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Messages - Bevan

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31
Off topic / Re: Question re FIRE future returns
« on: April 21, 2020, 03:17:38 pm »
Interesting questions Bevan.

An example of a puzzling phenomenon is Japan flat lining for 20 years. I know that their bubble burst in the early 90's, but wow- 20 years without growth in the stock market WITH a very diligent and productive workforce. It boggles my mind.

..i guess the bottom line might be as Buffet says... when everyone is excited be very cautious and when everyone is scared be bold

Japan has been suffering from a deflationary spiral. Simplistically inflation is too much money chasing too few goods. Deflation is too many goods looking to be spent with too little money around to buy them. The money obviously has to be freely floating and be spent in the population, not locked up in investments etc. Japan is a notorious nation of savers who all withdrew their money from the system, whilst supply of goods remained strong. Tough to inflate the economy that way...

The wider world going forward is really interesting now... We are printing more money than ever before and people are expecting massive inflation to kick in. But, unless this money actually finds its way into the population that's not going to happen. Depending on how this helicopter cash is distributed now, will impact markets quite differently.

Assuming they follow the 2008 model of rescuing the banks then the way they did it was to lower rates and issue bonds, notes etc. via the banks. The banks used all of this QE to invest and distribute into the market and all that cash ultimately found its way to the stock market. So we've had the largest bull run ever over the last 10 years, completely unwarranted according to value investors, and giving most stock market investors a dose of sleepy confidence. We haven't seen any indication of inflation because all that QE hasn't flowed into the real economy.

This time I suspect is going to be very different. It's not the banks that need saving now, it's the lower to middle classes. It's the real economy. The money printers going brrr now should result in at least some of that money trickling down to the lower levels. Of course the monetary system is still completely broken, because money should be created when workers create products and services, and not arbitrarily printed when the Fed panics, or when a computer solves a math problem, or when some rich IT geek "stakes" their digital wallet.

Whilst much of the helicopter money will still be sucked up now by the banks, wealthy investors, corrupt politicians and sheer bureaucracy, there should still be enough left when it reaches the real economy. This is going to result in the mother of all inflationary bubbles, especially in the US.

It helps to think of the global monetary system as wanting to always try and balance itself. However, the balancing mechanism is a lagging effect. So, all of the productivity and wealth creation over the last 100 years has been building up slowly amongst the wealthy, escalating the growing divide between rich and poor i.e. the poor produce the wealth and investors keep the wealth. So that's been the primary flow of productivity based wealth creation.  There have been interesting secondary flows e.g. in 2008 the middle-classes started accumulating significant wealth in property, a trend fed by the banking sector, allowing house owners to use their properties as ATM's.

That subsequent collapse in housing wealth was quickly re-inflated by the Fed with most of the QE going to the 1%. The gap between the very rich and very poor widened exponentially. That bulk of cash was now the target for the balancing mechanism, with everyone sensing a stock-market collapse being imminent. That has happened and many pension funds and investors have been hurt. But the Fed and US govt. are re-inflating again.

In the meantime where has all the clever, safe money run to? To the USD of course, the one place it can't get hurt as the US can print money with abandon as the whole world's goods are its playground, not just its own country's goods. We've also seen a decent dead cat bounce in the market over the last few weeks but that is a minor blip. The great balancer is still coming... I suspect it's coming in the form of synchronised, massive global inflation over the next few years. Unfortunately the real economy is going to get pretty rough. Stagnant growth and high inflation = stagflation. A fate far worse than Japanese deflation. The USD should still perform its safe haven status, until such time as the world finally loses faith in the US' ability to repay its debts. The US has kicked the bankruptcy can a long way down the road now, but inflation is going to bring it forward quite quickly now.

Inflation is the one thing that will see the wealth of the 1% eroded. But it will also mean that the poor cannot afford to eat. The entire global system is fundamentally broken and I cannot see how it can be (peacefully) fixed. I expect generally self-sufficient countries such as South Africa and China will fare much better than the generally importing countries of Europe and America. Yes, the ZAR may get to 100 to the USD before the implosion but that will be our pressure release valve. Our gold miners and food exporters will make a fortune.  One thing is for sure. Change is coming.

(Apologies for the long and opinionated piece but I hope it gives some food for thought...)

32
Off topic / Re: Live chat
« on: April 21, 2020, 02:27:25 pm »
Hang onto your Sasol @jaDEB. May looks like being another rough month for global markets but after that the recovery should be on firmer footing. Structurally, Brent and LNG and other products that Sasol deals in can't go negative, unlike WTI. Sasol might take some more pain in the short term as people seem to treat it as a proxy for the oil price - not sure why such a simplistic approach is taken. I reckon they've hedged their FX exposure quite nicely and they import a lot of spot crude, so they should do quite well on their forward refining margins for the next few months.

33
Off topic / Question re FIRE future returns
« on: December 01, 2019, 09:04:14 am »
Hi Patrick,

I'd like to get your opinion on this.... Martin Luther King once said that, "Communism forgets that life is individual. Capitalism forgets that life is social, and the kingdom of brotherhood is found... in a higher synthesis that combines the truths of both."

Unbridled capitalism has enabled market returns on average over the last several decades of around 10-15%. However, the world is realising that this is not only inequitable but also unsustainable. We are seeing the emergence of active investors and ESG and impact investors who are advocating for a fairer world, perhaps leading towards the synthesis mentioned in the quote above. Investors now realise that correcting wage and social inequality, helping protect the environment etc. all involve higher costs that were never previously considered by the rampant, greed driven capitalism.

The world is also struggling with the limits to growth, with negative rates abounding, even as central banks try to stimulate inflation and growth by conjuring up new cash. The problem is that there is not enough real-world growth to "absorb" this new cash and it has found its way into markets, dangerously overheating them, at least from a value-investors perspective.

Thus, I believe that low stock market returns are here to stay for the foreseeable future, of around 3-7% per year if we're lucky. There is also the ever-present risk of a serious market correction if prices trend too high above value. ESG and impact investors seem happy with this sort of return, as the world starts to consider measuring returns in more than just monetary terms.

The question is, what does this type of return do to the FIRE movement? What is the minimum annual return required to keep withdrawing (4%) of your capital and not run out of money?

In a way this whole trend change is making intuitive sense to me.... It's only possible to be a passive investor, adding no productive value to the world (e.g. indulging in travel), when we do not properly value the real factors (i.e. the workers and environment) that help that investment to make outsized returns. The days of rocking up with capital, facilitating an investment in a factory, paying slave wages, not accounting for environmental resources properly (cost of water or cleaning up pollution), and then taking the bulk of profits out, are nearing an end....

34
Shares / Re: Gold stocks
« on: August 25, 2019, 12:50:16 pm »
Lots of chatter about a "Black Monday" market crash tomorrow (Monday 26th). However, the fact that people are talking about it means it probably won't happen... Either way, gold stocks are still doing well, with the Runt set to weaken further.

35
Shares / Re: Gold stocks
« on: August 22, 2019, 08:28:44 pm »
On 17 Mar 2010, the now-defunct BitcoinMarket.com exchange is the first one that starts operating. On 22 May 2010, Laszlo Hanyecz made the first real-world transaction by buying two pizzas in Jacksonville, Florida for 10,000 BTC. In five days, the price grew 1000%, rising from $0.008 to $0.08 for 1 bitcoin

Back then it was faster, cheap and useable. Try buying a pizza today with a few Satoshis. The fees would kill the transaction, and it would take a few hours to go through to the pizza man. I know people that use it to transact (no, not all my friends are online drug and arms dealers) but it's more of a novelty value now. Many Zimbabweans also still use it as it can sometimes be cheaper than the taxi fees to transport hard currency across the border.
 

36
Shares / Re: Gold stocks
« on: August 14, 2019, 07:36:48 pm »
It's also interesting how many started trying to say that crypto markets were a great inverse correlation to equities etc. That they would perform just as well as gold due to their rarity value, which is what Satoshi originally tried to design into BTC. However, everyone knows that fear and greed (and when joined together, FOMO) have been largely responsible for crypto price moves.

So that supposedly inverse correlation is busy breaking down fast i.e. when all markets crash, investors tend to get margin calls. This results in often selling other positions to cover the calls. However, no-one sells their physical gold to cover a margin call. Rather sell this stupid thing called a Bitcoin, which doesn't seem to have any utility value anyway. If you try to buy a pizza with it, the transaction fees would probably be worth more than the pizza anyway.  :D  (Yes, I know you can't buy a pizza with gold either, although you probably could, but that's not what gold is there for. It's there to keep just ahead of inflation.)

37
Shares / Re: Gold stocks
« on: August 14, 2019, 07:29:38 pm »
I don't see gold popping yet but it's coming... The dream scenario for SA gold stockholders is a gold spike, together with another economic collapse / emerging market risk-off sentiment i.e. weaker Rand. I reckon inside of the next 1-3 years.... Interestingly, I reckon SA will recover quicker and faster than most developed nations, who will go into a Japanese style deflation scenario for a long time...

In case no-one has noticed, this dream scenario is busy unfolding for SA gold.... Stock markets look likely to head even further south from here on and whilst they will bounce back, 2019 looks like being another negative or flat year for equity markets. Interestingly, it's almost impossible to buy Kruger Rands at the moment. Apparently, as soon as the Mint opens every day, the available quota for the day is snapped up within minutes....

Whilst I don't think we will see a 1930's depression unfold, at least not yet because the US Dollar still seems to be currency to flee to in a crisis. Of course this is totally nuts as the US is indebted more than any other nation in the history of this planet. This penny has dropped to most of the ultra high net worths already and finally the large funds are starting to realise it. However, everyone is like the proverbial deer caught in the headlights. There is nowhere to turn to preserve value, never mind make a return. Gold, whether you love it or hate it, is becoming the only investable market. In localised markets property, diesel and bread (in fact most food and water) will hold their value too.

38
Shares / Re: Readjusting portfolio.
« on: June 26, 2019, 04:26:46 pm »
I've just managed to sell a property after it being a long time on the market and in light of the comments above where would you invest a large lump sum today as I have no intention of buying another property?

Bizarrely, productive agricultural land with water on site is an excellent investment longer term. Ask Dr. Michael Burry...
https://www.savingthegrace.com/blog/2018/7/25/why-michael-burry-of-the-big-short-is-investing-in-water-put-your-money-where-the-water-is

Unfortunately many risk-off markets have run already e.g. crypto-currencies, precious metals etc. Stock markets are very top-heavy. Bonds are in favour but only because everything else sucks. Private equity can probably offer decent returns. You might want to look at investing via Uprise.Africa or lending on RainFin. They are a little more risky but offering decent returns.

Collectibles are also offering decent returns. Classic cars, rare gold coins e.g. St. Gauden.... Read Simon's article on Sovereign Man...
https://www.sovereignman.com/international-diversification-strategies/the-most-interesting-way-to-buy-gold-today-23490/

39
Shares / Re: Gold stocks
« on: June 26, 2019, 04:19:25 pm »
Problem as always is the inverse correlation between gold and ZAR. Central banks are indeed buying gold en-mass now, as they spurn US Treasuries. The bond markets are signalling their fear of US debt levels and gold is benefitting from these concerns, as well as general US - Iran tensions, ongoing trade wars etc. Stock markets are very, very top heavy as companies have used all that lovely QE that has found its way to them, to buy back their own stocks. This has kept stock markets absurdly high even as the aging generation (who generally outnumber the young in developed economies) pulls their money from stocks into safer assets, like gold.

I don't see gold popping yet but it's coming... The dream scenario for SA gold stockholders is a gold spike, together with another economic collapse / emerging market risk-off sentiment i.e. weaker Rand. I reckon inside of the next 1-3 years.... Interestingly, I reckon SA will recover quicker and faster than most developed nations, who will go into a Japanese style deflation scenario for a long time...

40
Shares / Re: Readjusting portfolio.
« on: June 09, 2019, 08:48:39 pm »
...
Seems like a flat market has become the new normal over the years and no reversal is even expected in the near future.

I think flat would be nice. The concern is that we see a major correction. The Shiller CAPE ratio has only ever been higher two times before, once before the 1930's crash and the other during the irrational exuberance just before the dot.com crash. See https://www.multpl.com/shiller-pe - did anyone say Netflix, UBER etc.... Definitely heard that language before i.e. we operate on negative margins but we make up for it with eyeballs / volumes.... yeah right....

Some are talking 1930's depression again. I realise I've held a contrarian bearish "anti-investor" approach for some time, preferring to trade the swings and re-invest my profits. This means I often get to ride the same price moves up and down, two or three times. I'm completely price agnostic at all times.

My view is that governments and banks got bailed out in 2007/2008. Then more money than the world has ever known got printed. Where did it go? To the super wealthy of course, initially via the FED and the bond market, taking US debt to over $22-trn now. Note how the Chinese, Japanese and other traditionally large US treasury buyers have stopped buying and are turning to gold instead.... But for central banks their gold holdings are simply a nice way to earn annuity returns i.e. playing gold loans vs. interest rate swaps.

The super wealthy, clever money has also definitely been leaving the market of late, along with those baby-boomer pension funds, now all retiring. But you can't see them. Why? Because all those bucketloads of money have ultimately also found their way to companies, and those companies cannot find any value in the market, just like Warren Buffet sitting on oodles of cash reserves. So what do they do to appease their stockholders? They've been buying their own stocks back, keeping prices afloat. Of course the largely uninformed middle classes have also been buying stocks like there's no tomorrow. Because of course stocks always keep going up.... right? So whilst banks and governments got taken out in 2007/2008 we now need to see ordinary stockholders and companies get taken out, to restore the balance a little and help wipe out that massive excess of printed money.

I doubt the US will default as they will simply go after people's pensions first i.e. take away social security (it goes bust circa 2030 anyway) and replace it with a basic income grant instead. Either way, we are heading for interesting times. The top 1% will of course do just fine. Warren Buffett also has his put options and others have largely diversified into gold, properties, farms with water, rare collectibles etc.

Having said all that, the Dow has had a nice retracement on May's drop and looks like it could run further still to 27,000. Then however things should get very interesting. Will there be enough steam and momentum to push it higher or will we start to see the cracks? We haven't had a decent market correction for over 10 years now. This next one could be dramatic because I don't see anyone prepared to step in and save markets this time...

41
Off topic / Re: Live chat
« on: June 07, 2019, 10:21:22 am »
...until we revert to concurrent weakening again (to ride big swells), probably later in week....

We are in strong concurrent weakening on the Rand, now targeting 16 to USD by end June. However, for now we are quite overbought (i.e. USD) and Rand pushing outside the elastic bands (Bollingers), thus expect a little contraction and sideways, choppy price action. Especially as momentum (the wind) starts moving against signal and trend (the current). This will form the typical bull flag pattern, whilst momentum catches its breath. Following the bull flag, I expect further weakening to the expected 16 level.

42
Off topic / Re: Live chat
« on: June 03, 2019, 09:34:10 am »
ZAR is crosscurrent i.e. short term strength against medium term weakening. Expect choppy, sideways action (wind blowing against current in ocean) until we revert to concurrent weakening again (to ride big swells), probably later in week. Fundamentally, emerging markets to weaken against bleak global risk-off sentiment.

43
Off topic / Re: Life cover, income protection and such...
« on: May 20, 2019, 12:53:30 pm »
I don't do insurance. I prefer to do life. Hell, I don't even do medical aid. Instead, I eat healthy, organic food from the garden and our own animals. I cut down trees and carry logs and build stone cottages, which is way better than gym and keeps me in tip-top condition. I reckon I've pushed back any heart-attack etc. by many years now. Our place makes money from accommodation, selling food and other products, courses and compost making etc. I may have most of my eggs in one basket but I really like the basket and wouldn't want it any other way.

Insurance is pure grudge. If you're the sole breadwinner and your family has nothing else to fall back on then yes, you need it. Find the balance between being responsible and the least cost options, and invest whatever savings you can make instead.

44
Off topic / Re: Live chat
« on: May 19, 2019, 04:42:51 pm »
BTC on the Investor Challenge is also quoted in ZAR and the Runt looks like it's in weakening mode again. Expect 15 or even higher to USD fairly soon now. So weaker Runt and lower BTC means best to hold in the investor comp i.e. avoid paying taxes on profits.

45
Off topic / Re: Live chat
« on: May 19, 2019, 04:37:56 pm »
ETH and BTC both clearly very overbought and over-extended now. But weekly and daily momentum are still positive so no reason to sell. Just bring stop losses in quite close. This week could see some fast, gappy corrections so perhaps set guaranteed stops around 5% lower. If stopped out you probably want to look for an opportunity to re-enter on the long side, but we could see up to a 20% correction, so watch daily and 30-min momentum for timing.

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