Credit deflation and the reflation cycle to come.

[Chewing Grass]

36 minutes ago, stokiescum said:

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

Nah, you just need to collect piss like they did in the good old days.

My lads dog always pisses in the same spot when it appears round our house once a week, the grass in that spot is fantastic, green and lush and grows 3x faster than the rest of the lawn.

'Urine contains nitrogen, phosphorus and potassium -- essential plant nutrients that are usually mined from the earth or the air for agricultural use.'

https://modernfarmer.com/2014/01/human-pee-proven-fertilizer-future/

[Funn3r]

40 minutes ago, Tdog said:

Good time to buy into desalination plants then.

I just don't understand water problems in super sunny countries by the seaside. Unlimited sea water is free, unlimited solar boiling is free, how can it be a problem?

[Castlevania]

I’m in Serbia where people smoke everywhere. IQOS is being heavily marketed. That’s Philip Morris’s heat not burn alternative to smoking. They even had a stand in the bus station, manned by a tall semi plastic girl. I approve

On a more serious note I’ve not seen IQOS in the U.K. although they have a website. Apparently they spent over £3 billion developing it. Is heat not burn likely to take off? Or are the liquid type a better long term bet?

[Talking Monkey]

3 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.

is that rally in inflation SP, didn't quite follow that last bit

[Bobthebuilder]

59 minutes ago, Chewing Grass said:

Nah, you just need to collect piss like they did in the good old days.

My lads dog always pisses in the same spot when it appears round our house once a week, the grass in that spot is fantastic, green and lush and grows 3x faster than the rest of the lawn.

'Urine contains nitrogen, phosphorus and potassium -- essential plant nutrients that are usually mined from the earth or the air for agricultural use.'

https://modernfarmer.com/2014/01/human-pee-proven-fertilizer-future/

Ah yes "gardeners brew" they used to call it, great for tomatoes apparantly.

[Dogtania]

1 hour ago, Chewing Grass said:

Nah, you just need to collect piss like they did in the good old days.

My lads dog always pisses in the same spot when it appears round our house once a week, the grass in that spot is fantastic, green and lush and grows 3x faster than the rest of the lawn.

'Urine contains nitrogen, phosphorus and potassium -- essential plant nutrients that are usually mined from the earth or the air for agricultural use.'

https://modernfarmer.com/2014/01/human-pee-proven-fertilizer-future/

Possibly?  I definitely remember reading how the world's supply ran on guano for a bit (iirc very vaguely up to end 19th century maybe well before). They found uninhabited beislands around the Americas that mountains of the stuff piled sky high from centuries of the avian waste dropping from the sky.  Surprisingly that source was depleted pretty quickly.

They discovered the process for turning nitrogen into ammonia at the start 20th century .. Thus commercial fertilizer possible and not relying on bird droppings or the washer women's piss.

[DurhamBorn]

19 minutes ago, Castlevania said:

I’m in Serbia where people smoke everywhere. IQOS is being heavily marketed. That’s Philip Morris’s heat not burn alternative to smoking. They even had a stand in the bus station, manned by a tall semi plastic girl. I approve

On a more serious note I’ve not seen IQOS in the U.K. although they have a website. Apparently they spent over £3 billion developing it. Is heat not burn likely to take off? Or are the liquid type a better long term bet?

Imperial have Pulze as well,its mainly Japan.I think vape is likely winner,but heat not burn could still do very well,maybe market by market.

[Castlevania]

36 minutes ago, DurhamBorn said:

Imperial have Pulze as well,its mainly Japan.I think vape is likely winner,but heat not burn could still do very well,maybe market by market.

Thanks. Vapeing is illegal in Japan which probably explains why heat not burn is popular there.

[macca]

8 hours ago, Tdog said:

Good time to buy into desalination plants then.

If oil companies can pump oil from one side of America to the other

Why cant desalination plants pump water across Africa? Use the Sun to power them via huge solar fields

All we do is keep sending food, they keep having 10 kids each so the next year they need more food.. Its a stupid idea and not sustainable.. eventually  they all end up on a boat to Europe which will end badly for us.. We import 50% of our food so are not safe when food shortages start in the not too distant future

 

 

[Majorpain]

4 hours ago, macca said:

All we do is keep sending food, they keep having 10 kids each so the next year they need more food.. Its a stupid idea and not sustainable.. eventually  they all end up on a boat to Europe which will end badly for us.. We import 50% of our food so are not safe when food shortages start in the not too distant future 

Well, modern medicine has come in as well so the majority of Africans are well fed with a small standard of healthcare.  Its enough to cut down on things like all the easy to treat infant deaths which would otherwise be a population brake.

The African population charts trajectory are distinctly worrying, a prolonged decrease in food production/increase in prices and things will get interesting.

[Loki]

At the risk of staying on topic ...has New Gold finally started it's bounce back? 

[UnconventionalWisdom]

16 hours ago, sancho panza said:

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.

What do you think will lead to a rise in velocity? Taking my workplace as a very small sample (only 7 of us). Older guys with houses used their gains to move into bigger houses and hence more on the mortgage, young guys aren't on bad money but just about break even due to high rents (south east). Mid level guy has just bought a house with his misses that costs 10 times his earnings. 

They created loads of money and made credit cheap but this has just been swallowed up by housing costs across the board.

[Don Coglione]

1 hour ago, Loki said:

At the risk of staying on topic ...has New Gold finally started it's bounce back? 

Dunno, but I am finally out of the red on NGD.

[Loki]

37 minutes ago, Ponty Mython said:

Dunno, but I am finally out of the red on NGD.

I have a way to go, but then that's why durhamborn calls them rubber bands twang!

[Dogtania]

Ngd seems to be the super sprung rubber band.  Not sure if it's what was meant but seems the depressed price after trying themselves up for the foreseeable has given the twang

[kibuc]

NGD had two consecutive quarters of smooth operation and delivering on guidance, possibly for the first time in human memory.

The turned the corner in Rainy River, they have a clear plan for New Afton and their cash position is strong.

Their debt, however, is not going anywhere.

As I mentioned before, their exposure to gold rally is rather limited in terms of generating cashflow from continuous operations BUT it still gives them some options. It might make it easier to refinance. It might make them a M&A target. And, finally, it might help them get good price for Blackwater if they decide to pay off their debt that way. It's 10moz of gold in 70moz of silver (R&R) in stable jurisdiction, if gold continues on its way up some big boys could be interested.

[Don Coglione]

1 hour ago, kibuc said:

NGD had two consecutive quarters of smooth operation and delivering on guidance, possibly for the first time in human memory.

The turned the corner in Rainy River, they have a clear plan for New Afton and their cash position is strong.

Their debt, however, is not going anywhere.

As I mentioned before, their exposure to gold rally is rather limited in terms of generating cashflow from continuous operations BUT it still gives them some options. It might make it easier to refinance. It might make them a M&A target. And, finally, it might help them get good price for Blackwater if they decide to pay off their debt that way. It's 10moz of gold in 70moz of silver (R&R) in stable jurisdiction, if gold continues on its way up some big boys could be interested.

Thanks for the insight, kibuc.

[Bricormortis]

Hi ho silver ! £12.41 Oz. 

[janch]

David Hunter‏ @DaveHcontrarian 1h1 hour ago

Silver looks like it may finally ready for a catch-up rally. Should see it move above $16 soon & then higher from there. My target remains at $26.

  

[sancho panza]

On 15/07/2019 at 08:51, 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've psoted this chart before irc,XLE peaking in June 08-same time as the PM miners and commodity stocks as the dollar dropped.Having said tht worth mentioning I'm struggling to see where the weakening dollar will take Rio Tinto etc which are already sky high.

Few things worth going long at the mo,big oil is one imo

 

[sancho panza]

21 hours ago, Bobthebuilder said:

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.

They are cutting debt but liabilities are rising elsewhere-possibky down to sale n leaseback...??welcome anyone who knows more

20 hours ago, Majorpain said:

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.

thanks MP,appreciate the insight.this thread at its best if i may say.this wouldnt have crossed my radar otherwise.looking at how wafer thin margins are in the industry thi could have a large effect

 

questioin if you have time.have margins imporoved industry wide post carillion collapse?

19 hours ago, Talking Monkey said:

is that rally in inflation SP, didn't quite follow that last bit

Yes.derived from the old mv=pt equation.

rising velocity could create both credit and price inflation and the prospect of wage inflation if immigration is restricted post brexit.

6 hours ago, UnconventionalWisdom said:

What do you think will lead to a rise in velocity? Taking my workplace as a very small sample (only 7 of us). Older guys with houses used their gains to move into bigger houses and hence more on the mortgage, young guys aren't on bad money but just about break even due to high rents (south east). Mid level guy has just bought a house with his misses that costs 10 times his earnings. 

They created loads of money and made credit cheap but this has just been swallowed up by housing costs across the board.

complex question.

ill be honest, i need to research this more myself.

what we do know is tt the simple act of printing cash doesnt create inflation as is proven by last ten years.However,history also shows us that once inflation is running,it's very hard to reign it in.my worry is that the CB's over the last ten years have made some large errors in their belief that inflation is under control,not least in the fact that the measures they use are so inadequate in terms of being fir for purpose.yes,they measure some prices but they also ignore huge items like houses and pensions and they aslo fail to differentiate between the inflation felt by different income deciles.

those things are hard to achieve and wouldn't matter if they hadn't set their stall by the fact that their measure of inflation was adequat e and was the mathematical basis for measuring the damge QE was doing.

 

my theory is this and I welcome more enlightened souls offering their view.Basicallymthere will come a point wehn people start seeing the specie depreciate faster and faster,at that point people will start spending as they earn it.velocity will rise,prices will rise and wages will rise.

at the moment the CBs are trying to get the savers to borrow-thats what part of QE was,drive down IRs,get creditors to spend.in reality I think they failed to grasp that the main consumers who would borrow were likely those that wouldn't pay it back anbd the creditor class would merely reduce spending to compensate for reduced interest income.

 

the moment the creditor class give up the ghost and start splurging,I think is the pioint of no return and it could take us as a nation to some dark places espceially if it's ombined with a collapse in credit due to debt deflation.......

jsut my views.I hope they stop QE and Zirp in time and reverse course.

 

@Harley has a much better understanding of behavioural economics than I do

 

reposting Fishers paradox for those who havent' seen it

https://en.wikipedia.org/wiki/Irving_Fisher

According to Fisher, once the credit bubble bursts, this unleashes a series of effects that have serious negative impact on the real economy:

1. Debt liquidation and distress selling.
2. Contraction of the money supply as bank loans are paid off.
3. A fall in the level of asset prices.
4. A still greater fall in the net worth of businesses, precipitating bankruptcies.
5. A fall in profits.
6. A reduction in output, in trade and in employment.
7. Pessimism and loss of confidence.
8. Hoarding of money.
9. A fall in nominal interest rates and a rise in deflation-adjusted interest rates.

Crucially, as debtors try to liquidate or pay off their nominal debt, the fall of prices caused by this defeats the very attempt to reduce the real burden of debt. Thus, while repayment reduces the amount of money owed, this does not happen fast enough since the real value of the dollar now rises ('swelling of the dollar').^[25]

[Agent ZigZag]

40 minutes ago, janch said:

David Hunter‏ @DaveHcontrarian 1h1 hour ago

Silver looks like it may finally ready for a catch-up rally. Should see it move above $16 soon & then higher from there. My target remains at $26.

  

Looks that way and added further to my Fresnillo holdings. 

 

 

[kibuc]

Everything with silver in its name is flying today. I took all my profits (and then some) from NGD today and re-distributed between EDR and FR. 

NGD can go either way depending on financial report in a couple of weeks' time, but I figured between them and Guyana I already had too much exposure to troubled stocks and EDR simply looked too tempting to pass on.

[Hardhat]

Good couple of weeks for miners. 

As per the initial road map of the thread, is a pullback in PMs and miners still expected in the near future?

I remember target ~$40 GDX and ~$70 GDXJ being discussed as the peaks before a crash, and then trending higher.

 

[Majorpain]

2 hours ago, sancho panza said:

thanks MP,appreciate the insight.this thread at its best if i may say.this wouldnt have crossed my radar otherwise.looking at how wafer thin margins are in the industry thi could have a large effect

questioin if you have time.have margins imporoved industry wide post carillion collapse?

 

I very much doubt it, there is still far too many contractors who need work and are quoting cheap. Projects run for years so quote > negotiation > building > handover has a huge time lag.  Cheap credit this cycle also means people who should be out of business are not doing the decent thing yet, however that is starting to change this year IMO.

UKs oldest building firm just went under recently as well (1591-2019!).

https://www.bbc.co.uk/news/business-48868113