Credit deflation and the reflation cycle to come.

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31 minutes ago, 0x80 said:

Just listened to this "Macro Voices" episode.

https://youtu.be/tCFPrLrpLD8

Discussing the possibility that the latest "language" from the Fed is preparing people for negative rates.

 

What happens when the worlds reserve currency is in danger of being correlated with negative interest rates with the only ongoing belief that the last chance saloon is more QE? Interesting times. Do they save the $ or let the price of goods inflate away? 

The Fed now finds itself between a rock and a hard place, as we have been discussing on this thread (and hpc) for several years.

https://www.reuters.com/article/us-usa-fed-conference/pick-your-poison-for-fed-its-higher-inflation-or-an-inevitable-return-to-quantitative-easing-idUSKCN1T30UJ

Hedging against inflation is the key, whether PMs, reflationary assets, or (less popular) Crypto. The BTC halving happens in 2020 which will take it below inflation.

[sancho panza]

14 hours ago, CVG said:

This is a good overview of the PP approach from Monevator.

https://monevator.com/the-permanent-portfolio/

After buying the book and doing more research using the excellent Portfolio Charts

https://portfoliocharts.com/

I settled on using the Gold Butterfly as my portfolio framework.

Now, I know that you are supposed to use Passive Index funds but I actively manage within the framework by selecting specific equities, diversifying into miners, etc using lots of great info from folks like you and DB, and others.

If Linkers have a position anywhere in the portfolio then I think that they would be in the Cash element. I have PB, ST Gilts, Foreign Currency there already. I might just add some Linkers for extra diversification!

Cheers CVG.They mainly look to hold long term govt bonds.I'm trying to enlighten myself on what shorter term bond traders look for over saya 1- 2 year timeframe.

12 hours ago, DurhamBorn said:

Im not sure on the big pull back SP so il have to consider things when gold hits $1500 as the minimum i see in the first leg.GDX probably will see $28/$30 during that.Im very happy with Goldfields.I was my best set up stock and i took 37% out of it.If it had been a rubber band stock (Harmony,Endeavour,Coeur etc) id of simply sold the bottom ladder and kept the rest,but the set up stocks arent as explosive as the rubber band ones,and a 50% jump in that time was too tempting.I also wanted capital as i have some ladders close to/hit buying points,some new entries (Card Factory,Imperial,BT,,,ITV,Stagecoach,RM etc) and although i have the capital for them all,iv added a couple of extra stocks and the Goldfields profit pays for two ladders in two of them.Some arent reflation stocks,but have strong cash profiles.

At this stage it might of sold 50% of holdings if we do see the above levels then run the rest.I was going to simply use GDX as my timing tool,but iv been adding target prices on several of my PM stocks and will probably use them to sell ladders as/if they run.

Copper mines are probably the main silver producers,but is so small as a proportion that even in a big bull it wouldnt drive the economics of a copper mine given the scale of them.

Interested that you're buying ITV and Card factory.... what's the logic if you dont mind me asking?

I'ms truggling to see how they will propser longer term.

12 hours ago, Harley said:

 

I would also add JustETF.com as worth a look if you are just looking at UK available ETFs as it helps plough through the array of ETFs.

DYOR to work out what's right for you all though!

Harley,many thanks for this heads up and prevuous advice on issues pertaining to ETF's.

The one thing I'm very-and I mean very interested in-is fund flows into and out of ETF's.I've jsut spent a month trialling shorting QQQ,XLP,XLF etc etc in the US as I'm intending to use the funds to avoid the volatily arising from trading individual stocks.

I've been using this place as my main guide

https://etfdb.com/etf/QQQ/

https://etfdb.com/pricing/

 

All I'm really interested in that I can see is the fund flows.Priced at $199 p.a...................is that excessive or fair value?Is it available anywhere else?

I'm also deeply interested in any ETF site that will rank funds in terms of insider buying/selling in terms of the companies comprising the ETF.Do you know of any?

Open question to anyone reading?

12 hours ago, Majorpain said:

@sancho panza

https://www.thebalance.com/the-10-biggest-silver-producers-2340234

KGHM Polska Miedź S.A.

Glencore plc

Compania de Minas Buenaventura

Volcan Compania Minera

Hindustan Zinc Ltd

138m oz of silver with those, whilst they wont all be base/PM mix i have a feeling that a very large % is.

The more pure PM miners in that chart produced 126m oz as way of comparison.

Cheers MP, didn't realise KHGM was such a big player.There's a few on there that surprise including HOCM

Made me have a peer around a few lists and saw Freeport McMoran at no. 6 although I know these lists aren't necesarily based on the same data

https://www.sharpspixley.com/articles/lawrie-williams-world-top-20-gold-mining-companies-and-mines-2018-metals-focus_291771.html

 

[sancho panza]

7 hours ago, DurhamBorn said:

For tracking stocks i use Harmony and Sibanye.The South African miners are very price sensitive and tend to lead the complex by a few weeks to a month.My technical set up screen flagged Goldfields as the no1 set up as i mentioned back in the thread,that delivered in spades much quicker than expected and is sold.I tend to use triangle patterns on technical set ups.

The smart money is short,so the gaps might be filled yet and a pull back,but i think gold should hit a new all time high by 2021,time will tell.

 

Interested in your use of SA miners as lead indicators.

If we get a proper PM bull are you xpecting the royalty co.s to drop off the pace early doors? Are the structure of their deals such that they'll get cut out once the bull starts?

7 hours ago, JMD said:

SP, not sure if you were asking specifically about bonds, but below link might be useful. I know CVG has already recommended the Monevator site, but this link has bond info. (reference bond funds, but same technicals apply) including articles by Lars Kroijer.

https://monevator.com/understanding-bond-index-funds/#comments

 

Thanks for that.It's a good summary of influencing factors.MAde me look at a few charts

I'm in need of educating as to why these charts are so diffenret?

[sancho panza]

8 hours ago, Bobthebuilder said:

Hi SP,

Howdens mainly sell to small local builders, they sell kitchens, appliances,  staircases, wooden flooring, internal, external doors, building timber etc, etc and if you use them a lot you can get fantastic trade prices.

Dont know much about the business as such but they have always done well, back in the 2003 time they were the only part of the group keeping MFI aflout until they dropped em.

Builders love the kitchens as with discount are cheaper than ikea and the units come ready made plus a doddle to fit.

You've probabaly told me more than I'd have extracted from their annual report being honest Bob.Like my friend who was driving for that builers merchant,called the turn in BDEV/PSN etc better thn my charts or the pros at Godlman Sachs with all their moolah

I've had a look at their rev and net income figures since reading your post and all of a sudden it's become where they fit in and why they're figures are so different to some others in the construction sector eg BDEV/RDW

https://uk.investing.com/equities/howden-join-financial-summary

https://uk.investing.com/equities/barratt-developments-financial-summary

https://uk.investing.com/equities/redrow-financial-summary

Probabaly explains the corresponding lack of volatitily for now.I think in the coming UK housing downturn,they happen to have a customer base that will prove more relaible than big builders reliant on taxpayer subsidies.People forget that circa 40% of uK hosueholds own their homes outright and have inflation proof incomess and won't be seeing much of what ever downturn comes.Don't get me wrong,Ill still be shorting HWDN but I won't be holding it like I'm running my BDEV

FAscinating insight.Thank you.

4 hours ago, DurhamBorn said:

Inflation expectations are driving gold now i suspect.Its this stage of the cycle where inflation ticks higher while economies slow and box CBs in.There could be a decent pull back as they have ran too fast so far and people dont trust the rally.

Yeah I get the feeling we're due a pullback,some of the recent share rises looked like short covering to me-although it probably wasn't-it jsut looked too fast.We put a bit more into some GDXJ constituents this week but must admit,I'd be delighted if Gold Fields got back to $3 or Anglo Gold back to $10....................................these higher lows are looking quite good to my untrained eye.

3 hours ago, Sideysid said:

What happens when the worlds reserve currency is in danger of being correlated with negative interest rates with the only ongoing belief that the last chance saloon is more QE? Interesting times. Do they save the $ or let the price of goods inflate away? 

The Fed now finds itself between a rock and a hard place, as we have been discussing on this thread (and hpc) for several years.

https://www.reuters.com/article/us-usa-fed-conference/pick-your-poison-for-fed-its-higher-inflation-or-an-inevitable-return-to-quantitative-easing-idUSKCN1T30UJ

Hedging against inflation is the key, whether PMs, reflationary assets, or (less popular) Crypto. The BTC halving happens in 2020 which will take it below inflation.

They'll save the dollar.

Agreed Fed is between a rock and a hard place

Although I'm not sure theyr'e framing the question in the right manner.Expecting higher inflation and prepping hte printing presses are anything but mutually exclusive

' The Great Recession ended a decade ago this month, but for the U.S. Federal Reserve the fallout has posed an era-defining choice: Either jolt Americans to expect higher inflation, or keep the printing press ready for the next economic slide.

[DurhamBorn]

@sancho panza Card Factory as an inflation hedge and free cash flow.I also think the company has done amazing considering the headwinds they have faced.NMW increases,sterling falling a third,high street footfall.Iv a contact in Aldi high up and they told me the stores where they ran a trial stocking Card factory cards saw an increase in footfall.Click and collect should really help them from this year.ITV because BT might buy them out,or invest in Britbox.ITV is very risky and ive got 3 ladders,£1.05,0.90p,0.75p not the normal 5.

[spygirl]

Here you go.

Chariman Chen. They are really fucking angry.

OK, release that umbrella bloke, see if it shuts them up.

Nope.

OK, increase their wages by 20% and give them 5 days holiday.

 

And so it begins ....

[A_P]

Wrong thread ignore

[dgul]

9 minutes ago, A_P said:

@One percent Just reading the small print again. Here is something I missed before:

So not really sure why anyone would need a HTB if they have a 75% downpayment

The HTB always counted as deposit.  So the individual who could scrape a 5% deposit got a mortgage (rates) as though they'd managed a 25% deposit.

[A_P]

1 minute ago, dgul said:

The HTB always counted as deposit.  So the individual who could scrape a 5% deposit got a mortgage (rates) as though they'd managed a 25% deposit.

Yes I know how the HTB works and it was not in reference to that. Please see this thread:

 

[dgul]

34 minutes ago, A_P said:

Yes I know how the HTB works and it was not in reference to that. Please see this thread:

 

Ah yes, sorry -- got the %ages the wrong way around in your comment.

Yes -- it is crazy that HTB was offered to people with such large 'deposits' -- but the whole scheme was bonkers so that's only slightly more bonkers.

[Majorpain]

http://www.constructionenquirer.com/2019/06/16/shaylor-staff-laid-off-by-sunday-morning-email/

Cashflow, again.....

Arguably low interest rates are not helping here as companies are more loath than usual to hoard cash that gets eaten away by inflation.  They then rely on other people to lend them money which if that isn't forthcoming at any point leads to near fatal problems very quickly.

[DoINeedOne]

Just dropped under 90

 

Centrica Plc

LONDON: CNA.L (GBp)

 89.98p1.54 (-1.68%)

[Agent ZigZag]

I think CNA is getting oversold. Just my opinion.

[Errol]

Can Western Central Banks Continue Capping Gold At $1350?

http://investmentresearchdynamics.com/can-western-central-banks-continue-capping-gold-at-1350/

[Loki]

They can until they can't, i guess.

[sancho panza]

12 hours ago, Majorpain said:

http://www.constructionenquirer.com/2019/06/16/shaylor-staff-laid-off-by-sunday-morning-email/

Cashflow, again.....

Arguably low interest rates are not helping here as companies are more loath than usual to hoard cash that gets eaten away by inflation.  They then rely on other people to lend them money which if that isn't forthcoming at any point leads to near fatal problems very quickly.

One of many to come I fear.

Interesting to see the writing was on the wall for many earlier in the year.

 

'On Friday many staff at the Aldridge-based firm were told go home after subcontractors turned up at the head office demanding to get paid.

At one point it is understood police had to be called to calm the situation.

Subcontractors that worked on the Silverstone racing circuit visitors centre and Emporium student tower in Birmingham are among those left out of pocket.

Fears had been growing that the family-owned building group was in financial trouble since the start of the year.

Despite Shaylor Group reporting a pre-tax profit of £7.6m on revenue of £142m in 2018, subcontractors started to experience delays in payment early this year.

Credit reference agency Top Service said it had received around 64 adverse reports about payments to suppliers in the last 12 months, above average for a company of its size.

Another contractor said: “There were never problems with payment until the start of the year and then we started to run into difficulty getting paid.”

 

[sancho panza]

Wolf warns on Eurobanks

 

NPLs remain dangerously to catastrophically high in Italy, Greece, Portugal, and Cyprus

https://wolfstreet.com/2019/06/17/bad-loans-still-too-high-at-eurozone-banks-ecb-warns/

'

 

Inspired by Deutsche Bank Death Spiral, European Banks Sink to Dec 24, 2018 Level – First Seen in 1995

https://wolfstreet.com/2019/06/15/led-by-deutsche-bank-death-spiral-european-banks-sink-to-dec-24-level/

[sancho panza]

 

 

 

[Sugarlips]

https://www.zerohedge.com/news/2019-06-17/china-roll-out-new-rare-earth-policy

I know, it’s ZH but interested to hear how this might play out, US relies on China for 80% of its precious metals, if they are blocked in the next stage of the trade war, where are the next supplies going to be sourced and which firms will benefit? Western Australia has a lot of untapped lithium for example.

[MrXxx]

8 hours ago, sancho panza said:

Wolf warns on Eurobanks

 

NPLs remain dangerously to catastrophically high in Italy, Greece, Portugal, and Cyprus

https://wolfstreet.com/2019/06/17/bad-loans-still-too-high-at-eurozone-banks-ecb-warns/

'

 

Inspired by Deutsche Bank Death Spiral, European Banks Sink to Dec 24, 2018 Level – First Seen in 1995

https://wolfstreet.com/2019/06/15/led-by-deutsche-bank-death-spiral-european-banks-sink-to-dec-24-level/

This is a joke (GACS scheme)!...whatever happened to free-market economics, the foundation stone of capitalism?...it seems whether if it business lending (GACS) of societal lending (HTB) the finance industry wants to take massive profits via massive risks yet expect `The Common Man` to fund the losses, and this with further subsidized borrowing (FLS)...

...if this isn't a sign that the whole World finance industry in its present model is unviable and needs a `reset` I don't know what is!

[DurhamBorn]

2 hours ago, MrXxx said:

This is a joke (GACS scheme)!...whatever happened to free-market economics, the foundation stone of capitalism?...it seems whether if it business lending (GACS) of societal lending (HTB) the finance industry wants to take massive profits via massive risks yet expect `The Common Man` to fund the losses, and this with further subsidized borrowing (FLS)...

...if this isn't a sign that the whole World finance industry in its present model is unviable and needs a `reset` I don't know what is!

Its all due to the long deflation/dis-inflation cycle.Massive amounts of capacity came onto the world economy and that kept prices down.Money creation went above trend,but capacity was growing stronger,or in line.You can extend and shorten the road map to when this sort of thing ends,and this time it actually went pretty much as far as these things can.People could borrow for nothing,or very very little.Then other things come into play.This whole thread and the last one are about the very process.If you go out into the world among the population pretty much nobody understands cycles.In the city and the press there are hardly any people who even know its a cycle.The end of this cycle is happening all around us and its exactly as predicted.The politics tends to be first,it picks up on the changes even though people dont understand why they feel that way,why things happen.The kind of investments that hate deflation cycles have capitulated now (or are in the process) because the market thinks they are basket cases.They are making the mistake of looking backwards as always.Some areas that gain from inflation are starting to stir though.Gold moved exactly in the window expected,late May.Others like utilities and telcos are still suffering while others like some transports (Go Ahead for instance) have bounced almost 50% from bottom ladders.

Woodfords case might prove a focus to look back on in the future.He bought a lot of stocks that should do well in the future,but miss-timed,but also bought stocks with massive debts right at the end of the cycle.The irony is the people selling the funds down 20%+ are likely putting the money into funds that have gained most from deflation (FANGS/"growth" etc) and will likely see another big smack down.

Cash flow and debt repayment timing are critical as this cycle turns.Interest rates are going to creep higher after the deflation ends and many companies will see cash flow go negative in that window.The survivors will see rising prices for their goods at the same time as less competition.Inflation crushing margins or rate increases do the same job at the end of a disinflation.It doesnt matter the one that delivers the pain.

We just need the miners to keep running and GDX get to around $28 so we can then funnel those big capital gains into reflation stocks (and several other beaten down areas) and it will be job done until around 2025/26 when we might have to get busy again.

 

 

[BearyBear]

Something has recently changed on Gold, we've got a massive rally in the last 2 weeks ending in a big bearish pinbar on Friday, but the price isn't failing (it usually did in similar conditions). Watch for tomorrow 7pm.

[kibuc]

A certain online fashion retailer has just informed his employees of impending job cuts, spending cuts, everything cuts, "refocussing", "realigning", "reviewing" etc in a "tough retails climate". Revenue forecast has already been revised down but still we're failing to meet that on most weeks. It wouldn't surprise me to see a week where we're down YoY before the end of year.

[Majorpain]

10 minutes ago, BearyBear said:

Something has changed on Gold recently, we've got a massive rally in the last 2 weeks ending in a big bearish pinbar on Friday, but the price isn't failing. Watch for tomorrow 7pm.

Euro dropped and Dollar popped on Draghi's QE to infinity comments, one Trump tweet on currency manipulation later....

The solution to Brexit is simple - the EU ceases to exist.  A Euro crisis of sufficient magnitude will be ample to do this IMO, and its coming soon to a screen near you.

[DurhamBorn]

Just now, BearyBear said:

Something has changed on Gold recently, we've got a massive rally in the last 2 weeks ending in a big bearish pinbar on Friday, but the price isn't failing. Watch for tomorrow 7pm.

If the miners pull back after the Fed they should be bought i think ,though im fully invested in the space now apart from some capital i took off the table in selling out of Gold Fields and a slice of Harmony.If there is no pullback il likely put that to work in physical platinum

 

Just now, kibuc said:

A certain online fashion retailer has just informed his employees of impending job cuts, spending cuts, everything cuts, "refocussing", "realigning", "reviewing" etc in a "tough retails climate". Revenue forecast has already been revised down but still we're failing to meet that on most weeks. It wouldn't surprise me to see a week where we're down YoY before the end of year.

Sterling getting crushed is the big one.I ran my importing business right down and im selling off the last stock now.I was going to keep it ticking over,but cant be bothered really.Costs have gone up in every area yet unable to pass them on because of zombie companies living on debt.Imagine bigger companies with lots of staff,building etc.Bloodbath.