Financial thread

[Deleted]

Just a thought from my last post.

Once margin calls were beginning to be executed from US market open on 28th Feb.(2.30 UK time) Gold started to sell off aggressively to cover the margin losses elsewhere. Earlier that day, during the UK and European morning session, Gold only sold off moderately.

It will be interesting to see if a similar thing happens this afternoon once the US market opens. Gold has been a little bullish this morning, however, should margin calls be executed again this afternoon, it could easily reverse with a fairly large percentage drop.

[Deleted]

Looks like the UK & ECB are helping out the Banks with 'Virus relief', and probably at negative interest rates in the EU, so the ECB will be paying the Banks to take on the loans. Apparently there is a caveat to the relief payment to provide help to their business customers during this difficult period, and not to build up Bank coffers, as they did after the financial crisis, which saw many businesses go to the wall as a result.

It's reassuring to know that the Banks have learnt their lesson, and have not built up any major high risk derivative exposure since the financial crisis. After all, if the stock markets collapse, we would not want to see them being bailed out because they are too big to fail.

[Deleted]

Despite all this market turmoil, panic sell off (including safe havens), and putting aside further sudden bad news, we might see a little consolidation for a while, or even some bullish feeling coming into the markets over the next few weeks. If the latter, the S&P 500 might gradually form a bull trap, even reaching the 3000 level before turning down again. However, it seems more likely to me that general positivity will be sorely lacking, and a fairly wide ranging (due to high volatility) bear flag will form, before the next downward leg in this, now confirmed bear market.

Either way, the downward trajectory will probably gain momentum as 2nd quarter projections start to be banded about. If total capitulation does occur (we are not there yet), it would not surprise me to see the S&P 500 come down to levels last seen in 2011, somewhere between 1100 and 1200.

To me it looks like cash is king at the moment.

Gold has been suffering of late, as margin calls executed elsewhere have continued to see Gold sold to cover positions. Used in this way, the yellow metal is seen as a bank account rather then a safe haven. This morning, Spot Gold is up about 1.6% as Asian and European markets fall. However, the US markets finished strong on Friday, only to see them fall as Asian markets opened late Sunday night, so it is possible that further margin calls will be executed this week.

A side effect of margin calls seems to have contributed to Silver falling dramatically as Gold has fallen, so it is largely being seen as an industrial metal in this environment. If Gold had held it's ground I suspect that Silver would not be quite as low as it is.

[Deleted]

Stuff it all under the matress!

[Deleted]

Mar 17, 2020 2:24:53 GMT hongkongstone said:

Stuff it all under the matress!

Agreed. I was just being long-winded about it. Then again, maybe a tin of beans would be better.

[Deleted]

Mar 17, 2020 8:52:00 GMT @cgr said:

Mar 17, 2020 2:24:53 GMT hongkongstone said:

Stuff it all under the matress!

Agreed. I was just being long-winded about it. Then again, maybe a tin of beans would be better.

When my in-laws were going through the after effects of the 'change of regime', as the fall of the USSR is known out there, everybody could see that inflation would go through the roof and all their savings would be worth nothing (they've had quite a bit of experience of this in the last 100 years or so), so they tried to convert all their money into 'things' while it still had some value. Unfortunately, there wasn't a lot of stuff around that was worth buying or would retain its value and could be sold later, so they went for things that could be passed on to the next generation - mostly as wedding presents, or for their daughter's 'bottom drawer'.

The upshot is that practically every home in Hungary and the other ex-Eastern Bloc countries, has drawers and cupboards stuffed full of bed linen, cutlery, crockery, etc from the 80s and 90s. And, as I married a Hungarian, we also now have three different sets of cutlery, and cupboards full of crockery, most of which never gets used. We have an everyday dinner service, a weekend dinner service, a special dinner service, and even an extra-special dinner service (which we never use - and, anyway, I'd be frightened to wash it up!).

The moral of all this is, I guess, that money has no real value - just the value that everybody agrees it has. It's a sort of collective belief or myth - if that myth stops being believed in, or is shown to be untrue, money just becomes coins, notes and numbers - actually worth nothing at all.

[Deleted]

Mar 17, 2020 21:22:29 GMT @johndaubneyslegs said:

Mar 17, 2020 8:52:00 GMT @cgr said:

Agreed. I was just being long-winded about it. Then again, maybe a tin of beans would be better.

When my in-laws were going through the after effects of the 'change of regime', as the fall of the USSR is known out there, everybody could see that inflation would go through the roof and all their savings would be worth nothing (they've had quite a bit of experience of this in the last 100 years or so), so they tried to convert all their money into 'things' while it still had some value. Unfortunately, there wasn't a lot of stuff around that was worth buying or would retain its value and could be sold later, so they went for things that could be passed on to the next generation - mostly as wedding presents, or for their daughter's 'bottom drawer'.

The upshot is that practically every home in Hungary and the other ex-Eastern Bloc countries, has drawers and cupboards stuffed full of bed linen, cutlery, crockery, etc from the 80s and 90s. And, as I married a Hungarian, we also now have three different sets of cutlery, and cupboards full of crockery, most of which never gets used. We have an everyday dinner service, a weekend dinner service, a special dinner service, and even an extra-special dinner service (which we never use - and, anyway, I'd be frightened to wash it up!).

The moral of all this is, I guess, that money has no real value - just the value that everybody agrees it has. It's a sort of collective belief or myth - if that myth stops being believed in, or is shown to be untrue, money just becomes coins, notes and numbers - actually worth nothing at all.

Wise words indeed.

[Deleted]

Mar 17, 2020 21:22:29 GMT @johndaubneyslegs said:

Mar 17, 2020 8:52:00 GMT @cgr said:

Agreed. I was just being long-winded about it. Then again, maybe a tin of beans would be better.

When my in-laws were going through the after effects of the 'change of regime', as the fall of the USSR is known out there, everybody could see that inflation would go through the roof and all their savings would be worth nothing (they've had quite a bit of experience of this in the last 100 years or so), so they tried to convert all their money into 'things' while it still had some value. Unfortunately, there wasn't a lot of stuff around that was worth buying or would retain its value and could be sold later, so they went for things that could be passed on to the next generation - mostly as wedding presents, or for their daughter's 'bottom drawer'.

The upshot is that practically every home in Hungary and the other ex-Eastern Bloc countries, has drawers and cupboards stuffed full of bed linen, cutlery, crockery, etc from the 80s and 90s. And, as I married a Hungarian, we also now have three different sets of cutlery, and cupboards full of crockery, most of which never gets used. We have an everyday dinner service, a weekend dinner service, a special dinner service, and even an extra-special dinner service (which we never use - and, anyway, I'd be frightened to wash it up!).

The moral of all this is, I guess, that money has no real value - just the value that everybody agrees it has. It's a sort of collective belief or myth - if that myth stops being believed in, or is shown to be untrue, money just becomes coins, notes and numbers - actually worth nothing at all.

If money means nothing at all and I ain't got any money does that make me rich?

[Deleted]

Mar 18, 2020 8:42:33 GMT sword65 said:

Mar 17, 2020 21:22:29 GMT @johndaubneyslegs said:

When my in-laws were going through the after effects of the 'change of regime', as the fall of the USSR is known out there, everybody could see that inflation would go through the roof and all their savings would be worth nothing (they've had quite a bit of experience of this in the last 100 years or so), so they tried to convert all their money into 'things' while it still had some value. Unfortunately, there wasn't a lot of stuff around that was worth buying or would retain its value and could be sold later, so they went for things that could be passed on to the next generation - mostly as wedding presents, or for their daughter's 'bottom drawer'.

The upshot is that practically every home in Hungary and the other ex-Eastern Bloc countries, has drawers and cupboards stuffed full of bed linen, cutlery, crockery, etc from the 80s and 90s. And, as I married a Hungarian, we also now have three different sets of cutlery, and cupboards full of crockery, most of which never gets used. We have an everyday dinner service, a weekend dinner service, a special dinner service, and even an extra-special dinner service (which we never use - and, anyway, I'd be frightened to wash it up!).

The moral of all this is, I guess, that money has no real value - just the value that everybody agrees it has. It's a sort of collective belief or myth - if that myth stops being believed in, or is shown to be untrue, money just becomes coins, notes and numbers - actually worth nothing at all.

If money means nothing at all and I ain't got any money does that make me rich?

Only if you have got lots and lots of toilet rolls, and 5000 kilos of pasta.

[Deleted]

Mar 18, 2020 8:42:33 GMT sword65 said:

Mar 17, 2020 21:22:29 GMT @johndaubneyslegs said:

When my in-laws were going through the after effects of the 'change of regime', as the fall of the USSR is known out there, everybody could see that inflation would go through the roof and all their savings would be worth nothing (they've had quite a bit of experience of this in the last 100 years or so), so they tried to convert all their money into 'things' while it still had some value. Unfortunately, there wasn't a lot of stuff around that was worth buying or would retain its value and could be sold later, so they went for things that could be passed on to the next generation - mostly as wedding presents, or for their daughter's 'bottom drawer'.

The upshot is that practically every home in Hungary and the other ex-Eastern Bloc countries, has drawers and cupboards stuffed full of bed linen, cutlery, crockery, etc from the 80s and 90s. And, as I married a Hungarian, we also now have three different sets of cutlery, and cupboards full of crockery, most of which never gets used. We have an everyday dinner service, a weekend dinner service, a special dinner service, and even an extra-special dinner service (which we never use - and, anyway, I'd be frightened to wash it up!).

The moral of all this is, I guess, that money has no real value - just the value that everybody agrees it has. It's a sort of collective belief or myth - if that myth stops being believed in, or is shown to be untrue, money just becomes coins, notes and numbers - actually worth nothing at all.

If money means nothing at all and I ain't got any money does that make me rich?

In the things that matter, yes. Unfortunately, you can't buy beer with them...

[Deleted]

Mar 18, 2020 7:40:10 GMT @cgr said:

Mar 17, 2020 21:22:29 GMT @johndaubneyslegs said:

When my in-laws were going through the after effects of the 'change of regime', as the fall of the USSR is known out there, everybody could see that inflation would go through the roof and all their savings would be worth nothing (they've had quite a bit of experience of this in the last 100 years or so), so they tried to convert all their money into 'things' while it still had some value. Unfortunately, there wasn't a lot of stuff around that was worth buying or would retain its value and could be sold later, so they went for things that could be passed on to the next generation - mostly as wedding presents, or for their daughter's 'bottom drawer'.

The upshot is that practically every home in Hungary and the other ex-Eastern Bloc countries, has drawers and cupboards stuffed full of bed linen, cutlery, crockery, etc from the 80s and 90s. And, as I married a Hungarian, we also now have three different sets of cutlery, and cupboards full of crockery, most of which never gets used. We have an everyday dinner service, a weekend dinner service, a special dinner service, and even an extra-special dinner service (which we never use - and, anyway, I'd be frightened to wash it up!).

The moral of all this is, I guess, that money has no real value - just the value that everybody agrees it has. It's a sort of collective belief or myth - if that myth stops being believed in, or is shown to be untrue, money just becomes coins, notes and numbers - actually worth nothing at all.

Wise words indeed.

Although Hungarian, my wife actually grew up in the USSR (her family found itself on the wrong side of the new border in 1921), so her experience of how money works is quite interesting. The Rouble worked fine internally, but internationally it was worth almost nothing. The government pegged it at parity with the US Dollar, but in reality it was only worth a few cents.

As a result, there was a flourishing (but totally illegal) black economy based on the dollar. Anything that came in from the outside (jeans and records smuggled through customs, for instance) was paid for in dollars. Any money gifts (eg wedding presents) in Roubles would be looked down upon, it was a real status symbol to be able to give dollars. It meant you not only had money, but also the real 'currency' in the USSR - influence and contacts. Even when we were married in 2002, 12 years after the change of regime, we were given envelopes of dollars.

And yet, inside the system, the Rouble DID have real value, and worked fine. It still wasn't worth a dollar, but it was probably not far off, taking into account the lower cost of food, services, etc.

Funny stuff, money.

[Deleted]

Mar 18, 2020 9:33:30 GMT @johndaubneyslegs said:

Mar 18, 2020 7:40:10 GMT @cgr said:

Wise words indeed.

Although Hungarian, my wife actually grew up in the USSR (her family found itself on the wrong side of the new border in 1921), so her experience of how money works is quite interesting. The Rouble worked fine internally, but internationally it was worth almost nothing. The government pegged it at parity with the US Dollar, but in reality it was only worth a few cents.

As a result, there was a flourishing (but totally illegal) black economy based on the dollar. Anything that came in from the outside (jeans and records smuggled through customs, for instance) was paid for in dollars. Any money gifts (eg wedding presents) in Roubles would be looked down upon, it was a real status symbol to be able to give dollars. It meant you not only had money, but also the real 'currency' in the USSR - influence and contacts. Even when we were married in 2002, 12 years after the change of regime, we were given envelopes of dollars.

And yet, inside the system, the Rouble DID have real value, and worked fine. It still wasn't worth a dollar, but it was probably not far off, taking into account the lower cost of food, services, etc.

Funny stuff, money.

It's very humbling to see the world through the eyes of another. It certainly gives you food for thought.

Russia has always interested me, and I did try to learn the language, but didn't get very far. There used to be a TV series in the 70s teaching it which included a song called "до свидания лето", which for some reason I never forgot.

[Deleted]

Mar 18, 2020 11:05:29 GMT @cgr said:

Mar 18, 2020 9:33:30 GMT @johndaubneyslegs said:

Although Hungarian, my wife actually grew up in the USSR (her family found itself on the wrong side of the new border in 1921), so her experience of how money works is quite interesting. The Rouble worked fine internally, but internationally it was worth almost nothing. The government pegged it at parity with the US Dollar, but in reality it was only worth a few cents.

As a result, there was a flourishing (but totally illegal) black economy based on the dollar. Anything that came in from the outside (jeans and records smuggled through customs, for instance) was paid for in dollars. Any money gifts (eg wedding presents) in Roubles would be looked down upon, it was a real status symbol to be able to give dollars. It meant you not only had money, but also the real 'currency' in the USSR - influence and contacts. Even when we were married in 2002, 12 years after the change of regime, we were given envelopes of dollars.

And yet, inside the system, the Rouble DID have real value, and worked fine. It still wasn't worth a dollar, but it was probably not far off, taking into account the lower cost of food, services, etc.

Funny stuff, money.

It's very humbling to see the world through the eyes of another. It certainly gives you food for thought.

Russia has always interested me, and I did try to learn the language, but did'nt get very far. There used to be a TV series in the 70s teaching it which included a song called "до свидания лето", which for some reason I never forgot.

Indeed. It's fascinating being married into another culture, especially as varied as my in-laws'. My wife's family are from what is now Ukraine, but was originally Hungary. After WW1, Hungary lost two-thirds of its territory, and what had been Upper Hungary became part of the newly created Czechoslovakia, so my wife's grandparents found themselves Czechoslovakians.

Then in WW2, Hungary was tempted into the war on the German side by the promise of getting their 'lost territories' back, so her grandparents found themselves Hungarian again. But when the Soviets 'liberated' that area, they decided to incorporate it into the Soviet Socialist Repulic of the Ukraine - part of the USSR, so they became Soviet citizens.

And then, of course, they became Ukrainian citizens when the Soviet Union collapsed. Without moving house once, they had lived in four different countries, one of them twice!

My wife was born a Soviet citizen, then became Ukrainian, then moved to Hungary and was given Hungarian citizenship (on the grounds that she was actually Hungarian!). She was intending to eventually become a British citizen, just to complete the set, but I think the Brexit madness has put her off that...

[Deleted]

With all the fiscal stimulus being pumped into the market, once fear starts to subside, traders will probably start to get interested again, and start a bit of a rally in the markets soon. Although it has been speculated that the S&P 500 could reach the 3000 level again, that seems a bit high to me in this environment. Whatever level a near term future rally would make, it is likely to be relatively short lived (a few weeks?), and end in a bull trap, where markets eventually start to weaken again, and begin the next leg down in this bear market.

[Deleted]

Nov 30, 2019 5:16:07 GMT @cgr said:

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.

Just a note about my previous post above, where I mention a geared inverse Real Estate ETFs. Since the general downturn in the marktet, the ETF that I provided as an example, has risen from a low of about 16 and now sits around the low 30s. Should the stock markets have a decent rally over the next few weeks, as fear recedes, this ETF will probably loose value, and reverse down again to consolidate at a lower level. However, once the overall markets look like they are going to reverse again and aggressively move lower, this ETF could fly.

This is not a recommendation, just my thoughts about what could conceivably come to pass if the US economic outlook drastically deteriorates, and companies lay off staff in large numbers across the country.

Caveat emptor - Remember geared financial instruments, like this ETF, are VERY volatile and can go down just as rapidly as they go up.