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Credit deflation and the reflation cycle to come.


DurhamBorn

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5 hours ago, Harley said:

We've had the "good" inflation and as surely as night follows day, we'll have the bad inflation.  It always has been so.  The money has been sucked up into assets and the velocity of money is on life support.  But when that iceberg starts to melt, and the dynamics say at an increasing rate,.....

We may get a deflationary crash first, but that is just a crash.  The inflation is a longer, malignant thing.  I would prefer to be preparing for inflation, and maybe just trading the deflationary bust.  But how to prepare.  The last discernable (i.e. not hidden) time was long ago, before the internet!

Stocks worked in Weimar Germany, and elsewhere, but only for so far and then failed, much has been said about the real performance of PMs during inflation, will commodity derivatives, like any derivatives, truly reflect the underlyings, what about currency movements, etc?

Tough one.

Its probably the most important point of this thread Harley like you say.Im looking at it in two ways.First the inflation coming is a given.History shows like you say bad inflation always follows good,its simply how it is.That means at the very least you want inflation loving assets.The fact even they might under perform is a problem,but id rather have a company that can at least increase prices than one at the mercy of input costs (or worse a bond).

The 2nd part is like all inflation's it drives investment in ways to cut costs.Its highly likely this one will see a rush to electrify the economy.That should ensure the likes of silver have an open path to much higher prices.That means silver miners should magnify the gains.

I also think its hugely important to own companies that have really expensive fixed assets already in depreciation.They are mostly under valued right now for lots of reasons.People often forget, but the reason inflation cycles really fly is because new entrants into sectors dry up.Its ironic,but in lots of ways the UK has already seen huge falls in a very large percentage of the market with PE ratios in the 5 to 10 range for many companies.

Its going to be quite a ride,and we can only do our best to navigate it.

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16 hours ago, DoINeedOne said:

Actually thought about ordering some VAT free silver coins from the EU before said on the radio we can have an extension only if they vote in Mays deal so god knows whats going  happen

Can I ask - Would that be with Coininvest? Only I am looking to do the same. 

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8 minutes ago, JMD said:

Can I ask - Would that be with Coininvest? Only I am looking to do the same. 

Thats who i use JMD the VAT free coins.I really like the Queens Beasts coins,i think they will prove a very nice long term investment.Coins are a long term investment.Il probably sell mine a few at a time in a trip to Blackpool to ChardsxD

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46 minutes ago, DurhamBorn said:

......

The 2nd part is like all inflation's it drives investment in ways to cut costs.Its highly likely this one will see a rush to electrify the economy.That should ensure the likes of silver have an open path to much higher prices.That means silver miners should magnify the gains.

I also think its hugely important to own companies that have really expensive fixed assets already in depreciation.They are mostly under valued right now for lots of reasons.People often forget, but the reason inflation cycles really fly is because new entrants into sectors dry up.

......

Tidy.  Now we need names, names I say!  Or at least a list of criteria, like you've started.

We have:

. Expensive fixed assets already in depreciation.

. Price setters, not takers.  Such as in markets with barriers to entry.

. Producers to future trending sectors (electrification) and players in those sectors.

So I start looking at the VOD, RIO, etc accounts!

Other criteria, such as debt position (eg. below a certain ratio and fixed at low rates)?

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27 minutes ago, JMD said:

Can I ask - Would that be with Coininvest? Only I am looking to do the same. 

Yes, not used them before but heard plenty of good reviews about them

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3 minutes ago, Harley said:

Tidy.  Now we need names, names I say!  Or at least a list of criteria, like you've started.

We have:

. Expensive fixed assets already in depreciation.

. Price setters, not takers.  Such as in markets with barriers to entry.

. Producers to future trending sectors (electrification) and players in those sectors.

So I start looking at the VOD, RIO, etc accounts!

Other criteria, such as debt position (eg. below a certain ratio and fixed at low rates)?

Telcos,transports,energy,miners,delivery networks,and a handful of consumer stocks.For debt i want it fixed at low rates,a nice even spread of coming due,and not too much to re-finance before around 2027.

For VOD they have too much debt,but its fixed at very low rates.As long as its managed well bond holders have really simply funded the profits for equity while they take a bath.

Of course crucial to all the above is keeping free cash at decent levels even if dividends need to be cut.Only the strongest will be able to re-finance.

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When your fiat is not even worth keeping apparently people in venezula robbed the bank but not for the money, quite a few photos on twitter with money on the streets and stuck to trees

crazy

D1sm_uSWkAAq-m2.jpg:large

D2G4DvvW0AAGkAE.jpg:large

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reformed nice guy
52 minutes ago, DoINeedOne said:

Yes, not used them before but heard plenty of good reviews about them

I have now seen them mentioned on a few different websites, so I just placed an order with them.

I normally use Hatton Garden Metals and the total cost for the same order was about 12% lower.

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1 hour ago, DurhamBorn said:

Telcos,transports,energy,miners,delivery networks,and a handful of consumer stocks.For debt i want it fixed at low rates,a nice even spread of coming due,and not too much to re-finance before around 2027.

For VOD they have too much debt,but its fixed at very low rates.As long as its managed well bond holders have really simply funded the profits for equity while they take a bath.

Of course crucial to all the above is keeping free cash at decent levels even if dividends need to be cut.Only the strongest will be able to re-finance.

Tidy x 2!

I'm off to screen Morningstar!

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56 minutes ago, DurhamBorn said:

Thats who i use JMD the VAT free coins.I really like the Queens Beasts coins,i think they will prove a very nice long term investment.Coins are a long term investment.Il probably sell mine a few at a time in a trip to Blackpool to ChardsxD

Also love the Queens beasts, I picked up a few a while back along with some generic Brits.  Wonder if it's the kind of thing they keep minting IE lose potential rarity perception.  What I gathered though could be wrong was is when/ if silver goes into bubble territory then it's the simple brittanias etc that sell well and the collectors coins don't really fetch much premium. 

But out with that situation I'm thinking they could be good.  My personal favourite is an Australian mint ounce bar with a fancy Chinese dragon on one side.  They probably aren't anything special but really like the design.

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Castlevania
1 hour ago, Harley said:

Tidy.  Now we need names, names I say!  Or at least a list of criteria, like you've started.

We have:

. Expensive fixed assets already in depreciation.

. Price setters, not takers.  Such as in markets with barriers to entry.

. Producers to future trending sectors (electrification) and players in those sectors.

So I start looking at the VOD, RIO, etc accounts!

Other criteria, such as debt position (eg. below a certain ratio and fixed at low rates)?

Vanguard last year changed their precious metal fund from one 100% in precious metal miners to a more general one for an inflation cycle with only 25% in precious metal miners and rebadged it the Vangurd Global Capital Cycles fund. The list of assets they hold as at year end is here and should give you some ideas (or just buy their fund and forget about it).

https://advisors.vanguard.com/web/c1/fas-investmentproducts/0053/portfolio#composition-tab-set

 

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5 minutes ago, Dogtania said:

Also love the Queens beasts, I picked up a few a while back along with some generic Brits.  Wonder if it's the kind of thing they keep minting IE lose potential rarity perception.  What I gathered though could be wrong was is when/ if silver goes into bubble territory then it's the simple brittanias etc that sell well and the collectors coins don't really fetch much premium. 

But out with that situation I'm thinking they could be good.  My personal favourite is an Australian mint ounce bar with a fancy Chinese dragon on one side.  They probably aren't anything special but really like the design.

Yes i usually buy the brits and maples but always add a few of the designs i like in others.Love that dragon one you mention,think il get a few of those,really nice.

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1 hour ago, DoINeedOne said:

When your fiat is not even worth keeping apparently people in venezula robbed the bank but not for the money, quite a few photos on twitter with money on the streets and stuck to trees

crazy

D1sm_uSWkAAq-m2.jpg:large

D2G4DvvW0AAGkAE.jpg:large

To make the point about fiat, in a topical manner, would you trust it if it had a picture of May on it?  Now why trust any picture?  It's faith based and they are undermining that faith.  When faith goes, the velocity of money rises, causing (inter alia) inflation, causing the velocity of money to rise, and onwards and upwards we go.  It is V, the velocity of money, which brings in the human side to the inflationary equation.  And with QE, the potential tsunami from an elevated V is huge.  The other variables are technical and are managed by technical solutions.  V isn't hence the mental manipulation, aka BS which they only have a tenuous grip on.  That is why we need to read and think for ourselves.

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12 hours ago, sancho panza said:

I'd be careful of anyone using records of returns to sell subs.Better to understand how their portfolio is constructed and whether returns have been flattered by one of two big trades.eg many high yield portfolios blew up ni 08 as they were full of banks.

DYOR for systemized but maybe start with understanding some apects of technical analysis susch as long term mvoing averages

I agree, but recognising my own limitations in doing serious tech-analysis, I don't think this would be productive for me to attempt. I am still researching, etc, but have decided to divide my portfolio into say three equal parts - momentum investing (using saltydog system or similar), buy and hold (commodities, infrastructure, etf's), plus other part yet to be decided!!      

Btw the Saltydog system is buying the 2/3 top performing funds in each of 2/3 best performing sectors and reviewing weekly. It also takes into account factors such as fund history, size, volatility. Another similar system is Fundexpert. These type of momentum systems sound ridiculously simple but each has been running successfully for nearly 20 years, and many financial/academic type papers back up the theory. But depending on view taken about momentum investing, I guess it is fundamentally just identifying a macro trend, or merely an exploitation of market hearding (perhaps these are much the same thing?). As usual the key is to understand all risks in this type of investing and mitigating against them as far as possible.

Peoples thoughts on this would be very welcome.         

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20 minutes ago, Castlevania said:

Vanguard last year changed their precious metal fund from one 100% in precious metal miners to a more general one for an inflation cycle with only 25% in precious metal miners and rebadged it the Vangurd Global Capital Cycles fund. The list of assets they hold as at year end is here and should give you some ideas (or just buy their fund and forget about it).

https://advisors.vanguard.com/web/c1/fas-investmentproducts/0053/portfolio#composition-tab-set

 

Very interesting.  Maybe I need to read the prospectus as not clear what they mean:

  • Purchases securities in companies and industries where capital spending is declining, and seeks to avoid companies, assets, and business models that can be easily replicated.
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3 minutes ago, JMD said:

I agree, but recognising my own limitations in doing serious tech-analysis, I don't think this would be productive for me to attempt. I am still researching, etc, but have decided to divide my portfolio into say three equal parts - momentum investing (using saltydog system or similar), buy and hold (commodities, infrastructure, etf's), plus other part yet to be decided!!      

Btw the Saltydog system is buying the 2/3 top performing funds in each of 2/3 best performing sectors and reviewing weekly. It also takes into account factors such as fund history, size, volatility. Another similar system is Fundexpert. These type of momentum systems sound ridiculously simple but each has been running successfully for nearly 20 years, and many financial/academic type papers back up the theory. But depending on view taken about momentum investing, I guess it is fundamentally just identifying a macro trend, or merely an exploitation of market hearding (perhaps these are much the same thing?). As usual the key is to understand all risks in this type of investing and mitigating against them as far as possible.

Peoples thoughts on this would be very welcome.         

Definitely easy to overcomplicate and analyse things.  I have a lot of skills to do so but don't.  Depends what you're after but for trading, I go momentum based, using a bit of financial common and basic price charts, plus two technical indicators.  I don't care about the "story", just the price.  Simple systems are DIY, and better because you live and own them.  More bells and whistles progressively add little.  Totally different for say a buy and hold high div portfolio but the trading approach still works for timing the buys.

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1 hour ago, DurhamBorn said:

Thats who i use JMD the VAT free coins.I really like the Queens Beasts coins,i think they will prove a very nice long term investment.Coins are a long term investment.Il probably sell mine a few at a time in a trip to Blackpool to ChardsxD

thanks DB, I already own silver/gold eft and fund, but also want physical.

1 hour ago, DoINeedOne said:

Yes, not used them before but heard plenty of good reviews about them

thanks for reply 'dino'

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3 hours ago, DurhamBorn said:

Telcos,transports,energy,miners,delivery networks,and a handful of consumer stocks.For debt i want it fixed at low rates,a nice even spread of coming due,and not too much to re-finance before around 2027.

For VOD they have too much debt,but its fixed at very low rates.As long as its managed well bond holders have really simply funded the profits for equity while they take a bath.

Of course crucial to all the above is keeping free cash at decent levels even if dividends need to be cut.Only the strongest will be able to re-finance.

Thanks for this. 

As a noob investor I have formed the following shortlist. Mostly good quality (BT debt might be an issue?), mostly good dividend yielding, mostly good value telco and transports.

telcos and transports.PNG

2 hours ago, Harley said:

Definitely easy to overcomplicate and analyse things.  I have a lot of skills to do so but don't.  Depends what you're after but for trading, I go momentum based, using a bit of financial common and basic price charts, plus two technical indicators.  I don't care about the "story", just the price.  Simple systems are DIY, and better because you live and own them.  More bells and whistles progressively add little.  Totally different for say a buy and hold high div portfolio but the trading approach still works for timing the buys.

What is your buy signal?

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TheCountOfNowhere

Hi DB. I like to read this from afar. It's very interesting. 

Some alluded to the thing I just don't. 

I've said a few times... Are you sure we've not already had the credit deflation and the inflation has already been kicked off. 

Someone asked if you're expected the credit deflation, and surely a stock market crash, why the hell are you buying into it now?

It makes no sense. 

 

You can make a fortune just by sitting on your hands, that's if your right about the credit deflation to come. 

 

So are you expecting a credit deflation or not? 

 

Or are we already on a hyper inflation course., looking at house prices hyper inflation is what I see. 

 

Money's pretty much (relatively) worthless when in cones to houses now. 

 

Confused. 

 

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3 hours ago, billfunk said:

What is your buy signal?

A combo of MACD and Stochastics.  Wait for them to break out in a certain way - i.e. momentum.

I mainly look at weekly data given my available time plus gives a better buy and hold signal (daily means more risk of just optimising a buy in a downtrend).

Usually good at getting in on the lows but there could always be lower lows later (e.g. VOD)!

Hard part is when to sell, if a trade.  So now do three lots (assuming success): after the initial spurt, when things look like flagging, when things have started flagging.

Reliable but nowhere near infallable.  Add some money management and nets out OK though.

£5,000 for the specifics - took a lot of painstaking research!

PS: Thanks for sharing your shortlist and will also take a look.

PPS: For those interested in momentum trading, I found the turtle traders book a good story back in the day.  Highlighted being simple but consistent.

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2 hours ago, TheCountOfNowhere said:

Hi DB. I like to read this from afar. It's very interesting. 

Some alluded to the thing I just don't. 

I've said a few times... Are you sure we've not already had the credit deflation and the inflation has already been kicked off. 

Someone asked if you're expected the credit deflation, and surely a stock market crash, why the hell are you buying into it now?

It makes no sense. 

 

You can make a fortune just by sitting on your hands, that's if your right about the credit deflation to come. 

 

So are you expecting a credit deflation or not? 

 

Or are we already on a hyper inflation course., looking at house prices hyper inflation is what I see. 

 

Money's pretty much (relatively) worthless when in cones to houses now. 

 

Confused. 

 

This is pretty much my question as well...I have the understanding of what to/how to now buy (thanks to this threads posters and some reading), but when?...currently sitting in cash (like some others on here) and reluctant to buy at a peak only to see the market drop BUT the longer your are not in equities, the longer you are missing opportunities!

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27 minutes ago, Harley said:

A combo of MACD and Stochastics.  Wait for them to break out in a certain way - i.e. momentum.

I mainly look at weekly data given my available time plus gives a better buy and hold signal (daily means more risk of just optimising a buy in a downtrend).

Usually good at getting in on the lows but there could always be lower lows later (e.g. VOD)!

Hard part is when to sell, if a trade.  So now do three lots (assuming success): after the initial spurt, when things look like flagging, when things have started flagging.

Reliable but nowhere near infallable.  Add some money management and nets out OK though.

£5,000 for the specifics - took a lot of painstaking research!

PS: Thanks for sharing your shortlist and will also take a look.

PPS: For those interested in momentum trading, I found the turtle traders book a good story back in the day.  Highlighted being simple but consistent.

I read the Turtle Trader's book. I noted that the main chap busted out!

The thing I have found most difficult as noob investor is that every theory or truism seems to have its exact opposite. You are supposed to have stops and to honour them, but at the same time you have to give your investments time to work, have conviction in them and not bail on them early. You are supposed to find a trend and follow it to the end, don't be afraid of buying in at the 52 week high because it's going to go higher, but also you have to avoid buying overbought companies. Basically there is a million and one ways to theorise the basic aim of investing - "Buy this if you think it's price is going to go up" - with the riders "soon" and "a lot". "Sell this when you think the price is going to go down". I love all the theories and investing styles but at the end of the day I always return to those fundamental questions.

That said I like the idea of scaling/laddering especially for large positions (that I will hopefully have in a few years!)

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31 minutes ago, MrXxx said:

This is pretty much my question as well...I have the understanding of what to/how to now buy (thanks to this threads posters and some reading), but when?...currently sitting in cash (like some others on here) and reluctant to buy at a peak only to see the market drop BUT the longer your are not in equities, the longer you are missing opportunities!

IMHO the FTSE is already undervalued, by averaging in out of favour sectors in quality dividend paying companies which are already way off their highs, is a win either way given a long enough timeframe.

Should we see this play out like on this thread, then great, we’ll be well positioned coming out of the other side. If these defensive infrastructure stocks decline further then I can average further down and let the dividends reinvest. When you take a look at the likes of Diageo that was relatively uneffected during the last financial crisis, so not everything tanks. If the plates somehow manage to keep spinning then being all in on cash becoming ever more worthless in account is the last place you want to be.

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Castlevania
7 minutes ago, billfunk said:

I read the Turtle Trader's book. I noted that the main chap busted out!

The thing I have found most difficult as noob investor is that every theory or truism seems to have its exact opposite. You are supposed to have stops and to honour them, but at the same time you have to give your investments time to work, have conviction in them and not bail on them early. You are supposed to find a trend and follow it to the end, don't be afraid of buying in at the 52 week high because it's going to go higher, but also you have to avoid buying overbought companies. Basically there is a million and one ways to theorise the basic aim of investing - "Buy this if you think it's price is going to go up" - with the riders "soon" and "a lot". "Sell this when you think the price is going to go down". I love all the theories and investing styles but at the end of the day I always return to those fundamental questions.

That said I like the idea of scaling/laddering especially for large positions (that I will hopefully have in a few years!)

If it was that easy they wouldn’t be flogging books; newsletters and seminars.

Anyhow, the only advice that I have which tends to go against popular wisdom (diversify) if you think something is seriously under priced, fill your boots. 

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Bobthebuilder
On 17/03/2019 at 12:29, DurhamBorn said:

I actually took my profits on Great Panther Silver on friday.I had a 70% profit on it and although i would like to hold until silver hits targets,i have lots of silver positions.Im going to use the profits to buy some physical silver i think and if it pulls back to $1.05 re-enter.

I see Panther is back to this level, are you still interested?

Great thread BTW peeps.

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