Investments Trade Log

[shemp]

No, household and corporate debt does not necessarily have to be deflationary. There is no cause and effect relationship. There is correlation between debt levels and deflation, because of the reason I noted above. Namely, debt is typically concentrated in the hands of misers. Instead of spending interest in debt, misers hoard the interest, so debt causes a constant sucking of money and thus demand from the economy.

Suppose all household/corporate debt were magically transferred to poor young people who spent every penny of interest. Debt wound then have no effect on demand. Even better, suppose household/corporate debtors took on more debt at the same time the youngsters were spending all the interest on the existing debt. Then you get a credit boom, which is highly inflationary. (Of course, such booms don't go on forever, but that another story.) My scenarios may not be politically realistic, but it shows clearly that debt itself doesn't cause deflation.

Concentration of wealth in the hands of misers is a much better explanation of what typically causes deflation, but that explanation is avoided because "rich old misers" is just an unpleasant sounding name for the people usually called "the rich and powerful". Since these are the people who own the media outlets and universities, they decide what is published and taught. Teaching little people that debt is the cause of deflation is a way of deflecting attention from the real cause.

[giskard]

I don't where that slogan comes from, but it makes no sense. Do you really believe giving everyone $1 million of 10 year US government bonds paying 2% would be deflationary?

I think it makes sense. Take a company that fills up it's balance sheet with debt. Now it has to use it's cash flow to cover interest payments instead of on operations. All things being equal this is a deflationary force. Same thing when personal balance sheets are overloaded with debt, same with governments.

Now other things like interest rates to have an impact because as you lower them you can reduce interest payments and take on more debt but at some point interest payment burden will increase which reduces free cash flow.

I didn't think there was anything controversial about that idea, many prominent economic commentators (e.g. Lacy Hunt) will make the same point when analyzing the economy.

[shemp]

It matters not one wit whether a company pays out cash on interest or operations, as long as the recipient of the interest turns around and spends the interest. Deflation occurs when money stops circulating. Hoarding money, in other words. (The old money equation MV=P has always been stupidity inducing , because neither Money nor Price level of aggregate economic activity could ever be precisely defined, not even in primitive societies without banking and where all money was silver/gold, but at least it reveals clearly that hoarding, meaning decline in money Velocity, causes deflation.)

All advanced economies have a strong tendency towards deflation because, once people have satisfied their basic wants, the dominant want is for financial security, and the way to get that is to pile up wealth. Lots of ways to be wealthy, not all of which involve hoarding money, but nevertheless hoarding of money somewhere is inevitable when a substantial part of the population is striving to pile up wealth. To avoid deflation, either governments constantly create more money, by running deficits, or governments constantly transfer money from rich to poor (via taxing and spending) to keep money circulating.

And giskard, if you really think giving everyone $1 million in government bonds would be deflationary, you have just announced yourself to this forum as a complete moron where economics is concerned. Maybe go back and edit that last comment of yours...

[ertyu]

It matters not one wit whether a company pays out cash on interest or operations, as long as the recipient of the interest turns around and spends the interest.

That money is way more likely to keep circulating if spent on operations than if paid to a saver via interest. You guys are both right

[Alphaville]

fyi if anyone curious the paypal bitcoin lacks any and all trading tools. i mean just buy or sell but can’t place advanced orders or anything. so it’s basically just a two-way wallet. so, pretty useless in itself. like having a pet fish.

[giskard]

And giskard, if you really think giving everyone $1 million in government bonds would be deflationary, you have just announced yourself to this forum as a complete moron where economics is concerned. Maybe go back and edit that last comment of yours...

Haha well I never claimed to be the opposite. I'm just trying to discuss whether inflation or deflation is more likely in the coming years and how to trade around. I agree that giving everyone a million dollars in government bonds is inflationary. With regards to deflation was I not talking in absolute terms (I agree that it depends on the money velocity), I was just talking about that particular force happening now being deflationary.

Anyway, again the real point was to debate inflation vs deflation positioning for trading purposes.

[Lemur]

Recommendations for Nuclear ETFs?

[jacob]

Certainly. Save your money and buy direct. These are tiny and specialized ETFs with very few holdings and high management fees.

[Lemur]

@Jacob

Great reminder. I've gotten lazy lol. But could just grab an ETF and look at its top 10 holdings...and pick the one I like. Will have to research as I'm not familiar with this sector...but I do feel as a whole nuclear has no way to go but up in the decades to come.

[giskard]

@Jacob

Great reminder. I've gotten lazy lol. But could just grab an ETF and look at its top 10 holdings...and pick the one I like. Will have to research as I'm not familiar with this sector...but I do feel as a whole nuclear has no way to go but up in the decades to come.

I listened to an interview with Rick Rule recently and he was saying there are really on 3 big investable producing nuclear companies and they are the majority of the ETFs. So I think that would be Cameco - CCJ, NexGen - NXE, and Uranium Participation Corp which is URPTF on pink sheets. @Jacob are you buying these? I started buying some CCJ via selling puts to kinda DCA into it slowly.

I think its funny that MacroVoices is now sponsored by that URNM uranium ETF.

[jacob]

Heavily regulated utilities and/or commodity mining? No thanks!

[Flurry]

Is there any thread where people describe their investment strategy / asset allocation? From reading the posts in this thread I think that there are many interesting approaches around.

[ertyu]

Heavily regulated utilities and/or commodity mining? No thanks!

What is making you say such a resounding no to commodity mining? Seems to be the current darling of the "inflation is coming" fintwit crowd. Commodity miners are now being recommended as (1) leveraged exposure to commodities + (2) further assisted by the projected yield curve control that will keep cost of capital low and basically eat up their debt.

In case this isn't coming across correctly, I'm not trying to argue you wrong, I am curious about your reasons to forgo the sector in the face of what seems to be such resounding consensus.

[jacob]

Much simpler. I'm just not very good at predicting commodity trends within my SWAN strategy and I can afford the slack of not trying. I should have kept quiet.

[Lucky C]

...such resounding consensus.

Good reason to avoid such a trade right there.

[thedollar]

For the log...

• It seems like people never really decreased spending that much during this crisis
• Covid-19 vaccines are imminent
• Central banks in the US and Europe are printing money like never before
• Technology is enabling more and more people to buy equities and they continue to buy as cash and bonds are unattractive
• A lot of money on the sideline will eventually be invested
• Cash and bonds will stay unattractive as long as rates are low
• Rates will continue to stay low in developed economies due to low inflation/deflation forcing central banks to print more money

Blue skies ahead - I'm gonna increase my equity stake. *famous last words*

[giskard]

Trading updates:

- Palantir LEAPS are really paying off. May exit the 2022 leaps since they are already up 100% in a couple of weeks, but planning to keep the 2023 leaps for at least a year to get LT cap gains.
- Crytpo continues to run, not adding any more here but did get some limit orders filled last week below current range.
- Getting destroyed on my gold mining positions, but holding in for the long term. Almost back to even overall after pyramiding up my positions over the summer. Very concerned gold will continue to get pummeled and we see real deflation showing up. Vaccine news is killing gold as well, although I think people are overestimating how soon the reopening will happen. I might nibble a little more on the miners if we get a huge selloff but trying not add more exposure to them.
- Continue to run the wheel on Slack (WORK)

[Flurry]

I hold a bond ETF (Global Aggregate Bond hedged to EUR, 0,1% expense ratio) now and I don't know why I don't just hold cash. Weird times for investing in high-quality bonds. I just hope that interest rates will to continue to fall.

[giskard]

Trading updates

- Sold some smaller more speculative gold miner positions
- Sold more puts on the larger miners
- Sold some expensive tech company stocks
- Sold some of the Palantir LEAPS, still holding the 2023 ones.
- Bought some emerging market ETFs
- Bought more bitcoin

Next up

- If Palantir stops dropping 10% a day sell some puts against it.
- Sell more puts against gold & copper miners
- Probably will sell my WORK stock since I don't want to wait for the Salesforce acquisition to close

[Lucky C]

I don't think the next month or two is going to be so great for equities in general.