Credit deflation and the reflation cycle to come.

[Harley]

1 hour ago, Ponty Mython said:

Having done quite a bit of business with Russia, I would be happy to invest in their potential. The tricky bit is how.

The Russia ETF has done well this year.

[sancho panza]

On 19/06/2019 at 18:01, Starsend said:

The Government inflation figures are complete nonsense. Everything I see around me has double and tripled over the last 15 years, houses, electric, haircuts, food, tradesmen, eating out...

Pretty sure 15 years ago a bag of potatoes in Tesco was about 60p - now the best part of £2. Certainly more than 2% inflation that is.  Remember butter being about 70p not long ago as well, now it's £1.50.

Fark knows where the Government get their figures from but then who is the biggest beneficiary of high inflation, oh wait,  deficit spending Governments.

I do wonder if all these so called real returns in equities are actually nothing of the sort if measured against real inflation.

Apparently it was Abe

' You can fool all the people some of the time and some of the people all the time, but you cannot fool all the people all the time '

 

As I think DB said,people know somethings up and have done for some time.

[Harley]

Peak Aldi?  Now I've had a bit of a thing about Aldi well before it was fashionable but like all things I'm now worried it's had its moment for me, due probably mainly to the inflation end game.

I visited a newly refurbished Aldi today (been to a few).  I, and others, noticed two changes other than the (not really necessary) nicer layout:  higher prices and a reduction in lines (SKUs), especially away from the fancier, more expensive food stuff.  Worse, I recently shopped at Tescos and found the products to be of better quality and more variable than before as to which store was more expensive.

Aldi seem to have had quite a bit of shrinkflation in the past but maybe like the others just can't "suppress" higher prices any more so need to shrink the range, go for cheaper (to make and sell) products, and raise prices, in some cases by quite a lot.  Maybe also an increased proportion of processed stuff where you can play around with the recipe and hence costs.  Apart from the new layout, product wise it seemed to have regressed more towards the original Aldi.

Maybe these new stores need time to bed in or maybe a new strategy is also being rolled out at the same time.  Will be interesting to watch, but Tescos is looking more interesting than previously, something I never thought I'd see.

Maybe I need a new strategy too!

[Harley]

8 hours ago, Agent ZigZag said:

......I can see another Council Tax (Poll Tax) situation brewing here in the future.

Plus England is well overdue a re-rating as I believe happened in Wales, etc. 

IMO it's pensions, well beyond what most tax payers can get, not that I'm going to fall for a divide and rule tactic from the polos.

The result of yet another long period of failed polos, this time at the local level?

[Starsend]

21 minutes ago, Harley said:

Peak Aldi?  Now I've had a bit of a thing about Aldi well before it was fashionable but like all things I'm now worried it's had its moment for me, due probably mainly to the inflation end game.

I visited a newly refurbished Aldi today (been to a few).  I, and others, noticed two changes other than the (not really necessary) nicer layout:  higher prices and a reduction in lines (SKUs), especially away from the fancier, more expensive food stuff.  Worse, I recently shopped at Tescos and found the products to be of better quality and more variable than before as to which store was more expensive.

Aldi seem to have had quite a bit of shrinkflation in the past but maybe like the others just can't "suppress" higher prices any more so need to shrink the range, go for cheaper (to make and sell) products, and raise prices, in some cases by quite a lot.  Maybe also an increased proportion of processed stuff where you can play around with the recipe and hence costs.  Apart from the new layout, product wise it seemed to have regressed more towards the original Aldi.

Maybe these new stores need time to bed in or maybe a new strategy is also being rolled out at the same time.  Will be interesting to watch, but Tescos is looking more interesting than previously, something I never thought I'd see.

Maybe I need a new strategy too!

Take a lot for me to ever trust Tesco again. I used to shop there years ago but moved elsewhere as they gradually went through their entire food range making it inedible. Absolutely disgusting most of their food, beyond me who buys it.

[Harley]

On 19/06/2019 at 18:01, Starsend said:

I do wonder if all these so called real returns in equities are actually nothing of the sort if measured against real inflation.

Bingo!  I assume, where I can, a longer term real rate of return (net of inflation) of zero!  That's based on what to me is a reasonably derisked asset allocation still mainly in equities.  Anything over that is a bonus to be banked but not to be banked on!  Note the percentages that now have to be used in projections for the low  medium and high scenarios.  I believe the top rate is 7%! 

[sancho panza]

14 hours ago, DurhamBorn said:

Lots going on, $1360 was resistance on a long 6 year consolidation.Im really pleased my road map picked the turn perfectly.I get calls wrong,but i think i got the turn late May early June about as good as anyone in the market.There is still a chance we get a pull back.My sentiment indicator is flashing borderline danger (83% bulls retail) and the commercials have gone heavily short.We might see a pull back in the GDX still to around $22.40 and if we do anyone not long the sector should use the chance to get in.No selling here though for me.Its crucial not to let a pull back if it happens shake you out.Just for information my road map is showing $1550-$1620 likely range for gold,GDX $30 target,then goes down as US equity markets really crack lower.These arent timing tools they are where we should end up.

Perfectly put and exactly how im positioning.Passive investing is doomed in a distribution cycle.

I'm not one or blowing smoke up people's backsides but on this one you have been saying it for months.

13 hours ago, Majorpain said:

I'm less worried about where its going to be next week and more about where its going to be in 6 months, $1500+ gold would certainly put it back in view for the average investor. 

The good news is that Banks are getting wary and financial conditions are starting to tighten for the real economy, competitor took out a £100k loan for 12 months for £50k and a personal guarantee.   That's madness IMO, especially for a £4m turnover business with not a huge amount of debt.

I was looking at some bank share prices the other day and Barclays was £1 in 1990.Currently £1.50.The next picture paints a thousand words about QE/bad debts/ZIRP/HTB1+2/FLS.

Dread to think what would have happened without it.

13 hours ago, kibuc said:

BREAKING: People who pay through their nose for housing have very little to spend on anything else.

https://www.bbc.co.uk/news/uk-48700122

It's one of those 'no shit sherlock' moments for the So-Called BBC

13 hours ago, DurhamBorn said:

Its a conservative target CP and is only stage one in a cyclical bull,though i think the GDXJ might put on 50%+ during stage 1.A lot depends on how far the dollar goes down.A lot of miners give back on currency what they gain on gold,but investors tend to sentiment on gold price alone.Expect platinum to take over from gold at some point as well,it should double going forward.

Jury still out if we go straight to inflation or get a sharp deflation,but the mid term is clear.Inflation cometh.

AM learning all about this dollar connectivity

Personally,think we'll have a decent deflation first.

[Harley]

49 minutes ago, Starsend said:

Take a lot for me to ever trust Tesco again. I used to shop there years ago but moved elsewhere as they gradually went through their entire food range making it inedible. Absolutely disgusting most of their food, beyond me who buys it.

True, my sample size was statistically invalid: one box of sole fillets!  Bigger and tastier than Aldi who have recently reduced their box size by about 20% or so, and yet the fillets still rattle inside!

[Harley]

5 minutes ago, sancho panza said:

It's one of those 'no shit sherlock' moments for the So-Called BBC

Aka "crowding out", with all that implies!  

[sancho panza]

11 hours ago, Harley said:

 

According to: https://www.mycalculators.com/ca/retcalc1m.html

Dreamer Joe wants to retire at 55 with a £250k pension pot and reckons he needs £15k pa to live on (for simplicity, let's ignore the state pension whenever that kicks in).  Joe reckons he'll live to 85 like his mum and dad.  He doesn't want to leave any legacies other than his house which anyways may be needed for care.  Joe's done his research, listening to the former sports presenter now economics correspondent on the TV, and understands inflation is well under control at 2% and he can get 7% invested "somewhere".  Joe's right!  He can draw down an inflation adjusted £15k pa and end up thirty years later on £0 savings.

Then the truth fairy pays Joe a visit one night.  First she paints a picture of Joe living on £15k pa.  Fine for the basics thinks Joe but a basic 30 years is a long time.  So let's say £20k (although truth be known, he really thinks £25k).  Then the truth fairy reads him a bed time story about the deviousness behind the inflation figure and Joe realises he should have plumped for 5%.  Oh, and those investment returns, other than that 5:1 down the bookies, maybe should be more like 5% tops just to take some of the "excitement" out of the next 30 years.  Back to his calculator and, oh dear....£8k pa for you son!  But then he'll have his state pension, eventually, which assuming several things, may make up some of the shortfall, if he can live on the £8k until then.

Joe, thinking early retirement not so great, decides to work a bit easier a bit longer and happily books 2048 with the Grim Reaper!

Joe goes his merry downsized way, working part time while taking out his £8k a year.  Actually, turns out working at that checkout is good fun, meeting all those happy people.  But dark clouds start to gather.  Turns out that 5% return rate was a bit of a wish as the stock market just went down 25% the same year he "retired" and his pot shrunk to £187,500.  Hopefully it will go up again but alas hope doesn't pay the bills and it'll have to go up a lot to catch up and compensate.  Anyways this stock market thing is too scary so he gets talking to this bloke who says UK bonds are safer, at a cost of a 2% rate of return.  This other bloke cuts in the conversation and mentioned an optimised portfolio approach and expected rates of return but Joe don't do math.  So back to the calculator....£4k pa for you son!

Joe works out how long his £187,500 will last and calls back the Grim Reaper to re-book for 2036!  Agreed, a bit pessimistic given he's ignored his state pension but it turns out the Grim Reaper was on his way to visit HM Treasury for a "chat"!  Meanwhile, you can find Joe during his time off down the pub.  Buy him a drink and he'll now tell you about how a withdrawal rate is the answer and not the question.  That involves: the actual amount needed, the amount to leave behind, how long you've got, a real personal inflation rate, and a sensible rate of return versus risk (which is predicated on a chosen asset allocation), plus a few other assorted odds and sods.  

PS: A top down "safe" withdrawal rate of 4%?  That would be £10k pa on £250K, assuming that assumes a drawn down of a stable capital base to zero.  Or, looking beneath the sheets, 30 years at 7% return at 5% inflation, every year, no surprises.  Point is, how many would know how crucial these (brave?) assumptions are and are successfully managing things accordingly?  Me?  Even now, I only get one right!

An amazing bit of writing if I may say.Wasted on our minsucle audinece tbh.

But I enjoyed it as much for the humour as the content

5 hours ago, Cattle Prod said:

I like uranium, but the only way I found to access URA is an IG spreadbet. Done fuckall for months, but I don't mind. Price is low. Went well today top

Good aggregatoir ite below

http://www.miningfeeds.com/uranium-mining-report-all-countries

[DurhamBorn]

URA was a great way to play Uranium and iv made good money on it serveral times until the EU blocked us from buying US ETFs,

On gold and GDX i expect we might only see shallow pull backs  as the road map extends into late October/early November in an uptrend.Unless i see big changes in the data il be selling around that time heavily from my miners.I actually shaved a couple of bottom ladders today that were up 30%+

 

[Harley]

52 minutes ago, sancho panza said:

Personally,think we'll have a decent deflation first.

IMO only on distress selling before market consolidations and then oligopolistic or monopolistic pricing and inflation. 

Sterling has fallen, and continues to do so, to prevent much deflation in consumer prices.  This fall in purchasing power has been going on for decades and is driven by such macro factors as the balancing of East and West and fundamentally unsound monetary policy.  Nothing to do with Brexit, etc, like those politicised and hence worthless commentators would have us believe.  We are in a form of end game, or cycle within a cycle, within a....

That said, margins may only be turning now.  First the over-indebted badly run zombie companies go but eventually margins, which have been great, also go as shrinkflation, renting everything, and the other tricks have had their day.  People have run out of meaningful money!  End of!

I imagine many boardrooms have now run out of excuses for poor sales against prior years of ever increasing forecasts, and have had that come to Jesus moment where the dam bursts as someone says the unsaid - it ain't going to happen!  Everyone in corporate then runs round giving it yap until someone finally has the power base to step in and do the necessary.  That may be to cut costs further (tough), cut prices and hence margins, or actually cut output and raise prices (depending on price elasticity).

I was reflecting with a friend today on how much has changed in the last 5 years.  We were talking about some specific bullish corporate reorganisations back then that are now being reversed after years of financial failure.  The strategic corporate picture has radically changed. 

Must say, we nailed the strategic voodoo now coming to pass back at the start, 180 degrees from what they should have done.  Any disposals now are not for the once anticipated bullish strategic reasons but for basic working capital imperatives in the face of a wall of debt, covenants, and a "no mas" from the money markets and ultimate owners.

In terms of a stock market deflation, maybe it largely depends if money printing can outpace demographics and without those nasty side effects of robbing Peter to pay Paul.  A tough ask.

Economics, without true growth, is a zero sum game.  All they can do is play with time to give the appearance it (currently) isn't, but everything eventually becomes due, with interest!

I'm going long the Austrian school!

[Harley]

In case I sound a bit negative on this retirement malarkey, I put my trust in the immortal words of the immortal Ronnie Barker:

"No-one got rich by wasting money"!

Above a certain salary, especially with current tax rates, what I spent became more important than what I earned.

Sure, things do seem harder now with higher fixed costs but the level of sophistication in getting us to part with our money has also increased.

[DurhamBorn]

I think we need to start to put a portfolio together

3 minutes ago, Tdog said:

So you see a short sharp crash coming in Golds/Silvers in 4/5 months but looking to make significant gains until them.

Im no trader hence was preferring to dabble now and stick 15k or so in when the crash occurs, up about 1300GBP from 3k invested in SBGL - Endeavour and ELD.

Is there anything in the offing so ETFs can be bought, make like easier for people like me who'd be just as well off getting a monkey to choose which specific stocks to buy.

 

No that i know of Tdog.Thats a great return so far on capital invested and all three look good to go through this run.Endeavour have operational problems where silver is now so should splutter a bit until silver gets over $16,but then play catch up.Late October/November is where i see a big pull back in the present cycle and il be taking money off the table then.Im also skimming a few bottom ladders as we go along from a few.I sold a ladder in Coeur Mining for instance as it took a 30%+ gain from the 22nd May purchase and tickled out a few more Harmony for a 30%+ gain.I had far too many of them and the holding size is now much more sensible.

[Sound Money]

Gold at $1406. Things are starting to get interesting

[CVG]

8 hours ago, Harley said:

Peak Aldi?  Now I've had a bit of a thing about Aldi well before it was fashionable but like all things I'm now worried it's had its moment for me, due probably mainly to the inflation end game.

I visited a newly refurbished Aldi today (been to a few).  I, and others, noticed two changes other than the (not really necessary) nicer layout:  higher prices and a reduction in lines (SKUs), especially away from the fancier, more expensive food stuff.  Worse, I recently shopped at Tescos and found the products to be of better quality and more variable than before as to which store was more expensive.

Aldi seem to have had quite a bit of shrinkflation in the past but maybe like the others just can't "suppress" higher prices any more so need to shrink the range, go for cheaper (to make and sell) products, and raise prices, in some cases by quite a lot.  Maybe also an increased proportion of processed stuff where you can play around with the recipe and hence costs.  Apart from the new layout, product wise it seemed to have regressed more towards the original Aldi.

Maybe these new stores need time to bed in or maybe a new strategy is also being rolled out at the same time.  Will be interesting to watch, but Tescos is looking more interesting than previously, something I never thought I'd see.

Maybe I need a new strategy too!

Shrinkflation on their bog roll was especially noticeable and very upsetting! I have warned Aldi (via their Contact Us) not to play the same games as the rest. I'm sure they will heed the warning (lol).

[MrXxx]

6 hours ago, Harley said:

In case I sound a bit negative on this retirement malarkey, I put my trust in the immortal words of the immortal Ronnie Barker:

"No-one got rich by wasting money"!

Above a certain salary, especially with current tax rates, what I spent became more important than what I earned.

Sure, things do seem harder now with higher fixed costs but the level of sophistication in getting us to part with our money has also increased.

I think you have nailed the two things governing retirement and FIRE...save, by watching/curtailing your spending, and preservation, by investing to maintain parity with inflation...anything else is a bonus/luck of fate!

[Harley]

2 hours ago, CVG said:

Shrinkflation on their bog roll was especially noticeable and very upsetting! I have warned Aldi (via their Contact Us) not to play the same games as the rest. I'm sure they will heed the warning (lol).

Good luck with that.  I'm still waiting for a reply on why their organic chicken is as tough as a battery hen (maybe it is!) and that was years ago!

[Harley]

3 hours ago, MrXxx said:

I think you have nailed the two things governing retirement and FIRE...save, by watching/curtailing your spending, and preservation, by investing to maintain parity with inflation...anything else is a bonus/luck of fate!

Indeed.

Each to their own but it amazes me what people spend on cars, phones, subscription tv, entertainment, coffees, pubs, etc.  Especially when I know some of the margins in the supply chains.  We all need a vice or two and they do help with the shite most of us have to face on a daily basis but it is at the price of locking us into a system we eventually want out of.

Regarding a comment about a £250k or whatever pension pot being a faint possibility for a current 30 something, I recall spending the last of my savings at that age on my wedding.  Sure, housing was sort of saner back then, but there's a long time between then and retirement (which I would avoid, preferring downsizing) so maybe it can still be done.  And time is the secret weapon here.

Hope so.  I would happily let house prices collapse to get things back closer to a properly functioning state as IMO that really should not be seen as an investment for most people.  And house prices are primarily a function of credit (financialisation) and population growth, the same old same old two villains which crop up everywhere.  And these two things in turn are controlled by.......because......!  That's the system!

[BearyBear]

On 20/06/2019 at 08:07, Cattle Prod said:

@DurhamBorn The biggest compliment I can give you is that I'm not surprised. I've seen you do this on the dollar before, when no one else was calling it. Whatever you're doing, its working! And thanks again for sharing your knowledge.

Your roadmap is indicating c. 25% gain in GDX, and c. 20% in gold itself. I'm interested in why you think the miners won't leverage the price as much this time? General equity negativity?

Edit: that's timely, GDXJ just opened 6.3% up on the LSE, even though sterling bounced! US open is going to be bonkers, if they don't smash it down first

I have also say thank you @DurhamBorn for sharing your views and opinions. I can only hope the newcomers won't annoy you with private messages asking for investment advices... Please continue posting..!

[Harley]

11 hours ago, sancho panza said:

An amazing bit of writing if I may say.Wasted on our minsucle audinece tbh.

Have I just been fired? 😭

[sancho panza]

14 hours ago, DurhamBorn said:

URA was a great way to play Uranium and iv made good money on it serveral times until the EU blocked us from buying US ETFs,

On gold and GDX i expect we might only see shallow pull backs  as the road map extends into late October/early November in an uptrend.Unless i see big changes in the data il be selling around that time heavily from my miners.I actually shaved a couple of bottom ladders today that were up 30%+

 

If you have the money you can adjust URA to suit a small cross section of shares with a little work.Some of the holdings are out eg Barrick gold/Rio/BHP/Mitsubishi/Macquarei.

https://etfdb.com/etf/URA/

You could hunker down in Cameco/Uranium paticipation/Dennison/YCA/Fission etc and have a purer play than the ETF which gains a lot of exposure you may not want.

13 hours ago, Harley said:

IMO only on distress selling before market consolidations and then oligopolistic or monopolistic pricing and inflation. 

Sterling has fallen, and continues to do so, to prevent much deflation in consumer prices.  This fall in purchasing power has been going on for decades and is driven by such macro factors as the balancing of East and West and fundamentally unsound monetary policy.  Nothing to do with Brexit, etc, like those politicised and hence worthless commentators would have us believe.  We are in a form of end game, or cycle within a cycle, within a....

That said, margins may only be turning now.  First the over-indebted badly run zombie companies go but eventually margins, which have been great, also go as shrinkflation, renting everything, and the other tricks have had their day.  People have run out of meaningful money!  End of!

I imagine many boardrooms have now run out of excuses for poor sales against prior years of ever increasing forecasts, and have had that come to Jesus moment where the dam bursts as someone says the unsaid - it ain't going to happen!  Everyone in corporate then runs round giving it yap until someone finally has the power base to step in and do the necessary.  That may be to cut costs further (tough), cut prices and hence margins, or actually cut output and raise prices (depending on price elasticity).

I was reflecting with a friend today on how much has changed in the last 5 years.  We were talking about some specific bullish corporate reorganisations back then that are now being reversed after years of financial failure.  The strategic corporate picture has radically changed. 

Must say, we nailed the strategic voodoo now coming to pass back at the start, 180 degrees from what they should have done.  Any disposals now are not for the once anticipated bullish strategic reasons but for basic working capital imperatives in the face of a wall of debt, covenants, and a "no mas" from the money markets and ultimate owners.

In terms of a stock market deflation, maybe it largely depends if money printing can outpace demographics and without those nasty side effects of robbing Peter to pay Paul.  A tough ask.

Economics, without true growth, is a zero sum game.  All they can do is play with time to give the appearance it (currently) isn't, but everything eventually becomes due, with interest!

I'm going long the Austrian school!

I think we have to differentiate between credit deflation(in the banking system)which I'm on about and price deflation.Credit deflation can occur alongside price inflation.The two aren't mutually exclusive.

We will get a credit deflation-no two ways about it.It's a mathematical certainty.How long it lasts,who knows,depends on CB policy response.

Worst of both worlds is a credit deflation running alongside price inflation  which is becoming more and more likely.

 

ref economic growth,as ever we should refer back to money velocity and the decline of it post 08.No real growth without increasing velocity to my untrained eye.

 

Stock market deflation might not even occur across broad indices if some sectors deflate as others inflate.

 

10 hours ago, Sound Money said:

Gold at $1406. Things are starting to get interesting

Indeed.We may get a pull back.Nothing goes to Heaven/Hell in a straight line.But the fact that it's risen past $1400 is a sign of things to come I think

[Inoperational Bumblebee]

Revisiting something from earlier, I can confirm I don't get the London-listed GDX/GDXJ on iWeb either! They have SPGP though.

7 hours ago, CVG said:

Shrinkflation on their bog roll was especially noticeable and very upsetting! I have warned Aldi (via their Contact Us) not to play the same games as the rest. I'm sure they will heed the warning (lol).

They've recently changed their Saxon branded toilet roll and the kitchen roll. The toilet roll isn't as comfortable. The kitchen roll used to be nearly as good as Plenty but they've downgraded it to basically just be generic cheapo stuff. You can no longer use it to dry the outside of steak without it coming apart and covering your steak in bits of paper. They've lost my custom.

[JMD]

20 hours ago, Castlevania said:

For Uranium the closest proxy is probably Yellow Cake.

thanks Castlevania, I now remember this company being spoken about on here last year I think, and its share price has fallen since then so appears good value 

[JMD]

18 hours ago, Loki said:

I have it at the back of my mind they were giving land to anyone willing to farm it - and the soil there is incredible. 

Although, at that latitude, if we do get a solar minimum of mention, it will be unfarmable. 

Yes. I believe that a number of dispirited (disenfranchised) South African and Zimbabwean farmers have already emigrated to the Ukraine, so probably only matter of time before they trek onward onto those thawing Siberian plains.

re. your other point, I thought the theory of solar activity causing global warming - was based around solar activity increasing, and as such this type of cosmic change would almost certainly be a long term trend, which I guess sort of ties in with historical 'mini' warm/cold periods here on earth lasting hundreds of years.