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Time to feel bearish again?


Libspero

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It’s a long time since I hung up my HPC bear skins..  but something in the air is bringing out the beast again.

Inverted yield curves, once a topic of great excitement..  back in the HPC hayday.

http://www.yieldcurve.com/MktYCgraph.htm

 

Should we all be coming out of hibernation?

 

Quote

“The market is saying it thinks sometime two or three years from now, the Fed is going to be cutting rates because the economy is going to be in a recession,” Schiff said. “And so people think yields will be lower three years from now than they are today because they think the economy will be into a recession at some point in the future.”

 

Protect yourself *

 

:D;)

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Bobthebuilder

2006 - 2009 exciting times indeed on TOS, I learnt a lot from many posters back then, many of whom are on here.

Is it a repeat? i'm not sure it's there yet but can't be far away.

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1 hour ago, Bobthebuilder said:

2006 - 2009 exciting times indeed on TOS, I learnt a lot from many posters back then, many of whom are on here.

Is it a repeat? i'm not sure it's there yet but can't be far away.

I don't think it's a housing bubble or anything like the scale of the last crash..  That was probably a once in a lifetime event. 

More a gut feeling that things are overdue a change of direction and/or realignment. Still trying to decide what, where and when though. Things just feel too "rosey" at the moment. 

Will just keep watching the indicators for now.. 

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Noallegiance
29 minutes ago, Libspero said:

I don't think it's a housing bubble or anything like the scale of the last crash..  That was probably a once in a lifetime event. 

This is a strange one, to me, from an HPC veteran.

Do you not believe that the 'once in a lifetime event' was (and still is being) artificially stopped before the real damage was done?

The longer we go on, the more firm I become in my belief that 2008 wouldn't be fit to iron the next downturn's shirt.

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2 hours ago, Noallegiance said:

This is a strange one, to me, from an HPC veteran.

Do you not believe that the 'once in a lifetime event' was (and still is being) artificially stopped before the real damage was done?

The longer we go on, the more firm I become in my belief that 2008 wouldn't be fit to iron the next downturn's shirt.

Well as I recall they allowed the money supply to go crazy by authorising almost unlimited speculative borrowing against property.  When the debt couldn’t be repaid they printed money to fund government and private borrowing and bought up all the junk assets..  forcing interest rates down to effectively bail out the over leveraged speculators at the expense of other sectors that may have otherwise made more productive use of that wealth. By supporting house prices at artificially high levels they also forced the younger generation to leverage up transferring wealth from the young (as debt) and the old (with savings) to the speculators who’s gains were protected.

As a result of all that leverage the real risk would be if governments were somehow forced to put up interest rates..  but the strategy seems to be to try to inflate away the problem so it is unlikely that would ever happen except in the extreme case of rapid runaway currency debasement.  

So the situation appears stable,  albeit constituting the largest mis-allocation and transfer of wealth in generations.

What we are seeing is a lot more protectionism..  which could lead to trade wars with new emerging economies challenging the incumbent US. That could spark the next crisis. But hopefully not war,  as one prescient poster once predicted.

But those are just my uneducated ramblings

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Noallegiance
50 minutes ago, Libspero said:

Well as I recall they allowed the money supply to go crazy by authorising almost unlimited speculative borrowing against property.  When the debt couldn’t be repaid they printed money to fund government and private borrowing and bought up all the junk assets..  forcing interest rates down to effectively bail out the over leveraged speculators at the expense of other sectors that may have otherwise made more productive use of that wealth. By supporting house prices at artificially high levels they also forced the younger generation to leverage up transferring wealth from the young (as debt) and the old (with savings) to the speculators who’s gains were protected.

As a result of all that leverage the real risk would be if governments were somehow forced to put up interest rates..  but the strategy seems to be to try to inflate away the problem so it is unlikely that would ever happen except in the extreme case of rapid runaway currency debasement.  

So the situation appears stable,  albeit constituting the largest mis-allocation and transfer of wealth in generations.

What we are seeing is a lot more protectionism..  which could lead to trade wars with new emerging economies challenging the incumbent US. That could spark the next crisis. But hopefully not war,  as one prescient poster once predicted.

But those are just my uneducated ramblings

Decent ramblings

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Bobthebuilder
4 hours ago, Noallegiance said:

This is a strange one, to me, from an HPC veteran.

Do you not believe that the 'once in a lifetime event' was (and still is being) artificially stopped before the real damage was done?

The longer we go on, the more firm I become in my belief that 2008 wouldn't be fit to iron the next downturn's shirt.

I have been dumbfounded by the rise in property values since 1997, i was 27 years old then, i am now 50. Its completely mental.

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Inoperational Bumblebee
42 minutes ago, Bobthebuilder said:

I have been dumbfounded by the rise in property values since 1997, i was 27 years old then, i am now 50. Its completely mental.

Indeed. I think the only way out of this is inflation in everything else apart from housing.

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Green Devil
8 hours ago, Libspero said:

Well as I recall they allowed the money supply to go crazy by authorising almost unlimited speculative borrowing against property.  When the debt couldn’t be repaid they printed money to fund government and private borrowing and bought up all the junk assets..  forcing interest rates down to effectively bail out the over leveraged speculators at the expense of other sectors that may have otherwise made more productive use of that wealth. By supporting house prices at artificially high levels they also forced the younger generation to leverage up transferring wealth from the young (as debt) and the old (with savings) to the speculators who’s gains were protected.

As a result of all that leverage the real risk would be if governments were somehow forced to put up interest rates..  but the strategy seems to be to try to inflate away the problem so it is unlikely that would ever happen except in the extreme case of rapid runaway currency debasement.  

So the situation appears stable,  albeit constituting the largest mis-allocation and transfer of wealth in generations.

What we are seeing is a lot more protectionism..  which could lead to trade wars with new emerging economies challenging the incumbent US. That could spark the next crisis. But hopefully not war,  as one prescient poster once predicted.

But those are just my uneducated ramblings

Good Post. You've summed up the current state of play IMO. 

I think the only way out is a rebellion by the priced out generation by election of a politician who will fight their corner in years to come. Ie a trump of Corbyn (note I don't think Corbyn is the one as his policy are easily towed to the party for party politics). Though his policies may help to debase the currency as you speak, but this won't affect property as its an asset which will rise with loose money. 

The other way is by wealth transfer to alternative currencies ie cryto. The young are buying it. Everyone I know whose under 30 has some and is buying it. 

I think low rates are here for a very long time. Even currency shocks will be absorbed by further money printing. We are closer to Venezuela than you think (though we don't have the oil reserves). 

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  • 2 weeks later...

https://www.telegraph.co.uk/business/2019/04/12/equities-have-had-best-start-year-since-1987-could-looking/

Looking back, 1987 seems like a very different world from the one we live in today. But it had one thing in common with 2019. Equity markets got off to a roaring start.

The trouble is, the last time the markets started as strongly as this it ended up in the worst crash of modern times. Could it happen again? There are some worrying parallels.

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On 03/04/2019 at 00:00, Bobthebuilder said:

I have been dumbfounded by the rise in property values since 1997, i was 27 years old then, i am now 50. Its completely mental.

There's a lot of mental people will be insulted by that comment.

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On 03/04/2019 at 07:31, Green Devil said:

Good Post. You've summed up the current state of play IMO. 

I think the only way out is a rebellion by the priced out generation by election of a politician who will fight their corner in years to come. Ie a trump of Corbyn (note I don't think Corbyn is the one as his policy are easily towed to the party for party politics). Though his policies may help to debase the currency as you speak, but this won't affect property as its an asset which will rise with loose money. 

The other way is by wealth transfer to alternative currencies ie cryto. The young are buying it. Everyone I know whose under 30 has some and is buying it. 

I think low rates are here for a very long time. Even currency shocks will be absorbed by further money printing. We are closer to Venezuela than you think (though we don't have the oil reserves). 

Not sure Libspero has.

They've taken a housing bubble and turned it into an 'Everything 'bubble.Lookm at junk bond yields.Crud companies borrowing a few  points above base? 

 

The real coup de grace is yet to come.The monetary policy response to 2008 has turned a minor housing skirmish into something much worse.

 

As ever,the crises the central bankers of the world create,they still fail to see coming.

 

Look at the Russell 2000...kicking off the warning flags.

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28 minutes ago, Zanu Bob said:

 

Look at the Russell 2000...kicking off the warning flags.

I'm normally bearish, but I'm having a hard time seeing flags on this:

file.png?z768f7d0azcaac4df3212247a687f1d

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20 hours ago, georgist said:

I'm normally bearish, but I'm having a hard time seeing flags on this:

file.png?z768f7d0azcaac4df3212247a687f1d

Lower highs a la Dow Theory.Small companies good lead indicator of large cap stock market/economy.RUT peaked and hasn't got near it since.S&P has rallied close to highs,The internal momentum in the large markets died last year if you use longer term indicators.As Wolf Richeter says nothing goes to hell in a  straight line.Market was due a rally and it's got one ongoing but it's more for the traders I suspect rather than long term investors

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I liked the BDI as a relatively short term forward looking indicator too:

commodity-baltic.png?s=baltic&v=20190415

commodity-baltic.png?s=baltic&v=20190415

Not looking terrible,  but certainly not looking strong at the moment.

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17 hours ago, Libspero said:

I liked the BDI as a relatively short term forward looking indicator too:

commodity-baltic.png?s=baltic&v=20190415

commodity-baltic.png?s=baltic&v=20190415

Not looking terrible,  but certainly not looking strong at the moment.

Vague recollections from hpc ... BDI measures demand for container shipping versus capacity; while what you would really be interested in is the the demand alone.

The problem with the capacity term in that ratio is that people invest in new shipping when the going is good, and there is a significant lead time. Even worse, capacity increases immediately if the oil price goes down, because the whole industry is hyper-optimised, and if the oil price falls, you actually get a better return on your shipping investment by sailing them slightly faster (burn more fuel, but lower the transit times).

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16 minutes ago, BurntBread said:

Vague recollections from hpc ... BDI measures demand for container shipping versus capacity; while what you would really be interested in is the the demand alone.

The problem with the capacity term in that ratio is that people invest in new shipping when the going is good, and there is a significant lead time. Even worse, capacity increases immediately if the oil price goes down, because the whole industry is hyper-optimised, and if the oil price falls, you actually get a better return on your shipping investment by sailing them slightly faster (burn more fuel, but lower the transit times).

Yes,  that’s also my understanding.

The leadtime is around 2 years for new capacity,  so the chart captures sudden changes in demand <2yrs.   

It doesn’t help that Vale have massively (and debateably over) invested in capacity driving costs to all time lows since 2008.

To my mind it should still act as a decent bellwether for observing short term trends..  but is imperfect for the exact reasons you highlight.

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  • 2 weeks later...
Long time lurking
On 02/04/2019 at 22:24, Libspero said:

Well as I recall they allowed the money supply to go crazy by authorising almost unlimited speculative borrowing against property.  When the debt couldn’t be repaid they printed money to fund government and private borrowing and bought up all the junk assets..  forcing interest rates down to effectively bail out the over leveraged speculators at the expense of other sectors that may have otherwise made more productive use of that wealth. By supporting house prices at artificially high levels they also forced the younger generation to leverage up transferring wealth from the young (as debt) and the old (with savings) to the speculators who’s gains were protected.

As a result of all that leverage the real risk would be if governments were somehow forced to put up interest rates..  but the strategy seems to be to try to inflate away the problem so it is unlikely that would ever happen except in the extreme case of rapid runaway currency debasement.  

So the situation appears stable,  albeit constituting the largest mis-allocation and transfer of wealth in generations.

What we are seeing is a lot more protectionism..  which could lead to trade wars with new emerging economies challenging the incumbent US. That could spark the next crisis. But hopefully not war,  as one prescient poster once predicted.

But those are just my uneducated ramblings

It`s stable until it`s not 

I believe we are sleep walking into the mother of all cost of living crisis ,there`s only three ways out of that, wage inflation ,price deflation or a bit of both 

All i see is can kicking 

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Long time lurking
On 14/04/2019 at 01:02, Zanu Bob said:

Not sure Libspero has.

They've taken a housing bubble and turned it into an 'Everything 'bubble.Lookm at junk bond yields.Crud companies borrowing a few  points above base? 

 

The real coup de grace is yet to come.The monetary policy response to 2008 has turned a minor housing skirmish into something much worse.

 

As ever,the crises the central bankers of the world create,they still fail to see coming.

 

Look at the Russell 2000...kicking off the warning flags.

This in spades ,it goes as far as classic cars and motor bikes ,cars peaked about a year or two ago ,bikes are the new in thing ,it`s all about money looking for a return and nothing about the love of cars or bikes 

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Bobthebuilder
13 minutes ago, Long time lurking said:

This in spades ,it goes as far as classic cars and motor bikes ,cars peaked about a year or two ago ,bikes are the new in thing ,it`s all about money looking for a return and nothing about the love of cars or bikes 

Yep, i saw a Subaru B22 at £100,000 the other day. bat shit crazy.

 

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42 minutes ago, Long time lurking said:

This in spades ,it goes as far as classic cars and motor bikes ,cars peaked about a year or two ago ,bikes are the new in thing ,it`s all about money looking for a return and nothing about the love of cars or bikes 

At least bikes don't take up much room when they're not being used because 'investment'.

[I've got an 80's Suzuki GK71, just sitting there waiting to be worth $$$$s!]

[I don't think there's enough time before the crash for it to get to $$s, let alone $$$$s.]

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Long time lurking
23 hours ago, dgul said:

At least bikes don't take up much room when they're not being used because 'investment'.

[I've got an 80's Suzuki GK71, just sitting there waiting to be worth $$$$s!]

[I don't think there's enough time before the crash for it to get to $$s, let alone $$$$s.]

I seen a FS1E go for 7.5k the other day 

Rd 350 lc`s are getting into the 20`s

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My technical view on the weeklies for the main markets:

. The run up is getting a bit long and may be starting to top but could well keep going quite a bit longer yet.  For example, maybe a blow off.  Maybe some excitement after the summer recess.

. My canary short FTSE ETFs are bouncing along the bottom.  Momentum may have stopped falling but no buy signals;

. Hard to buy in this kind of environment but that needs a good dollop of patience.  PITA as I really want to put cash to work on some good dividend stocks.  I should have been more active at the year end when the current strong technical setup started.

. I worry a Brexit deal may give the FTSE a big boost to make up lost ground but would rather wait for the technicals to direct me.

. I'm not worried about the dip in PMs.  But not buying as I'm fully allocated.

Maybe time to use my hand sitting to explore some off piste areas, especially commodities.

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crashmonitor
On 03/04/2019 at 00:00, Bobthebuilder said:

I have been dumbfounded by the rise in property values since 1997, i was 27 years old then, i am now 50. Its completely mental.

And 90% of that increase, at least up north, fitted into just 5 of those 22 years between 1999 and 2004 when Brown got out of his strait jacket. Labour very much the party of HPI..no wonder all the big houses around my way have got Vote Labour  poster virtue signals. 

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Bobthebuilder
2 hours ago, crashmonitor said:

And 90% of that increase, at least up north, fitted into just 5 of those 22 years between 1999 and 2004 when Brown got out of his strait jacket. Labour very much the party of HPI..no wonder all the big houses around my way have got Vote Labour  poster virtue signals. 

Spot on.

I recently sold my late fathers house in a remote Dorset village, sold pretty much for the same price he paid for it in 2007. So not just up north either.

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