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Credit deflation and the reflation cycle to come.


DurhamBorn

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25 minutes ago, sancho panza said:

There's been the usual poo pooing of DB's gross derivatives exposure by the Banker gliteratti. However,it's worth remembering that when Lehman imploded,a team got tasked with working out their net exposure and effectively ended up guessing at it.How do I know? 'met a bloke in a pub once'......... 

 

I always dislike it when people start a discussion with 'if you question this then you're dumb or scaremongering'. Lucky people took a more enlightened approach Thalidomide.

The answer must be much more nuanced than is being claimed by either the FT or the Tweet below.For a start,you need to understand the nature of DB's derivatives book and just as importantly ,how it is hedged. Hedging is only as good as the counterparty the other side of it and I'd presume there's  a reasonable chance that some Italian/Spanish/Greek banks have been active in these markets,particularly Euro swaps.

Ergo,the central issue with DB's derivatives exposure doesn't actually lie with DB itself but the counterparties that run off it.As one of the biggest books they are 'systemic'.ISDA link below shows notional outstanding of  $980 trn(IRD +OTC),ergo DB 4.6% of the market.

Also,such confidence appears to ignore  existential risk.If the Euro goes pop,will the system be able to handle it? IRD includes Euro  denomintaed interest rate derivatives, a $112trn market. If DB is a chunky player here-and I'd suspect it is,questions should be asked about it's notional outstanding exposure.

ISDA basically saying gross credit exposure of the whole derivatives market is $2.3 trillion on $544trn + $436 trn +others= £980trn++.

German taxpayers should get a second opinion as it appears some deals are being done without any margin being posted.

Deutsche is only 4.6% of a $980tn market, that's totally alright then.  Everyone just needs to quietly ignore the "$980tn" bit which isn't a problem at all and hopefully the sheep will go back to sleep.

Just like 2008 its going to be a game of pass the "nuclear bomb derivative" parcel, who its going to blow up on no-one knows!

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reformed nice guy
1 hour ago, sancho panza said:

There's more warning that you realsie.Market tops  cna be mundane affairs.FTSE 100 Dec07 to Jan 08 dropped 10% but the big falls were later that year..Peak to trough then was from Oct 07 to Feb 09 ie 16 months.Current FTSE peak was July 18,so Ftse bottom could be anywhere from Oct 19 to Dec 20.

We're already heavily cash but still sat on some utlities/oilies/goldies/telecoms.Given recent peak in the S&P we could be looking at 2020/21 for the US bottom although earlier if the Russell 2000 is the primary timing mechanism for the US that some say it should be.

 

I agree with you Sancho and thank you for taking the time to post on this thread. It has helped me confirm my own thinking and I feel we could be near peaks.

I have recently sold quite a few positions to take profits: HSBC, Ferguson Plc, DiscoverIE Group, Petrobras, Diageo, Unilever, and Prudential. I have also reviewed my funds to minimise duplication, balance my various exposures and minimise fees. The cheap trackers mean that I still have exposure for any continuing melt ups.

The only purchases I have made have been some US bond funds like ITPS just to give me a currency hedge.

 

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17 hours ago, DurhamBorn said:

........................................it really opened my eyes to the debt people have.£900 mortgage,£120 gym memberships,2 lease cars,holiday on tick,temporary worker.Car park rammed with £30k cars under 3 year old,likely lease deals.Lots of financial dislocation ahead.

New cars are a complete rip-off.  A few years back houses were a similar price to what people are paying for cars in 2019.  Leasing means people never stop to think what they're doing.

As for food prices I was shocked to see my favourite fig roll biscuits in Tesco at 45p today and last week the same packet was 36p.  I suppose we have to expect some food to rocket especially if imported because the pound has been going down.  I presume the figs must be from Turkey or Greece(??)

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leonardratso

aye its on a rip.

I just scalped ego, took the top layer off, cant leave that cash lying around, need it to buy cheap plastic shit.

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6 minutes ago, kibuc said:

NewGold, bloody hell. I don't know nothing about nothing.

Still haven't come out of the red but I wasn't expecting to see that!

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Yellow_Reduced_Sticker
On 11/07/2019 at 14:58, Yellow_Reduced_Sticker said:

INDEED! Just loged into HL & yeah my Eldorado holding up 30%! (Portfolio only down now 2.0%)

I have a gut feeling about our other DOG ... New Gold ...it done a double-bottom @ around 88cents really should buy more even if i only put a monkey in, otherwise i'll ONLY be moaning when it does finally ROCKET!:o

 

COR Blimey New Gold UP today 15% today!

I was down 70% now they are only down 21% ...sh*t i didn't average down!

Bet theres some folks on here who bought at around 88 cents YOU guys MUST be smiling now eh?:D

thing is if they get to my purchase price do i sell at "even stevens" OR go for the BUMPY ride?

Still can't complain as me portfolio is UP (2.5%) for the 1st time since i started it with HL around this time last year.

SO BIG Thanks @DurhamBorn EXCELLENT thread! Keep up the GREAT Work! :Beer:

BTW...Just returned from tesco AND blanked YET AGAIN!

maybe NO more reductions...in which case i'll need my portfolio to go ONLY one way... :ph34r:

EDIT: 3 Posts ubove beat me to while typing this post!

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1 minute ago, Yellow_Reduced_Sticker said:

 

I was down 70% now they are only down 21% ...sh*t i didn't average down!

Neither did I, I bottled it. I'd already put in what I'd be prepared to lose, and at £12 a trade multiple buys of dubious certainty don't make sense to me 

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leonardratso

it is a problem when you put in smaller amounts and your trading costs and stamp duty push the average way above what you actually paid per share. They should really run it like bitcoin trading, i pay basically nill for the priviledge of buying and nill to sell, well, i say nill, but i think i last paid 81pence to buy like £400 worth, then 17 pence to flog a third of it or something ridiculously low like that, i really dont have to get my calculator out at all to know the average is about mid market and im usually breakeven just after buying, of course then either massively up or down 20 minutes later with it being bitcoin or similar crapto.

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leonardratso

yes, my £37.66 took me almost 20 years to save from mostly finding pennies and the odd £ coin on the street and down the back of the settee.

Nobody really knows these things, i mean look at cna, ftse blue chip, major company, fell like a piece of shit crypto alt coin and stayed on the floor, vod much the same, who'd a thunk it? NGD;s news/performance  wasnt exactly stellar but look at it fly, gap filling like a good un.

Mind you, im glad i averaged into the SWRESO TB riding gold fund;

image.thumb.png.92715c144cb725986894f767c86937cc.png

image.png.266ed8ebf2c64a2fb4f1df35f563bddf.png

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Sound Money

I'm doing nicely on the miners now, thanks to everyone on this thread.

SBGL: +91.43%
AUY : +2.41%
NGD: +24.37%
KGC: +45.75%
GDXJ : +21.77%
GDX: +26.07%
EGO: +71.80%
SLVP: +8.51%

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22 minutes ago, Sound Money said:

I'm doing nicely on the miners now, thanks to everyone on this thread.

SBGL: +91.43%
AUY : +2.41%
NGD: +24.37%
KGC: +45.75%
GDXJ : +21.77%
GDX: +26.07%
EGO: +71.80%
SLVP: +8.51%

Some lucky picks there :)

Guess it’s just not my day. Golden minerals AUMN -31.8%.

Well, if you want the rose you have to brave the thorns as they say.

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40 minutes ago, Sound Money said:

I'm doing nicely on the miners now, thanks to everyone on this thread.

SBGL: +91.43%
AUY : +2.41%
NGD: +24.37%
KGC: +45.75%
GDXJ : +21.77%
GDX: +26.07%
EGO: +71.80%
SLVP: +8.51%

Thats great.Im very very happy with where the miners are now,i pegged the bottom on a lot of them late May and i got close to 6 figures in them,though i have taken quite a lot of profit.I fully expect them to run still,but i always intended to use profits to enter into my reflation stock ladders and thats what im doing.Very pleased to see the silver miners put on nearly 20% in two days,

The miners have delivered now,so its what next?.Well iv been doing a lot of cross market work and i think we have a few sectors that are vastly under valued.Telecoms and gambling.I have a feeling both sectors will see a lot of consolidation,and will end up doing what tobacco did.Paying out huge free cash in dividends from an indsutry no newcomers can enter.The question is do they go lower,and how much?.Iv got Vod already and iv started to buy BT,and i bought Playech and William Hill at the lows earlier in the year.Im tempted to open ladders in GVC as well,though i dont like companies that expand so quickly.

I love the fact people made good money on Eldorado.I made good money twice on it.This time i was in and it socked me for £5k down,but i bought the ladders as it was on my rubber band list and i never second guess it and im making good money now.That old dog has barked at last.Really glad people are making good money.You all deserve it for ignoring the noise and working to a road map,destination,not the bumps along the way.

 

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Bricks & Mortar
1 hour ago, Loki said:

at £12 a trade multiple buys of dubious certainty don't make sense to me 

I'm a smaller investor too.  Spent about £600 on each of a few shares.  I didn't fancy averaging in, and rapidly found myself down as much as 40% (on Hecla).  Sure wish I'd spent an extra 2x£12 to do that in 3 tranches.
I've decided in future I'll be doing the laddering in/out even on the very small shareholdings I've got at present.  I maybe wouldn't on shares that are more stable - but for these miners, that can go up & down 10%+ in a single day, I think its worth it.  It'll be part of my strategy for cashing out at the top, (although, maybe the holdings might be a little bigger by then).

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1 minute ago, Bricks & Mortar said:

I'm a smaller investor too.  Spent about £600 on each of a few shares.  I didn't fancy averaging in, and rapidly found myself down as much as 40% (on Hecla).  Sure wish I'd spent an extra 2x£12 to do that in 3 tranches.
I've decided in future I'll be doing the laddering in/out even on the very small shareholdings I've got at present.  I maybe wouldn't on shares that are more stable - but for these miners, that can go up & down 10%+ in a single day, I think its worth it.  It'll be part of my strategy for cashing out at the top, (although, maybe the holdings might be a little bigger by then).

Hmmm good point that.  I just thought if they're gonna boing, just buy in one go and forget about until they've made some returns. 

But yes the potential gains your way are much better

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sancho panza
2 hours ago, kibuc said:

NewGold, bloody hell. I don't know nothing about nothing.

To be fair Kibuc,you know your apples.Your last opinion on new gold was something to the effect of the $400mn loan is still due in 2021 and the production  performance isn't exactly stellar.

What surprises me with this rally is that it's some of the worst shares that are having the strongest performance eg Hecla/New Gold(own both lol)

We're only down 50% now on new gold (it was one of our first purchases in the sector 2017).I may well follow your line of thinking and do the unthinkable ie sell.Everything else will get sat on and I always said I wouldn't sell anything for a few years but have to admit I'm tempted with new gold.Got more chance of double bagging in something like Kinross/Yamana, or one of the more 'leverage to gold price plays '  eg Superior

47 minutes ago, DurhamBorn said:

Thats great.Im very very happy with where the miners are now,i pegged the bottom on a lot of them late May and i got close to 6 figures in them,though i have taken quite a lot of profit.I fully expect them to run still,but i always intended to use profits to enter into my reflation stock ladders and thats what im doing.Very pleased to see the silver miners put on nearly 20% in two days,

The miners have delivered now,so its what next?.Well iv been doing a lot of cross market work and i think we have a few sectors that are vastly under valued.Telecoms and gambling.I have a feeling both sectors will see a lot of consolidation,and will end up doing what tobacco did.Paying out huge free cash in dividends from an indsutry no newcomers can enter.The question is do they go lower,and how much?.Iv got Vod already and iv started to buy BT,and i bought Playech and William Hill at the lows earlier in the year.Im tempted to open ladders in GVC as well,though i dont like companies that expand so quickly.

I love the fact people made good money on Eldorado.I made good money twice on it.This time i was in and it socked me for £5k down,but i bought the ladders as it was on my rubber band list and i never second guess it and im making good money now.That old dog has barked at last.Really glad people are making good money.You all deserve it for ignoring the noise and working to a road map,destination,not the bumps along the way.

 

You got a view on Natural gas?

FCG ETF

https://etfdb.com/etf/FCG/

My inital interest is in Devon/Noble/PDCE/Murphy/Encana/Vermilion/EQT/CNX/Antero/Enerplus/QEP

 

image.png.90765f6367330f4467105044df5a395f.png

image.png.e291ee7814c6740a3a567fcc8f0398e3.png

 

 

Also

TAN ETF which is solar energy.Some humdinging 90% losers in there

 

https://etfdb.com/etf/TAN/

image.png.bd609add7ecbcadb70a3912ee6bd7623.png

 

 

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sancho panza
20 minutes ago, Bricks & Mortar said:

I'm a smaller investor too.  Spent about £600 on each of a few shares.  I didn't fancy averaging in, and rapidly found myself down as much as 40% (on Hecla).  Sure wish I'd spent an extra 2x£12 to do that in 3 tranches.
I've decided in future I'll be doing the laddering in/out even on the very small shareholdings I've got at present.  I maybe wouldn't on shares that are more stable - but for these miners, that can go up & down 10%+ in a single day, I think its worth it.  It'll be part of my strategy for cashing out at the top, (although, maybe the holdings might be a little bigger by then).

Yeah we got mullered by not averaging in back in 2017 and not being spread wisely and widely enough.

On reflection,it was a big lesson and it says something that I've managed to emerge from a nascent bull market with a 50% loser in New Gold.

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Sound Money
27 minutes ago, sancho panza said:

Yeah we got mullered by not averaging in back in 2017 and not being spread wisely and widely enough.

On reflection,it was a big lesson and it says something that I've managed to emerge from a nascent bull market with a 50% loser in New Gold.

I didn’t do ladders, but did average in monthly since around April 2018, and always buying the ones that had underperformed to ensure I kept the same $ amount of each one. That’s until I got scared NGD would never recover then stopped putting any more into it.

Unfortunately this is just a small pot I allow myself to stock pick with in a larger overall portfolio, so I’m nowhere near DBs 6 figures 😂

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On 16/07/2019 at 14:46, Agent ZigZag said:

Looks that way and added further to my Fresnillo holdings. 

 

 

Lots of action on results today - not great but silver price certainly picked it up.  Held on to it - my largest individual PM stock holding

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Since reflation infrastructure QE policy seems a dead cert now, apart from telecoms, any builders or other shares to be watching? A matter of waiting to see which survive the deflation?

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9 hours ago, sancho panza said:

To be fair Kibuc,you know your apples.Your last opinion on new gold was something to the effect of the $400mn loan is still due in 2021 and the production  performance isn't exactly stellar.

Their operational performance has been decent (at last!) but I think their financials might be a rude awakening. I've been talking about it at length, so just to re-summarize:

1. 2/3 of their RR gold production is capped at $1300/oz

2. Lower grade at RR should translate into higher AISC

3. New Afton is predominantly a copper mine, and copper has been flat at best

4. Their debt hasn't moved and it costs north of $50mil per year to service.

For me the alarm bells start to ring whenever NGD exceeds WDO in market cap. That's why I sold half my holdings @1.67 and will be liquidating the rest this week or the next. I see very little chance that the financial report in two weeks' time will support current valuation.

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