possible we get to around $27 then a severe pull back and then start to trend much higher.Some very good profits were made in the last month in many of the miners and some of that will need shaking out.

DB, I recall you citing $1340 for gold in an earlier post? It touched that last week, could this be the pull-back before the rockets are engaged, in your view? 

[DurhamBorn]

3 minutes ago, Ponty Mython said:

DB, I recall you citing $1340 for gold in an earlier post? It touched that last week, could this be the pull-back before the rockets are engaged, in your view? 

I think we need to break $1368 area to really start to trend and a pull back to the $1260 area into May could happen.Whatever in the short term i expect we will see the GDX hit $26/27 or perhaps trend straight to the $36 area later.I top sliced many miners as i had large holdings and large profits on several and wanted capital to deploy just in case they do pull back.I much prefer they just trended now,but if not and they do fall into May that will likely be the last great buying chance before they trend.

[macca]

2 hours ago, spygirl said:

Really???? Did Amzo nmake $11,200,000,000 profit ?

A bit gormless Momentum comment.

At the moment Amzon is being run for tomorrow. They dony make any money.

All thse amazon services are being funded by amazon equity owenrs.

Not so sure.. I know clever accounting allows profits to be pushed through madeup expenditure to decrease tax.. Like Starbuck U.K. and their £3 paper cups.. We don’t make any profit.. looksee we spend all our money on these special cups that are sent from this tax haven.. 

I can’t say I’ve spent hours investigating my accusation but like most charts I’m sceptical of their legitimacy..

Like a BOE inflation report I’m not so sure, especially when the founder is the richest man on the planet from a company that paid no tax as it makes no profit? 

Amazing..

[Errol]

More Accounting Games At AMZN

AMZN’s stock trades at an eye-watering 65x operating income. It trades at 76x trailing EPS. Keep in mind that there’s a good argument to be made that AMZN stretched its GAAP income measurements with accounting games that reduced cost of goods sold and increased operating/net income. The jump in gross margin is a one-time event and likely not sustainable. Perhaps Bezos will plan another big acquisition in order to keep kicking the accounting indiscretions down the proverbial road.

Regardless, the stock remains insanely overvalued. As a comparison, Walmart trades at 22x operating income and a P/E of 18. Target trades at 9x operating income and a P/E of 11. AMZN’s stock price could get cut in half and it would still be overvalued relative to retailer comps. That said, AMZN’s stock price will likely trade directionally with the stock market, although it will outperform to the downside when the bear market resumes.

http://investmentresearchdynamics.com/more-accounting-games-at-amzn/

[sancho panza]

Down 75% off peak.Impressive.