Credit deflation and the reflation cycle to come.

[dgul]

1 hour ago, Bricks & Mortar said:

How those lovely, cuddly, landlords we all know and love manage to get by...
https://www.lovemoney.com/guides/5090/how-to-avoid-capital-gains-tax-by-using-your-taxfree-allowance-spreading

 

The CGT allowance is an interesting 'under the radar' regressive tax -- ie, everyone gets the allowance, but only the more wealthy are in a position to use the full allowance every year (eg, by buying investment vehicles that wrap dividends from stocks in the portfolio into a capital gain rather than passing them on).  IMO the system should be changed into a 'whole life capital gains allowance' that also includes inheritance tax (this would equalise the wealthy and poorish -- ie, all 'normal people' get to use up their lifetime allowance, rather than it being something only the wealthy use up).  I'd also include residential housing gains (but increase the allowance), but that's a different story.

1 hour ago, kibuc said:

I believe if you dispose of CGT-taxable items but re-purchase it within 30-days window, in some cases it does not trigger tax liability (or advantage).

The reason for this rule was to prevent people from selling their positions just to bank some taxable losses (to offset them against gains in other investments) or to trigger CGT liability while still under tax-free threshold, but then immediately re-purchasing their position.
 

So I would look into tax implications of selling your 5kg silver bar but then buying a 4kg one within 30 days.

https://www.oldmutualwealth.co.uk/Adviser/literature-and-support/knowledge-direct/individual-taxation/capital-gains-tax/30-day-bed-and-breakfast-rules-and-cgt/

Physical silver is physical silver in the eyes of the bed-and-breakfast rules (so you can't sell bars and buy coins, say).  But you can have different vehicles -- so eg, Just sell the silver and buy a silver ETF for 31 days.

[Thorn]

So.. Centrica At 66... And across the pond True Contrarian says energy stocks are hated...

[kibuc]

58 minutes ago, dgul said:

Physical silver is physical silver in the eyes of the bed-and-breakfast rules (so you can't sell bars and buy coins, say).  But you can have different vehicles -- so eg, Just sell the silver and buy a silver ETF for 31 days.

That's exactly what should help in this particular case, where you want to get some of the capital back. If you have enough capital gains on your 5kg to trigger tax liabilities, you should be able to sell it, immediately buy back 4kg or whatever amount needed and only be liable for gains on the difference (presumably falling below CGT threshold as that's the whole point of this exercise). As you say, silver is silver so those remaining 4kg should be seen as "never-has-been-sold".

If you want to stay fully invested and only want to reduce your future tax liabilities by materializing some of your gains, you'd have to buy back that missing 1kg after 30 days or do what you recommend and reinvest in a different asset class, like an ETF.

Also, gold is a different asset to gold so you could flip one shiny for another

 

[JMD]

Thank you guys - Harley, Castlemania, kibuc, dgul - for the great information.

It helps me decide because I have cash available now and wanted to get more physical silver, but with recent silver price rises, I didn't really want to pay more than £15/oz. 

I am looking at CoinInvest where they sell silver 'coin bars' (bars with a nominal legal tender value) where these can be sold vat free. However, customer doesn't get full '20% vat discount' more like 10%, as there is an added cost in creating the legal tender value bar. 

https://www.coininvest.com/en/silver-coins/coin-bars/5-kilo-fiji-coin-bar-silver-argor-heraeus/

 

[janch]

1 hour ago, Thorn said:

So.. Centrica At 66... And across the pond True Contrarian says energy stocks are hated...

https://truecontrarian-sjk.blogspot.com

"Just as you will be buying energy shares now when everyone you know is bailing out of them, you will be closing out your positions when your friends are asking you which ones you own because they don't want to miss out."

[A_P]

2 hours ago, Thorn said:

So.. Centrica At 66... And across the pond True Contrarian says energy stocks are hated...

How large a position are you going to take?

[leonardratso]

68pence, just enough to attend the AGM and throw bricks at the outgoing CEO.

[UnconventionalWisdom]

Is there concern here that Centrica wont recover and go bust? It seems they are putting all their efforts into energy supply to keep the new guys out. I am with a smaller supplier and did a cost comparison and the bigger guys now look a similar price (British gas cheaper so may be part of centrica's strategy to win back customers).

Is there a chance they could be too late? If the debt deflation doesn't happen for a year or two, money remains cheap, and the little guys can survive, could CNA have a death spiral?

 

[Bobthebuilder]

3 minutes ago, UnconventionalWisdom said:

Is there concern here that Centrica wont recover and go bust? It seems they are putting all their efforts into energy supply to keep the new guys out. I am with a smaller supplier and did a cost comparison and the bigger guys now look a similar price (British gas cheaper so may be part of centrica's strategy to win back customers).

Is there a chance they could be too late? If the debt deflation doesn't happen for a year or two, money remains cheap, and the little guys can survive, could CNA have a death spiral?

 

Some one will buy them out.

[DoINeedOne]

Miners in Argentina

BUENOS AIRES, Argentina (AP) - Argentine stocks and currency plummeted on Monday after Argentine President Mauricio Macri was snubbed by voters who appeared to hand a resounding primary victory to a populist ticket with his predecessor Cristina Fernández.

The preliminary results from Sunday’s voting suggest the conservative Macri will face an uphill battle going into general elections in October and gives the populists who governed Argentina

 for most of the past two decades a strong chance of returning to power.

The result stunned financial markets.

Yamana and Barrick have mines in Argentina if i remember correctly

[Yellow_Reduced_Sticker]

4 hours ago, leonardratso said:

68pence, just enough to attend the AGM and throw bricks at the outgoing CEO.

Or better still bring a LARGE duffle bag with ya, and FREE-LOAD all the grub they put on to take home!

seriously ...any you guys been to a FTSE 100 company AGM, ?

If the results are bad, they'll put on a great spread to keep the share-holders happy...AND the moaning to a minimum!

I used to know one guy in London, who bought 1share in FTSE 100 companies that he knew gave great food & drinks at their AGM's and he'd make sure most of thier AGM's were in London - this was in the days of buying paper-certs he had a great deal with the broker to buy 1 share!

...he used to tell me the LOOK on the person at the register section when they saw he had 1 share  ...as he made a bee-line for the FREE GRUB!

[leonardratso]

16 minutes ago, Yellow_Reduced_Sticker said:

Or better still bring a LARGE duffle bag with ya, and FREE-LOAD all the grub they put on to take home!

seriously ...any you guys been to a FTSE 100 company AGM, ?

If the results are bad, they'll put on a great spread to keep the share-holders happy...AND the moaning to a minimum!

I used to know one guy in London, who bought 1share in FTSE 100 companies that he knew gave great food & drinks at their AGM's and he'd make sure most of thier AGM's were in London - this was in the days of buying paper-certs he had a great deal with the broker to buy 1 share!

...he used to tell me the LOOK on the person at the register section when they saw he had 1 share  ...as he made a bee-line for the FREE GRUB!

nice if you live close enough. I think noel edmonds bought 1 LLOY share so he could attend the AGM and ask them 'pertinent questions' concerning his lack of millions.

[Lavalas]

Love reading the True Contrarian. Such clarity of thought. I really should see about subscribing. The cost doesn’t really tally with how much I can invest but as far as learning goes it would probably be worth it.

[Errol]

From the FT:

 

[Talking Monkey]

2 hours ago, Lavalas said:

Love reading the True Contrarian. Such clarity of thought. I really should see about subscribing. The cost doesn’t really tally with how much I can invest but as far as learning goes it would probably be worth it.

Top read just read his latest post. Are inflation stocks different to reflation stocks

[macca]

56 minutes ago, Errol said:

From the FT:

 

Did they not already do this? CEO's, Bankers and landowners seem to be drowning in cash! ;-)

 

[sancho panza]

On 05/08/2019 at 20:58, Cattle Prod said:

Thanks @DurhamBorn for your update. Reassuring, as I had sold a % of GDXJ over the last weeks to buy inflation stocks and had to watch todays action with green eyes. You're right, emotion begone!

Right on cue, John Hussman comes out with an excellent piece on inflation, and what drives it. Check out the attached chart showing the real GDP/deficit spending gap opening up wide. You can clearly see how the next 8 to 10 years are going to fill out that yellow area, jist like the 60s and 70s. Double digit inflation? Easily.

We may not be at that inflection point yet, but we are close. Govts are gearing up for infrastructure deficit spending already. Sure, we probably have a recession/crash to get through first, but that will only cause govts to open the spigots and blow that hole wide open. Goodbye fixed mortgage, hello silver and oil :-)

https://www.hussmanfunds.com/comment/mc190805/

I've been away,reread this at length and it was well worth the reread

' Market valuations have been extreme for a long time. While valuations have enormously important implications for long-term market returns and full-cycle market risks, valuations are not a timing tool. Indeed, it’s impossible for the market to reach hypervalued levels without persistently advancing through lesser extremes. .............

Our measures of internals shifted negative on February 2, 2018, and with very brief exception, have remained unfavorable since. Notably, at the close of Friday, August 2, 2019, the S&P 500 Index stood within about 2% of both its January 2018 and September 2018 pre-correction peaks. ............

Indeed, Morningstar reports that nearly half of all mutual fund assets are now passively managed, typically tied to capitalization-weighted indices like the S&P 500. All of this backward-looking performance chasing is likely to end badly, but over the short-run, it has been a thorn in the side of value investors. .....

Meanwhile, it’s also useful to remember how forgiving the complete market cycle is of exiting an overvalued market too early. The fact is that the 2000-2002 collapse wiped out every bit of total return that the S&P 500 had accrued over-and-above T-bills, all the way back to May 1996. The 2007-2009 collapse did the same, all the way back to June 1995. ..................

For now, we observe not only unfavorable valuations and still-divergent internals on our measures, but also the most extreme “overvalued, overbought, overbullish” syndrome we define. The only other times we’ve observed this syndrome in the context of a relatively flat yield curve (a spread of less than 1% between 10-year Treasury bond yields and 3-month Treasury bill yields) were the precise peaks of 2000, 2007, and September 2018. Narrow that spread to less than 0.5%, and only March 2000 and October 2007 remain. ....

I’ll repeat what I’ve emphasized publicly in the past two weeks. Presently, we observe market conditions that have been associated almost exclusively, and in most cases precisely, with the most extreme bull market peaks across history. A passive investment strategy is now closer to “all risk and no reward” than at any moment in history outside of the 1929 market peak.

Orders and backlogs lead, production coincides, and employment lags

It’s also important to recognize how strongly economic data tends to be revised, in hindsight, around recession turning points. For example, in the originally reported data for May through August 1990, as a new recession was emerging, the Bureau of Labor Statistics reported that 480,000 total jobs were created (see the October 1990 vintage in Archival Federal Reserve Economic Data). But in the revised data as it stands today, those figures have been revised to a loss of 71,000 jobs for the same period.

Consider early 2001. A U.S. recession had already started months earlier, but first-quarter GDP growth was initially reported at 1.2%. Based on final revision, that same quarter’s GDP growth is now reported at -1.1%. The vintage data shows that non-farm payrolls were initially reported with a gain of 105,000 jobs during January-April 2001, while the revised data now shows a loss of 247,000 jobs.

Likewise, by early 2008, the U.S. was also already in recession, but first-quarter GDP growth was initially reported at 1% growth. That figure was only later revised to -2.3%. The non-farm payroll reports were already deteriorating, with a cumulative job loss from February-May of 2008 of 248,000 jobs. Still, those initial reports pale in comparison to the revised figures, which presently show a loss of 550,000 jobs for the same period.

 

How to needlessly produce inflation

I’ve often noted that, if you spend a great deal of time with economic data, you’ll find that there is a remarkably weak relationship between inflation and variables like the money supply, or unemployment, government deficits, or the amount of slack in the economy. Somehow, we feel that these variables should be important, and we know from hyperinflations that they become important when they reach breathtaking extremes, but there’s no clear, linear relationship in the data between inflation and any of them. Indeed, the best predictor of future inflation that you’ll find in the data is the current rate of inflation.

The reason is that the value of a piece of currency, like the value of any other financial asset, depends heavily on the psychology of the holder. And psychology isn’t a nice, linear thing. Rather, just like the stock market can entirely ignore extreme valuations until investor psychology shifts from a speculative mindset to a risk-averse one (which we infer from the behavior of market internals), the tolerance of the public to hold the paper liabilities issued by the government can persist for some time, until unusually high issuance of these liabilities causes revulsion to kick in.

Then why hasn’t quantitative easing produced inflation? The answer is rather simple: quantitative easing is nothing but an asset swap.

This is a critical distinction. See, government deficits are funded by creating pieces of paper – namely government bonds, or if the central bank buys those bonds, base money. If the public believes that the government has a credible ability to retire its liabilities, or at least keep them from growing at a rate that’s not too different from the growth rate of the real economy, then people may be entirely content to hold those pieces of paper without being revolted by doing so

Again, QE is simply an asset swap. QE doesn’t produce inflation, and whatever inflation we get will not be the result of QE.

Why anyone would desire that outcome is utterly beyond me, and frankly, I’m alarmed by the entire notion of “targeting a higher inflation rate,” because my sense is that the associated revulsion would become very difficult to control. Still, if you want more inflation, the way to get it is by running government deficits that are out of line with sustainable norms. The U.S. has already placed itself on that course, but it’s not clear that we’re at the point of revulsion quite yet.

As economist Peter Bernholz has noted: “There has never occurred a hyperinflation in history which was not caused by a huge budget deficit of the state… In all cases of hyperinflation deficits amounting to more than 20 per cent of public expenditures are present.”

Put simply, quantitative easing merely changes the mix of securities that the public holds. Historically, inflation has been provoked by government deficits that create new government labilities at a “cyclically excessive” and unsustainable pace. Conversely, episodes of runaway inflation have regularly been ended by restoring public faith that fiscal and monetary policy have returned to a sustainable course. In his analysis of major hyperinflations, Nobel economist Thomas Sargent (also my former dissertation advisor at Stanford) observed:

“In each case we have studied, once it became widely understood that the government would not rely on the central bank for its finances, the inflation terminated and the exchanges stabilized. We have further seen that it was not simply the increasing quantity of central bank notes that caused the hyperinflation, since in each case the note circulation continued to grow rapidly after the exchange rate and price level had been stabilized. Rather, it was the growth of fiat currency which was unbacked, or backed only by government bills, which there never was a prospect to retire through taxation.”'

[sancho panza]

On 07/08/2019 at 23:54, Inoperational Bumblebee said:

FWIW, when I first started it felt like a hard slog. Through various good luck (happy to share details via PM if interested) I've accrued about 2 years wages in my portfolio. Probably laughable to some here, but I'm a family man of 39 who can't really put much away.

Your good luck may well be getting into PMs or inflation stocks because of this thread. Or something completely different.
You really have no idea how things will go in the future, but the point is that you now have actual skin in the game, and that you started in the first place.

Keep going. You can only succeed if you try.

I wish this thread had been around when I started out when I was 20 in the early 90's.I had my Grandad,but he didn't really get why he did well,unlike many on here.

As many ahve said,learning to live cheaply and humbly is the begining of financial security,then hopefully learning from the mistakes of others.

[sancho panza]

On 08/08/2019 at 17:36, JMD said:

hi SanchoPanza, excuse me tracking back somewhat, but did you narrow your list of potash potentials down, or are you going to wait for (hopefully) further price falls?

A few weeks back you made an interesting post, and I made a note at the time of the ones you were considering. I am now trying to come up with my own shortlist.

I believe your list was: Nutrien / Mosaic / Intrepid potash / Yara / PhosAgro / Compass / Incitec / NuFarm / K+S.

I also have ICL, and SQM (nutrien sold this to comply with merger rules), but not sure where or who I got these ones from !?!

 

 

A separate but related question which might be an interesting topic question for some here to respond to is ICL is an Israeli chemical company. I note that Israeli companies, particularly those in the tech sector, have been very successful in recent years (drones/AI). Although typically small players at present - I wonder are there any other Israeli companies - reflation play types for the next cycle of course - that others might have on their investing radar?     

 

I'll get back to you Firday night.Been away all weekend and got a long week at work on nights/looking after kids..Only really reply when on my desk top where my research paperwork is.

On 08/08/2019 at 13:35, Cattle Prod said:

Folks, a question on Fresnillio. (Dec. I own some). It is currently c. 50% below 2018 prices when silver was last 17 an oz, and gold was lower. I get that it missed earnings, but it hasn't participated in this rally at all. Production guidance dropped only a few %. Smells like am overreaction to me, and earnings are backward looking. RSI, Stochs, MACD all low and turning up.

I know its not a sexy name with you guys on here, so is there something I'm missing?! Time to take profits in Harmony (up 89%, hat tip to DB), and thinking of redeploying here.

Thoughts? P/E too high?

 

I had a decent size nibble for me.I think if silver rockets,they'll do well.DYOR natch

[Castlevania]

5 hours ago, DoINeedOne said:

Miners in Argentina

BUENOS AIRES, Argentina (AP) - Argentine stocks and currency plummeted on Monday after Argentine President Mauricio Macri was snubbed by voters who appeared to hand a resounding primary victory to a populist ticket with his predecessor Cristina Fernández.

The preliminary results from Sunday’s voting suggest the conservative Macri will face an uphill battle going into general elections in October and gives the populists who governed Argentina

 for most of the past two decades a strong chance of returning to power.

The result stunned financial markets.

Yamana and Barrick have mines in Argentina if i remember correctly

The thing about the plunge in the Merval is that the constituents are priced in Argentine Peso. In USD terms it’s pretty much halved in value in a day!

The flip side for the miners is that their wage bill just got slashed (assuming they pay salaries in ARS) whilst the PM’s they mine will be sold in USD on the global market.

[Bobthebuilder]

I think my share account has gone mad, PM goldies and Silver stocks cant be up that much today can they?

Edit, yes it went mad as they do from time to time. showed a 30% profit that was BS.

[BearyBear]

GOLD has just reached the area of resistance at 1525-1550, will be interesting to watch how it plays out.

[A_P]

9 hours ago, sancho panza said:

Meanwhile, it’s also useful to remember how forgiving the complete market cycle is of exiting an overvalued market too early. The fact is that the 2000-2002 collapse wiped out every bit of total return that the S&P 500 had accrued over-and-above T-bills, all the way back to May 1996. The 2007-2009 collapse did the same, all the way back to June 1995. ..................

This is why an asset allocation with some T-bills/bonds smooths out some of the rides. 100% equities is for the young and those that can withstand the emotions over a long period. How did the S & P 500 TR do outside of the cherrypicked windows and not timing the market?

The graphs below shows how some poor sod would have done if they invested at peak and doesn't consider any additional contributions.

As a side note this is an interesting slide:

Do people here track their returns and if so how have you performed over the last twenty years?

[A_P]

2 minutes ago, Tdog said:

Houses only 3.4% and only 1.2% above inflation?

 

The data is from JP Morgan so will be US based. Inflation is made up, we all know that right? As far as the graph goes

Quote

Indices used are as follows: REITS: NAREIT Equity REIT Index, EAFE: MSCI EAFE, Oil: WTI Index, Bonds: Bloomberg Barclays U.S. Aggregate Index, Homes: median sale price of existing single-family homes, Gold: USD/troy oz., Inflation: CPI.

The reason I posted it though is I found the average investor returns qutie interesting.

[Harley]

45 minutes ago, A_P said:

The reason I posted it though is I found the average investor returns qutie interesting.

Yes, a very interesting post thanks.  Would be interesting to see a UK one, or the US converted to GBP (eg. UK housing not looking so good in say USD, post real inflation, etc?).  Regardless, the investor returns was key - any explanation such as poor allocations, consistency, (lack of buy and hold), bad timing, etc?  That other post about returns being higher for those accounts doing nothing may be relevant here.  I certainly support the idea a sensible core asset allocation should be number one over the long term.  Sure, dabble a little bit, maybe even tilt at windmills, but steady eddy at the core.  Link?

PS:  https://portfoliocharts.com/

Really is the db's if you want to backtest such things, including in GBP.