Mooping Posted August 15, 2017 Share Posted August 15, 2017 55 minutes ago, durhamborn said: Probably do very well.There could be a big lag though where it goes down a lot first.A lot of the assets that will do the best in a reflation will get hit hardest in a deflation sell off.Two of the biggest financial mistakes iv ever made.First not buying a holiday home for £60k that is now "worth" £300k and rents for £500 a week holidays, i was minutes away from buying it at an auction,and not buying a huge field for £7k i was offered when i was 21.I regret the field more as i could of built my own wildlife reserve on it,its in a beautiful valley. Just seen this thread about Farmland which has just been posted. Quote Link to comment Share on other sites More sharing options...
simon49 Posted August 15, 2017 Share Posted August 15, 2017 14 hours ago, Mooping said: A quick question. If this scenario comes to pass, what's likely to happen to the price of agricultural land? It is now I believe in bubble territory. The only way is down for agricultural land for the short term. Quote Link to comment Share on other sites More sharing options...
Talking Monkey Posted August 15, 2017 Share Posted August 15, 2017 2 hours ago, durhamborn said: They are better capitalised but the derivative exposure is huge.I think several banks around the world will go under.In the UK i think Barclays might be in trouble depending on how bad the crash its.I dont see any deposits being lost though below the protected amounts (if any) and i actually have money with Barclays because in a deflation the CBs will be printing as much as they need.They will prop up the banks,but this time they will let the equity go to zero and the senior bond holders all get cleaned out i think. Probably inevitable that some of the big banks go under. I was also thinking about oil, you've discussed how it will plunge in the deflation maybe down to sub £20, in the reflation with the consumer subdued and the push for energy self sufficiency, with huge investment in renewables, what is your view on the longer term price of oil say through to 2025, would it be subdued or would it massively rally towards $100 Quote Link to comment Share on other sites More sharing options...
durhamborn Posted August 15, 2017 Author Share Posted August 15, 2017 http://www.bbc.co.uk/news/business-40933390 German growth flowing ,but the key points are the Euro area looks to be still growing while the US slows.The press will say the dollar is up due to Korea calming down,but the real drivers of the dollar are the fact the US is slowing relative to others.The dollar should start to fall again soon enough on its path down to 88.US data from this point on will be key.If things keep slowing then there is nothing the Fed can do to stop it. Quote Link to comment Share on other sites More sharing options...
Option5 Posted August 15, 2017 Share Posted August 15, 2017 2 minutes ago, Talking Monkey said: Probably inevitable that some of the big banks go under. I was also thinking about oil, you've discussed how it will plunge in the deflation maybe down to sub £20, in the reflation with the consumer subdued and the push for energy self sufficiency, with huge investment in renewables, what is your view on the longer term price of oil say through to 2025, would it be subdued or would it massively rally towards $100 If the banks go under so will a lot of smaller oil companies as they're laden with debt. Therefore one would assume that the oil price would rise, however it's more likely that the assets will be picked up cheaply, making the production cost lower, so it could also fall. I'd go for a fall when tshtf then a short rise while things settle down. With no cash sloshing about the cost of renewables will be an issue, for oil the infrastructure already exists. Quote Link to comment Share on other sites More sharing options...
durhamborn Posted August 15, 2017 Author Share Posted August 15, 2017 Just now, Talking Monkey said: Probably inevitable that some of the big banks go under. I was also thinking about oil, you've discussed how it will plunge in the deflation maybe down to sub £20, in the reflation with the consumer subdued and the push for energy self sufficiency, with huge investment in renewables, what is your view on the longer term price of oil say through to 2025, would it be subdued or would it massively rally towards $100 Oil i think goes sub $20 yes perhaps even sub $15 however crazy that sounds.In the reflation i think oil will probably be strong,but due to the focus on clean energy during the reflation im not sure how much exposure id want in my portfolio as i prefer the metals.It should go back up past $100 in a reflation easily,but i will likely buy FCG (natural gas producers) instead for carbon energy exposure and URA for uranium.BHP also have oil exposure and il likely be buying them anyway.Oil is an area i see massive defaults in the crash as there was far too much investment through this cycle.I wouldnt touch oil service companies at any price at the moment. Quote Link to comment Share on other sites More sharing options...
durhamborn Posted August 15, 2017 Author Share Posted August 15, 2017 (edited) 10 minutes ago, Option5 said: If the banks go under so will a lot of smaller oil companies as they're laden with debt. Therefore one would assume that the oil price would rise, however it's more likely that the assets will be picked up cheaply, making the production cost lower, so it could also fall. I'd go for a fall when tshtf then a short rise while things settle down. With no cash sloshing about the cost of renewables will be an issue, for oil the infrastructure already exists. Exactly right on the debt.Smaller oil companies and even more so the service companies should see massive defaults.I actually see them as the most exposed sector of them all to a deflation.Renewables should see huge investment in the next cycle alongside battery plants.Alongside public housing,transport and high speed internet they are the 4th area i see getting the lions share of government spending.Military should also figure in the mix. Edited August 15, 2017 by durhamborn Quote Link to comment Share on other sites More sharing options...
Option5 Posted August 15, 2017 Share Posted August 15, 2017 1 minute ago, durhamborn said: Exactly right on the debt.Smaller oil companies and even more so the service companies should see massive defaults.I actually see them as the most exposed sector of them all to a deflation.Renewables should see massive investment in the next cycle alongside battery plants.Alongside public housing,transport and high speed internet they are the 4th area i see getting the lions share of government spending.Military should also figure in the mix. I work in the industry, albeit not in any part that's likely to be effected too much. In my dealings with all the large service companies I see massive inefficiencies, in my opinion (not that it's worth much) some of them are getting by on cash flow alone. When that dries up they're toast. Quote Link to comment Share on other sites More sharing options...
durhamborn Posted August 15, 2017 Author Share Posted August 15, 2017 34 minutes ago, Option5 said: I work in the industry, albeit not in any part that's likely to be effected too much. In my dealings with all the large service companies I see massive inefficiencies, in my opinion (not that it's worth much) some of them are getting by on cash flow alone. When that dries up they're toast. Your opinion is worth a massive amount as is everyone's.People on the coal face see these things first like yourself so keep us informed in what you see as its a crucial sector in this deflation.Like you say the service companies are existing on cash flow while showing underneath the balance sheets are really strained.It doesnt take much to push them under.You would think at this stage of the cycle they would all be holding net cash,but no.Carnage there i expect. Quote Link to comment Share on other sites More sharing options...
Option5 Posted August 15, 2017 Share Posted August 15, 2017 32 minutes ago, durhamborn said: Your opinion is worth a massive amount as is everyone's.People on the coal face see these things first like yourself so keep us informed in what you see as its a crucial sector in this deflation.Like you say the service companies are existing on cash flow while showing underneath the balance sheets are really strained.It doesnt take much to push them under.You would think at this stage of the cycle they would all be holding net cash,but no.Carnage there i expect. Thank you, I got out of the "oil" industry 3 years ago and moved into a more general energy consulting role. I was offered jobs in my old role in the UK on more money but feared that the oil price collapse was going to be around for a while. The jobs I was offered have all now gone, not that I consider that a good thing but it did prove my suspicions correct. When the slump came a number of large projects had already started, these of course continued as the budget was already there, giving the service companies and equipment supply companies an income. As these contracts wound down these companies started "buying" work as it came available and putting it in the order book with fanciful profit margins to support the share price in the hope that they could ride out the storm. When the projects are finished and the "profits" have turned negative is when they'll go under. Their share prices will tank and the investors will probably pull the plug. Some will try mergers to delay the process but unless things improve it's not too far away. Quote Link to comment Share on other sites More sharing options...
durhamborn Posted August 15, 2017 Author Share Posted August 15, 2017 (edited) 6 minutes ago, Option5 said: Thank you, I got out of the "oil" industry 3 years ago and moved into a more general energy consulting role. I was offered jobs in my old role in the UK on more money but feared that the oil price collapse was going to be around for a while. The jobs I was offered have all now gone, not that I consider that a good thing but it did prove my suspicions correct. When the slump came a number of large projects had already started, these of course continued as the budget was already there, giving the service companies and equipment supply companies an income. As these contracts wound down these companies started "buying" work as it came available and putting it in the order book with fanciful profit margins to support the share price in the hope that they could ride out the storm. When the projects are finished and the "profits" have turned negative is when they'll go under. Their share prices will tank and the investors will probably pull the plug. Some will try mergers to delay the process but unless things improve it's not too far away. Its funny but i tracked the debt levels of the service companies and the oil price lag on projects and it flagged up that very problem.The leverage couldnt be covered once earnings fell.Its an interesting sector to watch and there is a chance the busts that start this thing off could come from there.A lot of banks are exposed to that debt. Todays data in the US is retail sales.The market is expecting +0.4%.Im more interested in the core numbers that excludes autos and gasoline prices.Gasoline prices have risen so could make the figures look better than they are. Edited August 15, 2017 by durhamborn Quote Link to comment Share on other sites More sharing options...
Option5 Posted August 15, 2017 Share Posted August 15, 2017 2 minutes ago, durhamborn said: Its funny but i tracked the debt levels of the service companies and the oil price lag on projects and it flagged up that very problem.The leverage couldnt be covered once earnings fell.Its an interesting sector to watch and there is a chance the busts that start this thing off could come from there.A lot of banks are exposed to that debt. I'm an engineer not an accountant but I could see what was going on, why don't the professionals? One shred of hope for them is that if they go under during a big project for an oil major it may be beneficial for the oil company to keep them afloat in some form to complete the job. This may give them a chance to regroup for when things pick up. Big ones in Norway will probably get bailed out by the government, not so sure about the UK (energy security reasons?) Quote Link to comment Share on other sites More sharing options...
durhamborn Posted August 15, 2017 Author Share Posted August 15, 2017 Just now, Option5 said: I'm an engineer not an accountant but I could see what was going on, why don't the professionals? One shred of hope for them is that if they go under during a big project for an oil major it may be beneficial for the oil company to keep them afloat in some form to complete the job. This may give them a chance to regroup for when things pick up. Big ones in Norway will probably get bailed out by the government, not so sure about the UK (energy security reasons?) Possible,but in those type of things the equity tends to get wiped out or diluted to such an extent holders see massive falls.We might get to find out pretty soon. Quote Link to comment Share on other sites More sharing options...
MrXxx Posted August 15, 2017 Share Posted August 15, 2017 OK, I have now re-read this whole post for the second time (all 29 pages!) and I think I understand it. I do however have some questions base on TLT and currencies:- 1. I assume people are saying that a save haven (and goos return) would be TLT's but why not UK LT gilts?...OK, they may not give as much return as the US but would they not be another 'safe' option?...and I asume that this is what a lot of peoples company pensions are also traded in, so if they have the option to 'tweak' their DC pensions from a more 'high-risk' Equities-based one to a 'lower-risk' they could do this? 2. If (as someone mentioned previously) the Russians/Chinese get together to make the $ no longer the currency of trade (and so all the $'s returning trashing the US), would TLT's not be a bad option? 3. If gold is set to rocket in a reinflation scenario, why focus on assets/equities/TLT's traded in $ that are not 'pinneded' to a gold standard RATHER than something like the Swiss Franc that is? Some of the above may be complete and utter rubbish, as I may have misinterpreted (or understood) what has been posted previously, so please be 'gentle' with me...I am a Biologist, not an Economist! :-) Quote Link to comment Share on other sites More sharing options...
Option5 Posted August 15, 2017 Share Posted August 15, 2017 I've been watching Wood Group's £2.2bn takeover of Amec Foster Wheeler and the words Pig and Poke keep jumping into my mind for some reason. Quote Link to comment Share on other sites More sharing options...
leonardratso Posted August 16, 2017 Share Posted August 16, 2017 much as i take zero hedge's many a day doom porn warnings with a pinch of salt, this one seemed less hysterical lately; http://www.zerohedge.com/news/2017-08-16/hussman-predicts-massive-losses-cycle-completes-after-fed-warns-markets-vulnerable-e but maybe its just another piece of doom mongering. Quote Link to comment Share on other sites More sharing options...
durhamborn Posted August 16, 2017 Author Share Posted August 16, 2017 2 hours ago, leonardratso said: much as i take zero hedge's many a day doom porn warnings with a pinch of salt, this one seemed less hysterical lately; http://www.zerohedge.com/news/2017-08-16/hussman-predicts-massive-losses-cycle-completes-after-fed-warns-markets-vulnerable-e but maybe its just another piece of doom mongering. I think the Fed notes from today will be looked back on in time as the moment they started to see that tightening into weakness was a huge risk and one they now cant stop. They are trapped.Inflation is falling close to deflation levels that would/will explode the leverage.The low rates and QE has flowed into assets,not the economy.Leverage in stocks and houses is at record highs while velocity is at economy crushing lows.Savings rates at record lows.Prices of cars falling like a brick,restaurant sales collapsing.The dollar got hit on those notes and gold moved again towards $1300.The other metals like Palladium shot up.The markets have shrugged off every sign and ignored it so far.It will be interesting to see if now things start to fall into place.Gold going through $1300 strongly soon and holding will be a sign people are waking up to the fact the Fed have backed themselves into a corner. I find it amazing that they have lowered the monetary base for three years because they were worried about inflation at 2% when the leverage is at levels never seen before.It might be an interesting second half of the year. Quote Link to comment Share on other sites More sharing options...
Sancho Panza Posted August 16, 2017 Share Posted August 16, 2017 2 hours ago, leonardratso said: much as i take zero hedge's many a day doom porn warnings with a pinch of salt, this one seemed less hysterical lately; http://www.zerohedge.com/news/2017-08-16/hussman-predicts-massive-losses-cycle-completes-after-fed-warns-markets-vulnerable-e but maybe its just another piece of doom mongering. The only problem with ZH is that one day,after many false dawns, they'll be right. Quote Link to comment Share on other sites More sharing options...
leonardratso Posted August 16, 2017 Share Posted August 16, 2017 Just now, Sancho Panza said: The only problem with ZH is that one day,after many false dawns, they'll be right. yes, broken clocks are right twice a day and they successfully called the last 2000 recessions(eventually all 2 of them), mind you wolf street is a bit more thoughtful and less of an aggregator, and yet that seems to be tallying lately as well although on less hysterical scale. Quote Link to comment Share on other sites More sharing options...
Option5 Posted August 17, 2017 Share Posted August 17, 2017 MSM getting on board :- Guardian article today, could have been written by someone on here: Ten years after the crash, there’s barely suppressed civil war in Britain https://www.theguardian.com/commentisfree/2017/aug/15/ten-years-after-crash-civil-war-britain-austerity Quote Link to comment Share on other sites More sharing options...
Sancho Panza Posted August 17, 2017 Share Posted August 17, 2017 9 hours ago, leonardratso said: yes, broken clocks are right twice a day and they successfully called the last 2000 recessions(eventually all 2 of them), mind you wolf street is a bit more thoughtful and less of an aggregator, and yet that seems to be tallying lately as well although on less hysterical scale. Agreed. http://wolfstreet.com/2017/08/14/inflation-reveals-worst-restaurant-recession-since-2009/ 'As the TDn2K report pointed out, households are having trouble maintaining their lifestyles, and those that have savings dip into them. But over half of US households don’t have savings to dip into. So credit card debt, at $1.02 trillion, has hit an all-time high. Auto loan balances, at $1.13 trillion, have far surpassed any prior all-time high. Housing costs are eating up an ever larger share of incomes. Healthcare costs are soaring. Households with kids in college are paying a big price. Many millennials, even those with good jobs, are buckling under their student loans, which have skyrocketed 164% over the past ten years to $1.45 trillion. And inflation-adjusted discretionary spending such as for restaurants by people at the lower 80% of the income scale is taking a hit. Something has to give. It’s the description of a messed-up economy.' Somethings gotta give. Quote Link to comment Share on other sites More sharing options...
Errol Posted August 17, 2017 Share Posted August 17, 2017 The Government’s Retail Sales Report Borders On Fraud As conditions worsen in the real world economy and political system, the propaganda fabricated in an attempt to cover up the truth becomes more absurd. Today’s retail sales report, prepared and released by the Census Bureau which in and of itself makes the numbers extraordinarily unreliable, showed a .6% gain in retail sales in July from June. As I’ll show below, not including the affects of inflation, in all likelihood retail sales declined in July. http://investmentresearchdynamics.com/the-governments-retail-sales-report-borders-on-fraud/ Quote Link to comment Share on other sites More sharing options...
durhamborn Posted August 17, 2017 Author Share Posted August 17, 2017 On 8/15/2017 at 1:34 PM, MrXxx said: OK, I have now re-read this whole post for the second time (all 29 pages!) and I think I understand it. I do however have some questions base on TLT and currencies:- 1. I assume people are saying that a save haven (and goos return) would be TLT's but why not UK LT gilts?...OK, they may not give as much return as the US but would they not be another 'safe' option?...and I asume that this is what a lot of peoples company pensions are also traded in, so if they have the option to 'tweak' their DC pensions from a more 'high-risk' Equities-based one to a 'lower-risk' they could do this? 2. If (as someone mentioned previously) the Russians/Chinese get together to make the $ no longer the currency of trade (and so all the $'s returning trashing the US), would TLT's not be a bad option? 3. If gold is set to rocket in a reinflation scenario, why focus on assets/equities/TLT's traded in $ that are not 'pinneded' to a gold standard RATHER than something like the Swiss Franc that is? Some of the above may be complete and utter rubbish, as I may have misinterpreted (or understood) what has been posted previously, so please be 'gentle' with me...I am a Biologist, not an Economist! :-) The thing with TLT as a sterling investor is that if we do get a huge deflation event the dollar will fly as well as TLT itself.In gilts your in sterling.Holding some gilts would be fine but you lose the currency hedge. TLT will be a terrible investment in the next cycle,as will all bonds.Holding it now/soon is simply to protect you from a collapse in equity markets etc.If you dont think thats happening there is no point holding it.I wont hold any bonds once the printing starts as i think rates are going to 8%+ in the next cycle. If/when gold (and silver) rockets in a reflation holding 15% of your assets in gold miners and silver miners will give you massive leverage to gold.The key as ever is a balanced portfolio,but one that has focus on areas that should/will do well in a relflation.You might own 15 FTSE 100 stocks still,but instead of BAT tobacco you own BHP or Anglo American. If we get a reflation cycle its a simple case of being positioned for it to play out.Not taking huge risk on small companies,futures,leverage etc.Just a portfolio angled to the cycle.Its amazing how much a solid blue chip portfolio can deliver like this. All just my opinion of course,not advice. Quote Link to comment Share on other sites More sharing options...
durhamborn Posted August 17, 2017 Author Share Posted August 17, 2017 13 minutes ago, Sancho Panza said: Agreed. http://wolfstreet.com/2017/08/14/inflation-reveals-worst-restaurant-recession-since-2009/ 'As the TDn2K report pointed out, households are having trouble maintaining their lifestyles, and those that have savings dip into them. But over half of US households don’t have savings to dip into. So credit card debt, at $1.02 trillion, has hit an all-time high. Auto loan balances, at $1.13 trillion, have far surpassed any prior all-time high. Housing costs are eating up an ever larger share of incomes. Healthcare costs are soaring. Households with kids in college are paying a big price. Many millennials, even those with good jobs, are buckling under their student loans, which have skyrocketed 164% over the past ten years to $1.45 trillion. And inflation-adjusted discretionary spending such as for restaurants by people at the lower 80% of the income scale is taking a hit. Something has to give. It’s the description of a messed-up economy.' Somethings gotta give. Exactly.Then factor in companies are very highly leveraged to any earnings falls.Fast food traffic has been falling in the US every month nearly all year as you say.Its one of the areas i track and consider very important.Iv always thought this would be a balance sheet recession in that everything is tapped out.US auto sellers are already smashing prices lower to try to shift stock.Margins are being crushed.That should start to show up in earnings soon.In the UK our retailers should be the first hit.Falling like for like sales of a few percent knocking profits down 20% etc.Margins are cut to the bone already in most places. Quote Link to comment Share on other sites More sharing options...
durhamborn Posted August 17, 2017 Author Share Posted August 17, 2017 11 minutes ago, Errol said: The Government’s Retail Sales Report Borders On Fraud As conditions worsen in the real world economy and political system, the propaganda fabricated in an attempt to cover up the truth becomes more absurd. Today’s retail sales report, prepared and released by the Census Bureau which in and of itself makes the numbers extraordinarily unreliable, showed a .6% gain in retail sales in July from June. As I’ll show below, not including the affects of inflation, in all likelihood retail sales declined in July. http://investmentresearchdynamics.com/the-governments-retail-sales-report-borders-on-fraud/ Thanks Errol,interesting work from that guy.I track the industry figures in autos,construction,restaurant sales and mall traffic.All are heading down and at a good speed.Restaurant sales are always a great lead i find. Quote Link to comment Share on other sites More sharing options...
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