Credit deflation and the reflation cycle to come.

[Bricks & Mortar]

Those dirty hippies with the glue are a beautiful sight, are they not?

https://www.kent.ac.uk/news/society/22011/solar-panel-demand-causing-spike-in-worldwide-silver-prices

 

[BearyBear]

Chart of the week

https://theotrade.com/money-losing-ipos-percentage-hits-a-record-high/

[JMD]

On ‎25‎/‎04‎/‎2019 at 14:11, DurhamBorn said:

The silver below $10 is based on the debt deflation finishing with a bang. There are that many derivatives out there i expect everything will be hit lower outside of T bills, but only for a very short window. We could see $8 and $25 within 12 months of each other. Im buying silver and the miners already and would see that as the chance to average down if it comes off. However there is a big chance inflation starts to show in the US first and that should see PMs trend. I have no problem buying silver and the miners here as i think we are in the early stages of the biggest silver bull in history.

 

Thanks for your reply DB.

Could you give an update on your roadmap please, I don't think you have given one for a while and it would be very useful especially given today's S&P new high… do you think the S&P melt-up is underway, does your charting still indicate a 3500-4000 range in Q3?

 

   

 

[DurhamBorn]

1 hour ago, JMD said:

 

To be honest im more interested in the PM space and think they will start to trend May or June.They key is if inflation starts to show around then as i expect it will.

[Dogtania]

1 hour ago, DurhamBorn said:

To be honest im more interested in the PM space and think they will start to trend May or June.They key is if inflation starts to show around then as i expect it will.

Hi db sorry for possibly asking the obvious.  If the US does experience a marked increase in inflation I take it the price of t bills IE TLT would normally be expected to lower ( and yields go up? )

[DurhamBorn]

3 hours ago, Dogtania said:

Hi db sorry for possibly asking the obvious.  If the US does experience a marked increase in inflation I take it the price of t bills IE TLT would normally be expected to lower ( and yields go up? )

Yes,though a lot will depend on the Fed.Highly likely they are boxed in,a debt deflation is underway,but price inflation might show its hand first.They cant tighten so they will likely go loose even with inflation.The move in PMs and the miners should be very decent and likely a trending move higher over a decent length of time.Iv got ladders ready to buy back my favourite miners that i sold some of when they ran.Im buying back Endeavour Silver,Harmony Gold,Yamana (i think Agnico might buy them at some point if the mine sale goes through ok),First Majestic,Panther Silver,International Tower Hill Mines.I havent set ladders on the individual stocks,im using GDX as the trigger starting at 20.12 and 19.40 bottom ladder.I already added back a few Endeavour at $2.83 (CAD).If my ladders hit it will be the last time i buy them and will be holding until they really trend.

[Queasing]

19 hours ago, sam1994 said:

Warren Buffet said that as you get near the end of a bull market, the quality of IPOs deteriorates. 

I'm still hoping to ride a small melt up if it comes to fruition and likely sell up in to cash shortly after and buy back in. 

 

Paul Hodges also had something to say (yesterday) about the quality of recent IPOs.

https://www.icis.com/chemicals-and-the-economy/2019/04/ubers-91bn-ipo-marks-the-top-for-todays-debt-fuelled-stock-markets/

[kibuc]

11 hours ago, DurhamBorn said:

Yes,though a lot will depend on the Fed.Highly likely they are boxed in,a debt deflation is underway,but price inflation might show its hand first.They cant tighten so they will likely go loose even with inflation.The move in PMs and the miners should be very decent and likely a trending move higher over a decent length of time.Iv got ladders ready to buy back my favourite miners that i sold some of when they ran.Im buying back Endeavour Silver,Harmony Gold,Yamana (i think Agnico might buy them at some point if the mine sale goes through ok),First Majestic,Panther Silver,International Tower Hill Mines.I havent set ladders on the individual stocks,im using GDX as the trigger starting at 20.12 and 19.40 bottom ladder.I already added back a few Endeavour at $2.83 (CAD).If my ladders hit it will be the last time i buy them and will be holding until they really trend.

It's worth remembering that there're only a few true silver miners left, getting their revenue primarly from silver (and not from "equivalents"). Off the top of my head I can only think of First Majestic, Endeavour, probably Pan American if they can get Escobal up and running... hmm... Alexco? And that's probably it.

[Majorpain]

26 minutes ago, kibuc said:

It's worth remembering that there're only a few true silver miners left, getting their revenue primarly from silver (and not from "equivalents"). Off the top of my head I can only think of First Majestic, Endeavour, probably Pan American if they can get Escobal up and running... hmm... Alexco? And that's probably it.

Those mines are nearly all pure silver though, they are a bit rarer than Gold/Silver mix ones.  Since silver is mainly a by-product of base metals mining and a lot of that has come on stream due to Chinese demand, it stands that a drop in Chinese demand (which is looking very likely now) will lead to a drop in base metal production and a proportional decrease in silver supply at some point.  This has a big effect on the Gold/Silver revenue ratio from producing mines that the gold is significantly more valuable than the suppressed price silver revenue.

At 1200/15 Fresnillo is a mainly gold miner, at 1500/25 Fresnillo is a mainly silver miner as an example.

[Bricks & Mortar]

On 22/04/2019 at 18:17, DoINeedOne said:

Interesting article
 

https://blogs.imf.org/2019/02/05/cashing-in-how-to-make-negative-interest-rates-work/

The long version:

https://www.imf.org/~/media/Files/Publications/WP/2018/wp18191.ashx

They've clearly thought about this.  I'm hoping it wouldn't be rolled out across the globe, but rather trialed in a few places first.  But then, maybe an island economy, newly separated from the economy in the rest of the continent, might be just the place for trials.

[kibuc]

2 hours ago, Majorpain said:

Those mines are nearly all pure silver though, they are a bit rarer than Gold/Silver mix ones.  Since silver is mainly a by-product of base metals mining and a lot of that has come on stream due to Chinese demand, it stands that a drop in Chinese demand (which is looking very likely now) will lead to a drop in base metal production and a proportional decrease in silver supply at some point.  This has a big effect on the Gold/Silver revenue ratio from producing mines that the gold is significantly more valuable than the suppressed price silver revenue.

At 1200/15 Fresnillo is a mainly gold miner, at 1500/25 Fresnillo is a mainly silver miner as an example.

Interesting opinion. My point is that mineres whose production (in terms of today's revenues) is 60% silver are probably better leveraged to the underlying than those whose production is, let's say, 40%. Let's say silver prices - and revenues - double, the former are now receiving 75% of their revenues from silver, while for the latter it's 57%. There is also less risk of other metals (zinc, led, copper) not keeping pace with silver and holding company revenues back.

[janch]

14 hours ago, Queasing said:

Paul Hodges also had something to say (yesterday) about the quality of recent IPOs.

https://www.icis.com/chemicals-and-the-economy/2019/04/ubers-91bn-ipo-marks-the-top-for-todays-debt-fuelled-stock-markets/

 

1 hour ago, Bricks & Mortar said:

The long version:

https://www.imf.org/~/media/Files/Publications/WP/2018/wp18191.ashx

 

They've clearly thought about this.  I'm hoping it wouldn't be rolled out across the globe, but rather trialed in a few places first.  But then, maybe an island economy, newly separated from the economy in the rest of the continent, might be just the place for trials.

Thanks for both of these.......food for thought!

[Majorpain]

3 hours ago, kibuc said:

Interesting opinion. My point is that mineres whose production (in terms of today's revenues) is 60% silver are probably better leveraged to the underlying than those whose production is, let's say, 40%. Let's say silver prices - and revenues - double, the former are now receiving 75% of their revenues from silver, while for the latter it's 57%. There is also less risk of other metals (zinc, led, copper) not keeping pace with silver and holding company revenues back. 

Yes, but your not taking into account how much your paying for that 60% silver now.  My favourite measure is Resources/Mcap which is rough but gives you an idea of how much your paying for the resource in the ground.

As an example:

Name/Mcap/Resource - figures are a bit rough as I don't update them more than once a year, at $1200 AU assumed price

Newmont mining -  $  18,521.60  $   82,200.00  ratio of 4.4

Harmony Mining -  $      806.40   $ 126,000.00  ratio of 156

Obviously Harmony is a marginal high cost producer which is why its so cheap, so buyer beware DYOR there is a reason its cheap and priced like that!

 

Disclosure that I hold PAAS and AXU of the silver list, so im not anti them by any means, but i feel its important to go into this knowing as much as possible, so if it starts going pear shaped you know when to quit.  There is always a chance that we are wrong.

[DurhamBorn]

5 hours ago, kibuc said:

Interesting opinion. My point is that mineres whose production (in terms of today's revenues) is 60% silver are probably better leveraged to the underlying than those whose production is, let's say, 40%. Let's say silver prices - and revenues - double, the former are now receiving 75% of their revenues from silver, while for the latter it's 57%. There is also less risk of other metals (zinc, led, copper) not keeping pace with silver and holding company revenues back.

You also get the hype effect.When silver runs people only have a small number of "pure" silver miners to buy.Yamana produce a lot of silver and i think one of the reasons they are selling Chapada is so they can invest in Cerro Moro more as it has really big silver potential.I reckon Agnico might take them out though once the balance sheet is clean.I think silver will bottom in the next 10 days then trend higher going forward.

[Castlevania]

2 hours ago, Majorpain said:

Yes, but your not taking into account how much your paying for that 60% silver now.  My favourite measure is Resources/Mcap which is rough but gives you an idea of how much your paying for the resource in the ground.

As an example:

Name/Mcap/Resource - figures are a bit rough as I don't update them more than once a year, at $1200 AU assumed price

Newmont mining -  $  18,521.60  $   82,200.00  ratio of 4.4

Harmony Mining -  $      806.40   $ 126,000.00  ratio of 156

Obviously Harmony is a marginal high cost producer which is why its so cheap, so buyer beware DYOR there is a reason its cheap and priced like that!

 

Disclosure that I hold PAAS and AXU of the silver list, so im not anti them by any means, but i feel its important to go into this knowing as much as possible, so if it starts going pear shaped you know when to quit.  There is always a chance that we are wrong.

Yeah I own Harmony due to the ounces in the ground

[Majorpain]

Donald wants his free money like Obama, the Fed is already getting it with both barrels and the US hasn't rolled over yet!

[dgul]

9 hours ago, Bricks & Mortar said:

The long version:

https://www.imf.org/~/media/Files/Publications/WP/2018/wp18191.ashx

 

They've clearly thought about this.  I'm hoping it wouldn't be rolled out across the globe, but rather trialed in a few places first.  But then, maybe an island economy, newly separated from the economy in the rest of the continent, might be just the place for trials.

Negative interest rates are a flawed concept.  It says something like 'people holding cash is bad, because if cash is held than that cash isn't available for investment'.  But they're two different things -- the money 'available to be lent out' isn't really related to 'money held in cash' (and this is as true for bank deposits as bank notes under the mattress).  

There is also an element of 'holding onto cash is bad because then people won't spend it' -- but that's not the point here.  This isn't about pocket money accounts, but how to deal with people who choose to take their pension pot out of investment and into cash while the economy is in turmoil.

The problem with recessions (etc) is that banks (etc) aren't willing to lend money out because they're less likely to get it back, not because 'they've not got money to lend out'.  Furthermore, they're right to worry about getting their money back, because in a recession they really are less likely to get it back.

I'd suggest that TPTB worry more about mechanisms to encourage chucking money at investments, even if they're awful, because that is what'll keep the economy going.

[I suppose they could make negative interest rates for investment -- that'll work.  That is, give people extra money every month if they take out a loan.  But that's not what they mean by negative interest rates.]

On a slightly related note, the problem with today's economy is that we've got far too many people with considerably more calls on future 'manpower'/'effort' (ie, 'wealth') than there'll be manpower/effort available in the future.  Thus either the wealth has to reduce (asset price deflation), or the cost of future manpower/effort increase (wage inflation).  I suppose 'negative interest rates' are an attempt to think about how to reduce 'wealth', but it only makes sense in a world where the only tool available is 'interest rates', which patently isn't the case.

[XswampyX]

59 minutes ago, dgul said:

Negative interest rates are a flawed concept.  It says something like 'people holding cash is bad, because if cash is held than that cash isn't available for investment'.  But they're two different things -- the money 'available to be lent out' isn't really related to 'money held in cash' (and this is as true for bank deposits as bank notes under the mattress).  

There is also an element of 'holding onto cash is bad because then people won't spend it' -- but that's not the point here.  This isn't about pocket money accounts, but how to deal with people who choose to take their pension pot out of investment and into cash while the economy is in turmoil.

The problem with recessions (etc) is that banks (etc) aren't willing to lend money out because they're less likely to get it back, not because 'they've not got money to lend out'.  Furthermore, they're right to worry about getting their money back, because in a recession they really are less likely to get it back.

I'd suggest that TPTB worry more about mechanisms to encourage chucking money at investments, even if they're awful, because that is what'll keep the economy going.

[I suppose they could make negative interest rates for investment -- that'll work.  That is, give people extra money every month if they take out a loan.  But that's not what they mean by negative interest rates.]

On a slightly related note, the problem with today's economy is that we've got far too many people with considerably more calls on future 'manpower'/'effort' (ie, 'wealth') than there'll be manpower/effort available in the future.  Thus either the wealth has to reduce (asset price deflation), or the cost of future manpower/effort increase (wage inflation).  I suppose 'negative interest rates' are an attempt to think about how to reduce 'wealth', but it only makes sense in a world where the only tool available is 'interest rates', which patently isn't the case.

When things get so more expensive then people have to hoard money in order to be able to buy expensive items.

In any rate money hoarded in a bank it still money available to the banks to lend against. It's bullshit that this hurts the modern economy.

What they mean is having money in the bank stops people taking out loans, ie creating even more money and this money saved could be spent on paying back a loan (destroying both the loan money and the saved money) and they don't know when the individual might make that choice. Eeeeek!

Better we all owe the banks and can't change the balance sheet against them.

 

[Thorn]

11 hours ago, XswampyX said:

When things get so more expensive then people have to hoard money in order to be able to buy expensive items.

In any rate money hoarded in a bank it still money available to the banks to lend against. It's bullshit that this hurts the modern economy.

What they mean is having money in the bank stops people taking out loans, ie creating even more money and this money saved could be spent on paying back a loan (destroying both the loan money and the saved money) and they don't know when the individual might make that choice. Eeeeek!

Better we all owe the banks and can't change the balance sheet against them.

 

Hat tip Sancho Panza -  think Fractional Reserve Banking means the idea of banks lending against saved money doesn't happen any more. 

[MvR]

Sirius Minerals, who mine fertiliser in Yorkshire ( there's got to be a joke in there somewhere) , has been mentioned here in the past as a possible re-inflation stock. 

I notice they're down almost 30% over the last couple of days on news of the completion of a $3.8bn finance deal with JP Morgan, which apparently includes more potential stock dilution than shareholders were expecting if bonds are converted to stock at some point. If that's now priced in, maybe it isn't a bad time to take a punt?

I've had a little nibble in my ISA.  Not a recommendation at all, but thought some might be interested.

https://www.ft.com/content/e8e3371a-6be5-11e9-a9a5-351eeaef6d84

[Lavalas]

No sign of Sancho since March. Hopefully just taking a break from it all.

[Majorpain]

2 hours ago, MvR said:

Sirius Minerals, who mine fertiliser in Yorkshire ( there's got to be a joke in there somewhere) , has been mentioned here in the past as a possible re-inflation stock. 

I notice they're down almost 30% over the last couple of days on news of the completion of a $3.8bn finance deal with JP Morgan, which apparently includes more potential stock dilution than shareholders were expecting if bonds are converted to stock at some point. If that's now priced in, maybe it isn't a bad time to take a punt?

I've had a little nibble in my ISA.  Not a recommendation at all, but thought some might be interested. 

https://www.ft.com/content/e8e3371a-6be5-11e9-a9a5-351eeaef6d84

Siruis is a money sponge, there is a good resource there but the cost of mine construction and digging the tunnel is phenomenal.  I think the mine will get to production, but current shareholders will get properly wiped out in the process.

Happy to be wrong, but these sort of shares have long odds for the little guys.

[MvR]

12 minutes ago, Majorpain said:

Siruis is a money sponge, there is a good resource there but the cost of mine construction and digging the tunnel is phenomenal.  I think the mine will get to production, but current shareholders will get properly wiped out in the process.

Happy to be wrong, but these sort of shares have long odds for the little guys.

Fair play.  I realise it's a bit of a gamble, so it's a very small punt.. too small to break down into laddered buys.  Trying to diversify a little really, given the heavily PM miner leanings in the ISA, and I feel we could see a bit of a bounce here based on technicals alone.

[Majorpain]

1 hour ago, MvR said:

Fair play.  I realise it's a bit of a gamble, so it's a very small punt.. too small to break down into laddered buys.  Trying to diversify a little really, given the heavily PM miner leanings in the ISA, and I feel we could see a bit of a bounce here based on technicals alone.

Just one final thought, the potash industry has known about the resource for many years, with Boulby operating just up the coast, yet have not been interested in developing it.  Does the established industry know something that the 92% free float (reads small investor to me) who have £ signs in their eyes doesn't know?  Gamble might be the right word! 

Baobab Resources is the company which got me, top class resource but they couldn't get the funding for construction for some reason.  Then the price of pig iron crashed and the reason became clear!

[subutai80]

just a heads up that ii (interactive investor) have no commissions on international trades today.