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Credit deflation and the reflation cycle to come.


DurhamBorn

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leonardratso

not a lot happening to be honest, days are too nice to waste researching not a lot.

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Bobthebuilder
15 minutes ago, Harley said:

Sad to see about the only people left posting here are posting at length about a subject patently way off topic.

Bit harsh Harvey, most of the work has now been done, just wait for the Autum or longer depending on your gold bug views.

Toungue in cheek post by the way, i really respect your input here and on TOS.

Thanks.

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20 minutes ago, Harley said:

Sad to see about the only people left posting here are posting at length about a subject patently way off topic.

I have an idea that people could do worse than chucking a small amount on long corn and wheat ETFs due to flooding 

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reformed nice guy
1 hour ago, Loki said:

I have an idea that people could do worse than chucking a small amount on long corn and wheat ETFs due to flooding 

To add to that, I have been looking into phosphates. Morocco makes about 12% of the world supply but has around 72% of all deposits. America produces about 12% annually with 2% of world deposits. China produces around 45% annually with  less than 5% of all deposits. About 20% of fertiliser cost is phosphate so increasing price due to extraction cost will increase food/commodity prices.

 

 

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8 minutes ago, reformed nice guy said:

To add to that, I have been looking into phosphates. Morocco makes about 12% of the world supply but has around 72% of all deposits. America produces about 12% annually with 2% of world deposits. China produces around 45% annually with  less than 5% of all deposits. About 20% of fertiliser cost is phosphate so increasing price due to extraction cost will increase food/commodity prices.

 

 

Just don't touch Sirius, I'm down 50%!

Or maybe that means you should?

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3 hours ago, leonardratso said:

not a lot happening to be honest, days are too nice to waste researching not a lot.

 

3 hours ago, Bobthebuilder said:

Bit harsh Harvey, most of the work has now been done, just wait for the Autum or longer depending on your gold bug views.

Toungue in cheek post by the way, i really respect your input here and on TOS.

Thanks.

All valid points.  Just my tidy mind at work.  Most, me included, meander a bit which is equally enjoyable to read.  And you only need to look at some other sites to feel the pain of zealous moderating.

Like I did a comparable weekly shop at Tescos last week and it cost almost 20% more than Aldi!  And that Sainsbury looks a possible buy technically now but the fundamental discussion on this thread would say a big fat no. Ultimately everything is connected.

The internet topic is interesting and one I've looked at quite a lot myself both as a geek and a tight ass.  But it gets to a point where it's worthy of its own thread.  Guess we don't know that at the start though!

Truth is, I miss the awol posters so apologies for being a grump!

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3 hours ago, Loki said:

I have an idea that people could do worse than chucking a small amount on long corn and wheat ETFs due to flooding 

 

2 hours ago, reformed nice guy said:

To add to that, I have been looking into phosphates. Morocco makes about 12% of the world supply but has around 72% of all deposits. America produces about 12% annually with 2% of world deposits. China produces around 45% annually with  less than 5% of all deposits. About 20% of fertiliser cost is phosphate so increasing price due to extraction cost will increase food/commodity prices.

Funny you say that as I've been looking at commodities lately both to trade and to maybe broaden my PM portfolio asset allocation to a more "hard asset" base.

I opened a few trades on several industrial metal ETFs and an energy one last week.  I also saw the moves in the softs and was annoyed the KID stuff stopped me buying SOIL (I prefer to buy the producers).  I bought the metal ETFs as the price of the miners like BHP, which I was accumulating, are now maybe a bit elevated to say the least.

Anyways, nobody is talking about commodities which are at historically low prices.  And that gets me interested.  How that fits with the theme of this thread is an interesting topic to consider.  And maybe in that respect not all commodities are the same - eg. softs versus metals.

Another related issue I've been considering is whether the equity holders of such producers, and REITS come to that, belong in my equity or hard asset portfolo allocation.  Correlation probably says the equity asset class but maybe a bit of a crossover.

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3 hours ago, Bobthebuilder said:

....just wait for the Autum or longer depending on your gold bug views......

I opened a FTSE short trade a few weeks back given the technicals and my desire to hedge some of my high yielders.  The aim was/is to goose my total return.  Has not gone very well.  I got a technical buy signal which may have failed.  Personally, I'm no fan of shorting given the attention and precise timing it requires given the price decay.  So not an area I do much of so a lot to learn. 

Thing is, this all got me wondering technically if the markets could yet go higher, and the FTSE in particular given its relative doldrums status to date and its opening to Chinese buyers.  Everything's a mix of cross currents and possibly enough to stem the posssible coming tsunami but something to consider.

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2 hours ago, Loki said:

Just don't touch Sirius, I'm down 50%!

Or maybe that means you should?

Is that SIRI on the Nasdaq?  Bounced well recently, like several others.  That's what got me looking at SOIL, etc.

Did you buy last year or so?  That's the trouble with such falls as mathematically they need so much more to climb back. 

And why I adopt a balanced asset portfolio mix at my age for my coming pension.  There maybe would be too little time for the climb back - aka sequence risk.

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leonardratso
3 hours ago, Harley said:

Is that SIRI on the Nasdaq?  Bounced well recently, like several others.  That's what got me looking at SOIL, etc.

Did you buy last year or so?  That's the trouble with such falls as mathematically they need so much more to climb back. 

And why I adopt a balanced asset portfolio mix at my age for my coming pension.  There maybe would be too little time for the climb back - aka sequence risk.

think he means lon:sxx - its very volatile and comes and goes in/out of fashion. Not sure about the company itself, its end game looks good but i think its mainly based on a tunnel isnt it? cant remember, but very narrow channel of failure/sucess.

image.thumb.png.9103b1bfe365a32653ba8c9035f30b0a.png

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I was half asleep at the time but it appears Marc Faber agrees about a deflationary crash.  

A sometimes odd programme but Marc is in fine form at about 34:30:

http://silverinvestor.blogspot.com/2019/07/dr-marc-faber-chris-waltzek-phd-robert.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+blogspot/ARAg+(The+Gold+and+Silver+Review:+Audio+Report)&m=1

Agree with him on most, especially wealth taxes for the non-elites.

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1 hour ago, leonardratso said:

think he means lon:sxx - its very volatile and comes and goes in/out of fashion. Not sure about the company itself, its end game looks good but i think its mainly based on a tunnel isnt it? cant remember, but very narrow channel of failure/sucess.

image.thumb.png.9103b1bfe365a32653ba8c9035f30b0a.png

SXX has a requirement for taking on massive amounts of debt at a point in the cycle when debt becomes harder to get.

It also has a product that doesn't really have a market -- it is a complex salt mix that no-one is crying out for.

It might well work out.  And i think it will work out.  But not with the existing shareholder structure.

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Bricks & Mortar

I was reading this earlier.  I think I'm out of step with the prevailing view, as I think tariffs are a (correct?) response to an impending deflation crisis, rather than the cause of it.

https://www.cobdencentre.org/2019/07/for-those-who-dont-understand-inflation/

It brought to me to wondering some more on what does cause deflationary collapse, and I realised I'd diverted about 1/3 of my income to share purchases since I started reading these threads.  So maybe  its all you lots fault!

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19 minutes ago, Cattle Prod said:

I'm leaning bullish oil again into the autumn/winter......

I hold some BP and RDS but not enough and their price is now a tad high (lesson learnt - too slow laddering in) so I've been looking elsewhere, such a service firms, for my high yield portfolio.  I had a technical bullish signal on WG a while back but the fundamentals look poor.  Shame I can't use the US ETFs.  Still looking.

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1 hour ago, Bricks & Mortar said:

I was reading this earlier....

Interesting and well written article thanks.

I was just thinking how the Great Depression was nearly 100 years ago and then the article  mentions Keynes early writings are already over 100 years old. 

But what a lot of commenting economists are not mentioning is the velocity of money (not a exciting topic for a Keynsian).  It's a glacier which will cause havoc when it melts.

Cash is trash and has been for a long time now.

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http://www.constructionenquirer.com/2019/07/15/call-to-delay-vat-changes-as-chaos-looms-for-contractors/

Construction subcontractors are about to have 20% knocked off their cash flow, my "50% of construction companies going out of business" is starting to look worryingly accurate if I say so myself!

*****DO NOT INVEST IN CONSTRUCTION FOR THE FORSEEABLE!!!!!!*****

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6 hours ago, Harley said:

Everything's a mix of cross currents and possibly enough to stem the posssible coming tsunami but something to consider.

Apologies, I missed a "not"!....

Everything's a mix of cross currents and possibly not enough to stem the posssible coming tsunami but something to consider.

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sancho panza
5 hours ago, Majorpain said:

http://www.constructionenquirer.com/2019/07/15/call-to-delay-vat-changes-as-chaos-looms-for-contractors/

Construction subcontractors are about to have 20% knocked off their cash flow, my "50% of construction companies going out of business" is starting to look worryingly accurate if I say so myself!

*****DO NOT INVEST IN CONSTRUCTION FOR THE FORSEEABLE!!!!!!*****

Ineresting find there MP.I presume all the big players will be well prepared fro this.It looks llike a tax change that will have no change to the burden of taxation but a huge change to cashflows..Is there a particualr reason it will hit construction companies worse or will it hit everyone the same?

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sancho panza
12 hours ago, Harley said:

 

All valid points.  Just my tidy mind at work.  Most, me included, meander a bit which is equally enjoyable to read.  And you only need to look at some other sites to feel the pain of zealous moderating.

Like I did a comparable weekly shop at Tescos last week and it cost almost 20% more than Aldi!  And that Sainsbury looks a possible buy technically now but the fundamental discussion on this thread would say a big fat no. Ultimately everything is connected.

The internet topic is interesting and one I've looked at quite a lot myself both as a geek and a tight ass.  But it gets to a point where it's worthy of its own thread.  Guess we don't know that at the start though!

Truth is, I miss the awol posters so apologies for being a grump!

Sainsbury's is a possible buy for me but at the right level.Not sure it's there yet.Would have to be super cheap and then it's a big 'if'.......

12 hours ago, Harley said:

 

Funny you say that as I've been looking at commodities lately both to trade and to maybe broaden my PM portfolio asset allocation to a more "hard asset" base.

I opened a few trades on several industrial metal ETFs and an energy one last week.  I also saw the moves in the softs and was annoyed the KID stuff stopped me buying SOIL (I prefer to buy the producers).  I bought the metal ETFs as the price of the miners like BHP, which I was accumulating, are now maybe a bit elevated to say the least.

Anyways, nobody is talking about commodities which are at historically low prices.  And that gets me interested.  How that fits with the theme of this thread is an interesting topic to consider.  And maybe in that respect not all commodities are the same - eg. softs versus metals.

Another related issue I've been considering is whether the equity holders of such producers, and REITS come to that, belong in my equity or hard asset portfolo allocation.  Correlation probably says the equity asset class but maybe a bit of a crossover.

I'm very interested in the potash miners and am a bull long term.Pondered SOIL but as ever,don't like the charts of the of the substantial componenents.Already own Nutrien via Potash Saskatchwan but there's a few on the list that will be added to my dream 2020 portfolio.Have you looked much at the component parts.

o/t sort of--------have you looked a t TAN? I was surfing Dr Bubbs forum a year or two back and note some of th solar shares were down 95% from peak.......

6 hours ago, Bricks & Mortar said:

I was reading this earlier.  I think I'm out of step with the prevailing view, as I think tariffs are a (correct?) response to an impending deflation crisis, rather than the cause of it.

https://www.cobdencentre.org/2019/07/for-those-who-dont-understand-inflation/

It brought to me to wondering some more on what does cause deflationary collapse, and I realised I'd diverted about 1/3 of my income to share purchases since I started reading these threads.  So maybe  its all you lots fault!

Don't have time to read this now but imho a credit deflation is casued by excessive leverage in the banking system-everyhting else incl tariffs-merely exacerabte or mitigate the effects thereof.Tariffs are a natural response to a trade deficit.The US is responding to a long term structural trade problem.Will a reduction in Interenational trade make the debt deflation worse?Most likely.

Price deflation is a function of a number of deifferent things including potentially a credit deflation(debt deflation)

6 hours ago, Cattle Prod said:

I'm leaning bullish oil again into the autumn/winter. Sentiment is poor, people are still chucking around demand issues and high US production. However the fault lines I mentioned in the Permian (which drives US production growth) are beginning to spill out. And the data points to legacy well decline exceeding new production by Q4. You won't hear any analyst talking about that, yet. And there is no other significant production growth.

Like you harley I've been balancing my PM holdings with oil stocks and ETFs. Going well so far. However - I'm not convinced by Brent/WTI technicals so am cautious. Alot depends on the pave of the US equity bear. If it's slow burning like 2007 I think oil will be one of the last sectors to pop. Which will of course be the final pin in the economic balloon.

I'm bullish oil especially with a looming period of dollar weakness which ...granted...isn't a given.Already sat on a chunky BP holding,looking to add some ENI and possibly some Exxon/Total/...

5 hours ago, Harley said:

Interesting and well written article thanks.

I was just thinking how the Great Depression was nearly 100 years ago and then the article  mentions Keynes early writings are already over 100 years old. 

But what a lot of commenting economists are not mentioning is the velocity of money (not a exciting topic for a Keynsian).  It's a glacier which will cause havoc when it melts.

Cash is trash and has been for a long time now.

Agreed on the velocity issue.All the experts at the CB's have printed moeny and been stunned that they couldn't generate inflation.But

a) they're looking in the wrong place  ie not assets

b) they presumed driving IR's down would increase spending as the presumed velocity was a constant.ANd as per our previous discussions you know what assumption is????

 

When velocity finally starts to rise,I think it be be a face ripping rally and once it's out of the jar,joe taxpayer will start paying a heavy price for their profligacy with the presses.

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Bobthebuilder
2 hours ago, sancho panza said:

Sainsbury's is a possible buy for me but at the right level.Not sure it's there yet.Would have to be super cheap and then it's a big 'if'.......

I was looking at Sainsburys annual report the other day, cant remember the exact figures but they have debt of approx £1.2 billion and reduced debt by £220 million this year. They plan to do the same every year going forward. I found that interesting in the premise of this thread.

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16 hours ago, reformed nice guy said:

About 20% of fertiliser cost is phosphate

Unless you're Organic :Old:

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16 hours ago, Loki said:

Just don't touch Sirius, I'm down 50%!

Or maybe that means you should?

7 hours ago, Majorpain said:

http://www.constructionenquirer.com/2019/07/15/call-to-delay-vat-changes-as-chaos-looms-for-contractors/

Construction subcontractors are about to have 20% knocked off their cash flow, my "50% of construction companies going out of business" is starting to look worryingly accurate if I say so myself!

*****DO NOT INVEST IN CONSTRUCTION FOR THE FORSEEABLE!!!!!!*****

Won’t be this that damages the big boys it will be the next recession that’s if we even got out of the 2009 one I’m expeting to be able to buy tw. For 32 p again when it finaly arrives

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2 hours ago, sancho panza said:

Sainsbury's is a possible buy for me but at the right level.Not sure it's there yet.Would have to be super cheap and then it's a big 'if'.......

I'm very interested in the potash miners and am a bull long term.Pondered SOIL but as ever,don't like the charts of the of the substantial componenents.Already own Nutrien via Potash Saskatchwan but there's a few on the list that will be added to my dream 2020 portfolio.Have you looked much at the component parts.

o/t sort of--------have you looked a t TAN? I was surfing Dr Bubbs forum a year or two back and note some of th solar shares were down 95% from peak.......

Don't have time to read this now but imho a credit deflation is casued by excessive leverage in the banking system-everyhting else incl tariffs-merely exacerabte or mitigate the effects thereof.Tariffs are a natural response to a trade deficit.The US is responding to a long term structural trade problem.Will a reduction in Interenational trade make the debt deflation worse?Most likely.

Price deflation is a function of a number of deifferent things including potentially a credit deflation(debt deflation)

I'm bullish oil especially with a looming period of dollar weakness which ...granted...isn't a given.Already sat on a chunky BP holding,looking to add some ENI and possibly some Exxon/Total/...

Agreed on the velocity issue.All the experts at the CB's have printed moeny and been stunned that they couldn't generate inflation.But

a) they're looking in the wrong place  ie not assets

b) they presumed driving IR's down would increase spending as the presumed velocity was a constant.ANd as per our previous discussions you know what assumption is????

 

When velocity finally starts to rise,I think it be be a face ripping rally and once it's out of the jar,joe taxpayer will start paying a heavy price for their profligacy with the presses.

Fertiliser will be the gold of the future has the worlds population increases and more country’s compete for dwindling supply’s and water will be faught over in Africa within 30 years

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6 minutes ago, Tdog said:

Good time to buy into desalination plants then.

The more rivers they dam in Africa the more problems downstream is one problem

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2 hours ago, sancho panza said:

Ineresting find there MP.I presume all the big players will be well prepared fro this.It looks llike a tax change that will have no change to the burden of taxation but a huge change to cashflows..Is there a particualr reason it will hit construction companies worse or will it hit everyone the same?

This is purely aimed at construction subcontractors as HMRC has had big problems with VAT refund fraud in the past.

It doesn't affect the main contractors in a major way, this is a VAT rule change for the little guys.  Previously you got paid that 20% VAT and could hold onto it temporarily using it as trading cash month to month, then paying HMRC every quarter.  Now that goes straight to HMRC a lot of those companies are going to have a hole in the cashflow which the VAT cash used to plug.

As an example, a £50m turnover subcontractor needs another £2.3m of trading cash or they are going to have problems, times that by 67% of subbies who have not prepared (read cash injection IMO!) and you have a problem.

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