Credit deflation and the reflation cycle to come.

[janch]

21 hours ago, M.C. UK said:

Right ... freetrade.io

They now have ISA available (not free but seems cheap enough).

I didnt have the “courage” to go for it, howerver:

 

 

Traded,i’ve got 3 VOD shares ... and the miracle of the centure : they are up!

(refarding freetrade , well tooearly to say ...)

I've just asked to join...........I'm at no 73241 on their list!   Could be a long wait but I suppose it's a good idea to increase their numbers gradually or they might not cope with the demand.  Please keep us posted as to how it goes.

[A_P]

47 minutes ago, janch said:

I've just asked to join...........I'm at no 73241 on their list!   Could be a long wait but I suppose it's a good idea to increase their numbers gradually or they might not cope with the demand.  Please keep us posted as to how it goes.

I'm sure youll move up the list in no time and suspect that number is randomly generated. I'm still waiting for them to launch the android app before I can complete my signup.

[DurhamBorn]

3 hours ago, Democorruptcy said:

I think they will definitely QE again. This time it will trickle up. It will be QE for helicopter money. People at the bottom will think it's great and they are getting something for nothing.  That will be true, it will be something for nothing. It will create price inflation so the gifted money will be eaten by prices rise and it will trickle up to the 1%. Inflation hurts the poorest people the most. It's the logical next step and merely an extension of other governbankment subsidies/benefits that ultimately just enable some people to pay more, so everybody has to. I went on the electoral roll last year to get my share, might as well have it. 

Tats exactly what i expect.They will QE,trillions,but not for the banks,for the government to invest direct into the economy.The people will be quite happy,until inflation takes everything they have (or will ever of had).

[sancho panza]

2 hours ago, kibuc said:

WDO Q4 results and 2019 guidance should drop today or tomorrow.

I'm expecting results to be bang in the middle of the revised 70-75koz guidance. They delivered a touch above 54koz in the first three quarters and Eagle River was scheduled to process some slightly lower-grade ore in Q4, including some tailings from the Mishi pit, so additional 18koz seem likely and would mean that the upward-revised guidance was right on target.

As for the 2019 guidance, I'm siding with my local twitter expert @EconomicAlpha on the 80-85koz range. With low-grade dirt from Mishi slowly disappearing from picture, they should be able to mill 50k tones of high-grade Eagle River ore each quarter. At 13g/t it would put them aroung 84koz mark for the full year.

Given their recent developments in the 303 & 7 zones, that would be a rather conservative guidance and one that would probably be revised mid-year, but it would make for a very good launching platform for the upcoming year. Anything above that would indicate a very high level of confidence in Eagle River development. The mill is good for 1000 tonnes per day so there's still plenty of reserve there. If they can open another mining face and start pushing extra ore through that mill even for one quarter, that guidance will be easily beaten and the path for 100koz in 2020 will be clear.

 

Edit: as for the price action, if the results are indeed as expected, it wouldn't surprise me if there was a correction, just like there was one after the last month's resource update. Simply meeting the guidance is not very sexy, and few people bother to actually read beyond the headline - f.eg. to check the proportion of high-grade Eagle River ore and low-grade Mishi ore milled in Q4. It was the same story with NGD Q3 results, where the impressive turnaround at Rainy River after late-August mill improvements was highlighted for anyone who cared enough to get to page 3. I know I fell for the headline numbers trap as well at first.

Thanks for the post on this Kibuc.I'm waiting to get some WDO.Chart looks a little toppy(I have a real aversion to buying near long term resisitance levels).If there is a downdraft then I might get a few.

 

 

Have to say,one of my big hopes for the next month or two,is a staggering breath taking rally on the S&P/DJIA,which will hopefully get XAU/HUI sinking so I can slop a little more into my insurance policy.

I was having a chat with a family member the other day and they were positing the theory that if the market sells off,PM miners would go to.Just like 08.Whilst I share that fear,I think it's worth bearing in mind that

1) PM miners aren't elevated like they were in 07/08,the bubble merchants aren't holding.

2) Some are touching levels seen only in 2015 and then before that 2000

3) There is a middling chance will rocket at some point in the next few years.

It's a difficult balancing act at times.

3 hours ago, Democorruptcy said:

I think they will definitely QE again. This time it will trickle up. It will be QE for helicopter money. People at the bottom will think it's great and they are getting something for nothing.  That will be true, it will be something for nothing. It will create price inflation so the gifted money will be eaten by prices rise and it will trickle up to the 1%. Inflation hurts the poorest people the most. It's the logical next step and merely an extension of other governbankment subsidies/benefits that ultimately just enable some people to pay more, so everybody has to. I went on the electoral roll last year to get my share, might as well have it. 

You truly are a beacon of darkness in a dark room DM...I must look mad laughing at my computer

[Eventually Right]

20 minutes ago, sancho panza said:

Thanks for the post on this Kibuc.I'm waiting to get some WDO.Chart looks a little toppy(I have a real aversion to buying near long term resisitance levels).If there is a downdraft then I might get a few.

 

 

Have to say,one of my big hopes for the next month or two,is a staggering breath taking rally on the S&P/DJIA,which will hopefully get XAU/HUI sinking so I can slop a little more into my insurance policy.

I was having a chat with a family member the other day and they were positing the theory that if the market sells off,PM miners would go to.Just like 08.Whilst I share that fear,I think it's worth bearing in mind that

1) PM miners aren't elevated like they were in 07/08,the bubble merchants aren't holding.

2) Some are touching levels seen only in 2015 and then before that 2000

3) There is a middling chance will rocket at some point in the next few years.

It's a difficult balancing act at times.

You truly are a beacon of darkness in a dark room DM...I must look mad laughing at my computer

I'd add a 4)

in 2008 QE was unprecedented on the scale undertaken by the central banks.  If the market sells off this time round, it won't be unprecedented, it will be expected by the market.  Which I think may well mean money flows into the PMs, ahead it being announced.  If you look at a chart of the GDX, it bottoms just before QE1 was announced by the Fed in late November 2008, whereas the S&P and DJIA didn't bottom til March 2009.  If the deflation is big enough, then perhaps all bets are off, and the miners sell off as well, but I'm leaning more and more towards holding the miners I have in my ISA, through any dip.

 

[sancho panza]

From Dec 26.Hussman,Full piece worth a read

https://www.hussmanfunds.com/comment/observations/obs181226/

' While we don’t presently observe conditions to indicate a “buying opportunity” or a “bottom” from a full-cycle standpoint, we do observe conditions that are permissive of a scorching market rebound, even if it only turns out to be the “fast, furious, prone to failure” variety. I say “permissive” because there is no certainty about a rebound, and we wouldn’t dream of removing our safety nets against a market decline that I continue to expect to draw the S&P 500 toward the 1000 level by the completion of this cycle.

In short, being fully aware of where the market is in the context of the complete cycle, safety nets remain essential here, but we also expect the next few sessions to include a potentially steep “clearing rally” to relieve the compressed condition of the market. As always, our approach is to align ourselves with the market conditions we observe at each point in time. For now, we remain cyclically defensive, prepared for extreme short-term volatility in both directions, and open to that direction being higher, perhaps into year-end. We’ll take fresh evidence as it comes .'

[Talking Monkey]

2 hours ago, sancho panza said:

Thanks for the post on this Kibuc.I'm waiting to get some WDO.Chart looks a little toppy(I have a real aversion to buying near long term resisitance levels).If there is a downdraft then I might get a few.

 

 

Have to say,one of my big hopes for the next month or two,is a staggering breath taking rally on the S&P/DJIA,which will hopefully get XAU/HUI sinking so I can slop a little more into my insurance policy.

I was having a chat with a family member the other day and they were positing the theory that if the market sells off,PM miners would go to.Just like 08.Whilst I share that fear,I think it's worth bearing in mind that

1) PM miners aren't elevated like they were in 07/08,the bubble merchants aren't holding.

2) Some are touching levels seen only in 2015 and then before that 2000

3) There is a middling chance will rocket at some point in the next few years.

It's a difficult balancing act at times.

You truly are a beacon of darkness in a dark room DM...I must look mad laughing at my computer

In terms of rally SP do you see all time highs or up a fair bit but not to all time highs. I reckon a lot of results will be disappointing for Q4 18 and then for Q1 19

[Calcutta]

OK apologies if this sounds stupid but....if/when the bubble does burst, China goes the way of Japan in the 90s. Then what happens to demand for metals? The miners must be selling a lot of their produce to China, the Chinese go back to eating clay and sparrows then that demand is gone.

Am I missing something? 

[DurhamBorn]

1 hour ago, Calcutta said:

OK apologies if this sounds stupid but....if/when the bubble does burst, China goes the way of Japan in the 90s. Then what happens to demand for metals? The miners must be selling a lot of their produce to China, the Chinese go back to eating clay and sparrows then that demand is gone.

Am I missing something? 

In the reflation demand for metals will go through the roof i think.The west will be pulling back production and upgrading everything from roads to sewers to reservoirs.China cant let 1 billion people go idle (or overthrow the communist junta) so they will double down on the one belt one road project.Massive spending on railways,warehouses,ports,telcos etc along the routes.

What people need to remember is there is a lot more use of metals in a reflation,as industrial cycles use a lot more (and energy) than consumer cycles do.A distribution cycle will see the consumer slowly become less of the economy and industry/production become more.If you look back at reflations over hundreds of years (even thousands) commods have always responded upwards and as the CBs will of put in motion currency destruction (debt monetization is simply currency devaluation) then even more so in fiat.

In simple terms a smaller part of the countries wealth will be being consumed,a larger part will be being tipped into real things,real production and assets.Debt cycles reach the end when the productive side of the economy cant produce enough to keep the credit cycle moving forward.When that happens advanced economies tilt towards producing more.

[Barnsey]

I think we'll see helicopter money in the form of tax cuts to continue the incentive to work, leaving unemployment benefits to erode under inflation.

Was interested to see the big Docs approve increased use of touchscreens for kids, they realise we need to enhance their skills from a young age for a competitive future.

Labour has a strategy for essentially a reflation investment bank as do the Lib Dems, also talk of separating "the deficit" into 2 parts, interest payments and investments.

Also very interesting to hear Carnage today saying he believes that in the future there will be several reserve currencies, on this I agree, not in the next recession but perhaps as a result of the fourth turning circa 2025-27. China still on track to overtake USA around 2032.

[Bobthebuilder]

Sorry to go off topic for a bit (as usual for me).

I wonder in the reflation whether there might be a case for re opening some of Beechings closed railway lines?

I know they have reopened the border railway and one near Bristol i think, maybe the Somerset and Dorset could make a return.

[Barnsey]

23 minutes ago, Bobthebuilder said:

Sorry to go off topic for a bit (as usual for me).

I wonder in the reflation whether there might be a case for re opening some of Beechings closed railway lines?

I know they have reopened the border railway and one near Bristol i think, maybe the Somerset and Dorset could make a return.

Not off topic in my eyes, not too confident about S&D, especially given existing peripheral coverage by SWT and GWR, but you never know! Govt aren't allowed to announce any info on future plans apparently until pretty concrete. Let's see how successful Oxford to Cambridge reopening will be, I'm thinking massively. Also Edinburgh to Galashiels reopening has done incredibly well, extension very much on the cards. As @DurhamBorn predicts, public transport will see unprecedented investment. Retiring baby boomers will look after the buses for a long time to come.

[eek]

20 minutes ago, Bobthebuilder said:

Sorry to go off topic for a bit (as usual for me).

I wonder in the reflation whether there might be a case for re opening some of Beechings closed railway lines?

I know they have reopened the border railway and one near Bristol i think, maybe the Somerset and Dorset could make a return.

I suspect they will open any practical line that hasn’t already been built on.

 

thats the reason we have the mess that is HS2 a north south line is supposedly required and the central midland line was closed and built on

[DurhamBorn]

43 minutes ago, Barnsey said:

Not off topic in my eyes, not too confident about S&D, especially given existing peripheral coverage by SWT and GWR, but you never know! Govt aren't allowed to announce any info on future plans apparently until pretty concrete. Let's see how successful Oxford to Cambridge reopening will be, I'm thinking massively. Also Edinburgh to Galashiels reopening has done incredibly well, extension very much on the cards. As @DurhamBorn predicts, public transport will see unprecedented investment. Retiring baby boomers will look after the buses for a long time to come.

Massive yes.I also think they will link closer towns with metro lines on a loop.A lot of the routes have been lost over time,but a lot do still exist.In a reflation governments will tend to look at projects good to go asap.Things like HS2 wont be a priority,extending a line a few stops will be.I also think younger people will get a free,or heavily discounted bus pass.They will do everything they can to get velocity of money moving and money moves when people move about.

Our local news had a big segment on the new Sirius minerals mine last night showing you around and interviewing lots of people.Its an incredible project.They had the Teesport end on where its all set up ready to drill the tunnel for the conveyor to move the potash to the plant from the mine.I dont know if its a good investment,it might go under before production then re-issue shares etc,but if they pull it off it will be massive for the area and the UK.The price will be going up and up in the next cycle,if they can get it running in time.

Dollar index looking nice today.

[Lavalas]

34 minutes ago, DurhamBorn said:

Massive yes.I also think they will link closer towns with metro lines on a loop.A lot of the routes have been lost over time,but a lot do still exist.In a reflation governments will tend to look at projects good to go asap.Things like HS2 wont be a priority,extending a line a few stops will be.I also think younger people will get a free,or heavily discounted bus pass.They will do everything they can to get velocity of money moving and money moves when people move about.

Our local news had a big segment on the new Sirius minerals mine last night showing you around and interviewing lots of people.Its an incredible project.They had the Teesport end on where its all set up ready to drill the tunnel for the conveyor to move the potash to the plant from the mine.I dont know if its a good investment,it might go under before production then re-issue shares etc,but if they pull it off it will be massive for the area and the UK.The price will be going up and up in the next cycle,if they can get it running in time.

Dollar index looking nice today.

Andy Burnham announced yesterday a two year trial where all 16-18 year olds in Manchester will get an ‘Opportunity Pass’, which is basically a bus pass with maybe some other free stuff too.

Also saw the Sirius thing on Look North (or Calendar, can’t remember which). Tracked there share price for a while but always held off as the engineering always seemed a little pie in the sky but very impressive to see their work to date. Will definitely keep an eye on it.

[DurhamBorn]

3 minutes ago, Lavalas said:

Andy Burnham announced yesterday a two year trial where all 16-18 year olds in Manchester will get an ‘Opportunity Pass’, which is basically a bus pass with maybe some other free stuff too.

Also saw the Sirius thing on Look North (or Calendar, can’t remember which). Tracked there share price for a while but always held off as the engineering always seemed a little pie in the sky but very impressive to see their work to date. Will definitely keep an eye on it.

Very interesting.Slowly these things start to emerge,but nobody is watching,too busy looking backwards at key inflection points.

[UnconventionalWisdom]

3 hours ago, DurhamBorn said:

In simple terms a smaller part of the countries wealth will be being consumed,a larger part will be being tipped into real things,real production and assets.Debt cycles reach the end when the productive side of the economy cant produce enough to keep the credit cycle moving forward.When that happens advanced economies tilt towards producing more.

Are you familiar with Ray Dalio's debt cycle explanation? Seems to agree with your outlook on what's happening with the deleveraging and revert back to a Reflation where debt is used to produce more useful things. I hope (and believe) you are right. I'm sick if the madness and can't believe people think I'm the mad one when I say a one bedroom flat isn't worth nearly £200k.

Heres an article on Dalio's take on debt cycles:

https://seekingalpha.com/article/4225374-ray-dalio-debt-cycle-will-end-soon

Stage 1 is the “good” part. People borrow money, but not too much. They use it for productive purposes. This helps the economy grow and lifts asset prices. And that’s where things start going south.

In Stage 2, which Dalio terms the “Bubble,” people look at the recent past and decide asset prices, total demand, and consumption will keep going up. They overconfidently borrow more money and start having too much leverage. 

Stage 3, the “Top,” occurs when central banks, regulators, and sometimes even the lending institutions notice problems. They take measures: raise interest rates, tighten lending standards, and so on.

Stage 4, the “Depression,” happens when growth slows or reverses beyond the ability of monetary and political authorities to help. Yet they keep trying. This is when we see interest rates go to zero or negative. The central bankers are out of bullets at this point. Everyone just has to suffer.

Stage 5 is the deleveraging phase. It is when businesses and families reduce spending to pay down debt and reduce their leverage. It can last a long time. But as leverage falls, people get a handle on their debt service costs and slowly start to recover.

Eventually, the economy reaches Stage 6, normalization, and the cycle repeats.

[sancho panza]

3 hours ago, Talking Monkey said:

In terms of rally SP do you see all time highs or up a fair bit but not to all time highs. I reckon a lot of results will be disappointing for Q4 18 and then for Q1 19

Hard to Dec  say.Personally I think all time Highs are still feasible but un likely which is where my money is.I felt there was a rally coming from early Dec iirc and it's come late but it's been strong on a daily basis,waiting to see if it has more medium term strength.

As yet,I've not started reshorting the stuff I puled out of previously,but given Ive had a a couple of runs at Berkeley group from 36 ish down to 33.I've had multiple runs at BDEV,TQ,RDRW.I'm cautiously optimistic that I'm going to get back on them all again around previous entry points(with Berkely that's a given).There's a couple fo years of whipsaws to trade from hereand when the shorts have hd a good run it's only natural that there's an overreaction back the other way.

 

Just my view.For what its worth I manily use chart work for short term trades,my buying of longer term trades is based on more fundamental reasoning.Individual conmpany results can be heavily gamed particularly by she buy bcaks.

[DurhamBorn]

@UnconventionalWisdom i consider Ray Dalio one of the best investors out there and also Seth Klarman and Howard Marks.They make mistakes of course,but over the long term understand the cycles very well and are well worth following,not for stock picks,but more cycle road maps.

[King Penda]

the only way opening shed loads of new lines will work unless its to high paying jobs in leeds or manchester is if they tax us off the roads,dont forget most of the north is basicly paid around minimum wage.obviesly the south is a bit different.but we dont want southern firms bringing well paid jobs up north we have seen what it does to house prices.a couple in the north on 27k each could probably have a similar standard of liveing to a couple in the south east pulling in 100k.

[Viceroy]

QUESTION: 

Am I correct in observing many assets are deflating in value, not inflating anyway, and that eventually the DOW, gold and (USD if not monetary change) will eventually reflate very strongly?

Also, is it possible that commodities will come back at the same time as  the DOW, gold ? How do they relate to each other?

It would seem that the time targets may be pushed back to 2032, so when would the deflation cease?

Have been to 2 conferences, read your reports. It seems I might have to reset my timelines.

Regards RM

 

ANSWER: Yes, we are still in the Asset Deflationary Mode. However, the ECM turns up in January 2020 so the next cycle is upon us soon. I warned at the WEC that we would make a correction in the Dow given it was an reasonable high on average of 8.6 years from the 2009 low. But it was also 86 years from the 1932 low. The correction appears to be setting the stage for the realignment where assets will rally and we should then see commodities, including gold, rally with the share market as was the case between 1976 and 1980.

Keep in mind that the Great Alignment is the shift from Public to Private Assets. This is when people begin to lose confidence in government. In Europe, we have rising discontent by not just the Yellow Vests, but strategic alignments between Italy and Poland to which we may yet see Hungary join. In the USA, the battle against Trump and the mainstream media even opening calling him an idiot does not speak well for firming up confidence in government. This war against Trump is undermining the confidence completely in government as a whole. The Democrats are out for blood and just want to win in 2020 ignoring what they are doing to nation. It no longer matters what a politician says they stand for. Both parties are told to vote party lines.

 

So this is part of the Great Alignment. The next ECM Wave should be an inflationary wave. We we have about 1 year for this to unfold.

[MrXxx]

8 hours ago, stokiescum said:

the only way opening shed loads of new lines will work unless its to high paying jobs in leeds or manchester is if they tax us off the roads,dont forget most of the north is basicly paid around minimum wage.obviesly the south is a bit different.but we dont want southern firms bringing well paid jobs up north we have seen what it does to house prices.a couple in the north on 27k each could probably have a similar standard of liveing to a couple in the south east pulling in 100k.

OK, bear with me on this one...with the return of cheap Eastern European labour due to Brexit (or the threat of it) and the cessation of generous UK tax credits, wages are now set to rise, previously these have been kept in check.

The use of subsidized (or even free) public transportation in Northern power house development zones would a) allow politicians to demonstrate that they are doing something for The North, and b) allow their paymasters to continue paying submarket rates of pay...as always the innocent tax payers will get the tab for their increased profits!

[King Penda]

Well between now and the end of the year the minimum wage is going to go up to 9 quid that’s well over 10 percent baked in for most

[kibuc]

To all NGD holder on this board - and I know there's quite a few of you here - I've joined the dark side yesterday and made NGD my biggest holding, and my only gold-price-leverage play (still holding WDO as an exploration play). We're in this boat together now

 

I know the maths for NGD and I'm still terrified by it, but with Rainy River finally operating and still improving that's one huge question mark removed from the equation. Now it's simply the case of how much FCF can it generate, and it will be driven mostly by gold price, although some improvements in AISC will surely be possible as well.

 

I think it should provide at least the same amount of leverage to gold price as Sibanye, without the added drama of the Lonmin deal, ongoing strike actions, MPs calling for suspension of licence etc.

 

They should provide their outlook for 2019 probably next week. I'm expecting 300-330koz for RR and 60-70koz for New Afton, for a consolidated 360-400koz and AISC in range of 1050-1150U$. AISC is really a shot in the dark due to Rainy River still being improved, but it's also much more important than the production guidance. Each $50 change in AISC moves free cash flow generation by 18-20mln and boy do they need every cent of it.

 

Anyway, if we're going down, we're going down together

[Lavalas]

13 minutes ago, kibuc said:

To all NGD holder on this board - and I know there's quite a few of you here - I've joined the dark side yesterday and made NGD my biggest holding, and my only gold-price-leverage play (still holding WDO as an exploration play). We're in this boat together now

 

I know the maths for NGD and I'm still terrified by it, but with Rainy River finally operating and still improving that's one huge question mark removed from the equation. Now it's simply the case of how much FCF can it generate, and it will be driven mostly by gold price, although some improvements in AISC will surely be possible as well.

 

I think it should provide at least the same amount of leverage to gold price as Sibanye, without the added drama of the Lonmin deal, ongoing strike actions, MPs calling for suspension of licence etc.

 

They should provide their outlook for 2019 probably next week. I'm expecting 300-330koz for RR and 60-70koz for New Afton, for a consolidated 360-400koz and AISC in range of 1050-1150U$. AISC is really a shot in the dark due to Rainy River still being improved, but it's also much more important than the production guidance. Each $50 change in AISC moves free cash flow generation by 18-20mln and boy do they need every cent of it.

 

Anyway, if we're going down, we're going down together

Welcome to the club (at a much better starting point).

It’s a great case study on terrible and then (so far) great management of a mining company. 

You’ve done your DD so good luck to us all.