Credit deflation and the reflation cycle to come.

[Harley]

10 minutes ago, Agent ZigZag said:

That is a very adult and mature post you have made Harley

Ta.  I try to keep things focussed here in the basement, and let myself go a bit more on the first floor threads instead.

[DurhamBorn]

1 hour ago, Harley said:

Any that can benefit from charging the higher interest rates via larger margins.  But obviously other factors to consider before investing in any.

The high dividend players are like bonds.  Will the divs increase in line with inflation and higher interest rates (money in the bank).

I'm just quoting what a lot of search results are saying to "investing for inflation".

I think thats right,and its key that the divi payers will be in areas that gain from inflation,not run against it.Its a very tricky area and not a science.Iv been looking at sectors where i think big changes will happen due to people being forced to save money etc.Bus over car.Distributed energy over a big nuclear plant etc.

The seeds of inflation are all around us.Look at the small energy companies all going under for example.

[sancho panza]

On 10/03/2019 at 20:23, DurhamBorn said:

Lots of different things Harley.

In buying the transports its because they hedge fuel 4 years out and i expect massive runs up in prices.That will force people out of cars onto buses.They can also increase prices with RPI while depreciation is set in stone for 5 to 10 years.People will be ditching the car in droves as prices crush them elsewhere.

Something like Royal Mail i expect competitors to go under.Their main cost is wages.Wages go up once a year.If they increase prices ahead of wages it will flow to free cash.

Energy companies because the price will go up,again faster than depreciation.The new cycle will see the economy move to more electric.

Telecoms are tricky.High debts mean increased payments and more investor worry.However again they have fixed depreciation somewhat yet can increase prices with inflation flowing direct to free cash.

Silver Miners for the explosion in silver use from EVs and solar (and telcos) topped by investment buying.

Gambling companies as people tend to gamble more when they are struggling.

Agriculture stocks due to the transfer of power to them from the consumer stocks during a reflation.

Military manufacture as tensions will rise and rise during inflation as it always does.

Not all will win of course,inflation can crush margins if the management arent clever,and demand can fall faster than they can make up.Having a semi monopoly really helps.

I simply tilt my portfolio towards inflation loving stocks.Its still balanced,just if dis-inflation continued id expect it to under-perform.If im right i expect it will out-perform,perhaps by 2% to 4% a year and as you know,that makes a big deal when compounding a decent sized portfolio.

 

There's a lot in that post DB.

I think there's a few societal themes going to change over the next decade

1) the move from the city to countryside.Loads of houses up here being built on green land miles out of Leicester.As motoring goes up in cost and there's a lag while public transport spreads to rural areas,could be some isolating times.Obviously,price of hosuing could crumble even more than otherwise.

2) you allude to the transfer of power in agriculture and I think we could finally see the supermarkets taking orders off the farmers rather than the other way aroud.

 

On 10/03/2019 at 21:47, Harley said:

Ta for that.

I haven't been idle since you mentioned a while back you'll talk some more about reflation stocks, and have started some research.

Pretty limited so far in that they all say the same limited things (which may or may not be correct):

. Real estate, especially land (store of value)

. Gold (store of value)

. Oil stocks (pricing power, often the cause of higher inflation)

. Inflation linked bonds (like the BoE pension fund!)

. Materials (pricing power, hold hard assets which go up in value)

. Infrastructure (hold hard assets which go up in value)

. Commodities (pricing power)

. Agriculture producers and machinery manufacturers (pricing power, increased earnings if a weak dollar)

. Financial companies (rising interest rates)

. Emerging markets (via commodity exposure and manufacturing)

. Transportation companies (demand, hold hard assets which go up in value)

. Bias towards small caps (leaner, potential to leverage higher prices)

. Fixed rate mortgage and other debt holders

. Particuarly from a US POV, international diversification (especially if falling dollar), mainly through currency diversification

. Growth rather than dividend or value stocks

. Those with market barriers to entry

And to avoid:

. Bonds (unless maybe if you hold individual ones to maturity), especially long term bonds

. Bond like stocks (i.e. dividend payers - ouch!) such as utilities (where inflation will reduce the attractiveness of relatively fixed yields)

. Variable rate debtors (including credit card debtors)

. Supermarkets (margin destruction)

. Retail (margin destruction)

The trouble with such a standard sector approach is it ignores the actual criteria (especially as not all companies in a favoured sector are necessarily good).

Still, gets you thinking the right way.

There's not jkuch to dsiagree with in the first section and none in the second.I'd also add to avoid branded goods makers.

[MrXxx]

Mmmm, last point is an interesting one, will we see a reversal of the fashion fad that started about 25 years ago, where fashion houses decided to use their customers as mobile advertising boards?...one that I have always fought against by avoiding as an `unfashionable` non~customer!

[Castlevania]

It all comes down to pricing power.

[reformed nice guy]

19 hours ago, DurhamBorn said:

The seeds of inflation are all around us.Look at the small energy companies all going under for example.

Agree. Sky broadband emailed me this morning saying that its price is going up £1 from April.

Is there any non-Governmental index of inflation that covers basics? Rather than including the price of the latest electronics (alexa, ipads, etc), an index that focuses on rent, price of bread, fuel and mostly basic consumables? A quick google yieled nothing obvious.

[NogintheNog]

Peak Gold???

https://srsroccoreport.com/the-hidden-decline-of-the-gold-mining-industry-that-no-one-is-talking-about/

http://investmentresearchdynamics.com/is-barrick-gold-signaling-peak-gold/

[DoINeedOne]

56 minutes ago, NogintheNog said:

Peak Gold???

https://srsroccoreport.com/the-hidden-decline-of-the-gold-mining-industry-that-no-one-is-talking-about/

http://investmentresearchdynamics.com/is-barrick-gold-signaling-peak-gold/

Interesting from the second link: There has not been a major gold deposit discovered in  several years. A five million oz discovery used to be considered “major.”  While I don’t know if this is still the case, a former Newmont geologist who now runs a junior mining company told me 10 years ago that NEM wouldn’t even consider a project unless the geologists thought it had a least 5 million ozs of gold.

[Ma2]

On ‎10‎/‎03‎/‎2019 at 21:47, Harley said:

nd to avoid:

. Bonds (unless maybe if you hold individual ones to maturity), especially long term bonds

. Bond like stocks (i.e. dividend payers - ouch!) such as utilities (where inflation will reduce the attractiveness of relatively fixed yields)

. Variable rate debtors (including credit card debtors)

. Supermarkets (margin destruction)

. Retail (margin destruction)

The trouble with such a standard sector approach is it ignores the actual criteria (especially as not all companies in a favoured sector are necessarily good).

Still, gets you thinking the right way.

I have seen TLT and IBTL mentioned a good few times on this thread (going back to ToS), from my understanding these are 20+ year US Treasury Bond funds and I was going to look into them further in case of lower interest rates. What are people's views currently on this type of investment in the current / impending climate?

[Wheeler]

48 minutes ago, Ma2 said:

I have seen TLT and IBTL mentioned a good few times on this thread (going back to ToS), from my understanding these are 20+ year US Treasury Bond funds and I was going to look into them further in case of lower interest rates. What are people's views currently on this type of investment in the current / impending climate?

I've got some IBTL (about 6% of my portfolio) but I only consider them as a short term investment. I've got them in case there is a rush to safety as part of a deflationary collapse. Of course that's on the basis that the US dollar is still considered relatively safe. I've seen reports saying that places like China and Russia are moving away from US treasuries and stockpiling PMs instead but I think there will probably still be a swing towards US treasuries in the event of a global collapse. 

I'll hold them until the end of June, when they pay the dividend and then consider whether to reduce the holding or not. I'd be looking for the Fed to reduce interest rates during a recession to try and kick start a recovery and would expect to sell out of IBTL once I think that most of the IR reductions are in.

These are just general thoughts and not specific advice of course! I'd welcome any other points of view.

[Harley]

1 hour ago, Ma2 said:

I have seen TLT and IBTL mentioned a good few times on this thread (going back to ToS), from my understanding these are 20+ year US Treasury Bond funds and I was going to look into them further in case of lower interest rates. What are people's views currently on this type of investment in the current / impending climate?

Yes, had me unsure too.

I hold them but Jim Puplava once mentioned the risk with long term bond funds in particular - early redemption required if people pull their money out implying a likely loss (versus hold to maturity).

I would rather ladder with individual bonds but that is more a US thing.  Hard for us to do in the UK.

Less risk with short dated bonds for this and also they will move with higher rates, but have a lower yield.

My "Permenant Portfolio" should have 25% of such long term bonds but I'm thinking of limiting my holdings.

Thankfully I have some NS&I indexed bonds (alas too few) which can act as a proxy.

Love to hear other views and ideas!

15 minutes ago, Wheeler said:

I've seen reports saying that places like China and Russia are moving away from US treasuries and stockpiling PMs instead but I think there will probably still be a swing towards US treasuries in the event of a global collapse. 

Indeed a push and pull.  The sovereigns probably would like to divest at least a bit, and also for political leverage, but then it's the biggest liquid market by far that can handle such large volumes.

Same with the S&P.

The PM holdings are as much for currency backing as anything else.  They're circling the USD as a regional currency!

[Harley]

5 hours ago, reformed nice guy said:

Is there any non-Governmental index of inflation that covers basics? Rather than including the price of the latest electronics (alexa, ipads, etc), an index that focuses on rent, price of bread, fuel and mostly basic consumables? A quick google yieled nothing obvious.

Of course not!  In the US you have John Williams of Shadow Stats who backs out all the naughty changes so we can compare historic rates of inflation.

But this is the UK!  Now get back to work!

[DurhamBorn]

TLT and bonds will be destroyed in the next cycle as rates go all the way back to even perhaps 13%.TLT is there to protect against a huge debt deflation.I see it as a hedge along with my PMs.I wouldnt hold any bonds in the next cycle,say 18 months out.Where rates and inflation end up cant be certain,but i fullt expect they will be high enough to destroy housing wealth,final salary pensions with 5% inflation limits etc.

[Harley]

8 hours ago, Castlevania said:

It all comes down to pricing power.

Indeed, with a touch of low or fixed rate debt and a sprinkling of real assets!

[DurhamBorn]

Just now, Harley said:

Of course not!  In the US you have John Williams of Shadow Stats who backs out all the naughty changes so we can compare historic rates of inflation.

But this is the UK!  Now get back to work!

Inflation is already getting out of hand in the UK Council tax again going up much faster than wages.Food for anyone who doesnt cook well and shop around going up fast.Iv been stocking up on quality clothes 2nd hand on Ebay etc for dirt cheap prices as i full expect people will start to be much more careful not far into the future.I put in a new combi last year,change upstairs windows etc while i could be arsed and as prices were so cheap.

[Harley]

I know massive inflation is coming because mine was the last year to study current cost accounting (accounting for inflation).  And I'm an old b*gger so it's well off the youngsters' radars now.  A classic environment for a shock resurgence!

[Barnsey]

25 minutes ago, Wheeler said:

I've got some IBTL (about 6% of my portfolio) but I only consider them as a short term investment. I've got them in case there is a rush to safety as part of a deflationary collapse. Of course that's on the basis that the US dollar is still considered relatively safe. I've seen reports saying that places like China and Russia are moving away from US treasuries and stockpiling PMs instead but I think there will probably still be a swing towards US treasuries in the event of a global collapse. 

I'll hold them until the end of June, when they pay the dividend and then consider whether to reduce the holding or not. I'd be looking for the Fed to reduce interest rates during a recession to try and kick start a recovery and would expect to sell out of IBTL once I think that most of the IR reductions are in.

These are just general thoughts and not specific advice of course! I'd welcome any other points of view.

I agree with this message, TEMPORARY flight to safety only, especially given how drastically U.S. will have to ease and print.

[Harley]

24 minutes ago, DurhamBorn said:

Food for anyone who doesnt cook well and shop around going up fast

I'm very self sufficient and shop around or just don't shop.  I'm shocked when I do go out and see the prices people are paying (mostly for tat food, clothes, etc).  I don't know how they do it, until I come home and look at the stats and see they don't, and no longer can, given they're all now maxed out on credit. 

I see two types of inflation:

. Stage 1:  The good type (asset) that benefits those who already have assets, feathering their nest for Stage 2;

. Stage 2:  The bad type (price) that causes rising prices and screws the remainder!

IMHO, it's now too late for Stage 1 unless you're very selective, talented, and hard working!

Sorry, pool's closed!

[DoINeedOne]

Thoughts Ashanti Gold
 

 

[Bear Hug]

53 minutes ago, DoINeedOne said:

Thoughts Ashanti Gold
 

Not junior enough anymore?  It's one of GDX constituents, with over $5.3B mkt cap (higher than anything left in GDXJ now)

[Harley]

FWIW, why I've taken up yoga and swimming......

The following data is out of date and should not be traded (especially as several buys have since become sells, are no longer valid buys, data errors, etc, etc).

Really, please do not use or rely on this illustrative data in any way!  Not my fault if you try using this dud data either way!  Really, it's dud data!  Dead!

And my system is way short of being reliable, not focussed on trading, and anyways proper money management is key!

This is a snapshot of my market (not stocks) watchlist (not holds) data showing the last buy signals:

<upon reflection deleted but point being they're mostly quite old, wish I had more confidence to share>

I prefer trading the weeklies (and then tend to buy and hold stocks rather than indicies).  I could try trading daylies but I have other things on the go so couldn't do a proper job.

I'm learning to sit on my hands and hopefully let the market come to me.  Else I'm a poor idiot!

So basically nothing much for me since way back and even then a lot looked slightly iffy on a longer-term basis, which may suggest a somewhat see-saw period.

Naturally I was having turkey and a hangover so did not get in at the year-end!  But hopefully rightly disciplined (TBD) not to chase the bus!

On my stocks, most of the risers from year-end are starting to top out on the weeklies.  Sure, could run a bit more but the air's beginning to get a bit thin!

Hopefully this post will make it rain soon, very soon!

[DurhamBorn]

7 minutes ago, sam1994 said:

How are you guys working out how to spread investments across miners? Is it a case of distributing it in proportion to shares in circulation / cap? Is there some analysis which demonstrates higher risk of some gold miners than others?

I'm considering just sticking with GDXJ and IAU for now until I can get a better understanding of things. I know the potential return will be lower than if you pick individual miners; but this may beyond my depths. 

@DurhamBorn Do you still think GDXJ will dip below $32 / we'll get a good opportunity to jump in around May?

As an aside, what do people think will happen with things like P2P lending services? Is it worth putting a small amount in them or will we see higher defaults as IRs increase?

S

I dont know.I thought gold would pull back from $1350 to $1250/60 and it pulled back to $1285.That could be it,or we might still test $1250.I bought back a few shares id sold when they went 10% down.I think May/June is the time we will really trend in the PMs.Im already invested,id simply keep buying a few more if they fell into May.

I dont over think allocation in the sector.I simply buy half of the stocks in my rubber band list and several from the technical list.Silver miners i pretty much bought 3/4s of the most pure players as i put them up back in the thread,most of those are doing very well so far.

 

[Harley]

7 minutes ago, DurhamBorn said:

I dont know.I thought gold would pull back from $1350 to $1250/60 and it pulled back to $1285.That could be it,or we might still test $1250.I bought back a few shares id sold when they went 10% down.I think May/June is the time we will really trend in the PMs.Im already invested,id simply keep buying a few more if they fell into May.

I dont over think allocation in the sector.I simply buy half of the stocks in my rubber band list and several from the technical list.Silver miners i pretty much bought 3/4s of the most pure players as i put them up back in the thread,most of those are doing very well so far.

I recently had a daily buy signal for gold in GBP but the weekly buy for me was way back on 24/09/18 so the daily might just be a pop in a downward trend.  I'm waiting for the weekly to give another buy.  That is, the daily and weekly data are not in synch so for me, as a buy and hold, indeterminate.  Indeed, the weekly techs I look at are currently not great.

[Ma2]

Thanks all for thoughts on IBTL. Sounds like something to consider as a small part of a balanced portfolio as long as you are able keep an eye on when to get out!

I am also trying to follow the permanent portfolio method with stocks leant towards reflation as suggested here.

Sadly most of my money is in a Standard Life work pension which has exorbitant fees outside of the balanced managed fund they auto enrol you in, and not much of a choice outside of those. So far I am 25% in Gold and General and 75% in a cash fund waiting. 

I will probably keep the work pension in steady ETFs once it's all calmed down and just use my SIPP and ISA's for the higher risk stuff, at the same time as trying to overpay the mortgage and have the odd luxury here and there. So not much is going in at the moment.

Very difficult to balance enjoying life now with preparing for the future. I enjoyed life a bit too much when I was younger so I am starting late! Serves me right.

Anyway it's very arrogant to worry about the future. As if we can know what's planned for us down the road  

[MvR]

16 minutes ago, sam1994 said:

How are you guys working out how to spread investments across miners? Is it a case of distributing it in proportion to shares in circulation / cap? Is there some analysis which demonstrates higher risk of some gold miners than others?

I've been putting just over 1% of total liquid capital each into a number of gold and silver miners. Starting with around 8 stocks, a mix of small and large miners. Mostly going by recommendations from this thread, and occasional interviews with Rick Rule and Sprott on YouTube. I then look at the technicals to get a sense which of the recommendations are oversold and look like they could bottoming or have bottomed.

I've top sliced some that showed good increases ( AngloGold and Kirkland being the best performers for me ) to bring the holdings back to just over 1%, and redeployed those profits to buy other miners ( mostly silver.) Currently I've got 13 different mining stocks, roughly equal holdings, which is pretty much my limit in terms of how much I want to allocate to the miners.  This is still a relatively large allocation, but in my case I can mitigate the risk a little by selling gold options.. Without that, I'd probably allocate slightly less to the miners.