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Credit deflation and the reflation cycle to come.


DurhamBorn

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1 hour ago, MrXxx said:

Just out of interest, are student loans in the US managed the same way as in the UK I.e payback is only started at a certain salary level and they are cancelled after x number of years?

My American relatives have at least $100k student debt each.  

https://www.cnbc.com/2018/03/22/you-may-soon-be-able-to-declare-bankruptcy-on-your-student-loans.html

In recent congressional testimony, Jerome Powell, new Chair of the Federal Reserve said that the student debt crisis has the potential to hinder the economy and that current student loan bankruptcy policies did not make economic sense.

"It absolutely could hold back growth," said Powell, as reported by Market Watch. "You do stand to see longer-term negative effects on people who can't pay off their student loans. It hurts their credit rating. It impacts the entire half of their economic life."

"Alone among all kinds of debt, we don't allow student loan debt to be discharged in bankruptcy," he said. "I'd be at a loss to explain why that should be the case."

https://www.armstrongeconomics.com/markets-by-sector/interest-rates/student-loans-the-economic-time-bomb/

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VeryMeanReversion
20 hours ago, JMD said:

I will soon have opportunity of ‘transferring out’ of my employer’s Defined Benefit pension and am being offered very high transfer value and feel would be stupid not to take advantage of this

Be very careful (add a few more "very's").   Your pension needs to provide a reliable income for you in retirement.   Getting a reliable income when controlling the investments yourself involves a lot of learning (and risk).  There are many opportunities to get ripped off.

I would consider a "high" transfer value something like 40-45x the future guaranteed income.  If it's < 30x, that's not good enough as it's not easy to get a very low risk 3.3% return after all investment costs.  Also consider side benefits of DB scheme of spouse pension and guarantees. 

Moneybox (Radio 4) had a program recently about the British Steel workers being offered deals like this that turned out to be very bad for them.  This is still available on iplayer radio. (one of the pension episodes).

Find out what your DB scheme offers as an income then see what an annuity would cost to provide that income. Then have a lie down.

 

 

 

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2 hours ago, Democorruptcy said:

I googled Errol's Tier 1 comment and found an article that includes a bit about ETF's

https://palisade-research.com/gold-re-monetization-2019/

 

Palisade are well-known paid pumpsters offering "sponsored coverage" for junior mining companies in exchange for stock which gets rapidly P&D'd leaving only dust and tumbleweeds. If they are making a case for gold then I'm truly worried.

https://incakolanews.blogspot.com/2018/09/how-palisade-global-works-part-deux.html

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sancho panza
2 hours ago, kibuc said:

Palisade are well-known paid pumpsters offering "sponsored coverage" for junior mining companies in exchange for stock which gets rapidly P&D'd leaving only dust and tumbleweeds. If they are making a case for gold then I'm truly worried.

https://incakolanews.blogspot.com/2018/09/how-palisade-global-works-part-deux.html

P&Ded=pump dump??

Thanks for the heads up, looking at my charts a lot of the PM miner complex very overbought,so a pull back must be expected.

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sancho panza
2 hours ago, Viceroy said:

My American relatives have at least $100k student debt each.  

https://www.cnbc.com/2018/03/22/you-may-soon-be-able-to-declare-bankruptcy-on-your-student-loans.html

In recent congressional testimony, Jerome Powell, new Chair of the Federal Reserve said that the student debt crisis has the potential to hinder the economy and that current student loan bankruptcy policies did not make economic sense.

"It absolutely could hold back growth," said Powell, as reported by Market Watch. "You do stand to see longer-term negative effects on people who can't pay off their student loans. It hurts their credit rating. It impacts the entire half of their economic life."

"Alone among all kinds of debt, we don't allow student loan debt to be discharged in bankruptcy," he said. "I'd be at a loss to explain why that should be the case."

https://www.armstrongeconomics.com/markets-by-sector/interest-rates/student-loans-the-economic-time-bomb/

This lines up with paul Hodges who argues that the economic growth of the 1960's to now has been based on the demogrpahic dividend of the baby boomers nesting and raising kids.

Lumbering people of child bearing age with massive debts before they even think about kids is arse about face imho.Thye should be lumbering the care costs onto the people with savings rather than the young people trying to raise kids.Just my views.

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10 minutes ago, sancho panza said:

P&Ded=pump dump??

Thanks for the heads up, looking at my charts a lot of the PM miner complex very overbought,so a pull back must be expected.

Correct. Pumpy Dumpy climbs the wall (or in this case, the palisade), Pumpy Dumpy has a great fall, everybody tries to put it together again while Palisade runs off with their money.

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sancho panza
1 hour ago, reformed nice guy said:

The cost of UK government borrowing has spiked suddenly - are the markets expecting a no deal?

chart (5).png

Markets are priced for perfection in some sectors.

If anyone of the EU countries veto the extension,then there is no extension.

 

 

In other news,Sydney hosue prices off 13% from July 17 peak .Note for the Dow theorists that volumes declined 20% or so.Falling prices,falling volumes.Big drops may be ahead or a bounce...

 

Also worth noting this is without an interest rate rise.Wait till the A$ starts dropping.

https://wolfstreet.com/2019/02/28/home-prices-sydney-melbourne-australia-spiral-down-bust-spreads-imf-to-regulators-reinforce-financial-crisis-management/

Australia-home-prices-Sydney-2019-02-28.

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1 hour ago, reformed nice guy said:

The cost of UK government borrowing has spiked suddenly - are the markets expecting a no deal?

chart (5).png

No.They are slowly waking up to inflation being in the system.We have a debt deflation to get through but then its inflation with bells on,3%,5%,7%,12%,15%,maybe even 20%+ for a short period.As always it will start slowly.Our road map is saying May/June time in the US is where TIPs will start to go up as they wake up to the inflation risk.Its that moment of change that should see gold and the PM miners start to trend.If gold hits around $1250 going into May that should provide the last great buying chance for anyone not aboard.Its up trending or down into May/June then up trending IMO.

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Apologies if already mentioned - what is the opinion on Centamin here? Lower expected output certainly seems to have hit the share price the last couple of days. I’m tempted to average in a small allocation at this point, but will need to do a bit more research.

https://seekingalpha.com/news/3436768-centamin-minus-25-percent-q4-results-2019-guidance-disappoints

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I should add my dollar index work is pointing to the chance of the dollar index hitting 100 as a ceiling in May/June rather than the 97 its had as a limit this last 12 months.Then down to 84/74.I wouldnt trade that as its too close on the road map and an outlier and the 84 minimum is much more clear and the focus point.However it could be another factor if gold falls into May.Wouldnt it be so much easier if the PMs just kept on trending from now.

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17 hours ago, DurhamBorn said:

Hi and welcome.Bond funds are two things.One corporate bonds,full of trash bad,government bonds full of thrash but own printing press good.At least for now until inflation gets going a few years down the road.Iv got some money stuck in a pension that has rubbish choices,but its a money purchase part of a final salary pension so i cant transfer and SIPP it without getting lots of advice and hoops on the final salary part.It shows how rubbish most pensions are.Somehow global growth that owns big wedges of Amazon doesnt appeal.

Thanks DB, I guess I was lucky as when my employer stopped their DB scheme some years ago, they opened a separate DC scheme for employees. So I have one of each but each is separate.

BTW, did you ever find a financial advisor that would ‘happily’ advise on doing large cash transfers from company schemes? I seem to remember a discussion here a while back about this being potentially difficult because advisors didn’t like ‘signing-off’ large transfer amounts.  

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15 hours ago, sancho panza said:

There's a risk to your capital if rates rise and you want your money out at any point.Bonds are always flogged as safe but they aren't necessarily depending on your position.

I wouldn't try and time the market too muich but rather make long term plans where a decent amount of potential outcomes are covered.

Thanks SP, can I mitigate some of those capitol risks you mention? As I mention I am here to learn so all information/advice/tips is greatly appreciated.... Here’s my thinking, though admit I am bit confused between the two bond fund types that describe themselves thus: UK index linked gilts (few of these fund types around); and 15/25/35 year UK gilts (seem to be the majority of bond funds).

Is the ‘index link’ feature important here - i.e. if inflation occurs the index funds wont take such a hit?

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5 hours ago, VeryMeanReversion said:

Be very careful (add a few more "very's").   Your pension needs to provide a reliable income for you in retirement.   Getting a reliable income when controlling the investments yourself involves a lot of learning (and risk).  There are many opportunities to get ripped off.

I would consider a "high" transfer value something like 40-45x the future guaranteed income.  If it's < 30x, that's not good enough as it's not easy to get a very low risk 3.3% return after all investment costs.  Also consider side benefits of DB scheme of spouse pension and guarantees. 

Moneybox (Radio 4) had a program recently about the British Steel workers being offered deals like this that turned out to be very bad for them.  This is still available on iplayer radio. (one of the pension episodes).

Find out what your DB scheme offers as an income then see what an annuity would cost to provide that income. Then have a lie down.

 

 

 

Thanks Verymeanreversion, it works out as 35x so I agree probably not ‘very high’ all things considered. However, I am waiting on news from pension trustees as apparently they are changing their valuation formulas this year - so with luck multiples/values might go up.

I am familiar with the British Steel workers story but I don’t think this applies to me. For example, I would intend to take as cash transfer and put that into a HL sipp, utilising HL platform funds, etc.     

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4 minutes ago, JMD said:

Thanks DB, I guess I was lucky as when my employer stopped their DB scheme some years ago, they opened a separate DC scheme for employees. So I have one of each but each is separate.

 

BTW, did you ever find a financial advisor that would ‘happily’ advise on doing large cash transfers from company schemes? I seem to remember a discussion here a while back about this being potentially difficult because advisors didn’t like ‘signing-off’ large transfer amounts.  

 

Yes,the problem is they will only do it if they handle the investments,ie they transfer into Standard Life then get the fees for years on end.The trick is act dumb,act like you want them to handle the investments but run it through you.Then they will do the transfer and a month later they get a transfer form from your SIPP provider and nothing they can do.As soon as they get wind youl do that though they refuse to do it,so its a case of act dumb.

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sancho panza
5 minutes ago, JMD said:

Thanks SP, can I mitigate some of those capitol risks you mention? As I mention I am here to learn so all information/advice/tips is greatly appreciated.... Here’s my thinking, though admit I am bit confused between the two bond fund types that describe themselves thus: UK index linked gilts (few of these fund types around); and 15/25/35 year UK gilts (seem to be the majority of bond funds).

 

Is the ‘index link’ feature important here - i.e. if inflation occurs the index funds wont take such a hit?

 

No they won't and it says a lot that the BoE's pension pot is 65% plus in linkers....you couldn't make it up.

Yeah,if you sit in non index linked and inflation and rates rocket,you could lose suffer some capital losses potentially if you're forced to sell for whatever reason.

 

Also worth considering who the counterparty is in your DB scheme as a top quality company with good cash flow is a good counterparty to have .Smaller concerns with large aging labour pools,maybe less so.Well worth looking at how the money is invested.I'm know very little so a good broad education in the risks-as you're doing-is best first before you move.

I'm a speculator,so be aware of how bad my advice might be.Mrs P  has a large blue chip the other side of her final salary and I always tell her to stay there as long as she can.They went to DC the year after she arrived in the UK.So she lucked out.

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1 hour ago, DurhamBorn said:

Yes,the problem is they will only do it if they handle the investments,ie they transfer into Standard Life then get the fees for years on end.The trick is act dumb,act like you want them to handle the investments but run it through you.Then they will do the transfer and a month later they get a transfer form from your SIPP provider and nothing they can do.As soon as they get wind youl do that though they refuse to do it,so its a case of act dumb.

thanks for clarifying DB

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1 hour ago, sancho panza said:

No they won't and it says a lot that the BoE's pension pot is 65% plus in linkers....you couldn't make it up.

Yeah,if you sit in non index linked and inflation and rates rocket,you could lose suffer some capital losses potentially if you're forced to sell for whatever reason.

 

Also worth considering who the counterparty is in your DB scheme as a top quality company with good cash flow is a good counterparty to have .Smaller concerns with large aging labour pools,maybe less so.Well worth looking at how the money is invested.I'm know very little so a good broad education in the risks-as you're doing-is best first before you move.

I'm a speculator,so be aware of how bad my advice might be.Mrs P  has a large blue chip the other side of her final salary and I always tell her to stay there as long as she can.They went to DC the year after she arrived in the UK.So she lucked out.

Thanks again SP. The parent company is Fujitsu Japan, they bought the old British ICL, rebranding it Fujitsu UK. However, the pension scheme is still named the ‘ICL pension scheme’ and Japanese parent company sends the UK pension scheme a shortfall ‘top-up payment’ of £40m each year, sounds generous but then again this was a goodwill gesture after Fujitsu reneged on its original promise of not to close the DB scheme to current employees, but which they did close. The top-up agreement ends in 2032. The scheme has approx. £4bn assets and £5bn liabilities, and for last 10 years the £1bn deficit has hardly shifted. Not sure if that's sustainable especially as head count keeps reducing, down to 10,000 from 20,000 back in year 2000. Not as bad as BT’s £14bn deficit I suppose but then again I understand BT have plans to pay off their entire deficit over the next 13 years.

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Anyone with thoughts on GBP going into ( potential ) Brexit at the end of this month? 

I'm seeing some negative divergence on my W%R(45) oscillator against both the dollar and the euro at the moment, and we're about one swing cycle from the Brexit deadline ( marked with a vertical line ). I'm currently around 40% in cash.. 1/3 of that in dollars and 2/3 in sterling.. wondering whether I should spread the sterling around a bit more. I'm heavy enough in PMs and miners for now. 

Of course it can work both ways. Regardless of my long term positive view on Brexit,  I'm thinking the markets would probably punish sterling in the short term on a no deal, based on previous action, but a delay or watering down of Brexit could cause it to rise. IMHO of course and definitely not advice.  

What are others doing?

984615167_Screenshot2019-03-01at17_16_44.thumb.png.503ec141ba5f5875745fe26e14604925.png

 

 

1719905292_Screenshot2019-03-01at17_18_25.thumb.png.1589940dae2dbd6b39917ebb879d9260.png

 

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Sigh.

Gold giveth and gold taketh away.

DB, so far you've predicted gold moves as if you were making them yourself, so can you please send it to stratosphere already? :)

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2 minutes ago, kibuc said:

Sigh.

Gold giveth and gold taketh away.

DB, so far you've predicted gold moves as if you were making them yourself, so can you please send it to stratosphere already? :)

I think he's got one of those special charting programs the Plunge Protection Team uses, where you can draw trend-lines and then set them to "enforce".. :D

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Don Coglione
30 minutes ago, kibuc said:

Sigh.

Gold giveth and gold taketh away.

DB, so far you've predicted gold moves as if you were making them yourself, so can you please send it to stratosphere already? :)

Cheer up, silver is worse...

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Castlevania
5 hours ago, DurhamBorn said:

I should add my dollar index work is pointing to the chance of the dollar index hitting 100 as a ceiling in May/June rather than the 97 its had as a limit this last 12 months.Then down to 84/74.I wouldnt trade that as its too close on the road map and an outlier and the 84 minimum is much more clear and the focus point.However it could be another factor if gold falls into May.Wouldnt it be so much easier if the PMs just kept on trending from now.

Nah. I have my annual ISA allowance to invest in April. A nice little pullback helps :)

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Castlevania
2 hours ago, MvR said:

Anyone with thoughts on GBP going into ( potential ) Brexit at the end of this month? 

I'm seeing some negative divergence on my W%R(45) oscillator against both the dollar and the euro at the moment, and we're about one swing cycle from the Brexit deadline ( marked with a vertical line ). I'm currently around 40% in cash.. 1/3 of that in dollars and 2/3 in sterling.. wondering whether I should spread the sterling around a bit more. I'm heavy enough in PMs and miners for now. 

Of course it can work both ways. Regardless of my long term positive view on Brexit,  I'm thinking the markets would probably punish sterling in the short term on a no deal, based on previous action, but a delay or watering down of Brexit could cause it to rise. IMHO of course and definitely not advice.  

What are others doing?

984615167_Screenshot2019-03-01at17_16_44.thumb.png.503ec141ba5f5875745fe26e14604925.png

 

 

1719905292_Screenshot2019-03-01at17_18_25.thumb.png.1589940dae2dbd6b39917ebb879d9260.png

 

The City seems to be reckoning on a deal of some sort, thus GBP’s relative strength of late

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Bricks & Mortar

Well,  I'm very cheered.  I missed getting into silver at the tail end of last year.  An accident meant several months of opiates and I didn't trust myself to do much.  Finally got my ducks set up a week ago, and was looking at miners on Monday and Tuesday.  Noted some doubt on here about performance short term, and came down on the side of, "haud oan the noo."

Cheers guys.

 

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