Financial thread

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I thought I would start off this thread as I feel it is important (and yes I know it's boring) to highlight any financial aspect that may affect our future well-being in general, and our ability to be able to afford to watch the Stones as time goes on. A prime example of this is the derivative driven financial crisis that has resulted in years of austerity and, for some, a detrimental financial and psychological future, job losses etc.

Whether we like it or not we live in a capitalist society, which at times, is largely, if not totally, driven by the state of the US economy (think sub-prime defaults that occurred during the late naughties) So I will start off with an aspect of the US financial machine that relates to overnight loan rates, which have been causing concern this week. This article explains it  www.reuters.com/article/us-usa-fed-repo-tools-explainer/explainer-the-fed-has-a-repo-problem-whats-that-idUSKBN1W30EJ

As fear is increasingly entering the global markets, this cog in the US financial system could act as a trigger, if the fear to lend takes hold. On the face of it the US economy looks strong, the indices are approaching all-time highs as foreign money tries all it can to access the $, but underlying this, the cracks in the wall might be starting to show themselves.

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So what's your bet about the outcome of the vote in Parliament tomorrow. If they reject BoJo's deal then we could see the value of the pound drop dramatically. Over the last few days the pound has risen fast due to the prospect of a deal with the EU being successful www.fxstreet.com/news/gbp-futures-upside-looks-exhausted-201910180535 This has resulted in a dramatic fall in the value of Gold when traded against Sterling.

If the deal put forward for the vote fails, Sterling should fall hard, and Gold (when traded in GBP) should be a good bet to rise for one or two days into next week, although the prospect of exiting the EU on the 31st without a deal would still be very much alive, and so may mute the strength of the fall in Sterling and the rise in Gold. A Gold ETF in GBP would be a good way into a short term trade.

The only other major effect on the movement in Gold is what happens in the US. If good news comes out there, and the Stock market rises, the rise in gold might be muted somewhat, or have no real effect at all, as the metal has held up quite well over the last few weeks. If bad news comes out, especially with regard to the US/China trade deals, or the $US rises, the rise in Gold will be exacerbated (when traded in GBP).

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Oct 18, 2019 7:25:07 GMT @cgr said:

So what's your bet about the outcome of the vote in Parliament tomorrow. If they reject BoJo's deal then we could see the value of the pound drop dramatically. Over the last few days the pound has risen fast due to the prospect of a deal with the EU being successful www.fxstreet.com/news/gbp-futures-upside-looks-exhausted-201910180535 This has resulted in a dramatic fall in the value of Gold when traded against Sterling.

If the deal put forward for the vote fails, Sterling should fall hard, and Gold (when traded in GBP) should be a good bet to rise for one or two days into next week, although the prospect of exiting the EU on the 31st without a deal would still be very much alive, and so may mute the strength of the fall in Sterling and the rise in Gold. A Gold ETF in GBP would be a good way into a short term trade.

The only other major effect on the movement in Gold is what happens in the US. If good news comes out there, and the Stock market rises, the rise in gold might be muted somewhat, or have no real effect at all, as the metal has held up quite well over the last few weeks. If bad news comes out, especially with regard to the US/China trade deals, or the $US rises, the rise in Gold will be exacerbated (when traded in GBP).

My bet is that the deal won't get through parliament. Without the support of the Ulster Unionists it requires too many Labour rebels and the numbers just don't add up. In spite of the rhetoric coming out of the EU, Ithink they will grant an extension which will be closely followed by a general election, and depending on the result, either a confirmatory referendum or a continuation of the stalemate and lack of progress we have had to put up with for the last three years. Either way, the prospects are pretty low for an end to the uncertainty and the detrimental effects on the UK economy.

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Just watched the first episode of season 10 Gold Rush on Discovery.
Tony Beets can’t mine Eureka this season as his water permit has expired, meaning a whole lot of new gold won’t be hitting the market this year, which could push prices higher🤞😉

Recently traded out half my ETF for a physical alternative, on the basis that it’s easier to spend should the need arise (dear god, please let that not be necessary)

But yes, you’re likely right, in Sterling terms, gold is a reasonable short term play on BoJo not getting his majority. Perhaps a trade today would be better though, it’ll already be in the price by Monday morning open

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The other 27 EU Countries must be getting thoroughly sick of the whole saga. It only needs one of them to veto any request for an extension; if so we leave on 31st October Deal or No Deal.

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Looks like the sub-primes in the States are back, and in full flow, as outlined in this Guardian article.
www.theguardian.com/business/2019/jan/12/subprime-timebomb-back-companies-lighting-the-fuse

and this Real Estate warning for next year is interesting.
www.facebook.com/EconomyMarkets/videos/2458230071097553/

Of course, this event may NOT materialise, but it might be worth a little flutter (pocket money guys) on a geared inverse Real Estate ETF like this one www.investing.com/etfs/proshares-ultrashort-real-estate-chart
As you can see it is currently at around 19, but if you scroll back on the chart, it went to a peak of 13000 when house prices collapsed during the last credit crisis in 2008. Not likely to reach those levels again, but would probably easily treble in value from these low levels should the U.S. housing market collapse. 

One word of warning, geared financial instruments, like this ETF, are VERY volatile and can go down just as rapidly as they go up.

I want to make it clear that I am NOT giving financial advice, I am just pointing out possible outcomes to plausible future events.

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I have heard these arguments for 18 months now.

My question is what event triggers this to happen?

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Dec 1, 2019 13:31:38 GMT sennockian69 said:

I have heard these arguments for 18 months now.

My question is what event triggers this to happen?

No one really knows, and indeed it may never happen. Last time it was the artificially supported US housing market itself (subprime derivatives). In my view, the market should have corrected three years or so before the crash actually happened, and maybe the outcome would not have been so bad. It is difficult to time when a trigger event like this happens because hey, while the sun is shining why would bankers advertise underlying problems, until it's too late for the man in the street. Rest assured that the big guys made their profit and got out before the faeces hit the fan.
 
Still what I am impressed by, is how the Fed are doing a great job on that tightrope swinging above the gigantic hole that they've dug, hoping that the economy does not overheat so that they might be forced to contemplate another round of raising rates again, as they know that it would put pressure on those global borrowers that took advantage of years of cheap US$ money, as a result of largely unsuccessful Quantitative Easing.

So this time, if there is a trigger, maybe will come from somewhere outside the US, the Middle East, North Korea, or maybe it will be purely financial, China and the trade tariffs combined with their own debt exposure to the US, or Deutsche Bank with their excessive $US derivative exposure is a great candidate. Can you imagine what their collapse would do to the ECB and those US homeowners, as millions of butterflies flap their little wings. Another contender is the ongoing overnight repo problem that is a concern for some investors, and they seem to be covering their investment exposure to the ever rising Stock Market.

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Gold has built an impressive bull flag since early September, which is of a similar rotation (7%) to the one that developed between Feb and May (6%) this year, prior to the fast rise that took place in Gold between May and September.

Is Gold priming itself for another leg up in what seems like a new bull market?

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Dec 11, 2019 8:51:58 GMT @cgr said:

Gold has built an impressive bull flag since early September, which is of a simiilar rotation (7%) to the one that developed between Feb and May (6%) this year, prior to the fast rise that took place in Gold between May and September.

Is Gold priming itself for another leg up in what seems like a new bull market?

I thought Gold was playing for Yeovil,got sent off Saturday 🙂

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Dec 11, 2019 11:01:22 GMT sword65 said:

Dec 11, 2019 8:51:58 GMT @cgr said:

Gold has built an impressive bull flag since early September, which is of a simiilar rotation (7%) to the one that developed between Feb and May (6%) this year, prior to the fast rise that took place in Gold between May and September.

Is Gold priming itself for another leg up in what seems like a new bull market?

I thought Gold was playing for Yeovil,got sent off Saturday 🙂

Seems like both Bury and Yeovil thought there something about him to put him on their books, or maybe he was just a cheap free signing for both clubs, so nothing to lose.

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Lose maybe

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corrected.

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Dec 11, 2019 8:51:58 GMT @cgr said:

Gold has built an impressive bull flag since early September, which is of a simiilar rotation (7%) to the one that developed between Feb and May (6%) this year, prior to the fast rise that took place in Gold between May and September.

Is Gold priming itself for another leg up in what seems like a new bull market?

 But the only game in town is the Stock Market and you know gold is the other side of the bet. So it's too soon to see gold begin its inevitable climb to heaven.

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Dec 11, 2019 20:51:23 GMT sennockian69 said:

Dec 11, 2019 8:51:58 GMT @cgr said:

Gold has built an impressive bull flag since early September, which is of a simillar rotation (7%) to the one that developed between Feb and May (6%) this year, prior to the fast rise that took place in Gold between May and September.

Is Gold priming itself for another leg up in what seems like a new bull market?

 But the only game in town is the Stock Market and you know gold is the other side of the bet. So it's too soon to see gold begin its inevitable climb to heaven.

It might well be too soon for Gold to continue it's climb since late 2018, and yes, the Stock Market is the only game in town, made up of individual elements, and Gold is just one aspect of the Market. Each aspect of the market has it's bull phase, bear phase, and range trading phase. If Gold is in a new bull phase, it will, like the current long term bull phase of the overall US Stock Market, eventually end, as phases always do. That is when it is time to sell, and rotate funds into more advantageous investment vehicles like Tech, Large, Mid or small cap stocks, depending on the investing environment within any particular time frame/s.

At the present moment in time, it must be stressed that all the US indices are still in a bull market, however the value of Gold appears to have held up pretty well considering the great run it had up to the end of August, only rotating lower by about 7% to date, and that is despite the general strength of the US$, and positive economic news coming out of the US over that period. Investors are becoming increasingly cautious and protectionist regarding the global economy in general, and the high price to earnings valuations of US companies, along with presidential election uncertainty, and trade negotiation issues etc. It seems that there are many that are either holding onto Gold that they already have, in it's various forms (physical, ETFs, and Miners to a lesser degree), or are buying, adding on the dips, with some selling into strength.

So is there going to be a general Stock Market Christmas rally, there's still time, or are the markets going to roll over, and money start to enter the safe havens of Treasury Bonds (Gilts) and Precious Metals. Tough call.