Credit deflation and the reflation cycle to come.

[DurhamBorn]

1 hour ago, Talking Monkey said:

Hi DB do you not see the PMs dropping during the initial stages of a major correction, I recall you expect PMs to go up to I think a target of 1350-1450 then perhaps down to 800-900 and from there to really take off. Does your analysis still see the potential for that dip that would put PMs briefly lower than they are now before taking off much higher

Im torn on what to do.My macro work points to an up down up,but my road map work points to a once in a lifetime bull going forward.If we happened to see $55+ hit in the GDX id consider options then.If i had some 3 baggers or more in my portfolio id be pretty certain to sell a lot and move into more inflation loving dividend payers.In more normal times id see holding a few miners and PMs as a hedge nothing more,but right now every one of my indicators apart from my ALGO one is pointing to extreme buy points.(my ALGO tracks momentum mostly id expect it to change to buy last).I would say the fact all the indicators are where they are points to one of two things.Gold really is finished or we are about to see a huge bull run develop.I like that kind of risk/reward and am postioned for it.

[Errol]

Gold hasn't got started yet.

[sancho panza]

12 hours ago, Sugarlips said:

Wheels are seriously coming off here in Oz:

https://www.macrobusiness.com.au/2018/08/mortgage-rejections-skyrocket-1347-credit-crunches/

The 'major banks reduction in borrowing power' table says it all, but the comments are worth a giggle as well..

Didn't realise you were Oz based.Fascinating if you can give us soem feedback from the frontline.I think Oz will hit the debt deflation button first for a few reasons.

 

Whereabouts are you if you don't mind me asking?

 

From the article

'Mortgage rejections skyrocket 1347% as credit crunches'

 

12 hours ago, dgul said:

Going long sterling*, surely?

[* assuming that's the cash you had in mind]

The currency you pick is your long of choice,moving to cash is a short position imo.

[sancho panza]

2 hours ago, dgul said:

Not necessarily.  It did last time, but it depends if the ones with the gold are the ones that need to sell to stay solvent.

Excellent point if I may say.The PM smashed into 08 but there were soem huge gains before March 09

2 hours ago, Errol said:

Gold hasn't got started yet.

Ten years ago,I'd have disagreed with you.Now I'd agree.

The next big turn will see faith in CB's fall massively.

[Sugarlips]

32 minutes ago, sancho panza said:

Didn't realise you were Oz based.Fascinating if you can give us soem feedback from the frontline.I think Oz will hit the debt deflation button first for a few reasons.

 

Whereabouts are you if you don't mind me asking?

Sure, left Bournemouth in my early 20s to go backpacking for a year (circa 2000) decided to live in Sydney which was great at the time, £ to A $ was very favourable was awesome being there for the millenium and the olympics but I got sick of the rat race  (it was obvious then that they wanted to turn Sydney into the next HongKong and the population in Syd/Melb has spiralled out of control since so the gridlock is easy as bad as SE England) and moved to Perth 10 years ago. I know a lot of people on here hate the place so I've stayed quite on the subject!

I like Perth more now that all the money has left town, it was getting quite ugly for a while but its calmed right down recently (as have i now im in my early 40s) 

The place is pretty fucked economically but for those of us who still have a well paid job and are capable of saving its as good a place as any to watch the coming crisis unfold. 

The royal commission into the banking sector has pretty much single handedly killed thd property ponzi golden goose. The govt and reserve bank are cornered on many fronts so there is little hope of innovating a way out of a recession this time.

Since climate change is destroying farming and the currency/cost of living is detering tourists, there is nothing else of note to offer besides selling uni degrees to 2nd class asian students who somehow all get Permenant residence on completion of the course (and bring their families with them). China is still buying iron ore but its questionable how long for with their clean energy targets and their own massive debt/property bubble.

Im lucky i have dual citizenship and still have family to return to if things start getting too Venezuela. Meanwhile i enjoy the sunshine, ocean, clean air and endless skies/space, its nice this time of year, the grass is green (as opposed to scorched/dead in summer). Plus the women are still often proper fit here

Edit to add an example of the crashing Perth property market which is still dropping after peaking 12 years ago - both in asking prices and rent:

https://www.propertyobserver.com.au/finding/residential-investment/sales-and-auctions/86202-half-price-1-050-000-kallaroo-wa-house-sold-by-mortgagee.html

For reference Kallaroo is a fairly soleless middle to affluent class outer north suburb on the coast. Those that are being forced to sell are often in neg equity, i guessing banks are giving forebearance on principal residencies so as to avoid flooding the market any more than it already is - wylie coyote style..

[sancho panza]

7 minutes ago, Sugarlips said:

Sure, left Bournemouth in my early 20s to go backpacking for a year (circa 2000) decided to live in Sydney which was great at the time, £ to A $ was very favourable was awesome being thdre for the millenium and the olympics but I got sick of the rat race  (it was obvious then that they wanted to turn Sydney into the next HongKong and the population on Syd/Melb has spiralled out of control since so the gridlock is easy as bad as SE England) and moved to Perth 10 years ago. I know a lot of people on here hate the place so I've stayed quite on the subject!

I like Perth more now that all the money has left town, it was getting quite ugly for a while but its calmed right down recently (as have i now im in my early 40s) 

The place is pretty fucked economically but for those of us who still have a well paid job and are capable of saving its as good a place as any to watch the coming crisis unfold. 

The royal commission into the banking sector has pretty much single handedly killed thd property ponzi golden goose. The govt and reserve bank are cornered on many fronts so there is little hope of innovating a way out of a recession this time.

Since climate change is destroying farming and the currency/cost of living is detering tourists, there is nothing else of note to offer besides selling uni degrees to 2nd class asian students who somehow all get Permenant residence on completion of the course (and bring their families with them). China is still buying iron ore but its questionable how long for with their clean energy targets and their own massive debt/property bubble.

Im lucky i have dual citizenship and still have family to return to if things start getting too Venezuela. Meanwhile i enjoy the sunshine, ocean, clean air and endless skies/space, its nice this time of year, the grass is green (as opposed to scorched/dead in summer). Plus the women are still often proper fit here

 

Interesting that you have such a bearish view.It amazed me when I looked at the export figures for Oz and saw how much they relied on Coal and Iron ore

Also second slide shows Perth rents down.Third Perth prices down.

Was recently in Switzerland and you can see why noone travels there due to cost.Oz must be getting mullered tourist number wise,or have the Chinese taken over from the Poms and germans?

That article you posted really shows how bad things could get for the ozzie housing market.People talking 5% down are living in cuckoo land.

https://dfat.gov.au/trade/resources/trade-at-a-glance/Pages/top-goods-services.aspx

 

AUSTRALIA'S TOP 10 GOODS & SERVICES EXPORTS, 2017 (a)
(A$ million)

(a) Goods trade are on a recorded trade basis, Services trade are on a balance of payments basis.
(b) Total is on a balance of payments basis.
(d) Includes international student expenditure on tuition fees and living expenses.

Based on ABS trade data on DFAT STARS database and ABS catalogue 5368.0.

Rank	Commodity	Value	% share
	Total (b)	386,677
1	Iron ores & concentrates	63,092	16.3
2	Coal	57,129	14.8
3	Education-related travel services (c)	30,263	7.8
4	Natural gas	25,620	6.6
5	Personal travel (excl education) services	21,281	5.5
6	Gold	17,632	4.6
7	Aluminium ores & conc (incl alumina)	8,426	2.2
8	Beef, f.c.f.	7,451	1.9
9	Wheat	6,062	1.6
10	Crude petroleum	5,246	1.4

[DurhamBorn]

Really interesting @Sugarlips keep us informed on how things are on the ground.Im really glad you mentioned farmland starting to produce less and less.A lot of farmland will stop producing and whats left will need massive amounts of potash to keep going.I think it will be one of the themes of the next cycle.BHP might regret not putting their massive deposits in Canada into production.

[Castlevania]

What are “travel services”? There’s two of them in the top 10 list of Australian exports and they’re the only items that aren’t commodities.

[dgul]

32 minutes ago, Castlevania said:

What are “travel services”? There’s two of them in the top 10 list of Australian exports and they’re the only items that aren’t commodities.

[sancho panza]

https://dfat.gov.au/about-us/publications/Documents/analysis-of-australias-education-exports.pdf

' Education exports were composed of Education-related travel services (which include fees and living expenses of foreign students studying in Australia) and Other education services (which includes the non-travel related education services such as consultancy services). '

 

Second one is posh words for tourism I beleive

4 hours ago, Castlevania said:

What are “travel services”? There’s two of them in the top 10 list of Australian exports and they’re the only items that aren’t commoditie

[sancho panza]

7 hours ago, Sugarlips said:

Since climate change is destroying farming and the currency/cost of living is detering tourists, there is nothing else of note to offer besides selling uni degrees to 2nd class asian students who somehow all get Permenant residence on completion of the course (and bring their families with them). China is still buying iron ore but its questionable how long for with their clean energy targets and their own massive debt/property bubble.

 

Worth noting that GDP is A$1.69 trillion in 2017.

Worth noting that ozzie exports to China were A$94bn in 2013 up to A$115bn in 2017.

Japan is another A$47bn.

Those two dwarf the rest.

[Sugarlips]

Heres the latest drought map for NSW (entire state is in a drought)

https://edis.dpi.nsw.gov.au

Re: Climate Change

https://www.perthnow.com.au/news/regional/erosion-threatens-1000-geraldton-properties-ng-b88936876z

Note its still its the house prices that they are crying over not the bigger picture

However for balance this morning there is suddenly going to be a high paying 'jobs bonanza' coming for Perth which if correct might help rebalance the city (its always darkest before dawn and all that !)

https://www.perthnow.com.au/business/economy/jobs-bonanza-promise-as-perth-puts-its-case-as-lng-hub-ng-b88942001z

[Barnsey]

Interesting report from the Strategic Research Council at the Academy of Finland, possibly suggesting a long term view of Central Bank driven investment in modern eco-friendly and sustainable energy/transport/food

http://bios.fi/bios-governance_of_economic_transition.pdf

In view of the challenges encountered today in implementing meaningful international agreements, the most likely option for initiating transitions to sustainability would be for a group of progressive states to take the lead. This would require economic thinking that enables large public investment programs on the one hand and strong regulation and environmental caps on the other. In the modern global economy, states are the only actors that have the legitimacy and capacity to fund and organize large-scale transitions.

[leonardratso]

27 minutes ago, Barnsey said:

Interesting report from the Strategic Research Council at the Academy of Finland, possibly suggesting a long term view of Central Bank driven investment in modern eco-friendly and sustainable energy/transport/food

http://bios.fi/bios-governance_of_economic_transition.pdf

In view of the challenges encountered today in implementing meaningful international agreements, the most likely option for initiating transitions to sustainability would be for a group of progressive states to take the lead. This would require economic thinking that enables large public investment programs on the one hand and strong regulation and environmental caps on the other. In the modern global economy, states are the only actors that have the legitimacy and capacity to fund and organize large-scale transitions.

overridden by pigs troughing no doubt.

[DurhamBorn]

31 minutes ago, Barnsey said:

Interesting report from the Strategic Research Council at the Academy of Finland, possibly suggesting a long term view of Central Bank driven investment in modern eco-friendly and sustainable energy/transport/food

http://bios.fi/bios-governance_of_economic_transition.pdf

In view of the challenges encountered today in implementing meaningful international agreements, the most likely option for initiating transitions to sustainability would be for a group of progressive states to take the lead. This would require economic thinking that enables large public investment programs on the one hand and strong regulation and environmental caps on the other. In the modern global economy, states are the only actors that have the legitimacy and capacity to fund and organize large-scale transitions.

100% certain Barnsey.The next cycle will see massive investment.The macro picture means governments have no choice but to invest and that always drags in capital.As inflation starts to increase bonds will start to fall and fall all cycle.That will release massive amounts of capital as well that will move into reflation areas.Reflation cycles produce big amounts of wealth,but only in certain areas,others struggle.

[Thorn]

21 minutes ago, DurhamBorn said:

100% certain Barnsey.The next cycle will see massive investment.The macro picture means governments have no choice but to invest and that always drags in capital.As inflation starts to increase bonds will start to fall and fall all cycle.That will release massive amounts of capital as well that will move into reflation areas.Reflation cycles produce big amounts of wealth,but only in certain areas,others struggle.

DB what do you see ahead for the funding of public sector pensions in the UK and elsewhere... 

[DurhamBorn]

1 hour ago, Thorn said:

DB what do you see ahead for the funding of public sector pensions in the UK and elsewhere... 

Tricky,soft defaults probably.Pension age pushed back,wages going up less than inflation and the CPI index going up much less than real inflation.Inflation solves lots of problems for those who have made promises.A lot of pensions have max uplifts of 5% now as well,that could prove a problem for people if inflation runs above 10%.For my own small final salary pension il be kicking it in at 55 and losing 40% for taking ten years early.Il get some back by not taking the spouse pension side.

[Barnsey]

Evening Standard reporting Carney has been asked to stay on until 2020, what does this tell us about the economic outlook for next year I wonder?

[Band]

2 hours ago, Barnsey said:

Evening Standard reporting Carney has been asked to stay on until 2020, what does this tell us about the economic outlook for next year I wonder?

Printy printy. He was wrong so gets asked to stay on by his keynesian chum hammond.

[Barnsey]

Couple of interesting charts I've found today on the Twittersphere:

One for the dollar bulls from @NautilusCap

And one for the SPX bulls from @JLyonsFundMgmt

 

[Thorn]

So... DOW back up over 26,000... and it’s all gone a bit red on the miners after yesterday being lovely and green.

Will the DOW next be headed for 40,000 with foreign capital and returning Tax looking for a home is the nagging question. 

Viceroy what’s your finger on the pulse say? 

[MrXxx]

8 hours ago, DurhamBorn said:

Tricky,soft defaults probably.Pension age pushed back,wages going up less than inflation and the CPI index going up much less than real inflation.Inflation solves lots of problems for those who have made promises.A lot of pensions have max uplifts of 5% now as well,that could prove a problem for people if inflation runs above 10%.For my own small final salary pension il be kicking it in at 55 and losing 40% for taking ten years early.Il get some back by not taking the spouse pension side.

I assume that you are not desperate for the pension so why sacrifice the 40%-?...do you think the economic climate is such that DB pension providers are likely to default or `move the goal posts` within 10 years?

[Band]

Any reason why UK 10 year jumped 13.6% today?  Carney firing up the printing press for Brexit?

https://www.bloomberg.com/quote/GUKG10:IND

[Green Devil]

13 minutes ago, Banned said:

Any reason why UK 10 year jumped 13.6% today?  Carney firing up the printing press for Brexit?

https://www.bloomberg.com/quote/GUKG10:IND

Can spunko set an auto correct to Cunt?

[Talking Monkey]

1 hour ago, Thorn said:

So... DOW back up over 26,000... and it’s all gone a bit red on the miners after yesterday being lovely and green.

Will the DOW next be headed for 40,000 with foreign capital and returning Tax looking for a home is the nagging question. 

Viceroy what’s your finger on the pulse say? 

I just cannot see it going up much further the PE is way over stretched. Will the next earnings round be even better than Q2, or will we see that earnings have peaked.