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Credit deflation and the reflation cycle to come.


DurhamBorn

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NogintheNog
1 hour ago, DurhamBorn said:

https://www.telegraph.co.uk/business/2019/06/25/gold-hits-six-year-high-amid-warnings-deflationary-ice-age/?li_source=LI&li_medium=li-recommendation-widget

Gold hits six-year high amid warnings of a deflationary ice age

I just love how almost everyone misses the leads and lags in a credit driven economy.Mainstream now.Maybe we should point them all to our two threads.If any bankers are reading we are available freelance,but it cant affect us getting to the reduced counter at Tesco.My dad sold out of Harmony earlier.He touched 48% up and sold.He said at 78 he aint interested in the long term because he might not see it O.o.He phoned me from the working mans club,asked the price and said sell that gold miner xD

The problem I have with that article is it doesn't give the whole story. I don't subscribe to the Telegraph but it should add that in many currencies Gold is at new highs, Australian and Canadian Dollars to mention two. It's almost back to the sterling all time high as we speak. But it just talks about the US$ price.

I don't earn US Dollars, I earn sterling. That's what those of us in the UK need to be looking at.

PS, thanks for this excellent thread DB! :Beer: 

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4 minutes ago, NogintheNog said:

The problem I have with that article is it doesn't give the whole story. I don't subscribe to the Telegraph but it should add that in many currencies Gold is at new highs, Australian and Canadian Dollars to mention two. It's almost back to the sterling all time high as we speak. But it just talks about the US$ price.

I don't earn US Dollars, I earn sterling. That's what those of us in the UK need to be looking at.

PS, thanks for this excellent thread DB! :Beer: 

Journos probably dont even understand that themselves xD.My house has fallen 36% in US$ terms since 2006.

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1 hour ago, Noallegiance said:

On TOS I messaged you privately long ago to thank you for sharing your knowledge. I've not been brave enough to dive into most of the things your talk about as I'm way out of my depth, but I have done some things that have been aided by your guidance.

On behalf of everyone here, lurker or poster, I sincerely hope you have some level of understanding as to the light you shine for the layperson fortunate enough to have made their way to this thread.

Well said

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57 minutes ago, DurhamBorn said:

Journos probably dont even understand that themselves xD.My house has fallen 36% in US$ terms since 2006.

Even if it gets choppy it’s a heck of a run on the Goldies and I think I will hold my few for dear life.

...here just a thought do you reckon New Gold is doing well a lot less because of the fundamentals and more just because it just pops up early when civilians google gold miners?

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sancho panza
14 hours ago, Majorpain said:

Geopolitical tensions are not decreasing, Iran's in trouble which is why they are blowing up oil tankers and China will not agree to anything that doesn't allow them to steal IP at will.  If the Iranians get desperate enough to block the straights of Hormuz then  $1500 gold will be easily met, it was pushing $1440 overnight which is surprising me as I was expecting a pullback to $1360!

Im not trading this apart from trying to time top-ups so it doesn't affect me too much either way.

We're in a similar position but as weird as it sounds, glad to see some red today .Need the rubber bands to dip....incl Pan Af

image.png.ea5946d8c8391dfb511d942d22e86402.png

14 hours ago, kibuc said:

First Majestic went up near 50% while silver spot has moved very modestly, compared to gold.

Also, NewGold is going haywire. They are kept on life support by copper from New Afton, and majority of their Rainy River 2019 gold production is hedged to stay within 1200-1300 sale price range. $1400 or $1700 spot makes not that big of a difference to them, they have signed themselves out of the rally. So it makes perfect sense they are +25% in just a week :D

I was watching New Gold and pondering whether to have a little nudge.Up 11% today.Didn't realise they'd hedged so much production.Having said that,rising gold pirce willease the pressure on them considerably.

13 hours ago, subutai80 said:

Anyone own NYSEARCA: SOIL (GLB X FUNDS/FERTILIZERS POTASH)? I've owned since 2016 and would like more exposure to the sector but as unable to buy more SOIL been looking through it's holdings. Does anyone have any favourites? any opinions on NYSE: MOS or TSE: NTR?

We already own Nutrien via purchase of Potash Saskatchwan a few years back.Looking to add Compass/Mosaic/K+S/Yara/Incitec.Like the look of the whole sector to be honest.

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sancho panza
9 hours ago, Lavalas said:

Oh dear, yeah doesn’t look like Rio2 is available on HL. I’ve rang up and asked them what the process is for making a specific stock available in the past but didn’t follow it through. I don’t think the process is particularly quick though.

Personally I was intending to buy through Interactive Investor as that is who my ISA allowance is with this year. I opted to them because they have every two bit exploreco on the Vancouver/Toronto exchange available and I flirted with investing in some before deciding it’s mostly not for me. Really regretting it now and wish I’d stuck with HL. I’ll be going back next financial year.

Funnily enough I was pondering Interactive Investor...what were the pluses and minuses of their service?

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sancho panza
3 hours ago, DurhamBorn said:

https://www.telegraph.co.uk/business/2019/06/25/gold-hits-six-year-high-amid-warnings-deflationary-ice-age/?li_source=LI&li_medium=li-recommendation-widget 

I just love how almost everyone misses the leads and lags in a credit driven economy.Mainstream now.Maybe we should point them all to our two threads.If any bankers are reading we are available freelance,but it cant affect us getting to the reduced counter at Tesco.My dad sold out of Harmony earlier.He touched 48% up and sold.He said at 78 he aint interested in the long term because he might not see it O.o.He phoned me from the working mans club,asked the price and said sell that gold miner xD

Fair play to him.As my Grandad used to say to me noone goes bust taking a profit.

On another matter looks like the middle part of the bear has arrived after the recent US attempt to tkae out the peak.My IG a/c is mainly shorts oparticualrly US etfs  and has gone markedly blue in last two seesions after a few hard weeks.Watch out below....

On another matter,Mrs P has taken to taking the Aldi specially selected ready meals to work instead of using the canteen as she prefers the food.Do you know what time they put the 50% off stickers on at Aldi?

@Yellow_Reduced_Sticker for any guidance?.

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sancho panza

 

2 hours ago, DurhamBorn said:

I just started the threads ,there are now many great people with fields of knowledge contributing.I must say though iv come close to stopping posting for one reason or another a few times.Im actually quite tired and at the end of the day im just a factory worker who collates information from many sources both known to me and outside.

What interests me now is the UK market.I had thought many reflation stocks would get to PEs between 6 and 8 after a crash,but many are there already.The question now is this.Is my roadmap right that they will turn at those levels,or not?.If its right then they would have to turn while US markets tank.Thats a big ask.The market is pricing them now to say deflation/dis-inflation will destroy them and they are simply companies in a liquidation process.Given my ladders are now being filled right down to 4th and even 5th (last) points my capital is going to suffer a good deal of pain if the market it right,and my roadmap wrong that deflation will usher in a reflation cycle.Time will tell.

 

 

I've had the odd moment where I've felt like giving up posting(including about a month recently) but I work in healthcare and I come here to have the conversations I can't in my daily life,to share ideas and find stimulating discussions.Sad really,but an indictment of the lack of decent financial education in schools/universities that you have to frequent obscure forums/Shaun Richards/Paul Hodges/Wolf Richter to find anyone questioning the economic ortohodxy that has led the Western World into the mess it's in.

re the question

For me,I think there's a real risk of seeing the E part of the ratio take a beating.Particualrly where they are vulnerable ie exposed to the credit cycle.There are others eg the bus companies that will maybe see E increase as credit deflates and people ditch cars.Things like Vod/CNA/United Utilities/BP/BT are jsut outright buys,the only question being how low will they go to bounce.

I don't think they will get destroyed and I think there are many sectors that will rebound a bit to give the headline numbers ie FTSE 100/SP 500 an easier ride to the bottom as the big techies/financials/real estate/industrials get battered.

 

1 hour ago, Thorn said:

Even if it gets choppy it’s a heck of a run on the Goldies and I think I will hold my few for dear life.

...here just a thought do you reckon New Gold is doing well a lot less because of the fundamentals and more just because it just pops up early when civilians google gold miners?

New Gold-like a lot of miners that are leveraged plays will go up exponentially compared to the less leveraged-to a point.

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sancho panza
2 hours ago, DurhamBorn said:

Journos probably dont even understand that themselves xD.My house has fallen 36% in US$ terms since 2006.

Pointed this out to Mrs P when we viewed a place in South Africa and her family were saying property only goes one way in SA and I replied 'that's because they aren.'t measuring it in dollars'

Place we looked at and liked in 2016 was the same price as 2002 if measuerd in $ (plus a decent renovation too).As ever,local population hoodwinked into seeing currency devaluation as investment gains.

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sancho panza

Wondered why my ITB short has gone blue after weeks in the red.Where's @Barnsey when there's a timing debate to be had?

https://wolfstreet.com/2019/06/25/the-most-splendid-housing-bubbles-in-america-first-year-over-year-drops-since-housing-bust-1/

The Most Splendid Housing Bubbles in America: First Year-Over-Year Drops Since Housing Bust 1

by Wolf Richter • Jun 25, 2019 • 6 Comments • Email to a friend

New York, San Francisco condo prices fall year-over-year. Seattle house prices flat year-over-year. After earlier declines, Denver, Boston hit new highs. Miami, Phoenix, Las Vegas try to regain nutty peaks of Housing Bubble 1.

Seasonal price spikes are cropping up in many of the most splendid housing bubbles in America, but in some metros they were not nearly large enough and prices fell compared to the same month last year, the first such declines since Housing Bust 1, and in others, they produced new all-time highs, and in others got them closer to the crazy highs of Housing Bubble 1.

New York Condo Prices:

In the New York City metro, condo prices dropped 0.8% in April from March, according to the CoreLogic Case-Shiller Home Price Index released this morning. This drop pushed the index down 1.8% from the peak in October 2018, and a tad (0.7%) below where it had been in April 2018, the first year-over-year decline since the end of Housing Bust 1. The index is now below where it had first been in January 2018:

US-Housing-Case-Shiller-New-York-condos-

The Core-Logic Case-Shiller Home Price Index is a rolling three-month average; today’s release represents closings that were entered into public records in February, March, and April.

San Francisco Bay Area Condo Prices

Condo prices in the five-county San Francisco Bay Area – the counties of San Francisco, San Mateo (northern part of Silicon Valley), Alameda and Contra Costa (East Bay), and Marin (North Bay) – jumped 1.5% in April from March, according to the Case-Shiller index. But it wasn’t enough to beat the seasonal surge last year, and compared to April 2018, the index declined 0.7%. This was the second month in a row of year-over-year declines – the first such event since April 2012 at the end of Housing Bust 1:

US-Housing-Case-Shiller-San-Francisco-Ba

San Francisco Bay Area House Prices

The Case-Shiller index for single-family house prices in the five-county San Francisco Bay Area jumped 1.6% in April from March. But it wasn’t enough and further eroded the year-over-year price gains, which are now down to just 1.8% compared to April 2018. The index remains below its peak of July 2018:

US-Housing-Case-Shiller-San-Francisco-Ba

The Case Shiller index was set at 100 for January 2000; a value of 200 indicates that prices have doubled since January 2000. Every housing market on this list of the most splendid housing bubbles in America has an index value somewhere in its history of over 200, either during Housing Bubble 1 or during Housing Bubble 2, the minimum requirement for this list.

Seattle House Prices:

Prices of single-family houses in the Seattle metro rose 1.1% in April from March. But it wasn’t enough to keep up with the seasonal spring surge last year. This left the index flat with April 2018, the first year-over-year flat-reading since the end of Housing Bust 1 in April 2012. The index is down 2.8% from the peak in June 2018:

US-Housing-Case-Shiller-Seattle-2019-06-

Los Angeles House Prices:

House prices in the Los Angeles metro rose 1.0% in April from March, thus beating by a tiny fraction the old record of August 2018, according to the Case-Shiller index. This moved the index up 1.5% from April 2018:

US-Housing-Case-Shiller-Los-Angeles-2019

San Diego House Prices:

House prices in the San Diego metro ticked up 0.5% in April from March, less than the seasonal jump a year ago, which eroded the year-over-year gain further, now down to just 0.8% compared to April 2018. The index remained down a smidgen from its peak in July last year:

US-Housing-Case-Shiller-San-Diego-2019-0

Portland House Prices:

The Case Shiller index for house prices in the Portland metro rose 1.1% in April from March, in line with the seasonal jump last year, leaving the year-over-year gain at 2.6%, but it allowed the index to barely squeak past its record of July 2018 to a new record by the thinnest of margins — and has the chart shows, has been essentially flat since July last year:

US-Housing-Case-Shiller-Portland-2019-06

Boston House Prices:

After declining three months in a row from their November peak, house prices in the Boston metro started rising again in March, in line with seasonal moves. In April, the Case Shiller index jumped 1.9% from March to a new high, for a year-over-year gain of 3.9%:

US-Housing-Case-Shiller-Boston-2019-06-2

Denver House Prices:

House prices in the Denver metro rose 0.8% in April from March, but the seasonal gain was smaller than last year, and the year-over-year gain of the Case Shiller index was whittled down to 3.8%, the smallest gain since May 2012:

US-Housing-Case-Shiller-Denver-2019-06-2

Miami House Prices:

House prices in the Miami metro in April ticked up a smidgen from March but remained a smidgen below February, creating a three-month flat spot that has now whittled the year-over-year gain down to 3.7%. This leaves the index 13.4% below the nutty peak of Housing Bubble 1:

US-Housing-Case-Shiller-Miami-2019-06-25

Tampa House Prices:

House prices in Tampa rose 0.7% in April from March and are up 5.6% year-over-year, but remain down 10% from their mind-bendingly nutty peak during Housing Bubble 1:

US-Housing-Case-Shiller-Tampa-2019-06-25

Phoenix House Prices:

The Case Shiller index for the Phoenix metro rose 0.8% in April from March, for a year-over-year again of 6.0%, leaving the index 17.7% from its crazy peak during Housing Bubble 1:

US-Housing-Case-Shiller-Phoenix-2019-06-

Las Vegas House Prices:

House prices in the Las Vegas metro rose 0.6% in April from March, for a 7.1% year-over-year gain, but that was down from February’s 9.7% and March’s 8.2% year-over-year gain. The index has been essentially flat since October last year:

US-Housing-Case-Shiller-Las-Vegas-2019-0

Washington DC:

The Case Shiller index for the Washington D.C. metro rose 0.9% in April from March, but this gain was less than the seasonal gain last year, and the year-over-year gain was whittled down to 2.6%. The index remains 9.6% below its nutty peak of Housing Bubble 1:

US-Housing-Case-Shiller-Wash-DC-2019-06-

The Case Shiller Index, a measure of house price inflation

The Case-Shiller methodology is based on “sales pairs”: It compares the sales price of a house in the current month to the last transaction of the same house years ago, thus tracking price changes of the same house over time. When the price of a house doubles, it’s not because the house grew to be twice its former size, but because it takes twice as many dollars to buy the same house. So the index tracks the purchasing power of the dollar with regards to the same house, which makes it an effective measure of house-price inflation.

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Yep it's definitely finally rolling over Sancho. Housing and autos, the 2 biggest personal expenses which have a pretty good track record of warning what's to come. Speaking of auto sales:

IMG_20190626_015642.thumb.jpg.b19b74dcfbabdab91104b03b2c81bb82.jpg

Holy ****

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6 hours ago, sancho panza said:

Fair play to him.As my Grandad used to say to me noone goes bust taking a profit.

On another matter looks like the middle part of the bear has arrived after the recent US attempt to tkae out the peak.My IG a/c is mainly shorts oparticualrly US etfs  and has gone markedly blue in last two seesions after a few hard weeks.Watch out below....

On another matter,Mrs P has taken to taking the Aldi specially selected ready meals to work instead of using the canteen as she prefers the food.Do you know what time they put the 50% off stickers on at Aldi?

@Yellow_Reduced_Sticker for any guidance?.

Before they open same as Iceland in most of them,so 8am.Nobody in then so no scrum.Not loads reduced,but still decent.

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3 hours ago, Barnsey said:

Yep it's definitely finally rolling over Sancho. Housing and autos, the 2 biggest personal expenses which have a pretty good track record of warning what's to come. Speaking of auto sales:

IMG_20190626_015642.thumb.jpg.b19b74dcfbabdab91104b03b2c81bb82.jpg

Holy ****

Best thing is i dont think those auto sales are coming back during the next cycle much.Transports will see a steady increase in demand im expecting.

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Lightscribe

Well here we are. It looks as though those that have been on this thread for a number of years, are finally seeing their preparation come to fruition.

A quick update in regards to BTC. It is now at $12.5k. I shall be taking another 10-15% profit soon, and then another 10% at the previous ATH, if and when we get there. Up in $ down in BTC, as I have a proportion of ETH and QNT (that’s up by 300% still) and they have lost out to the ferocity of BTC rise. This should be the point though nearing support levels where BTC takes a breather and the big ‘alts’ will rise back somewhat. It really depends how long the BTC plateau lasts, with the external financial shitstorm ahead, it could go vertical.

Other factors to consider is the increased regulations, and the likes of Binance separating the US on its own exchange and ‘approved’ currencies come September. Interesting times indeed.

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Not seen it posted yet - excerpt below

https://www.icis.com/chemicals-and-the-economy/2019/06/perennials-set-to-defeat-the-feds-attempt-to-maintain-the-stock-market-rally/

 

Quote

Since 2008, the Fed has completely failed to recognise this critical development for supply/demand balances.

Instead it has “doubled down” on the subprime policy, via record levels of stimulus.  If you ask them why, they will tell you their core economic model – the Dynamic Stochastic General Equilibrium model – doesn’t need to include demographic detail, as it is based on  Modigliani and Friedman’s theories.

We are therefore now almost certainly approaching a new crisis. As the chart on the left from Charlie Bilello confirms :

  • The total of government bonds with negative interest rates has now reached $13tn
  • The stock market is ignoring this evidence of slowing demand, and is still powering ahead

One or the other is soon going to be proved wrong.

THE END-GAME FOR THE STIMULUS POLICIES WILL LIKELY BE MAJOR DEFLATION

 

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VeryMeanReversion
3 hours ago, JMD said:

Hi Castle Mania, Cattle Prod, ReversionToMean,

Thanks for your really good info. received from you recently. If I may I do have a follow up question.

I have a good allocation of Silver/Gold in mining stocks/ETF's/coins. However, I would like to add some platinum, uranium, copper - for diversification - but crucially as part of my buy and hold strategy - along with my silver/gold holdings. I'm personally considering allocating 5% for platinum and uranium and copper (i.e. totalling 15% of my PM portfolio). I don't want to trade but rather hold for say 10 years, I think its been discussed here that the reflation cycle may plateau around 2028 (I know no one can predict exactly, but I need to have a strategy!).

I'm not asking for investment advise of course but was wondering what your thinking is regarding the PM space outside of silver/gold - do you think the up-trend over next 10 years for these metals may be similar to silver/gold? If you do hold other metals do you have a view on possible gains over say next 10 year (I think DB has suggested silver might 15x/30x, depending on inflation/money printing), I know there are different variable involved but any guestimate would be useful as i'm finding it difficult to judge risk/reward for investing in alternative metals - as buy and hold strategy - compared to say just buying more silver (I would prefer to diversify even if means taking on more risk than holding silver).

All replies very welcome...I know i'm being specific, but I think this question is kinda central to this blog, after all I don't want to miss out on any of that 'generational wealth making' DB has referred to (!?!) - however please feel free to shoot me down if you disagree!  

 

I'm no investing expert. All I know is that all my assets should not be too correlated. I generally choose boring divi payers and have no crystal balls.

My shares (70%) are mostly FTSE100/250 with a mix of UK earnings and foreign earnings. I like the FTSE for regulatory reasons but want a spread of earning sources. I spread across sectors with 20+ different shares i.e. mining, banking, retail, land etc.....

The platinum and silver ETCs (20%) seem to be less correlated to shares than gold.

The rest is cash (10%) ready for any good deals that may come up.

My house equity is similar value to the SIPP.

I have no bonds.  If I came across a corporate bond investment trust with low costs, I would do it but haven't found any so far. Returns would be low but it spreads the risk.

 

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10 hours ago, sancho panza said:

 

I've had the odd moment where I've felt like giving up posting(including about a month recently) but I work in healthcare and I come here to have the conversations I can't in my daily life,to share ideas and find stimulating discussions.Sad really,but an indictment of the lack of decent financial education in schools/universities that you have to frequent obscure forums/Shaun Richards/Paul Hodges/Wolf Richter to find anyone questioning the economic ortohodxy that has led the Western World into the mess it's in.

Ditto...and also as a `sounding board`/education.

Re your previous comment `Nobody makes a loss taking a profit`, I thought like that but have just read a book (see library thread) that has made me think a little...also beautifully descibes some investors styles seen on this forum.

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11 hours ago, sancho panza said:

I was watching New Gold and pondering whether to have a little nudge.Up 11% today.Didn't realise they'd hedged so much production.Having said that,rising gold pirce willease the pressure on them considerably.

Their gold production guidance is 245-270k from Rainy River and 55-65k from New Afton, for a total of 300-335k.

Out of that, 192k (or 16k per month) have been hedged to create a floor of $1230 and ceiling of $1300. That's roughly 60% of their guidance. Their exposure to higher gold prices is severly limited.

They better deliver a perfect Q2 in terms of operations or this rally will come to a very abrut end. They looked cheap-ish at 0.84 but 1.20 is a different story.

 

Having said that, markets can stay irrational etc etc

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sancho panza
1 hour ago, kibuc said:

Their gold production guidance is 245-270k from Rainy River and 55-65k from New Afton, for a total of 300-335k.

Out of that, 192k (or 16k per month) have been hedged to create a floor of $1230 and ceiling of $1300. That's roughly 60% of their guidance. Their exposure to higher gold prices is severly limited.

They better deliver a perfect Q2 in terms of operations or this rally will come to a very abrut end. They looked cheap-ish at 0.84 but 1.20 is a different story.

 

Having said that, markets can stay irrational etc etc

Appreciate your understanding Kibuc

do you know when the hedges finish? Would that open new River right up? Surely the debts due 2022 (?) would be easier to roll over with a gold bull .

I'm on the look out for some basket case stocks that will find their financial problems resolved by a gold bull.Not buying huge amounts jsut splitting some profits from bigger shares and putting them in, in case they run eg Alamos has doubled in 8 months or so,so I've halved it and run three trades from the profit.

Using this we bought some Teranga/Guyana/Dundee/Amarillo.Would have purchased Rio2/Fiore/Superior but haven't got a Broker that can settle them.

 

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sancho panza
9 hours ago, Barnsey said:

Yep it's definitely finally rolling over Sancho. Housing and autos, the 2 biggest personal expenses which have a pretty good track record of warning what's to come. Speaking of auto sales:

IMG_20190626_015642.thumb.jpg.b19b74dcfbabdab91104b03b2c81bb82.jpg

Holy ****

That's an annual chart so thsoe blips for 2019 will rise through the rest of the year.However if we assume flat seasonality then we double the EU 6.7 mn cars to June 25 2019 to 13.4 for the year to Dec 2019,that's still going to be down 10%++ from 15 mn odd in 2018.And that's a big if.

 

 

9 hours ago, MvR said:

May US new home sales down 7.8%, as opposed to up 1.9% as predicted. Consumer confidence lower than expected too..

1876552571_Screenshot2019-06-25at17_42_57.thumb.png.3df529f02998fe639aa7d7b7807fd71d.png

That's a big miss MvR.Off topic,you're an experienced options trader,have you any experience with Interactive Investor?

Explains ITB going blue for me.I was looking after the kids yesterday so had limited time at my desk.

You short anythign at the minute?

 

Mish had a delve into this now you've prompted me to check-

https://moneymaven.io/mishtalk/economics/new-home-sales-plunge-35-9-in-the-west-7-8-overall-prices-down-8-1-YXy04c-77kmrvvphEehjrw/

There is little to like in today's residential sales report. New home sales dove 7.8% overall and prices also fell 8.1%.

Economists expected a rebound in housing this month so they are no doubt shocked by the Housing Residential Sales report.

New Home Sales

Sales of new single‐family houses in May 2019 were at a seasonally adjusted annual rate of 626,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 7.8 percent below the revised April rate of 679,000 and is 3.7 percent below the May 2018 estimate of 650,000.

Sales Price

The median sales price of new houses sold in May 2019 was $308,000. The average sales price was $377,200.

For Sale Inventory and Months’ Supply

The seasonally‐adjusted estimate of new houses for sale at the end of May was 333,000. This represents a supply of 6.4 months at the current sales rate.

Attitudes

New home sales are below where they were in 1965.

Affordability and attitude changes by milennials towards the "ownership society" and family formation are the key reasons sales have gone nowhere.

When the Fed bailed out the banks and mortgage holders, it did so at the expense of the ascendant generation who now cannot afford homes and luxuries their parent did.

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sancho panza
4 hours ago, Queasing said:

Hodges points on the theoretical basis for Fed modelling are well worth a read in that article.Also added some detail to the last sentence as some may not click through and it's a point well made.

 

 

 

'And in the case of today’s central bankers, they are enslaved to the theories of 2 defunct economists:

  • One is Franco Modigliani, who won the 1955 Nobel Prize with his “life-cycle hypothesis”, which suggested individuals plan out their  lifetime income and spending in advance, so as to even out their consumption over their entire lifetime
  • The other is Milton Friedman, who won the 1975 Prize for his argument that “inflation is always and everywhere a monetary phenomenon”, ignoring the importance of supply and demand balances

Modigliani and Friedman were working before anyone realised a BabyBoom had taken place.  When John Richardson and I were researching our book ‘Boom, Gloom and the New Normal: How the Western BabyBoomers are Changing Demand Patterns, Again’ in 2010, the authoritative Oxford English Dictionary gave the earliest use of the word as being in 1979.

Since 2008, the Fed has completely failed to recognise this critical development for supply/demand balances.

Instead it has “doubled down” on the subprime policy, via record levels of stimulus.  If you ask them why, they will tell you their core economic model – the Dynamic Stochastic General Equilibrium model – doesn’t need to include demographic detail, as it is based on  Modigliani and Friedman’s theories.

We are therefore now almost certainly approaching a new crisis. As the chart on the left from Charlie Bilello confirms :

  • The total of government bonds with negative interest rates has now reached $13tn
  • The stock market is ignoring this evidence of slowing demand, and is still powering ahead

One or the other is soon going to be proved wrong.'

 

 

'THE END-GAME FOR THE STIMULUS POLICIES WILL LIKELY BE MAJOR DEFLATION
The central banks have spent the past 10 years following Friedman’s theory, believing they could create inflation via stimulus policies.  Instead, their low interest rates encouraged companies to boost supply, at a time when the rise of the Perennials meant demand growth was already slowing.

Unsurprisingly, therefore, interest rates are going negative, as the Fed’s policies have effectively proved deflationary.  Very worryingly, around 14% of US companies are already unable to service their debt, because their earnings are not enough to pay their interest bills.'

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1 hour ago, sancho panza said:

That's a big miss MvR.Off topic,you're an experienced options trader,have you any experience with Interactive Investor?

Explains ITB going blue for me.I was looking after the kids yesterday so had limited time at my desk.

You short anythign at the minute?

Interactive Investor ( ii.co.uk) ?   No, but I'm thinking of using them for this years ISA allowance to give me access to the Canadian markets and some PM/uranium miners I fancy.   They don't do options as far as I can see, but i may be mis-understanding your question.

I do my options selling through Interactive Brokers because of their low cost, great platform and Mark-To-Market accounting reports which are useful since mechanical options trading seems to fit HMRC's "Badges of Trade" rules, in that it is non-speculative, involves hedging rather than taking a view on market direction, and positions are mechanically rolled and managed to set rules.  For my personal situation this works well for me tax wise, and counts as one of my self-employed "trades".

I use TastyWorks for speculative options trades, buying options as directional bets, and accounted for under CGT rules.  I actually prefer the platform for ease of use, but the account and reports are in dollars, which is pain if there are hundreds of complex, rolling, multi-legged, hedged trades to account for, but manageable for simpler, less frequent, in/out transactions.

I'm also with IG for my other ISA, and very small spread-betting account I make occasional long/short scalps in.

As for being short... you know that's a complex question for an options trader running multiple accounts and strategies lol..  but basically not really. My IB options selling account would benefit from a short term downward correction in gold and stocks, but my speculative account wants them to rise longer term.

Overall, I'm basically long miners but looking to take profits on most of those as gold reach the 1500 area to free up some cash.  I've a very small amount positioned in low-probability long options to win bigly if DB and his mentor's targets play out, but not lose much if they don't, ( including GDX/GDXJ even if I've sold  the miners in my ISA ),  and I'm practising small scalping shorts on SPY, gold etc. in my spread-betting account, hoping to sharpen my top-picking skills ready for the big down-turn when it happens. 

Alongside all that I've been playing in IG's demo CFD account, placing balance long and short positions on basics like gold(long), stocks(long), oil(short), the dollar(short ) etc.  Not surprisingly I'm making out like a bandit in the demo account... up 80% in a month... it's so much easier when it's not real money! lol

EDIT: PS.. I know you watch the builders, but have you checked out the brick makers too?  Firms like Forterra, Ibstock Brick and Michelmersh?   As suppliers masses of building projects, they bound to be in play over the next few years, long or short.

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2 hours ago, sancho panza said:

Appreciate your understanding Kibuc

do you know when the hedges finish? Would that open new River right up? Surely the debts due 2022 (?) would be easier to roll over with a gold bull .

I'm on the look out for some basket case stocks that will find their financial problems resolved by a gold bull.Not buying huge amounts jsut splitting some profits from bigger shares and putting them in, in case they run eg Alamos has doubled in 8 months or so,so I've halved it and run three trades from the profit.

Using this we bought some Teranga/Guyana/Dundee/Amarillo.Would have purchased Rio2/Fiore/Superior but haven't got a Broker that can settle them.

 

It's 16k per month throughout the entire 2019. Their copper production is also hedged, again around 60% of their guidance, to stay between $2.50-$3.

Given the sheer amount of debt, gold even at 1700 wouldn't go too far towards repaying it, but positive sentiment towards gold could help with refinancing. Maybe that's what is pushing the price, that growing confidence that they won't simply go bust in 2022. Or maybe they are seen as an acquisition target - in a gold bull a major player would probably be happy to take on those obligations just to get to those ounces in the ground. 

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1 hour ago, sancho panza said:

 

 

 

'THE END-GAME FOR THE STIMULUS POLICIES WILL LIKELY BE MAJOR DEFLATION
The central banks have spent the past 10 years following Friedman’s theory, believing they could create inflation via stimulus policies.  Instead, their low interest rates encouraged companies to boost supply, at a time when the rise of the Perennials meant demand growth was already slowing.

Unsurprisingly, therefore, interest rates are going negative, as the Fed’s policies have effectively proved deflationary.  Very worryingly, around 14% of US companies are already unable to service their debt, because their earnings are not enough to pay their interest bills.'

Thanks, this helped me understand a concept that I had been struggling with for ages.

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