Credit deflation and the reflation cycle to come.

[DoINeedOne]

5 minutes ago, Admiral Pepe said:

I'm currently staircasing in; world index trackers, FTSE HYP/reflationary stock, gold etc/miners etf. Vod getting a few more purchases than I would probably like  but got my plan, sticking to it. Planting the seeds, not for today or tomorrow, but in ten years and beyond. Looks like the party is just getting started. Will the papers be writing  some scary headlines or will they stick wit the distracting stories?

6

Same with VOD

[MvR]

13 hours ago, Barnsey said:

Black Friday tomorrow? (the stock crash one not the discount sales one)

Seriously don't have a clue one minute to the next what direction things are heading at the moment, exciting.

The Dow had formed and broken through a clear head and shoulders pattern with a target price around 23200 ish. The last couple of days it retested the neckline from below and failed, so we could well be looking at a sharp drop here.  The 23200 level is below previous support, so could cause a further cascade, or it could be a bear trap and trigger a bounce..

 

[Lavalas]

18 minutes ago, kibuc said:

I gave them a second look yesterday, but it takes some suspension of disbelief to make the math work. It's all about debt. They owe:

500mln @6.25% maturing in Nov 2022

300mln @6.375 maturing in May 2025

around 100mln in revolving credit facility (out of 400mln available) until Dec 2021.

We're talking about 50mln+ p.a. in interest alone, plus the necessity to cough up 500mln four years from now. They already sold Mesquite at knock-down price. They sure as hell won't sell Rainy River. They might be forced to sell New Afton - maybe that's their play? On the call, Adams was talking about development plans in Afton penciled in for 2019, financed internally. If they can pimp it up and then sell, it might save them from costly refinancing or issuing new shares in 2022.

On the production side of things, Rainy River production was 55koz for the period but that includes 5-day break in mill operations, which they used to improve the process and it resulted in 25koz in Semptember alone. That is very good news. With further refinement to the process both in mining and milling, we could be takling about 320-350koz from Rainy River alone. With New Afton hitting higher grades in 2019, we could be talking about up to 450koz p.a.. The entire earnings call was focused on improving the process and bumping production asap. I have very little doubt that Adams will make Rainy River operate at full capacity.

BUT that will take money, and that means utilizing their revolving credit facility, as opposed to repaying what they already owe. Seriously, how are they gonna tackle that? Huge gold bull and full cash repayment, or medium bull and New Afton sale - both options depend on favourable market conditions and leave very little room for dividends.

To understand how much of a burden their debt truly is, consider this:

In Sep they were producing at 380koz p.a. rate and that should be easily sustainable. Could get to 420-450koz in 12 months. Their market cap two days ago was roughly 400mln.

Wesdome is producing 80koz p.a., with a plan to get into 175-200koz range in 12-18 months - if they can restart Kiena without hikkups. Their market cap two days ago was roughly 400mln. The catch? Wesdome has no debt.

Thanks for that. I dialled into the call but got distracted by work a few minutes in. I assumed they’d be forced to have an answer to the debt question on the call. It’s certainly the elephant in the room. Maybe they were just hoping for a gold bull. I mean everyone else is aren’t they (just most aren’t relying on it). Ha. I expect the new guy will have a more proactive plan that we’ll hear about in time.

[Barnsey]

37 minutes ago, MvR said:

The Dow had formed and broken through a clear head and shoulders pattern with a target price around 23200 ish. The last couple of days it retested the neckline from below and failed, so we could well be looking at a sharp drop here.  The 23200 level is below previous support, so could cause a further cascade, or it could be a bear trap and trigger a bounce..

 

And to think we're going into the next one with a huge number of investors now sitting lazily in passive trackers, and those that aren't have their money trusted to hedge fund managers with no experience of a bear market (more than 50% of fund managers in the U.S. have <9 years experience)

[Barnsey]

54 minutes ago, Admiral Pepe said:

I'm currently staircasing in; world index trackers, FTSE HYP/reflationary stock, gold etc/miners etf. Vod getting a few more purchases than I would probably like  but got my plan, sticking to it. Planting the seeds, not for today or tomorrow, but in ten years and beyond. Looks like the party is just getting started. Will the papers be writing  some scary headlines or will they stick wit the distracting stories?

Crazy to see VOD sitting at it's 2008 lows, hard not to keep piling in but must be diverse. Centrica hovering around the 2003 low another one I have to restrain myself from scooping up manically 

[A_P]

4 minutes ago, Barnsey said:

And to think we're going into the next one with a huge number of investors now sitting lazily in passive trackers, and those that aren't have their money trusted to hedge fund managers with no experience of a bear market (more than 50% of fund managers in the U.S. have <9 years experience)

According to the chart, I posted a few days ago, it's the hedge funds and pensions that are holding the bags. I couldn't source it sadly so no idea if accurate

[Barnsey]

2 minutes ago, Admiral Pepe said:

According to the chart, I posted a few days ago, it's the hedge funds and pensions that are holding the bags. I couldn't source it sadly so no idea if accurate

401k plans in the U.S. are going to get crucified, Govt pensions at massive risk bar 4 or so states that have kept on top of things (for now).

[kibuc]

22 minutes ago, Lavalas said:

Thanks for that. I dialled into the call but got distracted by work a few minutes in. I assumed they’d be forced to have an answer to the debt question on the call. It’s certainly the elephant in the room. Maybe they were just hoping for a gold bull. I mean everyone else is aren’t they (just most aren’t relying on it). Ha. I expect the new guy will have a more proactive plan that we’ll hear about in time.

There's a full transcript available at seekingalhpa.
https://seekingalpha.com/article/4214493-new-gold-inc-ngd-ceo-renaud-adams-q3-2018-results-earnings-call-transcript

I'll think about it a bit more when I'm in the thinking mood. Debt is a problem that needs to be addressed, but it's a long-term concern. Productivity issues need to be resolved asap, so no wonder they got prioritized on the call, and they might dominate the next one as well.

[A_P]

Just now, Barnsey said:

401k plans in the U.S. are going to get crucified, Govt pensions at massive risk bar 4 or so states that have kept on top of things (for now).

Yep and the pensions have already been suffering whilst in the bull market. It will be these guys that will be panicking. I'm less concerned* about the passives without looking at the data on the demographics that hold them, but I would assume it's skewed to the younger generation by enlarge. Can't help human nature/behaviour but I suspect passives will be able to stomach this wave a lot more than your boomers nearing retirement. 

 

[Lavalas]

12 minutes ago, kibuc said:

There's a full transcript available at seekingalhpa.
https://seekingalpha.com/article/4214493-new-gold-inc-ngd-ceo-renaud-adams-q3-2018-results-earnings-call-transcript

I'll think about it a bit more when I'm in the thinking mood. Debt is a problem that needs to be addressed, but it's a long-term concern. Productivity issues need to be resolved asap, so no wonder they got prioritized on the call, and they might dominate the next one as well.

Thanks for that, I’ll take a look now. I’m sure much of it will go over my head but keen to learn.

[A_P]

19 minutes ago, Barnsey said:

401k plans in the U.S. are going to get crucified, Govt pensions at massive risk bar 4 or so states that have kept on top of things (for now).

Had a quick search around but couldn't find any market-wide demographic data specifically for passive investors although vanguard shared some info:

  

Oh boy:

• According to the Federal Reserve Board’s Survey of Consumer Finances, the 45- to 64-year-old age group owned 50% of all U.S. equities in 2016. This was almost identical to the 51% average held by the same cohort over the previous 27 years. During that time, the number of 45- to 64-year-olds increased from 19% to 26% of the overall population. In other words, even as the proportion of pre-retirees increased, their stock market footprint did not.

[Harley]

2 hours ago, Admiral Pepe said:

I'm currently staircasing in; world index trackers, FTSE HYP/reflationary stock, gold etc/miners etf. Vod getting a few more purchases than I would probably like  but got my plan, sticking to it. Planting the seeds, not for today or tomorrow, but in ten years and beyond. Looks like the party is just getting started. Will the papers be writing  some scary headlines or will they stick wit the distracting stories?

Right with you there, except bonds rather than miners.  Actually got a very weak buy signal on the FTSE yesterday but I'm not that brave!  Currently buying up some HYP FTSE100 stocks as it's a yellow sticker day.  Sure could go down more but it's a relatively small buy and hold HYP portfolio.  BATS still doing OK (about the only riser)! 

Hah, kiss of death - BATS just went red!

[Harley]

19 minutes ago, Admiral Pepe said:

Had a quick search around but couldn't find any market-wide demographic data specifically for passive investors although vanguard shared some info:.....

Thanks, good data.  I was pretty much just an iShares guy but have been moving more to Vanguard recently for the broad ETFs.  Both provide good data on their products but Vanguard provides that little bit more, plus more general stuff.  They also seem to rank low in securities lending.  Anyways, spreading money across several providers seems sensible.

[Harley]

1 hour ago, Admiral Pepe said:

Yep and the pensions have already been suffering whilst in the bull market. It will be these guys that will be panicking. I'm less concerned* about the passives without looking at the data on the demographics that hold them, but I would assume it's skewed to the younger generation by enlarge. Can't help human nature/behaviour but I suspect passives will be able to stomach this wave a lot more than your boomers nearing retirement. 

 

"Sequential risk" coming to a boomer near you!

[Harley]

14 hours ago, Inoperational Bumblebee said:

Are there not a number of us on this thread effectively doing so? US treasuries, PMs, reflation stocks and some cash while waiting for the big one?

That's my issue - to follow the model in UK form (as Browne suggested) or modify it into non-US stocks and bonds?  My tendency is to stay true to the unmodified form but that's a lot of (UK) country risk, especially with sterling the way it is.  But then PMs are not an issue and the FTSE is more a global index (seems to mostly move inversely to sterling).  Bonds are the problem as Browne's portfolio, originating in the US, has a better bond pool to access.  Ideally I would ladder individual long term bonds rather than use a fund but not an attractive ask in the UK.  Less concerned about short term bonds as cash equivalents.  They help keep cash below FSCs limits but then the ETFs themselves are at risk (the bonds being lent to the banks, to varying degrees depending on the ETF provider).  

[A_P]

6 minutes ago, Harley said:

Right with you there, except bonds rather than miners.  Actually got a very weak buy signal on the FTSE yesterday but I'm not that brave!  Currently buying up some HYP FTSE100 stocks as it's a yellow sticker day.  Sure could go down more but it's a relatively small buy and hold HYP portfolio.  BATS still doing OK (about the only riser)! 

My "bond" allocation is staying in cash either in the tax wrapper or high-interest regular savers/cash savings. I don't fancy bond funds and laddering HMGov bonds doesn't seem that feasible/great for me at the moment. I've not got the kind of funds where I need to worry about the return of money outside of FSCS protection, across accounts it's sufficient. I have considered about laddering with fixed-rate bonds but will stick with cash for now.

I agree with you on the FTSE. I know i won't time the bottom but I have no issue with dipping my toes in at the moment and will continue to do so. Like @Inoperational Bumblebee having experienced crypto volatility equities isn't quite so bad.

 

1 minute ago, Harley said:

Thanks, good data.  I was pretty much just an iShares guy but have been moving more to Vanguard recently for the broad ETFs.  Both provide good data on their products but Vanguard provides that little bit more, plus more general stuff.  They also seem to rank low in securities lending.  Anyways, spreading money across several providers seems sensible.

I'm with you on splitting across the providers. Vanguard seems to be well priced too. Their global all-cap fund is only 0.24% ocf

 

[Harley]

8 hours ago, Festival said:

calling a relatively shallow correction down to about 2100 in the S&P.

2,100!  Shallow!

Totally see what he means though.

[A_P]

18 minutes ago, Harley said:

"Sequential risk" coming to a boomer near you!

Had to google that, thank you!!

https://www.investopedia.com/terms/s/sequence-risk.asp

[Barnsey]

And there we have it folks, as of 5 mins ago the S&P 500 entered a correction.

[DurhamBorn]

2 minutes ago, Barnsey said:

And there we have it folks, as of 5 mins ago the S&P 500 entered a correction.

Gold looks to have lots of energy building up .Everything looking good,just need the miners to deliver the profits now to buy up the stocks getting smashed down.We are positioned very well so far.The miners are only trading at 13 times gold on the HUI,the average is 35 and has been as high as 60,huge amounts of energy on the band if it snaps back into rising gold.My portfolio is -0.2% today,very happy with that.I just hope the market doesnt capitulate too early.Down,down pain inflicted over a longer time will be better,for us at least 

[Harley]

3 hours ago, Harley said:

Currently buying up some HYP FTSE100 stocks as it's a yellow sticker day. 

Ended up buying a lot less than expected.  The technicals for a number of target shares are deffo turning positive but no strong buy signals yet.  Overall, better to wait until next week when I expect some clearer signals.  Quite pleased with myself for holding back!  Patience makes money and age makes patience!

[Harley]

An interesting day in the US (15 minute chart, click to enlarge):

Fingers on the buttons!  S&P goes down on the open while GDX (and gold to a lesser extent) shoots up only to reverse later in the day and then (currently) again.  NIce clear inverse relationship.  On the NASDAQ (not shown, but went lower than the S&P) Apple followed the S&P rather than NASDAQ but Google and (especially) Netflix moved far lower than the NASDAQ.  Like a box of rubber bands!

But on the daily:

S&P falls, GDX and $Gold rise, GDX rises more than $Gold, but GDX then gives up some (most) gains while $Gold keeps rising.

On a major change, cash cyles between the S&P and the miners but leaks into $Gold (and elsewhere?) and stays there?

Treasuries (not shown) did very little to nothing.

Trade the S&P dip with GDX, get out, and then funnel the profits into $Gold?

That's a question, not advice!

 

[MrXxx]

5 hours ago, Barnsey said:

401k plans in the U.S. are going to get crucified, Govt pensions at massive risk bar 4 or so states that have kept on top of things (for now).

But does this only matter if those in the pension fonds need it soon for their pensions?...surely those with other investments/funds could `hold tight` and stay invested until things improved again?

[Harley]

13 minutes ago, MrXxx said:

But does this only matter if those in the pension fonds need it soon for their pensions?...surely those with other investments/funds could `hold tight` and stay invested until things improved again?

Ideally.

But they don't sit tight.

And 10,000 typically cash strapped US boomers retire each day: http://www.mybudget360.com/looming-retirement-crisis-baby-boomer-hit-retirement-age-per-day/

Please don't ask about the UK!

[DurhamBorn]

39 minutes ago, Harley said:

An interesting day in the US (15 minute chart, click to enlarge):

Fingers on the buttons!  S&P goes down on the open while GDX (and gold to a lesser extent) shoots up only to reverse later in the day and then (currently) again.  NIce clear inverse relationship.  On the NASDAQ (not shown, but went lower than the S&P) Apple followed the S&P rather than NASDAQ but Google and (especially) Netflix moved far lower than the NASDAQ.  Like a box of rubber bands!

But on the daily:

S&P falls, GDX and $Gold rise, GDX rises more than $Gold, but GDX then gives up some (most) gains while $Gold keeps rising.

On a major change, cash cyles between the S&P and the miners but leaks into $Gold (and elsewhere?) and stays there?

Treasuries (not shown) did very little to nothing.

Trade the S&P dip with GDX, get out, and then funnel the profits into $Gold?

That's a question, not advice!

 

Take a look at the HUI to gold ratio Harley over time.The miners are already hugely undervalued compared to gold.The rubber band is pulled right back with lots of energy.The SA miners usually lead the turns in the complex and thats what they have done this time.Sibanye and Harmony turning first and hardest.My rubber banders have pinged in line though a few with deep problems are still under the cosh as expected in that type of list.Next up id expect some of the smaller silver miners to start to move.Im long Endeavour Silver and then First Majestic for this.They should then lead the whole complex higher.Daily sentiment on the dollar hit 97% bulls and is over 90%.That will reverse soon and help gold as well.The candlesticks on the equity markets points to drawn out falls coming of the highs we have seen.If they do buy this dip it will be the last one i think.