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DurhamBorn

Credit deflation and the reflation cycle to come.

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3 minutes ago, Noallegiance said:

In other news, the US 2YR/10YR yields have not only caught parity today, but the 2YR yield has shot past the 10YR by 12 basis points. Three days ago it was 10 basis points the other way round.

Apparently, this inversion has correctly preceded every recession, market crash and depression without fail. Apparently.

And the Fed respond by smashing down rates everytime + more QE this time. Only question is when?

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2 minutes ago, Starsend said:

And the Fed respond by smashing down rates everytime + more QE this time. Only question is when?

With the speed events are moving I'm gonna stick my neck out and put £0 on pre-Xmas QE.

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1 hour ago, Noallegiance said:

In other news, the US 2YR/10YR yields have not only caught parity today, but the 2YR yield has shot past the 10YR by 12 basis points. Three days ago it was 10 basis points the other way round.

Apparently, this inversion has correctly preceded every recession, market crash and depression without fail. Apparently.

Such a liar.

It's down to 3 basis points from inversion.

Coaching note: read the correct table column.

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Anyone else feeling a touch of remorse they didn't sell their miners yesterday? I know I need to hold fast but my portfolio has seen a bit of a dent today, somewhat exacerbated by crypto dropping too.

I might need to dial back my risk level a bit as it appears crypto and miners combined are just over 40%. o.O

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4 minutes ago, Inoperational Bumblebee said:

Anyone else feeling a touch of remorse they didn't sell their miners yesterday? I know I need to hold fast but my portfolio has seen a bit of a dent today, somewhat exacerbated by crypto dropping too.

I might need to dial back my risk level a bit as it appears crypto and miners combined are just over 40%. o.O

I sold all my profit last week and the rest today. Im not a trader, i have enjoyed the pm stocks for this run. Still have a bit in silver miners.

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2 hours ago, Noallegiance said:

With the speed events are moving I'm gonna stick my neck out and put £0 on pre-Xmas QE.

I reckon it will be next year personally. Inversions usually signal recession 6 months away at the earliest. Next year, kabooooom.

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28 minutes ago, Starsend said:

I reckon it will be next year personally. Inversions usually signal recession 6 months away at the earliest. Next year, kabooooom.

The Fed is way behind the curve,they are far too tight and have been for 18 months.Its always funny watching the news and seeing lots going on,yet the MSM dont understand the cause.HK riots,Yellow vests France,car sales plunging in India,all to do with the Fed being too tight.My $ liquidity tracker was the backbone to the gold call because once they are too tight for too long cracks appear and those cracks cause gold to move,but its the liquidity the real cause (or lack of it).Everyone and his dog says higher dollar,but i expect sterling,YEN and Euro should all rally soon against it.Most of the west is already in recession,the figures will show it soon enough.

Credit market will tighten now,and that will sow the seeds of inflation 2 to 3 years down the road.

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Posted (edited)

Some index charts not been looking great and the regional AsiaPac, LA, and emerging have lost their shine.  But very big picture is the monthly VIX chart.  It's base trend was down from 2009 but that changed in August 2017 and is currently clearly rising.  This also marked a slowdown in the rate of ascent of the S&P.  The VIX RSI and MACD started rising since then and momentum (stochastic) is in a wedge/descending triangle pattern.  Not great?  At least we don't have a divergence between momentum and price as we had prior to 2008/9.

Edited by Harley

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Q. Whats the difference between a unit trust index tracking say FTSE100 and an ETF doing the same. If they both buy same shareholding I cannot see a difference, unless I am missing something?

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8 hours ago, Inoperational Bumblebee said:

Anyone else feeling a touch of remorse they didn't sell their miners yesterday? I know I need to hold fast but my portfolio has seen a bit of a dent today, somewhat exacerbated by crypto dropping too.

I might need to dial back my risk level a bit as it appears crypto and miners combined are just over 40%. o.O

Seems like you asset allocation has changed quite dramaticallty from what I read on teh thread you created in the investing forum. 40% in miners and crypto isn't for the faint hearted. Have you binned off most of your of holdings from that post then?

7 hours ago, DurhamBorn said:

Its always funny watching the news and seeing lots going on,yet the MSM dont understand the cause.

 

They don't need to understand the cause. That isn't their job. However, what the headlines do to the markets are quite interesting: https://www.investopedia.com/terms/h/headlineeffect.asp

But as Peter Lynch showed in his book beating the street, it's best served to ignore the headlines and MSM

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2 minutes ago, MrXxxx said:

Q. Whats the difference between a unit trust index tracking say FTSE100 and an ETF doing the same. If they both buy same shareholding I cannot see a difference, unless I am missing something?

Your best bet is to google difference between OEIC and ETF. Monvator has some good info on it.

Some of the differences though to consider:

ETF's can be traded throughout the day like normal shares and have discounts and premiums on the nav

OEIC's are usually priced and traded once a day. Eg if you do a buy or sell order at 1pm you're going to have to wait.

In the UK generally OEIC's are based in the UK where as ETF's could well be ROI. So there are a few things to consider with FCSC cover

But overall really for a small time investor imo there isn't much in it. Go with what your broker has and charges for. I hold ETFs in my LISA with AJ but mainly funds in my SIPP and ISA with II. Spread the love

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8 hours ago, Inoperational Bumblebee said:

Anyone else feeling a touch of remorse they didn't sell their miners yesterday? I know I need to hold fast but my portfolio has seen a bit of a dent today, somewhat exacerbated by crypto dropping too.

I might need to dial back my risk level a bit as it appears crypto and miners combined are just over 40%. o.O

I sold profit in a few individual miners but have not touched my GDX/GDXJ holdings or physical silver. I'll be looking to add more in a dip. I don't hold crypto though and I think I'm younger than most on this thread so will be holding on to gold miners for the ride, can always earn more :P

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8 hours ago, Inoperational Bumblebee said:

Anyone else feeling a touch of remorse they didn't sell their miners yesterday? I know I need to hold fast but my portfolio has seen a bit of a dent today, somewhat exacerbated by crypto dropping too.

I might need to dial back my risk level a bit as it appears crypto and miners combined are just over 40%. o.O

Zero remorse. Miners are still lagging way behind metals, and metals recovered nicely yesterday. I believe there's still headroom for PMs and a lot of catching up to do for miners.

However, I'm a believer, not a voice of reason.

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4 hours ago, Harley said:

Some index charts not been looking great and the regional AsiaPac, LA, and emerging have lost their shine.  But very big picture is the monthly VIX chart.  It's base trend was down from 2009 but that changed in August 2017 and is currently clearly rising.  This also marked a slowdown in the rate of ascent of the S&P.  The VIX RSI and MACD started rising since then and momentum (stochastic) is in a wedge/descending triangle pattern.  Not great?  At least we don't have a divergence between momentum and price as we had prior to 2008/9.

Harley do you see any evidence that rather than a crash we get a market by market sector by sector fall?.I had expected we would see PE ratios fall to around 6 to 9 and many value shares are in or near those ranges.Of course it could be they see big profit hair cuts and have another -30%.However $ adjusted here in the UK we have many big stocks down circa 60%-75% already.

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8 hours ago, DurhamBorn said:

The Fed is way behind the curve,they are far too tight and have been for 18 months.Its always funny watching the news and seeing lots going on,yet the MSM dont understand the cause.HK riots,Yellow vests France,car sales plunging in India,all to do with the Fed being too tight.My $ liquidity tracker was the backbone to the gold call because once they are too tight for too long cracks appear and those cracks cause gold to move,but its the liquidity the real cause (or lack of it).Everyone and his dog says higher dollar,but i expect sterling,YEN and Euro should all rally soon against it.Most of the west is already in recession,the figures will show it soon enough.

Credit market will tighten now,and that will sow the seeds of inflation 2 to 3 years down the road.

 
AGREE!
 
Listening to LBC radio on Monday evening the £/$ hits its lowest point since brexit 1.2017...and the financial tart that comes on from the FT was going on about the RECORD amount of SHORTS on £ sterling...
 
I'd say the BELL has RUNG for the bottom for the... 'ol £!
 
I'd like to take a LONG punt on £, however don't have me spread betting acc anymore so looked on HL for something along these lines...
 
Can someone here who knows about this ETFS below explain, as looking at the 1 year chart its gone ONLY one way!
 
ETFS Foreign Exchange Ltd Long GBP Short USD (GBP)
 
image.jpeg.cde9345e79157121a9a91421294895ef.jpeg

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@Yellow_Reduced_Sticker id avoid that,its market cap is below £2 million and only works i presume if your buying it with dollars,not sterling.

Its highly likely that if sterling does turn then UK domestic cyclical stocks will turn as well.Rising currency does the job interest rates should do and so tends to lead to lower rates etc.One of the reasons i sold a large portion of my gold miner stocks was because of sterling.They hit my target (past mostly) and so i was happy to take the profits and keep laddering into UK cyclical stocks.

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Posted (edited)
1 hour ago, kibuc said:

Zero remorse. Miners are still lagging way behind metals, and metals recovered nicely yesterday. I believe there's still headroom for PMs and a lot of catching up to do for miners.

However, I'm a believer, not a voice of reason.

Ditto, although if there was any hype around PM's then I would be selling now for sure.  As it is the bulletin boards for shares which are up even 50% are currently pretty dead which goes to show how hated PM's still are IMO.  Volume isn't anything to write home about either.  I agree there is money to be made in the casino till year end, although its significantly riskier at $1500 AU!

9 hours ago, DurhamBorn said:

.My $ liquidity tracker was the backbone to the gold call because once they are too tight for too long cracks appear and those cracks cause gold to move,but its the liquidity the real cause (or lack of it).

Its fascinating that its always a simple reason why things happen, it doesn't get simpler than there are not enough $ in the world for everyone.  Trump for all he gets slagged off appears to understand that.

Edited by Majorpain

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Thanks for the pep talks folks. xD

1 hour ago, A_P said:

Seems like you asset allocation has changed quite dramaticallty from what I read on teh thread you created in the investing forum. 40% in miners and crypto isn't for the faint hearted. Have you binned off most of your of holdings from that post then?

Some of them, but a lot of it is the run up in crypto and the miners!

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12 minutes ago, Majorpain said:

Ditto, although if there was any hype around PM's then I would be selling now for sure.  As it is the bulletin boards for shares which are up even 50% are currently pretty dead which goes to show how hated PM's still are IMO.  Volume isn't anything to write home about either.  I agree there is money to be made in the casino till year end, although its significantly riskier at $1500 AU!

Its fascinating that its always a simple reason why things happen, it doesn't get simpler than there are not enough $ in the world for everyone.  Trump for all he gets slagged off appears to understand that.

We had a fantastic talk about this way back in the thread @sancho panza etc.The conclusion was that the Fed etc knew the affect and werent stupid,its just it was a weapon to hit China and make sure the dollar was king,at least for another cycle.I think from what we are seeing now we were 100% correct on that,and i havent seen that said anywhere else,by anyone.The first thing my friend told my nearly 30 years ago now was the most important thing in a market economy was the cost of money.Everything else is leads and lags to that and cross market work.Like you say its the simple that causes things,not the complex.The complex is actually the affect of the simple.Gold isnt going up because of the China/US trade war,its going up because dollar tightening like you say means not enough dollars for everyone.One of the best tools i have is the liquidity one,because it doesnt look at "oh rates are still very low we are fine",it looks at are things tightening or loosening.Thats the key.Take UK houses.If liquidity is falling then you cross market that with other things like demographics in buying age,inflation,real wages etc and you then get the end result.

If i need £5 of diesel to get to work,but only put £4 in the tank then the car isnt getting to the destination.Its stopping outside of Best kebab and im walking the rest.The fact i "still" have £4 of diesel makes no difference.The car needs £5.

The Fed started to tighten nearly 2 years ago.18 months is about right for the cracks (it seems tightening take longer to take affect than going loose for some reason).

8 minutes ago, Inoperational Bumblebee said:

Thanks for the pep talks folks. xD

Some of them, but a lot of it is the run up in crypto and the miners!

Yeah you just got richer :),my PM allocation went too high (Errol will say there is no such thing),but because they shot up so hard (and of course some other parts of my portfolio fell)

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52 minutes ago, Inoperational Bumblebee said:

Thanks for the pep talks folks.

I'm holding and adding. I haven't got enough invested to make it feel "worth it" to sell now. I'm also fairly young and willing to hold for the long term.

And I get a kick out of the drama. ;)

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Posted (edited)
3 hours ago, DurhamBorn said:

Harley do you see any evidence that rather than a crash we get a market by market sector by sector fall?.I had expected we would see PE ratios fall to around 6 to 9 and many value shares are in or near those ranges.Of course it could be they see big profit hair cuts and have another -30%.However $ adjusted here in the UK we have many big stocks down circa 60%-75% already.

I had hoped you'd have the answer!

It hasn't rained enough to stop my other work.  My mistake was using the So-Called BBC Weather app.  Can't trust that either!  Switched sources (Met Office) so things should be better now!  Looks wet today though, but plenty of other accumulated desk work!  However, a good topic worthy an initial thought, as much for my own benefit!

I think of several types of "sector": Economic (e.g. "Industrials"), Regional (e.g. AsiaPac), Asset (e.g. Bonds), Currency (e.g. USD and PMs), and Time (e.g. Weekly).  I could also add investment type (e.g. shares v ETFs v funds v trusts) given a period of heightened risk.  I look at any specific investment through these lenses. The world of house prices, precious metals, etc look very different from that POV.

I think we're currently in slack water where tides are turning without clear direction and momentum.  This is often characterised by volatility and churn.  We will also see more hard regulation (beyond QE) as those helping us get into this mess try and make their theories and preferences happen, regardless, through sheer force.  Cue the Lagarde appointment?  Against this backdrop anything could happen, as has been the case for a few years now.  Maybe that's why I find myself increasingly looking at the monthly charts.

No evidence, but there never is that degree of certainty.  But I struggle to decide between a crash and a slow grinding downtrend (masked by churn in all the above sectors). Things may fall as at the end of last year and then pop, but maybe not pop quite enough, and then fall, rinse and repeat.  But then I see some similar signs to those preceding the 2008/9 crash.  Time to cover the bases!

This seems a time for a good asset allocation strategy and stock picking (regardless of sector):

. Economic.  Some economic sectors would seem better than others, just as back in the tech boom where the Walmarts, etc were well out of favour only to have their day.  Some people I listen to are highlighting the energy sector (and I have an oil boiler!) and dividend payers (picked across sectors using such metrics as cash flow, borrowings, etc).  I favour companies supplying things people and businesses need, not want.

. Assets.  Now is a good time to look very closely at asset allocation strategies (e.g. via Portfoliocharts.com) and implement the chosen strategy on weakness.  I stayed under allocated in bonds and regret that, especially as the marked funds stayed in cash.  I listened more than went back to allocation fundamentals. But I'm aware of some fundamental demographic trends (but poor yielding bonds or div players?).  And maybe play any short term swings (e.g. as in PM miners, although that one may have longer legs).  Momentum trading?

. Regional.  Some regional sectors have done well (e.g. Russia, emerging, Asia Pac) and are ones to watch as we have been undergoing a glacial global re-alignment.  I like to think the relative lackluster performance of the FTSE will be the biggest Brexit dividend.  It's odd how the FTSE is claimed to be more of an international index yet has done poorly against a global ETF.   I'm currently spending most of my time swimming the relatively shallow waters of the FTSE, but the other sector considerations are beginning to force me to move beyond the FTSE.

. Currency.  If currency is the current warzone then maybe PMs (and crypto?) are the neutral Switzerland (not Sweden)!  The USD is the biggest market liquidity wise and the USD might be the place to run to.  But an inflexion point is out there somewhere ready to catch people out.  BTW, one of my better "investments" in GBP has been some CAD cash!

. Time.  Finally periods, we're all f*cked long term.  Now is the time to question fundamental principles such as what is a store of value and what is an asset.  Crypto is the first sign of that, especially as just having watched the RealVision video with the Goldmoney guy on crypto versus gold.  An interesting debate.  This is a political economy, where economic principles are subservient to politics, until it all blows up, as it always has from the Roman Empire and before.  I hope, at the end of the day, sans government grabs, companies with real assets owned outright will come through.  I'm also buying some of the non-financial assets (chattels) I need now.  Not necessarily because they're cheap (maybe cheaper with distress deflation prior to inflation) but because I don't trust the money and taxes.  We're all Chinese now!

. Type.  I'm trying to wind down on ETFs, funds and trusts a bit in favour of individual stocks.  I want to be as close to the assets as possible.  ETFs have been untested (except the pain of failure of one for me) and some lend out their holdings, etc, trusts tend not to list their holdings, and all seem to be able to freeze redemptions (Woodford just the latest).  Personally, I'd rather cherry pick an ETF holdings list.  Plus broad trackers could be WMDs some time in the future if it becomes a more stock picking market and/or a crash and no-one to sell to.    

More of a "problem statement" right now.  I'll add a sector review (all sector types!) to my growing to-do list.

The usual disclaimer to all:  For discussion purposes only from some knob. I have a natural bearish personality bias.   DYOR and make your own decisions or risk losing money!

Edited by Harley
Loads of adds as I save here due to the risk of internet loss!

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Yield curve inverted in the US and UK now.

https://uk.reuters.com/article/uk-britain-economy-inflation/uk-inflation-unexpectedly-overshoots-boe-target-in-july-idUKKCN1V40R5

Then as we said inflation would move higher here as a credit deflation hits trapping the BOE,raise interest rates destroy the economy,dont raise and inflation does the work anyway.

I think history will show companies who managed to hold or nearly hold free cash flow this year are actually doing fantastic in the liquidity crunch underway.

 

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Posted (edited)
8 hours ago, Harley said:

Some index charts not been looking great and the regional AsiaPac, LA, and emerging have lost their shine.  But very big picture is the monthly VIX chart.  It's base trend was down from 2009 but that changed in August 2017 and is currently clearly rising.  This also marked a slowdown in the rate of ascent of the S&P.  The VIX RSI and MACD started rising since then and momentum (stochastic) is in a wedge/descending triangle pattern.  Not great?  At least we don't have a divergence between momentum and price as we had prior to 2008/9.

I may be "smoking" a bit here (it was late) but this is what I meant.

VIX in turquoise and S&P in orange.  Monthly data. 

It seems when the VIX trend line turns up, there's a lag in the S&P which more of less rounds, and then falls (obviously?).

Maybe we've had it or are currently still in one such period. 

Not always the case though, especially for the smaller VIX uptrends.

1738535289_Capture2.thumb.JPG.a7bb8bc5fd3a28b195e3ff0c44294f99.JPG

PS: The Trump adminsitration is going to have a job to keep the S&P going up as we come into the electoral season.  Possible but tough.  Maybe that's the importance of the trade war - bringing jobs to the working man (woman) rather than profits to Wall Street!

Edited by Harley

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13 hours ago, Starsend said:

I reckon it will be next year personally. Inversions usually signal recession 6 months away at the earliest. Next year, kabooooom.

Be careful Starsend, everything else has been inverted for some time! That brief inversion of 45 minutes could be all it takes, certainly been a wakeup call for the Fed, probably the signal to start cutting "bigly", I wouldn't even rule out a pre-meeting cut at Jackson Hole this month.

BRACE YOURSELF FOR SOME EXPERT TECHNICAL TRENDLINE ANALYSIS :P

fredgraph.thumb.png.817dfc435787071613ffc0874fef5ec5.png

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