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Credit deflation and the reflation cycle to come.


DurhamBorn

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sancho panza
On 20/07/2019 at 19:37, DurhamBorn said:

The ultimate aim of investing should be to secure cash flow from dividends to retire on and perhaps some slight capital selling.I see a long term dividend of 6% + 3% increases in it as success and thats what i aim for.During this cycle turn i sold BAT at £50,bought HMY at $1.54,sold some HMY at $2.24 and bought back BAT at £24 that i will no hold for 8 years +.Busy at the moment,but in a year or so its likely il go whole years with maybe 2 or 3 buys or partial sells,or maybe no trades at all.In basic terms,if someone made £2k profit on HMY,nothing wrong with selling, splitting that profit 3 ways,buying Imperial Brands,Royal Mail and Stagecoach and collecting the dividends for the next 20 years and ignoring the short term movements.

That's exactly our aim,even the goldies will eventually be sold for income bearing assets

 

On 20/07/2019 at 21:39, Castlevania said:

I’m in at just under 8p a share. I initially bought in early 2016. All the gold miners went to the moon in the next few months, apart from this dog. But then when gold’s been on the floor it’s not puked up it’s guts like a lot of other gold miners have. 

This is definitely not advice, but if you’re prepared to lose all your capital then by all means take a punt.

Could advice,I Have a little sidepot for the riskier potential mulitbaggers and recycle some profits on bigger plays there.Pan African/Amarillo to name two.

On 21/07/2019 at 14:19, Sideysid said:

I’m not selling out of PM’s as this is just the beginning. But I too haven’t got the likes of 100k or so invested either. We’ve got much further to go for me to pull out my holdings before we start seeing ‘cash for gold’ adverts on TV and gold vending machines making a return.

Yes we may certainly have a pullback and if so I’ll be putting more in. The way I’m playing it, is I’m re-investing profits elsewhere in the sector. For example I’m taking all profits out of my Hochschild and putting into Fresnillo who have taken hit the last few days through less than expected results with investing in new infrastructure etc. 

I think we are much closer than people think. Recession indicators are filtering into everyday life. I’m on holiday in Mallorca at the moment in what would be a very busy area at this time of year. Hotel is not even half full, and this is 4* with 4.5 star reviews on trip advisor etc. In town in the evening even seems quieter than years gone past.

Fed can cut rates 0.5%, but that’s no longer going to be effective as it once was IMO. More QE will see the last hurrah certainly in the FAANGs, but I think the market can now smell it in the water and the smart money is going elsewhere. I’m pencilling in October to see where the land lies from there.

Compeltely agree on bit in bold.I also bought Fres for the first time this week,First time their chart has shown enouhg value for my liking

23 hours ago, Hardhat said:

Any thoughts on INRG?

Clean energy ETF offered by BlackRock. Good performance over the last year with a lot of exposure to solar energy companies.

VanEck also have SMOG but it's not listed on the LSE as far as I can see.

There are also UKW - exposure to UK Wind industry, and NESF, for UK solar. They've both been good performers over the last year.

I'd like a pure clean energy play going forward, especially if we see a major crash, in which case I feel some kind of "green new deal" / infrastructure spending has massive potential to happen.

I know with CNA and other "reflation" stocks there is some energy exposure, but does low carbon etc factor into this thinking at all?

Does anyone have any holdings in this sector?

If anyone is interested in discussing clean energy investing I may start a new thread (unless there already is one that I've missed 🙄)

A separate thread on thsi would be appreciated.I'd definitely prefer a thread we can track back on.Side plays can get lost in this thread at times

3 hours ago, MvR said:

 

The thesis of this thread is very convincing, and seems to be playing out so far, but I'm being careful not to assume it's definitely going happen as predicted. Even the best get it wrong sometimes.  Where the thesis really helps is it gives me what seems like a better than 50/50 chance of getting direction right in the near-mid term, along with some confidence to play for some specific targets. I can build my options strategy around this, including when to take profits, etc.

If I were just holding stock, I'd sell maybe 1/4 at a time as we approach the predicted target levels.  If I were able to put a good chunk away each month and was thinking purely long term, I may not sell at all, and simply leave new contributions in cash for a month or so until after a downswing, and then add to my positions. 

 

Markets and irrationality are historical bedfellows.Take this rally since Christmas has even caught out the people who called it in it's length and breadth

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Bricks & Mortar
9 hours ago, sancho panza said:

Current story is of dollar strength rather than gold weakness.

Absolutely agree.  And it's got me a bit confused.   I was expecting the $ to go lower, and this to propel gold upward.    I thought the market was pricing in a fed rate cut - and I expected downward pressure on the $...
So why is it staying up?
I saw someone floating the dollar milkshake theory yesterday, I think it was on Raoul Pal's twitter, (by someone else).  That was particuarly annoying for me, since I decided last week it was going lower and sold some $ denominated miners to buy more in other currencies. 
This is from way back on these pages:  (page 198)
 

 

  • EDIT:  All the following was originally posted (or reposted) by Eventually Right, (their words are after DB's).  It doesn't look like normal copypasta on here.  I had some difficulties with the copypasting.
On 12/11/2018 at 22:25, DurhamBorn said:

The dollar index has touched my top target today and my figures show it going down to 85 from here.Interesting to see if that call works out as its pretty much opposite what the market sees.Roadmap says dollar 85 gold $1500+,Silver $22.Those seem crazy calls right now,but iv been buying some more silver miners shares today (Endeavour and Majestic).

Lots more sectors here in the UK getting hit hard.Gambling companies seem to be the last lot to get whacked down.The likes of William Hill and Playtech down over 50% now from highs.

Our bear seems to be going sector by sector.It will be very interesting to see if we continue to fall as the US does or not.Tobacco taking a big whack today.

Debt to GDP in the US is now at 240% where just before the Great Depression it was at 180%.A debt deflation and/or massive inflation are the only ways out.BTL and housing still look the most likely place for the pain in the UK.

This part originally by EventuallyRight  I’m very interested in seeing whether you’re right on this DurhamBorn! I’m seeing plenty of predictions for DXY going well above 100 on twitter (by macro guys) but nobody predicting sub 90 in the short to medium term. Your dollar calls have been spot on so far, so it will be interesting to watch how it plays out.

Have you heard of Brent Johnson’s “dollar milkshake” theory by any chance?

His thesis is that the central banks have injected a huge amount of liquidity into the financial system since 2008, and by tightening, the US is going to suck that liquidity into the dollar, and dollar assets. So DXY and US equities way up in the next year or so, because the rest of the world is even more of a financial basket case than the US.

Short 3 min video here of him explaining it: https://m.youtube.com/watch?v=6mkV-c0mlZE

written explanation here: https://www.capitalandconflict.com/investing-in-gold/a-most-destructive-milkshake/

I can see some logic in his argument, so would be interested in why you think he’s wrong, if you’ve got time.

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sancho panza
1 hour ago, Bricks & Mortar said:

Absolutely agree.  And it's got me a bit confused.   I was expecting the $ to go lower, and this to propel gold upward.    I thought the market was pricing in a fed rate cut - and I expected downward pressure on the $...
So why is it staying up?
I saw someone floating the dollar milkshake theory yesterday, I think it was on Raoul Pal's twitter, (by someone else).  That was particuarly annoying for me, since I decided last week it was going lower and sold some $ denominated miners to buy more in other currencies. 
This is from way back on these pages:  (page 198)
 

 

  • EDIT:  All the following was originally posted (or reposted) by Eventually Right, (their words are after DB's).  It doesn't look like normal copypasta on here.  I had some difficulties with the copypasting.

This part originally by EventuallyRight  I’m very interested in seeing whether you’re right on this DurhamBorn! I’m seeing plenty of predictions for DXY going well above 100 on twitter (by macro guys) but nobody predicting sub 90 in the short to medium term. Your dollar calls have been spot on so far, so it will be interesting to watch how it plays out.

Have you heard of Brent Johnson’s “dollar milkshake” theory by any chance?

His thesis is that the central banks have injected a huge amount of liquidity into the financial system since 2008, and by tightening, the US is going to suck that liquidity into the dollar, and dollar assets. So DXY and US equities way up in the next year or so, because the rest of the world is even more of a financial basket case than the US.

Short 3 min video here of him explaining it: https://m.youtube.com/watch?v=6mkV-c0mlZE

written explanation here: https://www.capitalandconflict.com/investing-in-gold/a-most-destructive-milkshake/

I can see some logic in his argument, so would be interested in why you think he’s wrong, if you’ve got time.

At all times,as an indiviudal investor,you are working your best guess of where we are given what's known and what you know.

1) timeframes are key here

2) predicting forex moves is a very-and I mean VERY -difficult business,particularly over the short term

 

As to why it's staying up...Could be anything from what's happening in teh gulf to what's happening in the eurozone/China.

 

Essentially,what he's says makes a logical sense but just because it's logical it doesn't mean it will come true.His thesis is based on the fed continuing tightening which if they don't will cause dollar weakness, or if other CB's start tightening for whatever reason,then the dollar will weaken.For me,he's right in that as markets hit crash mode in a year or two,the dollar will strengthen possibly with a face ripping rally as people pile into dollar $ and UST's.

With any currency prediction there are multiple things that could go wrong.Not least that independent CB activity eg raising rates to fend currency collapse, can undermine good,logical calls.

His basic thesis as explained here is that CB liquidity injections have created a situation where dollar and gold will get stronger.Dollar as a safe haven  from otehr currencies and gold as a safe haven from all currencies.hard to argue with that.

It doesn't mean we won't see dollar weakness if the fed cuts or doesn;'t cut.Interesitng half hour piece by him here.

Ref this video at 13 minutes he says whilst a lot of CB's are doing QE ie creating milkshake,the fed is the only one with a straw.

Whilst he's currently right,any change of course by another CB/govt could undermine that.

Ref his call for $5000 gold at 20 minutes..............................................compelling.Decl-long goldies

 

 

Ref his call that on the CB's being unable to keep the plates spinning for anotehr 5 years ,he was wrong and got his timing worng,consdierations change depending which currecny you're in.

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sancho panza
1 hour ago, Bricks & Mortar said:

Absolutely agree.  And it's got me a bit confused.   I was expecting the $ to go lower, and this to propel gold upward.    I thought the market was pricing in a fed rate cut - and I expected downward pressure on the $...
So why is it staying up?

Also meant to add that it's worth considering the timeframes here.Monthly charts are much better for seeing these themes develop.rather than weeklies.

Looking back at 08 we had dollar weakness up to June 08 as worldwide assets benefited,then as the crisis approached,dollar firmed and then streghtened into the crisis .To me that's the key move that I want to pick up on as we progress.

All in with CB's having printed so much and thanks to declining velocity not seen much price inflation,there's an awfull lot that can go wrong for teh CB's here.

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I recently subscribed to FTAdviser and find it a great resource for the adviser community and others

Just saw this article today about the SLA and Scottish Widows deal:

https://www.ftadviser.com/investments/2019/07/24/sl-retains-35bn-of-assets-after-scottish-widows-deal/

But what I grinned at was the bit "Around £30bn of the assets being retained by Standard Life Aberdeen are invested in passive funds, with the other £5bn in real estate funds...".

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32 minutes ago, sancho panza said:

....Monthly charts are much better for seeing these themes develop.rather than weeklies....

Totally agree.  A really laid back type could invest according to these but would have to wait a long time for the rare signals. But the signals would probably be better most of the time.  I've recently started using them regularly (well monthly!) to validate trends and frame my day to day and week to week work.  I would probably have used them more when younger and busier elsewhere if I had known.

PS: The "basement" comment is a test of my vanity!  We down here are probably mostly the awkward money nerds who are out of water in the bright lights and fast moving pace of the above stairs "Off Topic" thread!  But they will come, and we'll have our moment of glory, one sad dark day.  The time to do things is usually yesterday.

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17 minutes ago, sancho panza said:

All in with CB's having printed so much and thanks to declining velocity not seen much price inflation,there's an awfull lot that can go wrong for teh CB's here. 

This.  Its impossible to know exactly what will go wrong, only that with the amount CB's have messed with the economy/markets that something big will eventually go very wrong.  All that remains is take a position that will hopefully capitalise on that mistake.

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Don Coglione
13 hours ago, Tdog said:

Good news for Eldorado gold holders.

Greece’s recently-elected government wants a stalled gold mine investment by Canada’s Eldorado to be revived, its energy minister said on Tuesday after meeting company executives.

https://www.reuters.com/article/us-greece-eldoradogold/greece-seeks-to-kickstart-stalled-eldorado-gold-mine-investment-idUSKCN1UI2I4

Anyone still holding Infrastrata? Im going for the shit or bust approach, bust seems to be looking more likely!

I am with you! Oh for my finger to have fallen on the "sell" button at 2p...

 

 

 

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sancho panza

Copper...shhhh.

https://edition.cnn.com/2019/07/15/economy/china-gdp-growth/index.html

Hong Kong (CNN Business)China's economic growth has slumped to its lowest level in nearly three decades as the world's second largest economy feels the effects of a prolonged trade warwith the United States.

The country's gross domestic product grew at 6.2% in the quarter ended June, the slowest quarterly growth rate since 1992 and down from 6.4% in the previous quarter, according to government figures released on Monday.
 
China's exports fell 1.3% year-on-year for the first half in dollar terms, while imports dropped 7.3%.
The country recorded a sharper decline in exports to the United States, which decreased 8.1% for the first six months of 2019. Imports from the United States plunged 30% year on year.
 
Global auto brands are also suffering as the world's largest car market slows further this year, following its first contraction in decades in 2018. Chinese consumers are less willing to make big ticket purchases in the uncertain environment, while a government campaign against deadly levels of pollution is also having an impact.
 
Analysts expect Beijing to unveil more stimulus measures to stabilize growth, including boosting infrastructure spending and possible interest rate cuts by the country's central bank, the People's Bank of China. The US Federal Reserve has also signaled it may lower interest rates.
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sancho panza

https://www.bloomberg.com//news/articles/2019-07-24/aston-martin-cuts-vehicle-sales-forecast-on-challenging-outlook?srnd=markets-vp

Aston Martin Lagonda shares plunged the most since they were listed less than a year ago after the British luxury carmaker lowered its full-year sales forecast in response to a deepening auto industry slump in Europe.

 
 

The sports-car manufacturer based in Gaydon, England said Wednesday that deliveries to dealers will decline to as low as 6,300. That compares with a plan unveiled in May for the sale of as few as 7,100 vehicles.

 
 

Aston Martin has already blamed sluggish sales on uncertainty about Brexit and Wednesday’s warning shows a wider market slump in Europe is also starting to bite. In the second quarter, demand fell by 22% in the U.K., its biggest market, and 28% in Europe. By contrast, Asia-Pacific and the Americas region showed double-digit gains.

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sancho panza

USA

https://www.nytimes.com/2019/07/23/business/were-full-car-dealers-say-as-auto-sales-slow-after-a-long-boom.html?emc=rss&partner=rss

Over the past decade, the auto industry enjoyed a boom unlike any other in modern history.

Sales of new cars and trucks rose steadily from 2009 to 2016, the longest growth streak since at least before the Great Depression. Millions of Americans traded up to bigger and more sophisticated vehicles decked out in leather and outfitted with gee-whiz electronics and safety features.

But sales to individual buyers are now falling. Even once popular sport utility vehicles and pickup trucks are sitting on dealer lots for longer stretches.

Car dealers around the country said that the upgrade cycle they rode to rich profits in recent years appears to be ending and that they are seeing fewer buyers despite offering discounts and other incentives. So, dealers say they are ordering fewer vehicles from manufacturers.

On Tuesday, AutoNation said it too has been paring inventory for the last three months, and now has 64,000 new vehicles in stock, 9,000 fewer than a year ago. The company has been limiting orders to top-selling models and cutting back on vehicles that tend to languish for weeks or months and often need to be heavily discounted or sold at a loss.

With more than 325 franchises, AutoNation is considered an industry bellwether and other dealers often follow its lead.

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sancho panza
5 minutes ago, Harley said:

Thought I'd share my motley investing bookcase.....

1386790147_Bookcasev2.jpg.dda3b38d5b6c306016b89e3f73ceddee.jpg

Plus a few eBooks.

Any others?

Except for the first few pages of Bernard grey,I haven't read any.What would be the first one you'd reccomend?

 

and no pun intended with the following Harley old chap...

https://www.bloomberg.com//news/articles/2019-07-23/harley-lowers-profit-margin-outlook-as-slump-spreads-to-europe?srnd=markets-vp

Harley also cut its shipment forecast this year to 212,000 to 217,000, from a previous range of 217,000 to 222,000.

“Plummeting demand in the U.S., which made up 58% of 2018 deliveries, is structural,” said Kevin Tynan, an analyst with Bloomberg Intelligence. “Achieving a goal of attracting 2 million new riders by 2027 will be challenging even without elevated tariffs.”

Retail sales in the U.S., Harley’s biggest market, fell 8%, the 10th consecutive quarter of declines, while worldwide sales dropped 8.4%. Deliveries to Europe, which had been spared from steep declines in recent quarters, tumbled 12.5%.

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30 minutes ago, sancho panza said:

Except for the first few pages of Bernard gary,I haven't read any.What would be the first one you'd reccomend?

Oh, I love them all! 

One of the most interesting takeaways is the diversity of the investing and trading subject.

So depends which part you wish to exercise: brain, technical analysis, big picture, economics (I have, for sanity, excluded my text books!), etc.

But my fav book for sentimental and practical reasons is the first - Murphy's book on chart patterns.  Bought before all this was available on the internet.  My introduction to basic TA and the day I got systematic in my approach.

Then:

. "Living Off Your Money" (McClung) - Beware, heavy going and expensive but good for my detailed research last year into my preferred asset allocation model (although TBH https://portfoliocharts.com/british-portfolios/. is great).

. "Behavioral Technical Analysis" (Azzopardi) which has yet to be properly read but hopefully gives a good insight into the tricks our brains play when trading and investing.

. All the Douglas trading books as they gave me a good insight into how (practically) to kick off all this trading malarkey.

. Then "Trend Following", "Juggling Dynamite", and the "Way of the Turtle" for examples of how effective simple but disciplined trading and investing approaches can be.

. Then the books on past markets and wizards for exemplars and general gossip!

Then my Harley Davidson manual (which is too oily to have in the house)!

 

PS: Also recently bagged a few of Tim Hartford's (of the R4 "More or Less" programme) books - great for war stories on the use and misuse of statistics.

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On 20/07/2019 at 11:15, Harley said:

Oh, I feel a nice little research project coming on!.....

I've tried trading GDX in the past using TA but gave up, having had too many false buy signals. But maybe a bit of yin and yang in that when you get it right you make tons, which maybe offsets the losses (as opposed to more turtle like trades).  I'll re-assess (something to always do as findings and assumptions do change in this game) but moving on to my conclusion at the time to trade the constituents for a better result (discussed some months ago)....

I'll take a group of miners and run them through my momentum based TA system for buys and see.  Probably not sells as that's more subjective, etc but I'll see.  My system isn't anything special other than it's a system rather than hormones, bias, etc but it should act as a fair TA proxy.  So which stocks to consider.......

Maybe a good start would be a subset of @sancho panza's recent list:

Any other candidates?

PS: May take a little while as I have another life outside of this malarkey!

Will indeed take some time as best I automate the process, which has required me to learn the Pine editor in TradingView to automate and back test trading strategies.  An excellent topic but very annoying.  But I love the way it forces you to be watertight in your trading strategy (else you can't code it) as well as highlight the systematic versus intuitive mix in most approaches.    

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Chewing Grass

Love how media pundits blame the symptoms (Brext/China Trade War) rather than the underlying structural issues they have been papering over since at least 1992.

Either I'm delusional or they are deceitful useful idiots.

 

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9 minutes ago, Chewing Grass said:

Either I'm delusional or they are deceitful useful idiots. 

They are deceitful idiots and people are only delusional if they don't see it!

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13 hours ago, sancho panza said:

 

Compeltely agree on bit in bold.I also bought Fres for the first time this week,First time their chart has shown enouhg value for my liking

Silver up again today, Fresnillo down again!  If it gets down to 700, I may top up, even though I already have too much. Still below 5% total portfolio if I take work pension into account!  

I had excellent ride on New Gold trades (mainly thanks to @kibuc) but on much smaller amounts because I was a bit more brave buying and selling in my cheap transaction trading account. Fresnillo is in £10 a trade Lisa, so there were definitely couple of times when I was close to selling but haven't because I was worried about transaction costs and lost out.

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5 hours ago, Tdog said:

Itll either go well past that 2p mark or die a death by the end of the year imho.

I'm stunned it can do anything other than increase, I've seen it get EU funding and take off deals since i bought and it decreased.

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Agent ZigZag

After reading opinions made yesterday, thank you all,  I decided to take very healthy profits today from all of my gold miners except Yamana that has been a slow dog for me and reinvested part back into the silver miners I own namely Fresnillo, First majestic and Endeavor as well as topping up a number of dividend paying shares. I still hold a sizeable amount in the gold miners under my ISA some would say an unbalanced portfolio  but so far I am happy to take the risk that has worked in my favour..I am now fully invested in my ISA for the year. Now Im just watching the silver price and the dollar that will dictate what I do next. My SIPP I am leaving alone and will just keep on adding and holding cash. If we get a big sell off in equities I want to have the fire power available to hand even though my gut tells me the markets are still going to roar ahead.

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6 hours ago, Chewing Grass said:

Love how media pundits blame the symptoms (Brext/China Trade War) rather than the underlying structural issues they have been papering over since at least 1992.

Either I'm delusional or they are deceitful useful idiots. Economists

 

 

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Open question -  if you were looking for one commodity stock to buy, bearing in mind commodities are at near historic lows, what would it be?

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Napoleon Dynamite

I found this Mark Blyth talk interesting.  A lot of insight into the history of the economy over the past century.

Hard to sum it up as it's a 100 miles an hour, and in all honesty I was struggling to keep up.  Has lots in common with the thinking on this thread regarding the history of things, but comes to a different conclusion to this thread on where things are going to go.  Seems to think the low interest rates will persist along with controlled inflation and future economic changes are climate change driven (after the fall of the populist leaders). He's left wing so worth bearing that in mind as to his angle.

Lecture is 50 mins worth, the rest is a Q&A.

 

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