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Credit deflation and the reflation cycle to come.


DurhamBorn

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4 minutes ago, JMD said:

Thanks Harley for providing this. It is very useful as I am still fine tuning my strategy. So in particular, any insights for running a balanced and well diversified, low volatile portfolio would be very welcome - as from what i've read this is the main way for keeping funds invested/deployed and therefore increasing returns. 

As I posted few days back I have recently decided on running 3 portfolios - momentum fund system; long-term buy-and-hold index/etf/fund/PM's/reflation shares (as per reflation cycle strategy); and the third to be - though not 100% certain yet - income funds/divi shares. My total portfolio value is currently 300k held in isa's/money purchase type pension. I would seek to divide into three equal portfolio amounts and rebalance yearly so each remained equal. I unfortunately don't have the skills to 'trade' but instead would be on the lookout for adding value/growth or income/divi investments over time.

 

 

12 minutes ago, Majorpain said:

Gotta be an area to watch.  Think I'll set up a watchlist of commodity ETF/ETNs to see how things pan out.

Then there's the producer shares.......

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55 minutes ago, JMD said:

Thanks Harley for providing this. It is very useful as I am still fine tuning my strategy. So in particular, any insights for running a balanced and well diversified, low volatile portfolio would be very welcome - as from what i've read this is the main way for keeping funds invested/deployed and therefore increasing returns. 

As I posted few days back I have recently decided on running 3 portfolios - momentum fund system; long-term buy-and-hold index/etf/fund/PM's/reflation shares (as per reflation cycle strategy); and the third to be - though not 100% certain yet - income funds/divi shares. My total portfolio value is currently 300k held in isa's/money purchase type pension. I would seek to divide into three equal portfolio amounts and rebalance yearly so each remained equal. I unfortunately don't have the skills to 'trade' but instead would be on the lookout for adding value/growth or income/divi investments over time.

 

Sounds quite similar to mine (except momentum fund system = momentum trading system), so naturally I think you're a genius!  I found this really is the way for me to proceed - get my setup right first so I know why each portfolio exists and what each is aiming to do, then allocate funding targets according to my risk profile, age, retirement date, required portfolio sizes, etc.  Then once I had a solid framework, I started to fill up according to whatever system(s) I had chosen (could have simply been dollar cost averaging, but I had a charting/TA interest).

I took inspiration from those talking about the "floor" and "upside" portfolios for retirement (floor = long term portfolio and upside = income portfolio).  I even went as far as to review my actual household expenditure to forecast my essential retirement expenditure requirements (using discounted cash flow and all that) so as to know how big my final floor fund needed to be for retirement.  How many people ever think about that and set up the appropriate portfolios sizes and risk profiles?  That stuff about a bond:equity split according to age just seems so lame to me.  But then I've never taken proper authorised professional advice so could be completely wrong!  I then set funding targets for the other two portfolios.  Each portfolio then had a certain risk profile which determined what they should hold so, for example, the floor portfolio had a low risk profile.  I used the Permenant Portfolio allocation for that (many others available).  All depends on how far to retirement, attitude to risk, etc.

Can't tell you how great I felt once I had all my ducks lined up and knew what I (and each portfolio) was doing.  It's like tailoring a suit that just fits.  TBH, I have come to this point the very hard way - siting in cash not knowing what to do or cluelessly investing blindfolded!  I just wish I had done it all so much sooner!  I should have known better - doctor heal thyself and all that!  It took me a solid 3 months or so!  To bring it all back to this thread:  I need to be running a tight ship, with everything functioning and correctly stowed away, to ride the storm.  A bit too late to be thinking of these things in a force 10 storm!  And the macro picture contained within this thread, if I buy into it, would be a key determinant in how I structure and fill things. 

Just my personal approach, not advice, I could be completely wrong, I'm just some knob in pajamas on the internet, seek proper professional advice, DYOR, and all that.

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leonardratso
35 minutes ago, Harley said:

Just my personal approach, not advice, I could be completely wrong, I'm just some knob in pajamas on the internet, seek proper professional advice, DYOR, and all that.

its early evening. early night? or off to the mosque?

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7 minutes ago, leonardratso said:

its early evening. early night? or off to the mosque?

Just what me mummy told me to do!  Should be tucked up soon and then mummy promised to read another chapter from "The Wealth of Nations"!  

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Yield curve inverted today.Hope the Fed enjoy that little fact.Just a little tick up in inflation in May or June should trap them good and proper.

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4 minutes ago, DurhamBorn said:

Yield curve inverted today.Hope the Fed enjoy that little fact.Just a little tick up in inflation in May or June should trap them good and proper.

It will be interesting to watch where things go from here DB.

I've been looking at the stockcharts for the pm miners and loads of them look to be getting into Stage 2 now - pullback to 200MA might happen but then after that... you never know.

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15 minutes ago, Thorn said:

It will be interesting to watch where things go from here DB.

I've been looking at the stockcharts for the pm miners and loads of them look to be getting into Stage 2 now - pullback to 200MA might happen but then after that... you never know.

I took some profits off the table Thorn in a few PMs  mainly selling a silver miner and top slicing a few goldies,but holding most.I still think May/June might see them start to trend.The Fed is trapped,they tightened too much already and if inflation does nudge higher they are goosed,tighten into a depression or sit tight and see a massive debt deflation speed up.My guess is they will wake up to their mistakes pretty quickly,but wont act until its too late.The worse part is i think we might be about to go into a "normal" business cycle recession  at the same time as a credit event.Thats as dangerous as it gets and it was similar in the late 20s.

The equity markets might run higher yet if they smell QE from the CBs,but its too late,they will be firefighting soon enough i think.The question is do all equity markets go down together,or have some seen a big chunk of the falls.Many UK stocks look dirt cheap on a discounted cash flow if we assume CB money flooding the downturn lifts things back.Looking at the growth shares/momentum i reckon most are in for 80% falls,some 90%+.Once they cant fund growth from equity and debt the market will discount them to 15 times free cash flow at best,and thats if they have free cash flow.

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52 minutes ago, Thorn said:

Well it looks like history wants to repeat alright...

https://northmantrader.com/2019/03/21/recession-is-coming/

 

 

I find it incredible that the CBs didnt see their tightening was very very wrong.Never in history has anyone ever rolled back liquidity without a big downturn yet they thought they could do it.Economies always grow/evolve to take up all the liquidity there is.I think another mistake they are making is they dont see the next cycle as a distribution cycle.They simply dont see that due to debt and the pull back of government pensions etc (in the UK pushing the age back) that people will start to sell down assets.The data is at last starting to go where we expected on this thread.

 

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17 minutes ago, DurhamBorn said:

I find it incredible that the CBs didnt see their tightening was very very wrong.Never in history has anyone ever rolled back liquidity without a big downturn yet they thought they could do it.Economies always grow/evolve to take up all the liquidity there is.I think another mistake they are making is they dont see the next cycle as a distribution cycle.They simply dont see that due to debt and the pull back of government pensions etc (in the UK pushing the age back) that people will start to sell down assets.The data is at last starting to go where we expected on this thread.

 

Well I reckon you’re on the money regarding the facts but it seems that sentiment is going to guide things too.

Heard a lad on Friday on  BBC radio 4  say he thought Brexit/Populism etc were a reflection that the younger generation are waking up to the fact they are going to have a worse life overall than their parents generation. More debt, no house just renting off Boomers and worse health/earlier deaths.

...gradually the Boomers will be screwed as nobody wants to buy their stuff. 

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2 hours ago, DurhamBorn said:

Thats as dangerous as it gets and it was similar in the late 20s.

Without sounding too extreme, the 1920's (c.1929) has been my model.  Obviously not the same in looks, but in nature.  There are just so many social, political, and economic parallels.  

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1 hour ago, Thorn said:

Well it looks like history wants to repeat alright...

https://northmantrader.com/2019/03/21/recession-is-coming/

 

 

Sharp analysis.  I've been banging on about the sugar rush of the US tax cuts.  The cupboard's now bare.  And I just can't see lower rates doing anything to goose the markets this time.  But everyone seems so wedded to that as a saviour.  That'll be the shock.  Even printing like mad, the CBs may have indeed lost this one and have to sit it out, apart from the odd plays.  CBs and the stat agencies will be seen as yet more failing institutions, something well overdue IMO.  My last look at the flows suggested the smart money was pulling out and retail were taking up their usual position, ready to take the hit!

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Yellow_Reduced_Sticker

"A stock market bloodbath saw £37 billion wiped off the FTSE 100 on Friday as a host of weak economic data pummelled shares."

https://uk.finance.yahoo.com/news/ftse-100-tumbles-markets-plunge-173254464.html

"Markets drop sharply as fears of global slowdown intensify"

https://uk.finance.yahoo.com/news/eurozone-suffers-sharp-decline-manufacturing-125657957.html

Blimey just woken up here in the land of smiles, tucking into my Thai YRS grub ....

fire up me laptop AND things on the financial front now looking tasty xD last night FTSE down near on  -150 points & DOW -500! ...GOLD price UP:D

@DurhamBorn & Folks, I wonder if this is going to be the pull-back ...followed by the last mega RISE before the 1929 style BANG CRASH?

EXCITING times...I'm of to get some more YRS bargains, toodle pip...:D

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Castlevania
11 hours ago, Thorn said:

It will be interesting to watch where things go from here DB.

I've been looking at the stockcharts for the pm miners and loads of them look to be getting into Stage 2 now - pullback to 200MA might happen but then after that... you never know.

I’m hoping for a pullback over the next two weeks so I can then fill half my ISA allowance with PM miners at a reasonable price.

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Talking Monkey
11 hours ago, DurhamBorn said:

Yield curve inverted today.Hope the Fed enjoy that little fact.Just a little tick up in inflation in May or June should trap them good and proper.

If inflation ticked up and the anticipation of rate cuts is decreased would that impact the chances of one last huge meltup. Would it also decrease the chances the DXY goes to 84

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NogintheNog
11 hours ago, DurhamBorn said:

Yield curve inverted today.Hope the Fed enjoy that little fact.Just a little tick up in inflation in May or June should trap them good and proper.

https://youtu.be/bP49DHHsIO8?t=1228

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Talking Monkey
10 hours ago, DurhamBorn said:

I find it incredible that the CBs didnt see their tightening was very very wrong.Never in history has anyone ever rolled back liquidity without a big downturn yet they thought they could do it.Economies always grow/evolve to take up all the liquidity there is.I think another mistake they are making is they dont see the next cycle as a distribution cycle.They simply dont see that due to debt and the pull back of government pensions etc (in the UK pushing the age back) that people will start to sell down assets.The data is at last starting to go where we expected on this thread.

 

If they hadn't tightened DB wouldn't the mal investment been bigger and the everything bubble even more stretched

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Looking into how to be sure if it’s a turn...These candlesticks seem to really help indicate turns and interesting here how Clive Maund buys and sells.

D2WGDswWwAEtQA8?format=jpg&name=900x900

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15 hours ago, DurhamBorn said:

Yield curve inverted today.Hope the Fed enjoy that little fact.Just a little tick up in inflation in May or June should trap them good and proper.

I read somewhere yesterday that 311 days is the average amount of time from the yield curve inverting on the 3 month / 10 year until a recession is officially reported. As it takes 2 Qs of - growth for this to be reported, this means we should be ~ 130 days from the SHTF, is that about right?

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3 hours ago, Talking Monkey said:

If inflation ticked up and the anticipation of rate cuts is decreased would that impact the chances of one last huge meltup. Would it also decrease the chances the DXY goes to 84

Dollar should go down over the medium term now whatever happens.Inflation ticking up isnt a given,but if it does id expect it to mainly help PMs start to trend.

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3 hours ago, Talking Monkey said:

If they hadn't tightened DB wouldn't the mal investment been bigger and the everything bubble even more stretched

We came to the conclusion way back in the thread (or perhaps the last one) that the Fed chose to defend the dollar (and screw China) rather than concentrate 100% on the US economy.I tend to think our problems with QE wasnt malinvestment,it was more malconsumption.In the Uk i always think about every garden on a council estate having a trampoline in the garden (look on google earth) made in China,paid for with printed money handed to the government for tax credits.

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I like to follow Grainger Trust (LON: GRI). Even showed my wife the chart around Christmas time suggesting house prices might follow. Been climbing ever since but now the gap has closed I'm hoping it will start going south again. 

LCG_Trader.png

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Talking Monkey
20 hours ago, DurhamBorn said:

Dollar should go down over the medium term now whatever happens.Inflation ticking up isnt a given,but if it does id expect it to mainly help PMs start to trend.

Thank you DB

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Castlevania
18 hours ago, subutai80 said:

I like to follow Grainger Trust (LON: GRI). Even showed my wife the chart around Christmas time suggesting house prices might follow. Been climbing ever since but now the gap has closed I'm hoping it will start going south again. 

LCG_Trader.png

I once viewed a flat owned by Grainger. It’s one of the worst flats I’ve ever seen. They converted a school into flats, but due to the layout and their greed they took what should have been a really nice one bed and turned it into a three bed. Two of the bedrooms were in frosted glass capsules overlooking the reception room and the third had no natural light. None of them had windows. Definitely a candidate for Vice’s shit flats feature that they used to do.

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