Credit deflation and the reflation cycle to come.

[Cosmic]

27 minutes ago, Gordie Lastchance said:

If my boiler knew how you spoke of it, it would blow a fuse!!! However, I looked at Fundsmith (thank you - something else I had no idea about) and am attempting to get my head round it. I think I worked out what inc and acc means - took ages, like! Admiral Pepe mentioned monevator, so I've been fiddling with that too. A Fidelity fund is attempting to relieve me of my remaining grey matter. This finance stuff ain't half complicated.   

When you know everything about OEIC's and get bored, there's investment trusts (or ITs) too

[sancho panza]

Looking for the unloved....

Any ideas gratefully welcomed.

[leonardratso]

whatever you end up buying, you should immediately be prepared for instant red as soon as you own it, dealing costs,  sods law, other costs etc, immediately eat into what you actually spend and reduce the net worth, then theres exit costs such as dealing costs, maybe averaging up/down if you hold and want more etc etc etc.

Best to not check it every hour/day and just get on with your life, leave it to it. I admit i do pull out if my (arbitrary) loss threshold is breached, but i also tend to pull out if my target is reached/breached. This is because i am a good catholic and would never resort to contraception unless they were of course the popes own recommended brand ('Popes pre-pricked johnnys' TM)

[Gordie Lastchance]

2 minutes ago, Cosmic Apple said:

When you know everything about OEIC's and get bored, there's investment trusts (or ITs) too

The last time I did homework was the year we got electricity and an indoor toilet in our house!

Seriously, thank you, though. 

[sancho panza]

[Gordie Lastchance]

10 minutes ago, leonardratso said:

whatever you end up buying, you should immediately be prepared for instant red as soon as you own it, dealing costs,  sods law, other costs etc, immediately eat into what you actually spend and reduce the net worth, then theres exit costs such as dealing costs, maybe averaging up/down if you hold and want more etc etc etc.

Best to not check it every hour/day and just get on with your life, leave it to it. I admit i do pull out if my (arbitrary) loss threshold is breached, but i also tend to pull out if my target is reached/breached. This is because i am a good catholic and would never resort to contraception unless they were of course the popes own recommended brand ('Popes pre-pricked johnnys' TM)

I know that feeling only too well - the bit about instant red.

Anyway, I think it might be called synchronicity (or some other word) but guess what's just landed on the doormat? A bloody letter from Nationwide Building Society saying my Instant ISA Saver interest rate, which is a shoddy 0.75% is going down to 0.50%. I don't have much in it, but you can see why I want to try and make what I've got return something a bit more than a fly's fart. I've also read on ToS members' opinions of said BS and its lending, so it'd be nice to get it away from them and working elsewhere.

[TheCountOfNowhere]

1 hour ago, spygirl said:

Ive mentioned here (I think) and on ToS - US FED sets the risk free price of cash.

The BoE can only set UK IRs higher than the FED.

Until Carney, we've never had IRs below the FED. UK always has to set rates ~-1-.15% higher - currency risk, lower growth.

Even the ECB cannot buck the FED:

https://www.ft.com/content/c01d76d8-6d7b-11e8-92d3-6c13e5c92914

ECB unwinding QE.

It has to. No cover from FED.

The BoE is so far bhind raising rates. The BoE are kidding themslves that a lower pound will help exports - uit seems like every fucker i nthe UK is working in a nailbar or whatnot.

There are very UK exporters.

I doubt there are any large UK exporters - bar petrol - that export a product entirely sourced in the UK.

Ill give you Scotch and lamb/beef.

 

 

IMHO, they are not kidding themselves, they are kidding us.  From where I am sitting the unelected Mark Carney's sole objective is to keep asset prices ( houses, shares ) from collapsing on his watch.

A couple of commentators now saying, the MPC will have no choice but to raise rates faster and harder now because of this.

This is a disaster in the making, for many, for most.

 

[Inoperational Bumblebee]

4 hours ago, Gordie Lastchance said:

See, this is what's great about this place. People have their sources and resources they're prepared to share. Goodness knows when I'd have found that link you've posted. Cheers AP. 

If it's the psychological side that is troubling you, perhaps you need a larger cash allocation to dampen the swings? May I also recommend:
https://theescapeartist.me/
http://www.thefinancezombie.com/
http://thefirestarter.co.uk/
I've got a whole other bunch if you like those...

4 hours ago, Gordie Lastchance said:

Grateful to you SP. I think you've got the real me already - that's just what I want to do: buy and hold. But buy and hold good (better?) shares. I think I'm getting too wrapped up in playing a timing game - buying when I think they're at a good low point so that I can then enjoy the ride back up the way. I hadn't really put much thought towards dividends, until it was mentioned here - especially the way members have put it (compounding). I also think I've not appreciated the risks associated with the ones I bought previously. As for emotional - been there. The pharma company I bought was around 55p. Dot.com bubble took that to about £2 from memory. Then they dropped to £1.80. "It'll come back up again. Hold on for now." Then it slid to £1.60. "Gordie, that's a big hit. Wait for now, it'll come back up again." Then £1.50, then down and down to being worth bugger all. Same with the tech firm. Bought at 20p and it went to £1. Should have sold. Held on. Saw a hit, but thought it would come back up. Never sold. Same - now worth naff all. Grrr. These shares make me sound good (when they were at their peak), but it was all a big, fat, bubble; that went the way of all bubbles.   

Timing is trading, not investing. Buy good companies for the long term because they are good, not because they are cheap and you hope they'll go back up.

[spygirl]

17 minutes ago, TheCountOfNowhere said:

IMHO, they are not kidding themselves, they are kidding us.  From where I am sitting the unelected Mark Carney's sole objective is to keep asset prices ( houses, shares ) from collapsing on his watch.

A couple of commentators now saying, the MPC will have no choice but to raise rates faster and harder now because of this.

This is a disaster in the making, for many, for most.

 

Indeed.

Carney is a vane, self important fucker.

Should have followed the FED up, delaying by a month or two.

BoE is a price taker not maker.

 

[DurhamBorn]

@sancho panza those goldies are all smashed down,but the charts look good to me.Im glad you reminded me of Kinross,they did a rotten deal in Africa at the top of the last cycle,but i think il add a few of them.Gold looks very similar to the 1999 - 2001 pattern before it has a long bull run.It (and the goldies) look like a rounded bottom and id expect the opposite,a rounded top in the equity markets to form.Harmony have 30 million ounces in the ground (at least) and are valued less than $1 billion.Gold at $1350 and the rand where it is now would give them $300 million free cashflow roughly.$1550 would give them $550mill free cash,or a PE of 2.

Thats a sector that nobody owns.

 

[Yellow_Reduced_Sticker]

7 hours ago, InLikeFlynn said:

This. Too much investment talk on the 'web focuses on buying shares in small and risky companies or instruments (mining cos, crypto currencies, CFDs), hoping for wild and exciting capital growth.

The cruel truth is that none of us can read the future reliably and that the "wild and exciting" capital gains more often than not turn out to be lame and depressing losses.

The dull but pragmatic approach of regular saving into low cost investment funds (in a tax efficient manner using ISAs, SIPPS, VCTs etc), with dividend reinvestment will usually offer much greater rewards in the long term. You will also be able to sleep at night.

Apologies for taking this thread OT,

as you were

 

INDEED!

The above is basicly how warren buffett the second richest person in the world, with a $73.9 billion net worth, made his CASH...

 

[Yellow_Reduced_Sticker]

2 hours ago, janch said:

Yes I had paper certificates and then stopped "investing" after I followed a share tip and bought Marconi because my dad used to work for Plessey (which turned into Marconi) only to see the lot wiped out.............and I used to follow all the action on Ceefax too.  I did use HL to buy and sell via  the phone and I'm not sure about using t'internet and nominee accounts being such an old fashioned kind and risk averse to boot.  However DB is slowly converting me to have another go.  I'd also worked out it's probably better to go for divis rather than worrying about capital gains/losses.  Dealing costs are a big deal too so the idea of a savings account and £1.50 per deal as mentioned by Castlevania seems a good idea.

I've been expecting the mother of all crashes in property and other assets since about 2003 but it seems they've managed to keep the plates spinning all this time so what do I know. 

I lost £2K on Marconi ...thought i was getting a BARGAIN @ £1.25 bloody catching a falling ***** knife

an old chap where i worked at the time put in £17K and like all of us lost the lot...

Its about having balanced portfolio - so even if 1 share does a "Marconi" some of ya others could become 10 baggers!

Ya on the right board to learn from some GREATcontributors here 

[NogintheNog]

6 hours ago, Lavalas said:

Fed statement at 19:00 and Conference at 19:30. See what gold/silver do after that.

I think the PM's have already got todays FED hike priced in, and probably the next two 25 basis points rises also!

The action will happen when they go the other way... Especially the miners

[Gordie Lastchance]

1 hour ago, Inoperational Bumblebee said:

If it's the psychological side that is troubling you, perhaps you need a larger cash allocation to dampen the swings? May I also recommend:
https://theescapeartist.me/
http://www.thefinancezombie.com/
http://thefirestarter.co.uk/
I've got a whole other bunch if you like those...

Timing is trading, not investing. Buy good companies for the long term because they are good, not because they are cheap and you hope they'll go back up.

Thanks for passing them on IB. The firestarter one (which I can't get back into for some reason), had a picture and story about the guy getting a new shed. Now, I'm of the view that a man can never have enough sheds. I gazed longingly at the one on the firestarter site - I guess because I understand sheds more than I do investing!! Hee hee. That's all changing, thanks to the kindly folk like yourself on here and what you've all provided me with.

And yes, what you've said there at the end of your contribution (which mirrors others on here) has been a mindshift for me. Up to now, I have looked at shares because they're cheap and I'm hoping I might get in for a rebound - although I've never made the commitment over these past years after losing my fingers when I tried share buying before. 

[Wheeler]

On 12/06/2018 at 12:08, sancho panza said:

I think there's a danger using M1 velocity due to the fact that it doesn't include time deposits and other liquid assets that M2 does.M2 has had a couple of upticks but over the longer term it's never been lower-I've tried to copy n paste the chart but I can't.

Just to add velocity is a output/money supply as outlined in link.Big mistake of CB's psot 2008 was to assume that velocity would stay constant with money supply increases.Second mistake was to assume that people would spend more as interest rates were driven down.As I've posited on ToS, all they really achieved was to get the indebted spending more.The people they wanted to spend more ie the savers actually appear to have reined in spending somewhat.

You couldn't make it up.

[snip]

1 in terms of yield inversion-we've had discussions before about how much we can trust this measure this time given the vast treasure chest of bonds that the Cb's are sat on.As you say though,the direction of travel is heading that way.

2 as mentioned bfore there's a slight uptick in M2 velocity over the last few quarters but I think the hsitorical low in M2 is of more significance.

I'm also wary of judging this recession by previous ones.As I've posted before there's a theory that there are two types of recessions-inventory and credit.In inventory recessions companies build too much and then sell it cheap.In credit recessions,we see decreases in broad money supply aas banks rein in credit.The last time we had a credit recession was the Geat Depression which featured a significant debt deflation and which features what has been called Fisher's paradox ie that the more debt is paid down,the more people/companies default.

3 It'll be interesign to see what happens to M2 over the next year as to whether it has bottomed.

 

Many thanks SP. I did look at M2 as well but thought that M1 would be more relevant to consumption than M2 which has an element of saving in the time deposits. I read somewhere (but can't remember where) something about when there is an increasing propensity to save then M2 would increase relative to M1 as more funds went into time deposits. 

I do find myself falling into the trap of looking for some simple numbers/graphs to explain everything when if it were that simple everyone would already know about it!

 

 

[Majorpain]

1 hour ago, spygirl said:

Indeed.

Carney is a vane, self important fucker.

Should have followed the FED up, delaying by a month or two.

BoE is a price taker not maker. 

They cant raise rates, the economy would fall to bits.  Its too dependent on cheap credit and the MPC knows it, house prices, PCP cars, 0% credit cards, BTL and HTB for starters.

If it was up to me i would rather raise rates and take the slim chance that things work out, keeping them at 0.5% when the fed is heading 2%+ is a guaranteed one way ticket to pissing off anyone who wants to buy essentials when sterling tanks.

[Hopeful]

On 12/06/2018 at 10:10, DurhamBorn said:

If it was me id be want to be mostly cash as the aim is to use that £100k to buy a house (and i would guess have no/as low as possible debt after purchase),there should be a nice window from houses falling hard before inflation runs hard,that will e the sweet spot (when most people without liquidity cant buy).Im always careful and i consider a home without leverage the no 1 priority.Not everyone would agree,thats just how i see it.After all if things do play out,buying a house cash,then using all spare income to buy inflation assets as the cycle unfolds is a very nice position for an ordinary person.

So if i had £100k and i wanted to buy a house at some point in the not too distant future id probably go 75% sterling cash,15% IBTL (a sterling hedge) and 10% some of the bigger Gold miners.If we get deflation the IBTL and sterling cash should/will increase in value against a house.If we get high inflation the gold miners,although only 10% of your wealth would probably return enough to protect the value of the 100%.If your really worried id take the sterling cash to 65% and 10% in silver and gold as well.

The way i see things now (and i think the way lots more people will see things in the future) an ordinary person can protect themselves with between 10% and 20% of their liquid worth in PMs and their miners.If they get cut in half you lose 10% of your wealth.If we get a full on reflation cycle,you likely protect all your wealth and increase it.Thats a risk reward im very happy to take.Im no gold bug,but the signs are everywhere that its best to own some hard assets,not all in,just a sleep at night amount. 

  

Thanks, I've had a burning similar question to @C-gull for ages having followed your thread on ToS and now here. Always rented, lived frugally, always saved, and 100% in cash. Gave up salaried work 2 years ago and now ticking over, another 14 years to what people consider retirement age. I've never had time (weak excuse) to understand investing outside BS and NS&I ! Although, the one time I did think I should do something and spoke to an IFA, I saw the with profits bonds I was recommended for the pup they were, which put me off ever speaking to an IFA again. Interested you said gold first though, I expected you to say silver, which perhaps shows you how little I know. My question would be what gold or what silver ?

[Wheeler]

On 12/06/2018 at 18:55, Onsamui said:

https://www.vetr.com/posts/9272521995-How-are-US-Treasury-Bonds-and-the-Dollar-Correlated  FYOR

 

Thanks for that @Onsamui. I've read it twice and think I'm starting to understand it now.

[Van Lady]

56 minutes ago, Hopeful said:

Thanks, I've had a burning similar question to @C-gull for ages having followed your thread on ToS and now here. Always rented, lived frugally, always saved, and 100% in cash. Gave up salaried work 2 years ago and now ticking over, another 14 years to what people consider retirement age. I've never had time (weak excuse) to understand investing outside BS and NS&I ! Although, the one time I did think I should do something and spoke to an IFA, I saw the with profits bonds I was recommended for the pup they were, which put me off ever speaking to an IFA again. Interested you said gold first hough, I expected you to say silver, which perhaps shows you how little I know. My question would be what gold or what silver ?

@DurhamBornI have the same question as this. Although I don’t have much spare cash I’m interested in buying a small amount of something that might help for my future. Not get eroded away to nothing. Say £2k

I’m similar to hopeful in lifestyle but I own outright a small 2 bed bungalow. Drawing a private pension that was reduced because I took it five years early and six years away from state pension age. 

[DurhamBorn]

1 hour ago, Hopeful said:

Thanks, I've had a burning similar question to @C-gull for ages having followed your thread on ToS and now here. Always rented, lived frugally, always saved, and 100% in cash. Gave up salaried work 2 years ago and now ticking over, another 14 years to what people consider retirement age. I've never had time (weak excuse) to understand investing outside BS and NS&I ! Although, the one time I did think I should do something and spoke to an IFA, I saw the with profits bonds I was recommended for the pup they were, which put me off ever speaking to an IFA again. Interested you said gold first though, I expected you to say silver, which perhaps shows you how little I know. My question would be what gold or what silver ?

Gold or silver.Depending on portfolio size,if it isnt big id go for several gold miners.10% in them should cover you.If the market thinks the Fed is behind the curve and tightening will push the world to a liquidity crunch the miners should now lead gold higher.

[DurhamBorn]

4 minutes ago, Economic Exile said:

@DurhamBornI have the same question as this. Although I don’t have much spare cash I’m interested in buying a small amount of something that might help for my future. Not get eroded away to nothing. Say £2k

I’m similar to hopeful in lifestyle but I own outright a small 2 bed bungalow. Drawing a private pension that was reduced because I took it five years early and six years away from state pension age. 

If it was £2k id split it between two decent sized gold mining companies.The other option with that sort of money is silver.£2ks worth of silver coins would be a nice amount.It depends on your other investments etc.

As ever its down to individual people.What we do isnt really make trading calls,we offer a road map of what looks likely to be ahead.Then an individual can look at their own position and take it from there.

[DurhamBorn]

1 hour ago, Majorpain said:

They cant raise rates, the economy would fall to bits.  Its too dependent on cheap credit and the MPC knows it, house prices, PCP cars, 0% credit cards, BTL and HTB for starters.

If it was up to me i would rather raise rates and take the slim chance that things work out, keeping them at 0.5% when the fed is heading 2%+ is a guaranteed one way ticket to pissing off anyone who wants to buy essentials when sterling tanks.

Remember they only control the overnight rates,they have no control over the longer end of the curve.The market decides that.Even the Fed cant control the longer end for very long.

[Gordie Lastchance]

5 hours ago, sancho panza said:

Edit to add- we own a raft of these at not dissmilar prices to current.Some up,some down.

I'm weighing purchase of Sibanye/Kinross

 

 

 

Stuck these in the wrong thread....

 

 

Not knowing much about the miners, but eager to ask the silly question - is Kinross a share for a widow or orphan (or tight, scaredy-cat like me)? Cheers SP.  

[Van Lady]

11 minutes ago, DurhamBorn said:

If it was £2k id split it between two decent sized gold mining companies.The other option with that sort of money is silver.£2ks worth of silver coins would be a nice amount.It depends on your other investments etc.

As ever its down to individual people.What we do isnt really make trading calls,we offer a road map of what looks likely to be ahead.Then an individual can look at their own position and take it from there.

Very helpful response DB. Thank you very much!

Super interesting thread!

Glad it’s now on this forum too and full of a sort of mismatch of very very interesting and many knowledgeable people.

[Hopeful]

22 minutes ago, DurhamBorn said:

Gold or silver.Depending on portfolio size,if it isnt big id go for several gold miners.10% in them should cover you.If the market thinks the Fed is behind the curve and tightening will push the world to a liquidity crunch the miners should now lead gold higher.

Ta,

Appreciate what you said about trading calls to @Economic Exile  and I agree. All your analyses and predictions, the road map, make perfect sense to me from a cycle standpoint as I see it. I've just no clue where to start buying