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IGNORED

Credit deflation and the reflation cycle to come.


DurhamBorn

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26 minutes ago, Majorpain said:

 

I don't think that avoid all ETF is the correct terminology, GDX and GDXJ are held by a lot of people here I imagine.  Its just watch out what they actually contain, you could be getting too much exposure to one sector (looking at you FANG's) as the fund managers all pile in to juice their returns and avoid underperforming.  Even Terry Smith of Fundsmith is guilty of this IMO when he bought Facebook (although he has claimed otherwise!). 

I agree.Nothing wrong with passive investing at all,but like you say its crucial you know what your buying.In my pension at work i have no choice but to be in a tracker until i leave.Its a UK one.In affect its tracking Shell and HSBC and a few other large caps.A lot of US passives have far too much exposure to a small range of tech mega caps.Here in the UK thanks to the crazy EU rules on what you can buy we are now cut off from most of the best passive ETFs for different sector exposure.The US range is superb,country specific,small/large,industry,commod etc etc.I used to always own around 20%/25% of my portfolio in those sort of ETFs,but am now unable to access my favourite funds (the likes of COPX,SEA,SIL,URA,and all the country specific funds.I wish those US fund houses would cough up the stupid Kid documents,but it shows how little retail business they do in the UK/EU that they cant be arsed.

 

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46 minutes ago, Majorpain said:

 

I don't think that avoid all ETF is the correct terminology, GDX and GDXJ are held by a lot of people here I imagine.  Its just watch out what they actually contain, you could be getting too much exposure to one sector (looking at you FANG's) as the fund managers all pile in to juice their returns and avoid underperforming.  Even Terry Smith of Fundsmith is guilty of this IMO when he bought Facebook (although he has claimed otherwise!). 

GDX/J contains only one sector. An index that contains FANGs likely will be much broader and have much less exposure to any one company/sector, unless the market deems it so.

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Castlevania
3 minutes ago, A_P said:

GDX/J contain only one sector. An index that contains FANGs likely will be a much broader.

My issue is that by it’s nature you’ll be overweight certain sectors at the peak and underweight other sectors which may well do brilliantly in the next few years. Take a FTSE 100 tracker. Had you bought in at the previous peak during the dot com boom you’d have been buying a shedload of exposure to telecoms all of which are now worth a fraction of what they were 20 years ago. You could buy the industrial miners and some large multinational consumer goods stocks for a tenth or less of what they’re now worth. The fact that it’s an index means you don’t buy 1% of each name but in respect to their weighting to the index. I think a lot of people don’t necessarily understand how much of an index is weighted to the ten biggest names at that point in time.

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39 minutes ago, Castlevania said:

My issue is that by it’s nature you’ll be overweight certain sectors at the peak and underweight other sectors which may well do brilliantly in the next few years. Take a FTSE 100 tracker. Had you bought in at the previous peak during the dot com boom you’d have been buying a shedload of exposure to telecoms all of which are now worth a fraction of what they were 20 years ago. You could buy the industrial miners and some large multinational consumer goods stocks for a tenth or less of what they’re now worth. The fact that it’s an index means you don’t buy 1% of each name but in respect to their weighting to the index. I think a lot of people don’t necessarily understand how much of an index is weighted to the ten biggest names at that point in time.

I was merely pointing out the contradiction :). There does seem to be a lack of understanding on what makes up an index and the exposure one receives. Not really for me to argue for or against. I just like to try and clear up some of the obvious mis-concpetions.

Unfortunately I can't get the data for the FTSE 100 total return that far back. Although no idea why one would only want to be in 3 or 4% of the global market. That would suck buying in at the top of the dot com. But here's a graph for the FTSE all share for the last 15 years or so. Not a bad return if you want a simple way to invest. However, not as good as if one took more of a global and holistic approach.

image.png.3149da314b01501ed2627e0f133728ed.png

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VeryMeanReversion

Rather than giving exact numbers, I'll disclose based on gross salary (after sacrifice) = "x"

House equity = 10 x

Building plot = 5 x (free-market value) , 8x if I do the project myself

SIPP = 9 x

Dividend income in SIPP per year = 0.6 x

More than a third of salary is sacrificed into SIPP each year with the aim of FIRE at age 55 (~5 more years).

 

SIPP is mostly FTSE100/250, a wide range of stocks/sectors. I have around 30 different holdings. Some up 166%, some down 50%. 

Net running cost of SIPP is basically zero. The annual cost is nearly covered by cash back offers to transfer in.

And my general view is this:

1.  FTSE still looks like the best game in town. Yields are far better than the alternatives.  I have no need for big returns, slow and boring suits me.

2.  I've hardly any cash left in the SIPP. Any cash went on platinum/silver ETFs (17% of SIPP) rather than being 100% in equities. I'd rather own something real than hold cash.  As divis roll in, I buy something when they get to £10K.  I have no interest in bonds.

3. I'm aiming for total housing equity at 25x and pension at 20x to provide future housing/income.  If the stock market crashes 50%, the housing could be used to replace the income (rent-a-room tax-free).

4. In FIRE, I'll pull 5% of SIPP per year until state pension age then 3% afterwards. Will have similar disposable income as now and the kids might have moved out by then.

5. Expect long term falls in nominal house prices but not enough to justify selling to rent. (Did that once before).

6. I'd never invest in a PM miner (Old quote - "liar standing in front of a hole") or Buy-to-let.

7. I rarely sell, just buy and hold. 

8. I have "laddered" but don't plan on doing it again.  I'd rather go wider than deeper.

9. I like my job but don't want to be doing it full-time any more.  Have some EMI options as potential upside but need to do 25 hours per week to keep them

 

 

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4 hours ago, MrXxx said:

......

Just to add to my post above, can anyone explain the impending negatives that some are espousing for index ETFs, as I have seen little convincing evidence for this apart from oft repeated dogma of `Index ETFs are bad, avoid!`

For me for ETFs generally:  increased counterparty risk; not been really stress tested (one I had was and failed); and securities lending.  Not totally conclusive so I just spread the risk by buying individual stocks as well for my HYP.

For indexing, none if the time is right and the ETF or fund is the right one (which index?).  First is being in the market at the right time (eg. long enough), then the right sector (including asset allocations), then lastly the right stocks.  Primarily worrying about the alpha of picking the right stocks above all else seems to be the wrong way round.

My SIPP is ETF based which I'm happy with.  But I use geo ETFs for the equity to get worldwide exposure and ETFs elsewhere for bonds and PMs.  I could go up a level and get a global equity ETF but I want to control the allocations to improve performance and to spread risks.  That seemed worth it after some historical analysis.  But no, I would not want to go down another level to sector ETFs or even individual stocks.  I mix ETF providers to spread risk.

My ISAs are for HYP (high yield equity).  One is just individual stocks.  The other is investment trusts.  That way I spread the risk of being rubbish at investing.  However, I'm tempted to move my ITs to my SIPP and use the ISA for individual high yield international stocks.

I've toyed with sharing my watchlists FWIW, even written the posts, but am nervous, even if it's quite normal on say Lemonfool.

I also have a trading account for when I have the time to "play".

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3 hours ago, Castlevania said:

The fact that it’s an index means you don’t buy 1% of each name but in respect to their weighting to the index.

That's important.  It depends on the type of indexing the ETF uses.  Some (most) are capitalisation based others are not.  Other devils in the ETFs' details too.  

A slightly tangential example was when I was looking at high div ETFs:

. IUKD is just based on the higher div payers, which means it picks up all the dogs who's share price is going to collapse or has and the div will follow.  Another one included historical div payouts, etc in their selection criteria.  A more div aristocrats based approach.  The latter had a lower yield but also a lower risk to capital. 

. But anyways, I just decided to buy the sounder constituents directly in the end. 

. May not be so for overseas stocks though where market access could be a problem, but then maybe better at that stage best to use an investment trust instead of an ETF (especially if they don't exist).

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Really enjoying reading the banter on the twitter threads from David Hunter. He called bear in 2014 and the turn at the low after. He called the low in December and says pms and the SPX will rally from here for the first half of this year. Then a likely bust. 

Sounds remarkably like Martin Armstrong who says Gold and the DOW will rise together this year in a flight from govt bonds in what he called The Great Alignment. 

Paging Viceroy... what say you

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59 minutes ago, Thorn said:

Really enjoying reading the banter on the twitter threads from David Hunter. He called bear in 2014 and the turn at the low after. He called the low in December and says pms and the SPX will rally from here for the first half of this year. Then a likely bust. 

Sounds remarkably like Martin Armstrong who says Gold and the DOW will rise together this year in a flight from govt bonds in what he called The Great Alignment. 

Paging Viceroy... what say you

Doh

image.png.0374c521494cfc2ff7548e878c04e341.png

 

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8 hours ago, A_P said:

Doh

 

To be fair to him it has gone back to 2600, anyone who is 100% accurate at timing the markets is just lucky and will shortly not be accurate.

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1 hour ago, Majorpain said:

To be fair to him it has gone back to 2600, anyone who is 100% accurate at timing the markets is just lucky and will shortly not be accurate.

giphy.gif

Thank you, I had a good feeling I would get a response like that. I didn't post the tweet for the specific call (although it was a pretty wild one xD), nor as a personal response to conflic with Thorn. It was more to highlight one will see what they want to see and it's easy to cherry pick one the tweets (there are plenty) for any given scenario.

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41 minutes ago, A_P said:

giphy.gif

Thank you, I had a good feeling I would get a response like that. I didn't post the tweet for the specific call (although it was a pretty wild one xD), nor as a personal response to conflic with Thorn. It was more to highlight one will see what they want to see and it's easy to cherry pick one the tweets (there are plenty) for any given scenario.

Good point.

Still- the turns rather than the timings.

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35 minutes ago, Thorn said:

Good point.

Still- the turns rather than the timings.

To some extent yes. But when you consistantly call for turns that never materalise or continually move the goalposts/timeframe, it's worth stopping and taking a critical look. At what point does one decide perhaps it's not worth paying so much attention to? Evenutally the call(s) could be right but by then the boy has cried wolf so many times that the correct call has little to no significance anymore.

For the people that follow this Hunter chap, how did you find him? Why do you follow him and for how long? Were you invited to recieve his letter? If so how much does it cost?

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sancho panza
4 minutes ago, sancho panza said:

https://www.retailgazette.co.uk/blog/2019/03/1200-jobs-at-risk-as-office-outlet-falls-into-administration/

The future of 1200 jobs at Office Outlet has been plunged into uncertainty as the retailer fell into administration.

Partners at Deloitte were appointed joint administrators yesterday.

All 90 of Office Outlet’s stores will continue trading while the business is marketed to potential new owners.

“In addition to a general downturn in trading as a result of the ongoing decline in the stationery market and UK retail in general, the company has recently experienced a reduction in credit from key suppliers, given the economic outlook which has severely impacted the financial position of the company,” joint administrator Richard Haws said.

“We are hopeful a buyer can still be found for the business in the coming weeks and we will continue to trade the business with that aim in mind.”

The news comes after Office Outlet launched a CVA last August, which saw a handful of store shut down as well as three years of free rent on 20 others.

However, the CVA failed to save the retailer, which has reportedly had trouble scraping together rent for its estate of more than 90 stores ahead of the due date on Friday.

US-based stationery giant Staples agreed to sell its UK shops to Hilco Capital, the former owner of HMV, in late 2016.

The stores were then renamed Office Outlet, while a separate online business continues to operate separately and independently in the UK under the name Staples.

Office Outlet chief executive Chris Yates said: “Over the last two years the business has been transformed from the heavily loss-making old Staples business to a near break-even modern multichannel retailer.

“However, additional growth capital was required to continue delivery of the next stage of the management buyout business plan.

“Despite being highly impressed by the Office Outlet story potential investors have held back due to retail sector sentiment and the general level of uncertainty.”

Office Outlet’s collapse is another disappointment for Hilco, after the investment firm was forced to place HMV into administration late last year.

The music retailer was eventually sold to Canadian music business Sunrise Records, resulting in the closure of 27 locations including the original Oxford Street branch.

 

I';ve set up a separate thread where on bricks n mortar retial.

 

key poitns here in terms of debt deflation isjob losses,  withdfrawal of credit,free rent failed to save them(and therfore the loans that sit behind vast CRE empires).

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Noallegiance
15 minutes ago, A_P said:

To some extent yes. But when you consistantly call for turns that never materalise or continually move the goalposts/timeframe, it's worth stopping and taking a critical look. At what point does one decide perhaps it's not worth paying so much attention to? Evenutally the call(s) could be right but by then the boy has cried wolf so many times that the correct call has little to no significance anymore.

For the people that follow this Hunter chap, how did you find him? Why do you follow him and for how long? Where you invited to recieve his letter? If so how much does it cost?

For me, this points to what kind of person is investing and what the period of the cycle is happening.

Those making a living out of it will be more interested in short term moves. Those seeing the bigger picture as detailed in this thread seem to be the more cautious type looking for protection + long term growth instead of quick bucks.

It's just an inexplicable brain/experience/learning/programming/circumstance mix.

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sancho panza
43 minutes ago, A_P said:

To some extent yes. But when you consistantly call for turns that never materalise or continually move the goalposts/timeframe, it's worth stopping and taking a critical look. At what point does one decide perhaps it's not worth paying so much attention to? Evenutally the call(s) could be right but by then the boy has cried wolf so many times that the correct call has little to no significance anymore.

For the people that follow this Hunter chap, how did you find him? Why do you follow him and for how long? Where you invited to recieve his letter? If so how much does it cost?

I don't follow him and I'm not on the guest list either and I'm not that bothered about it .I make my own calls for us as a family taking in the views of lots of different people.Not least some on here who've changed my opinion on things.

There's  a decent record of posters on here declaring interests either long or short when making comments where a conflict has arisen.

I will declare a subscription to Steve kaplan-True Contrarian-worth every penny of the $200 p.a..I tried it initialy after reading him when @DurhamBorn led us to him on here. Took a three month and found that he does a lot of teh legwork in terms of market research that I would do.I'm busy,time poor(kids,Mrs P, Mama P and wider family,job etc) I must say I don't particularly follow his tips(he invests in a wide range of ETF's) but that's not what I use him for and I don't try and time market turns off him alone.But I clearly do try and time market/company turns.........................I'd be lying if I said I didn't.

http://truecontrarian-sjk.blogspot.com/

I will also declare a subscription to IKN as hattipped by @kibuc.Comes in at $40 a month.Wouldn't say worth every penny but it does what I needed it to in terms of backing up my attempts to invest across the precious metals mining sector,educate me some on what to look for, market whispers,avoid pump n dumps.His actual tips are weighted by quality so not equal wiehgt,his returns have been mixed over the years but his research is incredibly detailed and he's clearly very committed to his work and the yellow metal.I do use his tips sometimes but not religiously as I mix with my own research as is often recommended on hre. I have actually used some of the reccomendatiosn for companies on here from @kibuc @Majorpain @DurhamBorn for which I've thanked them previously. As ever it's DYOR.

https://incakolanews.blogspot.com/

 

Most tipsheets/newsletters are crap,regurgitating the comapny accounts and the lucky ones invest in Apple at $1 and then are top of the returns list for fifteen years as a result.Hulberts Digest collates some data.

 

Personally,I'm happy to pay for research a) if it's what I want b) if it's good enough.Most buy and sell notes from most brokers are utter garbage and you'df be better off buying a index/sector ETF and using long term moving averages

 

Jsut my views.Appreciate your several points across several posts as they've made me think about things.

 

Edit to add:I will probably keep the kaplan running long term.IKN will probably skip once we're fully invested in the sector as when we sell,we'll be selling the lot in a oner.

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Shatner's Bassoon
27 minutes ago, A_P said:

To some extent yes. But when you consistantly call for turns that never materalise or continually move the goalposts/timeframe, it's worth stopping and taking a critical look. At what point does one decide perhaps it's not worth paying so much attention to? Evenutally the call(s) could be right but by then the boy has cried wolf so many times that the correct call has little to no significance anymore.

For the people that follow this Hunter chap, how did you find him? Why do you follow him and for how long? Where you invited to recieve his letter? If so how much does it cost?

I think that's fair. This man's work has obviously massively influenced this thread and given that its central premise is around his wider macro/cycle picture, I must admit to being a little surprised that he's in the business of making bold short-term predictions like this. Twitter is full of US alpha male shills cockily making outlandish  "100% guaranteed" calls that are quietly glossed over when they turn out to be incorrect. 

That's not to say that I don't find his arguments compelling or that he won't eventually be right. But given his importance to this thread, I think it's only fair that we look at his record. 

This is not to denigrate DB either - I love his posts and I've learned so much from him and others on here.

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On 16/03/2019 at 14:43, billfunk said:

YCA - uranium investment company, currently 231p, NAV gives a share price of 255p. 

CCJ - big, US uranium producer, the other half of any uranium bet, for me.

 

Dominic Frisby mentions YCA in his article on moneyweek today. Suggests uranium is a good long term bet but "On the evidence of this, now is a better time to be watching than buying. 2014, 2017 and 2018 all suggest we should be looking to buy in the late April to June timeframe." 

https://moneyweek.com/503584/uranium-looks-a-good-long-term-bet-heres-how-to-play-it/

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30 minutes ago, Shatner's Bassoon said:

I think that's fair. This man's work has obviously massively influenced this thread and given that its central premise is around his wider macro/cycle picture, I must admit to being a little surprised that he's in the business of making bold short-term predictions like this. Twitter is full of US alpha male shills cockily making outlandish  "100% guaranteed" calls that are quietly glossed over when they turn out to be incorrect. 

That's not to say that I don't find his arguments compelling or that he won't eventually be right. But given his importance to this thread, I think it's only fair that we look at his record. 

This is not to denigrate DB either - I love his posts and I've learned so much from him and others on here.

Completely agree.

Just to add I'm not trying to muddy the waters but I do think it's important to discuss. I like to know what makes people tick/post and why they do so I can judge for myself. And as you rightly say he has had a big influence on the thread and I imagine on some people's trades/purchases. I've also seen this thread mentioned in a few other places around the web.

Anyone here buy Tbills?

 

 

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I sort of resented A_P chiming in and spoiling things at first. It just goes to show herd mentality can crop up anywhere though. The proof is in the pudding as they say.

It all makes for interesting reading. This has made me step back once again and take stock of how memes start....

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On 19/03/2019 at 10:16, VeryMeanReversion said:

Rather than giving exact numbers, I'll disclose based on gross salary (after sacrifice) = "x"

House equity = 10 x

Building plot = 5 x (free-market value) , 8x if I do the project myself

SIPP = 9 x

Dividend income in SIPP per year = 0.6 x

More than a third of salary is sacrificed into SIPP each year with the aim of FIRE at age 55 (~5 more years).

 

SIPP is mostly FTSE100/250, a wide range of stocks/sectors. I have around 30 different holdings. Some up 166%, some down 50%. 

Net running cost of SIPP is basically zero. The annual cost is nearly covered by cash back offers to transfer in.

And my general view is this:

1.  FTSE still looks like the best game in town. Yields are far better than the alternatives.  I have no need for big returns, slow and boring suits me.

2.  I've hardly any cash left in the SIPP. Any cash went on platinum/silver ETFs (17% of SIPP) rather than being 100% in equities. I'd rather own something real than hold cash.  As divis roll in, I buy something when they get to £10K.  I have no interest in bonds.

3. I'm aiming for total housing equity at 25x and pension at 20x to provide future housing/income.  If the stock market crashes 50%, the housing could be used to replace the income (rent-a-room tax-free).

4. In FIRE, I'll pull 5% of SIPP per year until state pension age then 3% afterwards. Will have similar disposable income as now and the kids might have moved out by then.

5. Expect long term falls in nominal house prices but not enough to justify selling to rent. (Did that once before).

6. I'd never invest in a PM miner (Old quote - "liar standing in front of a hole") or Buy-to-let.

7. I rarely sell, just buy and hold. 

8. I have "laddered" but don't plan on doing it again.  I'd rather go wider than deeper.

9. I like my job but don't want to be doing it full-time any more.  Have some EMI options as potential upside but need to do 25 hours per week to keep them

 

 

Interesting post VMR I will make a few comments as to how your approach differs to mine.

First I like this thread I admire the way the conversation is handled with respect and openness and I admire (but am unable to replicate) the frugality of many on here and think this will be an increasing theme of society going forward. I am mainly interested what comes in what order out of inflation/deflation as the sequence of them will determine investment returns. I don't have a strong view on this but mildly favour a deflationary move next over an inflationary one next which seems to show up in asset holding differences between us. However of the two I fear inflation more longer term as I think it will have a bigger effect on quality of life over say a thirty year period than a shorter term deflationary bust. 

I FIRED last summer at 52 live in the EU and have spent 9 months or so adjusting to life with about 60% of former income having run a small business for over a decade. I went then because i found working part time meant a lot less income but for comparatively more effort and stress if you like so i wanted the time not the money. Its been a simple decision, I don't miss the money and apart from a short period of what next its been a relatively simple transition. My wife works part time and intends to continue for the foreseeable which simplifies the equation further.

My numbers are a bit different to yours as follows.

- House x5 of income. We intend to downsize in 10 years to circa 3x income

- Pension x9 mix of SIPP, company pension and final salary pension invested in shares and funds.

- Shares x 15. mainly UK shares 20 or so - looking to expand to c 30 and add more overseas funds when good value 

- Bonds and cash equivalents x5 Mix of UST and £

- Gold, silver and commodities x1. Looking to expand here given the relative long term value i perceive

- Together the above minus the SIPP generates 90% of annual spending needs with wife's income the rest. I am cautious on returns - I'm looking for a 3-4% return across the portfolio over the very long term. I feel my cash portion particularly the sterling portion is too high given sterling's terrible track record so  continue to look for UK based shares at good value which derive majority income from overseas. They are quite hard to find ATM.

I don't intend to take the pensions until age 60 at which point I think I will use similar numbers to yours for withdrawal until and after state pension kicks in although if find it difficult to think that far ahead.

I have also found when you retire good health not wealth becomes the main focus and the wealth part is more for people in the 10 or so years before they retire as they stack for an unknown longevity. 

 

 

 

 

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5 minutes ago, Gin said:

I sort of resented A_P chiming in and spoiling things at first. It just goes to show herd mentality can crop up anywhere though. The proof is in the pudding as they say.

It all makes for interesting reading. This has made me step back once again and take stock of how memes start....

I don't think it spoils the overall thesis/premise. It's obvious to most on the thread something isn't right out there and that's why we are here. If people are looking for protection there has been some fantastic contriubtions in the thread along with many other musings. Who got on INFA? There have been some great calls on the miners and some not so great as one would expect.

A healthy amount of sketpcism is good though.

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23 minutes ago, A_P said:

I don't think it spoils the overall thesis/premise. It's obvious to most on the thread something isn't right out there and that's why we are here. If people are looking for protection there has been some fantastic contriubtions in the thread along with many other musings. Who got on INFA? There have been some great calls on the miners and some not so great as one would expect.

A healthy amount of sketpcism is good though.

That's the downside of following a system though, from time to time they throw up errors.

The trick is to be right more than you are wrong, I remember reading an article saying if you get 60% of your trades right you will be doing better than most.  Then you get into contrarian investing being a long term thing not well suited to short term trades as Durhamborn has alluded to many times.

I re-evaluate my position at least once a week due to the amount ive got at stake, so far despite reading widely there is still nothing to suggest that the current financial system will end well.  They can extend the cycle with QE but ultimately the mal-investment must be purged at some point.

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reformed nice guy

Further flattening going on.

6 mnth is 2.506

1   year is 2.489

7   year is 2.497

10 year is 2.594

Will the 10 year invert next?

chart (6).png

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