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Credit deflation and the reflation cycle to come.


DurhamBorn

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UnconventionalWisdom
28 minutes ago, Loki said:

I was tempted by ETFs, but I can't shake the idea that "If you can't hold it, you don't own it".  Regardless of issues with spot price/selling, I think physical is the way to go.  Of course all we talk about here is electronic/paper based too, but I consider my 'stash' the ultimate backup plan.

I think a mixture is good. I've got gdx and gdxj as I dont have enough knowledge on particular miners. They have better liquidity compared to physical, but I know what you mean about holding it is knowledge you have it. 

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4 minutes ago, Noallegiance said:

It's all very well the world measuring PMs in $, but unless there's a real reason for the attitude as a whole toward PMs to do a 180, a weak $ and a strengthening £ doesn't do UK physical holders much good, does it?

A 300% increase in gold and a 1500% increase in silver would though.Sterling might go up 20%.Of course if it does UK cyclical stocks will respond upwards.Gold and silver are a hedge for most people,nothing more.Its just everything came together for them lately,and the next cycle should be one that really suits them.Time will tell.

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Democorruptcy
1 hour ago, DurhamBorn said:

It doesnt work,and thats exactly why thanks to the help of someone else on here im in the process of taking the transfer value of my DB pension and putting it into my SIPP (hopefully).The transfer value is eye popping compared to the pension given up.I am worried though they will move the age up where you can get it,its going to 57,but who is to say it wont go to 65 and state pension 70.If they dont stagger the move to 57 i should be able to get into draw down at 55,but who knows.

Like you say there is only one end result of whats coming,inflation.My friend thinks 18% or more and rates above 20% for a few months.Im not a high as that,but i do think inflation at 10% as you say is very very likely,and above 7% certain.I think my inflation road map goes to 12% and rates 11%.It sounds incredible,but if they are to stop the collapse and introduce enough liquidity to turn things that what looks likely.Silver says $150 to $250 or higher.Crazy really.

The only way out is total collapse or some real full on inflation.So inflation it is.They tried to get it already,but it just pushed up shares in the US and houses in the UK.This time they will bypass the banks and inject into the economy.Lets see what Javid starts with.

 

I don't like Javid's SDLT paid by vendors instead of buyers.

Inheritance tax is being increased so more properties escape it, that reduces the supply of property because it's becoming tax free to hoard it until death. Why sell and move the money into taxable assets? Making vendors pay SDLT will also encourage them to hoard their property instead of selling. If this comes in I can see increased demand from those who can leverage up what would have been their SDLT pot, with less supply of properties.

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Bricks & Mortar

Hat off to DB on the ibtl call.   Thankyou again for starting the thread, and to all contributors for expanding my knowledge.

I've no idea if the reflation stocks will go down with the wider stock market.  My gut feels they might.  I don't think there'll be enough people who understand whats going on, and why these might be different.  

That was the main reason I stuck with the miners.  From the day DB advised us he'd sold his, (about 2 weeks ago), I've lost nearly half my gains.  Still got my stake and a 15% gain if I sold out here.

I think the news of last few days, (yield curve normalized, Trump phones banks, trade war concessions), mean the melt-up looks on in the US.  ibtl's run might be done, as money into the stock market has to come from somewhere.  Worrying about where the money comes from also has me looking at the pm's.  Possible my remaining 15% about to get wiped out this week.   Might panic-sell some tomorrow.  So much learning going on here.

The thing that freaked me right out, was watching Trump say there was no choice but to vote for him or the market would crash.   Seems he, (and presumably the administrations economic advisors ),  haven't read this thread.  A bit worrying, that is.

Now, if I'm thinking ibtl goes down as the market melts up...  Would that be a relatively safe place to park some funds during the deflation?  (I think this was discussed earlier in the thread, maybe even on t' os - I've tried looking, but there's so much - and regretably that was the first time I'd ever considered treasuries or an etf.)

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sancho panza
21 hours ago, DurhamBorn said:

.

A key question i see now is this.When we get the hit and the likes of Experian shares go down 75%+,Burberry 80%+ etc as mentioned in the thread,do the likes of BT and VOD,Imperial and BAT,SSE etc also go down another 50% or do they turn?.When the builders collapse do people rush to buy utility like companies on PEs of 7 or do they sell them as well?

 

Obvosly,no two stock market downtnrs are the same.We're possibly another year away from the big drops,so some of the more hammered companies could easily rally from here and then go down again

But in answer to your question,most of these droppped m ch less than the wder market and recovered generally sooner.looking at the price action from 08,CNA dropped ahead of the market from it's 10/07 peak,the big falls came for the main indices 8/08 to Mar 09.

Worth noting CNA recovered handily ahead of teh market into 2011,along with gold and commodity shares(bt obviously by nowhere near as much)

image.png.95561bc57c1f11c72c6e890025d7728b.png

Vod had pretty much bottomed before the 08 crisis began and again staged a good market beating recovery

image.png.ce183eef7eebc3ee282c63ee47e85dae.png

SSE

image.png.3a2a09bdeb1c96a8a80008443db68835.png

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18 hours ago, Sasquatch said:

A sobering post DB with some very important observations. Struggling to sleep tonight and have ended up on the forum and reading up on other sites as well. I didn't get my act together with the PM stocks so missed out on most of the potential gains although have managed to acquire a decent amount of physical gold and silver. I will be buying quite a few stocks as soon as my SIPP has been transferred and also have an HL isa recently set up. Still deliberating which shares to go for though!

In terms of the wider marketplace, I work in the construction industry (professional consultancy - own business husband and wife) and we have been called by two builders we know in the last week looking for tendering opportunities. This is a canary for us and suggests that work is beginning to dry up. Our particular bit of the industry is quite niche and this is the first sign to us of a slowdown (and perhaps is beginning to replicate the pattern we experienced in 2007/2008). Things can change very quickly once investors/companies lose confidence and either postpone or cancel projects. I expect the next 6 months or so will be very 'interesting'.

 

 

Really intrigued by the anecodtal.Whne you've been in a trade for some time as it sounds like you have then there's certain signs that only appear before cycles turn up start or before they end.

 

FWIW me and Mrs P rent,various reasons,but mainly financial a we rnet on a 3% gross yield,next house up in the chain rents on a near 2% gross yield.Quite simply I'm not going to live long enough to jsutify sinking family capital into something as illiquid/high cost of carry as hosuing.There are downsides eg lack of security of tenure.If we were to go to a 6/7 % yield I might see it differently,but we're not living in Durham

 

 

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sancho panza

 

9 hours ago, Barnsey said:

I won't pretend for one second that I'm an expert on ETFs, but much of my concern surrounds the weighting of the top 10 stocks in the S&P 500, arguably the most popular focus of ETFs globally, and the sheer scale of an illiquid selloff should those top 10 take a massive hit. I never underestimate contagion, and as the ETFs become "arrested" in a panicked fall, with bid and ask spread miles apart, I can see actual stock holdings (no matter what they are) also being sold off in tandem as may be more liquid and only source of liquidity in a falling ETF market, especially if not holding more liquid assets such as Gold. Just thinking out loud.

Valuable point regarding more of a US issue, but I'm still thinking of the theory of an S&P flight to safety and melt up from other nation index trackers if we see some kind of rate/QE surprise from the Fed as others enter severe recession imminently, whilst the US still stands relatively stable (for now).

Maybe I'm misunderstanding the argument here but things like CNA adn VOD won't get hit much if there is a passive ETF sell off(quite likely imho),they form small parts of the most actively traded ETF's.

The ETF sell off wouldn't have a liquidity problem,as genreally,they hold liquid tradeable assets either options or shares.

 

7 hours ago, Majorpain said:

The problem is that the deflation (which looks inevitable now) eventually brings unfortunate consequences (economic collapse).  How does a pension fund, which requires cash on hand to pay people, operate in a govt bond environment (which they are forced to buy) when everything out to 50 Years has a negative yield?  Doesn't work, and its surprising that more people cant do the basic maths on that one.  Ditto for the screwed Euro banks.

It really is print or die, and Sajid is greasing the UK printing presses as DB detailed up thread...  A good dose of 10% + inflation will sort out the debt problem for better or worse.

There's is another option and that's to let rates normalise,which is I susect where we wll end up a la Volcker

4 hours ago, UnconventionalWisdom said:

This will be the light bulb moment for most people when they realise negative interest rates can't become the norm. 

The addition will also be a buy and forget. :)

if people lose faith in the CBsththey will first run to gold, once that gets too expensive, they will head to silver. 

Negatve rates won't last long as they'll destroy whats left of th EU banking system,bt that hasn't stopped the CBers trying.Quite incredible how they can look the evidence of their failure in the face and then try and do the same thing another time in the hope of a differnet result

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sancho panza
3 hours ago, DurhamBorn said:

A 300% increase in gold and a 1500% increase in silver would though.Sterling might go up 20%.Of course if it does UK cyclical stocks will respond upwards.Gold and silver are a hedge for most people,nothing more.Its just everything came together for them lately,and the next cycle should be one that really suits them.Time will tell.

I'm intigued by the gold:silver ratio.Worth noting that it bottomed Jan 82 at the saem time as silver peaked.image.png.3e8ffe43d55cc51b0c035cde33c34945.png

image.png.23c797d4877ac5f19bef2219710c2847.png

 

Also worth noting that the April 11 peak in silver also coincided with a bottom in the Gold:silver ratio at 30.

If gold goes up from here,tehn that gives silver some real upside.

image.png.759fe08edb88820230f01930f718f3fa.png

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sancho panza
4 hours ago, DurhamBorn said:

The only way out is total collapse or some real full on inflation.So inflation it is.They tried to get it already,but it just pushed up shares in the US and houses in the UK.This time they will bypass the banks and inject into the economy.Lets see what Javid starts with.

 

The problem will come for them when velocity starts to run.They don't model it as they believe inflation is purely a monetary phenomenon.Once it runs,they won't get it back in the bag without some hard medicine and given how by then they'll have destroyed the balance sheets of most banks,there's no real predicting what'll be left of the usual conduits to reflate the economy.

1 hour ago, Bricks & Mortar said:

Hat off to DB on the ibtl call.   Thankyou again for starting the thread, and to all contributors for expanding my knowledge.

I've no idea if the reflation stocks will go down with the wider stock market.  My gut feels they might.  I don't think there'll be enough people who understand whats going on, and why these might be different.  

That was the main reason I stuck with the miners.  From the day DB advised us he'd sold his, (about 2 weeks ago), I've lost nearly half my gains.  Still got my stake and a 15% gain if I sold out here.

 

How are things going in the wider buidling trade B&M>?Any change from when you last updated us.

We haven't sold any PM miners.Time will tell if that's a mistake

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Bricks & Mortar
1 hour ago, sancho panza said:

How are things going in the wider buidling trade B&M>?Any change from when you last updated us.

From where we are, I think there's less work out there.  Certainly a lot less enquiries for us this summer.  Possibly, because I've been off work for 6 months though (fractured heel bone) - I'm just getting back to work now, and worrying about our workload a little.  Not too much worrying - because I've downsized the workforce, and have no debt.  Might even manage to re-roof our premises.

P.S. - Whoever asked about a political betting thread - I thought that interesting.  Noted Elizabeth Warren is 11/2 and  ringing her bell for impending recession, while Trump is telling them everything is awesome.

And, a meetup somewhere is an interesting idea.

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7 hours ago, DurhamBorn said:

It doesnt work,and thats exactly why thanks to the help of someone else on here im in the process of taking the transfer value of my DB pension and putting it into my SIPP (hopefully).The transfer value is eye popping compared to the pension given up.I am worried though they will move the age up where you can get it,its going to 57,but who is to say it wont go to 65 and state pension 70.If they dont stagger the move to 57 i should be able to get into draw down at 55,but who knows.

Like you say there is only one end result of whats coming,inflation.My friend thinks 18% or more and rates above 20% for a few months.Im not a high as that,but i do think inflation at 10% as you say is very very likely,and above 7% certain.I think my inflation road map goes to 12% and rates 11%.It sounds incredible,but if they are to stop the collapse and introduce enough liquidity to turn things that what looks likely.Silver says $150 to $250 or higher.Crazy really.

The only way out is total collapse or some real full on inflation.So inflation it is.They tried to get it already,but it just pushed up shares in the US and houses in the UK.This time they will bypass the banks and inject into the economy.Lets see what Javid starts with.

 

Thanks again DB this very insightful stuff and really helps sort the wheat from the chaff.

Can you predict a timeline for the 11% rates?

If say someone wants to keep owning their current mortgaged home through this next cycle do they go for the cheapest longest fixed rate they can find now (and dig out a basement for the silver stash) or will this take 3-5 years before it starts to run?

 

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4 hours ago, Sugarlips said:

Thanks again DB this very insightful stuff and really helps sort the wheat from the chaff.

Can you predict a timeline for the 11% rates?

If say someone wants to keep owning their current mortgaged home through this next cycle do they go for the cheapest longest fixed rate they can find now (and dig out a basement for the silver stash) or will this take 3-5 years before it starts to run?

 

As a prospective FTB (for many years now), this is a point of focus for myself, and a question I've asked myself probably more than once on here.

My belief is they'll have to drop mortgage rates short term at least (not that it'll help when prices keep declining), you see news articles every day now about negative rate mortgages in Denmark and near zero elsewhere in EZ.

How long this window of opportunity exists, not sure, perhaps through to end of 2021, maybe longer if job market really in the doldrums for a while until reflationary stimulus feeds through? Then I'm thinking it'll be a fairly steady climb up to what @DurhamBorn expects over a period of 5 years or so but hard to call as we just don't know quite how desperate/reckless central banks are going to be over the next year.

Edit: Should probably add I've bitten the bullet and finally called it quits on the South East, relocating to Staffs end of the year. Obviously family asking if I'm buying straight away but couldn't think of a worse time as prices only just starting to level out there, I don't pay attention to the daft % rise numbers given as very lagging and most include new builds, i just track the houses I'm interested in and very few are shifting at all, we've now entered the staring competition phase.

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4 hours ago, Sugarlips said:

Thanks again DB this very insightful stuff and really helps sort the wheat from the chaff.

Can you predict a timeline for the 11% rates?

If say someone wants to keep owning their current mortgaged home through this next cycle do they go for the cheapest longest fixed rate they can find now (and dig out a basement for the silver stash) or will this take 3-5 years before it starts to run?

 

2028ish, and will run slowly at first,might be only 5% by 2025.though remember its just what i see at the end of my road map.Its the direction that matters.We might not reach the end,lots can happen on the way,but thats what i see as things stand now.Next few months im going to work through some foreign stocks i think will do well in the reflation,in a few sectors not really mentioned on here yet.I think as Harley says its time to get ready about where to allocate as we could be close (within a year maybe?).

One of the companies is Evonik Industries,i like the fact its involved in animal medicines,growth stuff etc,if anyone would like to do a bit of research,the farm animal/poultry feed,medicine sector is a one that should do well.Other im watching is Bayer AG,but there must be a lot more if people want to do some leg work.The US feed companies are way too high,the few iv checked.Germany etc might be a good hunting ground.

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25 minutes ago, DurhamBorn said:

2028ish, and will run slowly at first,might be only 5% by 2025.though remember its just what i see at the end of my road map.Its the direction that matters.We might not reach the end,lots can happen on the way,but thats what i see as things stand now.Next few months im going to work through some foreign stocks i think will do well in the reflation,in a few sectors not really mentioned on here yet.I think as Harley says its time to get ready about where to allocate as we could be close (within a year maybe?).

One of the companies is Evonik Industries,i like the fact its involved in animal medicines,growth stuff etc,if anyone would like to do a bit of research,the farm animal/poultry feed,medicine sector is a one that should do well.Other im watching is Bayer AG,but there must be a lot more if people want to do some leg work.The US feed companies are way too high,the few iv checked.Germany etc might be a good hunting ground.

There are some absolutely incredible finds over in Germany for the reflation trade, but perhaps a bit early yet, let's see what happens when the DAX gets hit hard and GBPEUR reverses course. Must admit I'm frothing at the mouth to start averaging in to some ideas but think the next few months is going to be very treacherous so holding still. Look forward to further discussion on this.

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Talking Monkey
20 minutes ago, Barnsey said:

There are some absolutely incredible finds over in Germany for the reflation trade, but perhaps a bit early yet, let's see what happens when the DAX gets hit hard and GBPEUR reverses course. Must admit I'm frothing at the mouth to start averaging in to some ideas but think the next few months is going to be very treacherous so holding still. Look forward to further discussion on this.

Would you be able to give some pointers Barnsey on what looks good in Germany

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If GDX / GDJX & miners fall it's probably time to top up.

They're a long term hold for me, unless they deliver some more astounding short term profits.

As mentioned David Hunter seems to think they will.

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UnconventionalWisdom
10 hours ago, sancho panza said:

Negatve rates won't last long as they'll destroy whats left of th EU banking system,bt that hasn't stopped the CBers trying.Quite incredible how they can look the evidence of their failure in the face and then try and do the same thing another time in the hope of a differnet result

They can hide behind the fact that it's not been catastrophic yet. It's when things turn ugly that the public wont allow them to do the same thing.

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2 hours ago, Talking Monkey said:

Would you be able to give some pointers Barnsey on what looks good in Germany

I don't have anywhere near the analytical eye of many here, and certainly not as much skin in the game as others too (I'm more of a chancer, spray and pray), and I'd only commit if I saw some of the prices take quite a drop from here (back near 2008-2011 levels) but I really like @DurhamBorn's suggestions, along with Siemens, BASF, E.ON and VW (yes really, their I.D. range of EVs will bring affordable electric cars to the masses, a game changer IMO, and built on their most cost efficient platform yet, just an unfortunate year to be launching initial products).

Haven't ventured into MDAX much yet, but Evotec (needs to drop) and K+S catch my eye.

Please DYOR as I'm quite the amateur, and average into all my stocks on a monthly basis.

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Only one dubious buy signal on last week's weekly close across my income accounts this week.  Weekly momentum on most stocks I'm watching/holding still weakening so expecting further lows for most.  A fair few are now in the  oversold zone but could always stay there for a while, leading to further lows.  A few are weakening but are in such strong uptrends I may never get a buy signal so (given they still have good yields) I may have to jump on soon.  Many holdings are finally getting to their 4% max allocations - I so need to get some fresh smaller cap and foreign blood into the portfolios, as I keep yapping on about, but have been too busy being out and about.  A few have now done so well they have exceeded that limit (5%)!  Overall though one portfolio is red and one green, but they are both very new (recent restructures).  Very happy to see the FTSE as it is, given I'm still accumulating. 

The balanced portfolios are loving it and doing what they should (easy though at the moment) with the PMs and the (few) bonds easily bailing out the equity falls.  My short term bonds are weakening a bit momentum wise, the longs look OK, and PMs have eased their ascent a tad.  Maybe that will continue as GBP has started to tick up momentum wise, although priced in USD, things still seem OK (fundamentally OK?).  Silver seems to be stair stepping up (short pull backs) on the weekly charts while gold is being more steady.  Not sure what I would do now though if I had funds waiting to invest into PMs.  Again, happy to see the equity weakness as I have a lot to accumulate.  Currently focused on regional ETFs with a bias to the UK but may branch out from ETFs to spread risks.  Hope to pick up bonds down the line after some falls, but need alternatives to bond funds.  Also intend getting some crypto, as much as ready access to a potential safe harbour (if needed) as a current investment.  I hold very small NS&I accounts for the same reason.     

My trades are a mixed bunch and best I pull back until I can devote the required time.  Any free time though is best spent casting a bigger net for more income stocks.  At last though, may be time to convert that CAD given the improvement in the weekly GBP momentum (in CAD, USD and EUR).  Could be a blip but the GBP descent has been going on for some time now and no need to be too greedy.  Everything has been essentially such a currency play over the last few years, with a few notably fundamentally strong exceptions.  In GBP, my excess holiday money from old has probably performed among the best!  Even the local sheep farmers are quiet, which usually means their doing just fine on their exports!

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22 hours ago, Sasquatch said:

Not an area I know much about to be honest. We've holidayed in the Lakes, North York Moors and Dales quite a bit. Our daughters live in Leeds (one in Uni, one just graduated) and they are likely to stay north and I think we will gravitate towards them and make sure no more than 1 to 1.5 hours drive away. I'm pretty keen to 'cash in' our relatively expensive house and buy something equivalent elsewhere for half the price!! That would help early retirement a lot.....

Thats a doddle then.

Look at places near a1 or a19.

Boroughbride wetherby easingwold.

*The* best value is Scarborough. There are some nice areas where southern equity gets a really good house.

Id avoid york. Traffic horrendous. Inner city drinking is beyond joke, making living and shopping at weekend pretty horrendous.

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