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Credit deflation and the reflation cycle to come.


DurhamBorn

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5 hours ago, DoINeedOne said:

This was not from the guy i knew but came across it online after researching Argentina online and what happened, interesting read 

https://www.dropbox.com/s/1m246bmxb9o2y34/Argentinastory.pdf?dl=0

 

Extract:

"GOLD!! Someone hit me in the head please because I messed up about the gold issue. Everyone wants to buy gold! “I buy gold. Pay cash” signs are everywhere, even on TV! I can’t believe I’m that silly! I just didn’t relate it to what I read here because they deal with junk gold, like jewelry, either stolen or sold because they needed the money, not the gold coins that you guys talk about. No one pays for the true value of the stuff, so big WARNING! Sign on people that are buying gold coins. Since it is impossible to determine the true mineral percentage of gold, small shops and dealers will pay for it as regular jewelry gold. What I would do if I were you: Besides gold coins, buy a lot of small gold rings and other jewelry. They should be less expensive than gold coins, and if the SHTF bad, you won’t be losing money, selling premium quality gold coins for the price of junk gold. If I could travel back in time, I’d buy a small bag of gold rings. Small time thieves will snatch gold chains right out of your neck and sell them at these small dealers found everywhere. This is VERY common at train stations, subways and other crowded areas. . my advice, if you are preparing for a small economical crisis, gold coins make sense. You will keep the value of the stuff and be able to sell it for its actual cost to gold dealers or maybe other survivalists that know the true value of them. In my case, gold coins would have been an excellent investment, saving me from losing money when the local economy crashed. Even though things are bad, I can go to a bank down town and get paid for what a gold coin is truly worth, same goes for pure silver. But where I live, in my local area small time dealers will only pay you the value of junk gold, no matter what kind of gold you have. . I’d have to say that if TSHTF bad, gold jewelry is a better trade item than gold coins. "

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UnconventionalWisdom

Germany preping for fiscal spending if they head into recession.

Goes along with DB's preduction that QE will be performed straight into the economy. 

https://www.bloomberg.com/news/articles/2019-08-20/look-to-2009-as-precedent-for-modern-era-german-fiscal-stimulus

"Financing wouldn’t be a problem -- debt yields are at record lows and Germany will sell a 30-year bond at a 0% coupon for the first time on Wednesday -- though Scholz would need to find a way around constitutional rules that limit government spending."

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6 hours ago, Starsend said:

Hi DB

Do you think there's a possibility they could go a lot higher yet? If the FED smells recession and drops rates to zero + massive QE and buying up of long bonds then will this not cause another big leap in bond prices? People are already anticipating this hence the big price jumps so far this year. More to come?

I agree that bonds are toast over the medium to longterm.

My road map says rates go to minus 1.0% on the 10 year,but im ignoring the last bit as we are close enough on my road map to start laddering into the other side of that trade.

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4 minutes ago, UnconventionalWisdom said:

Germany preping for fiscal spending if they head into recession.

Goes along with DB's preduction that QE will be performed straight into the economy. 

https://www.bloomberg.com/news/articles/2019-08-20/look-to-2009-as-precedent-for-modern-era-german-fiscal-stimulus

"Financing wouldn’t be a problem -- debt yields are at record lows and Germany will sell a 30-year bond at a 0% coupon for the first time on Wednesday -- though Scholz would need to find a way around constitutional rules that limit government spending."

We said they would do this two years ago.Leads and lags.Governments cant have deflation.The bond market can do all it wants,governments will print and borrow at 0% to 1% as much as is needed until they get inflation.Of course lags work the other way,and they will do too much.The question is does inflation go to 7% or 20%+,anything up to 7% is happening.Our liquidity flow work showed us all countries would be involved hence we would get inflation not currency offsets.

Im not working on my road maps anymore,no need to,i know where we are going.Work now is on stocks to add to my portfolio in areas i want covered.Germany will provide the chemical companies i want.Finland another,the US.Lots of work to get ready for the knockdown.Soon everyone will scream deflation and be dumping inflation loving assets,just as the biggest inflation cycle since the 70s is getting underway.

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9 hours ago, Barnsey said:

And another...

 

Really great you finding these.Just as we said,straight into the veins of the economy.This idea they are out of ammo is bollocks.They are never out of ammo.Governments will spend whatever the banks will print for them.They are out of QE for the banks,because they need inflation in prices.

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Democorruptcy
20 hours ago, Agent ZigZag said:

 My friend in London who does mortgage lending Valuations told me that all 90% LTV she is doing are through Yorkshire. The agreed sales are through desperate buyers. The returned valuation is often lower than the agreed purchase price. These are sales. I dont know what remortgages she is doing with the same lender, but god help us as these lenders have learned nothing.

Who kept their bonuses and who got locked up?

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Democorruptcy
13 hours ago, DurhamBorn said:

I should add the reason growth shares are priced so highly is the discount rate due to bond yields.Once that gets pushed out they will fall heavily,thats without any change to their fundamentals.If they worsen 90%+ falls likely in those sort of companies.

I know that personally you don't like shorting, though I think it's only fair you do a list of companies who are going to drop 90%+, for those that do

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Just now, Democorruptcy said:

I know that personally you don't like shorting, though I think it's only fair you do a list of companies who are going to drop 90%+, for those that do

Mostly US tech stocks DC,Amazon etc could see 90% falls,though 70%+ likely.The semi conductor stocks from their highs could do 90%.Over here we might see similar in some areas.Unless a takeover by some crazy PE the likes of Burberry might go down 90%.Rightmove 75%+,some house builders could go under.Just eat would be a 90% one if the takeover goes wrong.

I very rarely short,and dont think its a good idea as a takeover can land at any time.Look at the pubs yesterday.

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1 hour ago, DurhamBorn said:

we are close enough on my road map to start laddering into the other side of that trade.

Hi @DurhamBorn do you mean here that you would start buying shares in companies that will do well with the government borrowing at very low/negative interest rates (which presumably could include many of the reflation stocks we have been discussing) and exiting positions in long term treasuries to release the capital to do this? I know that you were selling PM miners to release capital.

Not looking to be spoonfed it's just I've been leaning towards holding miners, selling IBTL to fund my reflation stock purchases. Just wondering if I am missing a trick here!

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Bobthebuilder
10 minutes ago, Ma2 said:

Hi @DurhamBorn do you mean here that you would start buying shares in companies that will do well with the government borrowing at very low/negative interest rates (which presumably could include many of the reflation stocks we have been discussing) and exiting positions in long term treasuries to release the capital to do this? I know that you were selling PM miners to release capital.

Not looking to be spoonfed it's just I've been leaning towards holding miners, selling IBTL to fund my reflation stock purchases. Just wondering if I am missing a trick here!

Im a dumbass builder who couldnt trade the stock market for shit, but i know a good thing when i see it. i bought PM miners last year and sold when DB sold his a few weeks ago, 50% up across the lot. Thats now all in cash for drip feeding into the usual suspects, (i would like some divi payers as getting close to retirement).

I owe a few of you on here a beer or two, sorry i post crap but ive seen stuff like this in the past and never acted on it (gold in 2004, bitcoin etc).

Sorry i cant help more.

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26 minutes ago, Bobthebuilder said:

i bought PM miners last year and sold when DB sold his a few weeks ago, 50% up across the lot

That's great Bob, nice one on the timing. I bought IBTL last year and have some substantial gains there, but bought Gold and General and GDXJ for the miners so didn't see the gains some of you have picking individual stock. So really it's trying to understand which to hold, I did have a plan that IBTL would just hold it's value, but as usual things don't always turn out exactly how you think. Nice problem to have anyway. Could always sell and hold half of each I suppose but that doesn't quite feel right, neither does selling the lot.

Also agree a big thanks to all especially DB for the thread, ideas and discussions

 

9 minutes ago, leonardratso said:

its all good.

You're right, it is :)

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Talking Monkey
1 hour ago, DurhamBorn said:

Mostly US tech stocks DC,Amazon etc could see 90% falls,though 70%+ likely.The semi conductor stocks from their highs could do 90%.Over here we might see similar in some areas.Unless a takeover by some crazy PE the likes of Burberry might go down 90%.Rightmove 75%+,some house builders could go under.Just eat would be a 90% one if the takeover goes wrong.

I very rarely short,and dont think its a good idea as a takeover can land at any time.Look at the pubs yesterday.

I reckon a lot of people will lose tremendous amounts of wealth buying the tech stocks as they fall only to see them fall further and further, a lot of SIPPs will be decimated

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leonardratso
4 minutes ago, Ma2 said:

That's great Bob, nice one on the timing. I bought IBTL last year and have some substantial gains there, but bought Gold and General and GDXJ for the miners so didn't see the gains some of you have picking individual stock. So really it's trying to understand which to hold, I did have a plan that IBTL would just hold it's value, but as usual things don't always turn out exactly how you think. Nice problem to have anyway. Could always sell and hold half of each I suppose but that doesn't quite feel right, neither does selling the lot.

your right, i umm and arr flogging of the flyers (well i just scalp really) and then pumping those gains into the losers, seems like throwing good money after bad, but to be honest its actually just a balancing act, i need to average down those losers so why not use the free money rather than putting the hard won stuff in. Having said that i dont expect ill sell the miners and physicals out completely, ill keep some, even if they tank badly.

I dont mind owning funds really, they wont do as well as individual components but what if i pick the wrong component and go down hard with it, id rather the loss was soaked against a flyer and i got less of a loss overall or maybe just a smaller win. Over the long term is all pretty much of a muchness anyways. Anyway got to get back to my bitcoin, nothig like trading a figment of your imagination 24/7 with a volatility that now makes CNA look totally crazy -  at least bitcoin goes up now and then (4 times a day).

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1 hour ago, Ma2 said:

Hi @DurhamBorn do you mean here that you would start buying shares in companies that will do well with the government borrowing at very low/negative interest rates (which presumably could include many of the reflation stocks we have been discussing) and exiting positions in long term treasuries to release the capital to do this? I know that you were selling PM miners to release capital.

Not looking to be spoonfed it's just I've been leaning towards holding miners, selling IBTL to fund my reflation stock purchases. Just wondering if I am missing a trick here!

Il be honest here,i look at my own portfolio and families needs when deciding what to sell/buy etc.I sold most of my miners because they delivered what i hoped for and it was a lot of capital,it would buy a small house here in Durham.I put a lot of effort into them and then i took my pay day.My buying doesnt need any capital from sales,iv already got half of my capital  to invest outside of miners and treasuries.Iv got ladders underway in most of the UK stocks i want.Im now spending my time researching stocks in other markets i want to start adding.Iv got a few lined up already in Germany.I should end up with a blue chip dividend paying portfolio that leans towards what i consider winners from the next cycle.Not all will be of course.I dont know how low they will go before they turn,so il ladder into them all.

My road map on gold said $1530 was the point to start to lighten so i did.Gold can easily go higher,much higher,but i follow the plan and try to keep emotions out of it.If PMs dont pull back later then iv still kept some holdings and will be happy whatever.

The next cycle will be a distribution cycle,and thats a very tricky prospect.Its not a given any asset class makes a positive return.Low PEs,decent dividends and a cycle that should help will hopefully provide the edge.Im hoping we go a lot lower in the stocks i want,but i am slowly buying ones i think might be well into their falls.

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Democorruptcy
2 hours ago, DurhamBorn said:

Mostly US tech stocks DC,Amazon etc could see 90% falls,though 70%+ likely.The semi conductor stocks from their highs could do 90%.Over here we might see similar in some areas.Unless a takeover by some crazy PE the likes of Burberry might go down 90%.Rightmove 75%+,some house builders could go under.Just eat would be a 90% one if the takeover goes wrong.

I very rarely short,and dont think its a good idea as a takeover can land at any time.Look at the pubs yesterday.

Funnily enough I created a watchlist in my HL account last week called 'Short' that was Rightmove and house builders. HL had a link with IG for spread betting but don't seem to want to do it now.

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6 minutes ago, Democorruptcy said:

Funnily enough I created a watchlist in my HL account last week called 'Short' that was Rightmove and house builders. HL had a link with IG for spread betting but don't seem to want to do it now.

Iv done shorts before but never feel comfortable with them.If im buying shares im buying for a cycle so looking perhaps 5 to 10 years out.Being underwater doesnt concern me at all,in fact i tend to like being underwater as i build out the portfolio.Shorting though you can end up right,but lose due to timing,fees etc.I just get the feeling however well you would do it would end in tears.

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1 hour ago, leonardratso said:

Having said that i dont expect ill sell the miners and physicals out completely, ill keep some, even if they tank badly.

I dont mind owning funds really, they wont do as well as individual components but what if i pick the wrong component and go down hard with it, id rather the loss was soaked against a flyer and i got less of a loss overall or maybe just a smaller win. 

Agree on the funds, prefer to keep it simple even if the gains aren't as big. 

I'm going to take another look at bitcoin, I was going to chuck £100 in a few years back just to see how it all worked, just never got 'round to it, then saw the price it had got to and couldn't bear to thing about it! Some of us are destined to take the longer route.

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1 hour ago, DurhamBorn said:

Il be honest here,i look at my own portfolio and families needs when deciding what to sell/buy etc

Thanks DB, appreciate you have a strategy that you are working towards for your purposes.

I am still learning and so although my overall target is clear my strategy of how to get there often isn't. As I gain more knowledge or ideas from this discussion and other research I find that I hadn't quite grasped something or that there was an alternative I'd overlooked.

 

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Love this from UK Value Investor on Stagecoach, he has a really great grasp of looking at the fundamentals, if only he looked beyond the figures to see what advancements were being made and the potential for buses in general -

“I DON’T EXPECT STAGECOACH TO SET THE WORLD ALIGHT IN TERMS OF FUTURE GROWTH, AND DOING MUCH MORE THAN KEEPING UP WITH INFLATION MAY PROVE VERY DIFFICULT OVER THE LONGER TERM.”

"High yield, but high risk In summary then, although I like Stagecoach's 6% dividend yield and its leading position in the UK bus market, I don't like the lack of growth potential in its core UK bus business and its inability to successfully expand internationally or into UK rail. Yes, it could turn things around and return to steady single-digit growth under the right conditions, but I think it's just as likely to go nowhere until buses become as quaint as horse-drawn carriages."

Full article here - https://www.ukvalueinvestor.com/wp-content/uploads/2019/08/Master-Investor-Magazine-Issue-53-Stagecoach.pdf

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sancho panza
12 hours ago, DoINeedOne said:

Actually a survivalist thread would be a good shout, i knew someone who lived in Argentina during there 2001 collapse and i have a PDF that someone wrote who lived through it and talked about what he wish he did different 

 

Whilst i dont think the UK would ever get like that no harm in learning from others

 

 

I'd be interested.WHy not set one up and see what debate follows.

3 hours ago, DurhamBorn said:

Mostly US tech stocks DC,Amazon etc could see 90% falls,though 70%+ likely.The semi conductor stocks from their highs could do 90%.Over here we might see similar in some areas.Unless a takeover by some crazy PE the likes of Burberry might go down 90%.Rightmove 75%+,some house builders could go under.Just eat would be a 90% one if the takeover goes wrong.

I very rarely short,and dont think its a good idea as a takeover can land at any time.Look at the pubs yesterday.

A lesson for us all that one.

 

42 minutes ago, Democorruptcy said:

Funnily enough I created a watchlist in my HL account last week called 'Short' that was Rightmove and house builders. HL had a link with IG for spread betting but don't seem to want to do it now.

This is nto advice and I'm short a few builders and RMV but BDEV and BKGH are the two that have dropped the least of late and seem high versus the rest of the sector with little reason for the outperformance imho.DYOR natch.

Currently on BDEV at 625 which is the highest average price I've ever got on at over the 3 occasions I've shorted it over the last year.

I'mlooking to build the RMV position.I think they could be in some trouble a year out.

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