Credit deflation and the reflation cycle to come (part 2)

[Bricks & Mortar]

22 minutes ago, UnconventionalWisdom said:

On 07/04/2020 at 23:39, ThoughtCriminal said:

Hello All

Long time lurker, followed the thread from the beginning and finally decided DB’s warnings of inflation destroying my wealth can no longer be ignored.

 

Never bought a share in my life so just after some very basic advice.

 

Am I correct in thinking I need to open the s+s ISA with the platform I intend to use for buying the shares? HL, for instance? If so can anyone recommend one?

 

Im looking to buy and hold for the duration of the shitstorm to come, so I won’t be making many trades.

 

Thanks in advance.

I've just started using Freetrade. Good app and no buy or sell fees. 3 quid a month.

If you're going to buy & hold, I'd go with HL, (which I'm with), or AJ Bell, (which others on here have led me to believe is similar, some prefer the interface, and may have a wider range of investments to choose from).  Why not have a look at both, and see what you like.  In a matter of months, you'd be better off with a £12 fee for each trade and dodge the £3/month. 

[MrXxxx]

38 minutes ago, Bricks & Mortar said:

If you're going to buy & hold, I'd go with HL, (which I'm with), or AJ Bell, (which others on here have led me to believe is similar, some prefer the interface, and may have a wider range of investments to choose from).  Why not have a look at both, and see what you like.  In a matter of months, you'd be better off with a £12 fee for each trade and dodge the £3/month. 

If your going to buy and hold surely a fixed one off fee such as iweb would be better wouldn't it?

[Bricks & Mortar]

18 minutes ago, MrXxxx said:

If your going to buy and hold surely a fixed one off fee such as iweb would be better wouldn't it?

I must admit I'm not aware of what iweb can offer.  Sounds like they should check that out though.
 

 

[NogintheNog]

56 minutes ago, Bricks & Mortar said:

If you're going to buy & hold, I'd go with HL, (which I'm with), or AJ Bell, (which others on here have led me to believe is similar, some prefer the interface, and may have a wider range of investments to choose from).  Why not have a look at both, and see what you like.  In a matter of months, you'd be better off with a £12 fee for each trade and dodge the £3/month. 

HL and AJ Bell also charge a fee based on your holdings of shares/funds. HL charge 0.45% a year of your shares capped at £45. So £3.75 per month over £10,000 worth of holdings.

[MvR]

On 11/04/2020 at 01:05, MvR said:

 I'm tempted to do something with US steel myself now you point it out. I'll see what the market's doing on Tuesday ( or is it Monday they open? I'd better check!) and put on an X trade of some sort, and post it here, along with its performance and any adjustments I make as time progresses, reasoning etc.

I've started a thread on the Shares Trading sub-forum, tracking this X ( United States Steel ) trade.

 

 

[sancho panza]

Posted this before.We aren't even at stage one yet but the signs of the credit bubble are there,it's jsut looking for that pinprick.I genuinely do wonder if we're finally gettinghere.

The psychology of using income to clear debt rather than borrow more is what initates Fisher's paradox which dictates that as people pay down debt then their ability to earn income(ie as GDP reduces) will decrease,effectively meaning that the very act of reducing debt may well mean that they reduce their chances of clearing any more.

https://en.wikipedia.org/wiki/Debt_deflation

Fisher's formulation (1933)

In Fisher's formulation of debt deflation, when the debt bubble bursts the following sequence of events occurs:

Assuming, accordingly, that, at some point in time, a state of over-indebtedness exists, this will tend to lead to liquidation, through the alarm either of debtors or creditors or both. Then we may deduce the following chain of consequences in nine links:

1. Debt liquidation leads to distress selling and to
2. Contraction of deposit currency, as bank loans are paid off, and to a slowing down of velocity of circulation. This contraction of deposits and of their velocity, precipitated by distress selling, causes
3. A fall in the level of prices, in other words, a swelling of the dollar. Assuming, as above stated, that this fall of prices is not interfered with by reflation or otherwise, there must be
4. A still greater fall in the net worths of business, precipitating bankruptcies and
5. A like fall in profits, which in a "capitalistic," that is, a private-profit society, leads the concerns which are running at a loss to make
6. A reduction in output, in trade and in employment of labor. These losses, bankruptcies and unemployment, lead to
7. pessimism and loss of confidence, which in turn lead to
8. Hoarding and slowing down still more the velocity of circulation.

   The above eight changes cause

9. Complicated disturbances in the rates of interest, in particular, a fall in the nominal, or money, rates and a rise in the real, or commodity, rates of interest.

— (Fisher 1933)

[Majorpain]

10 hours ago, sancho panza said:

Where we are now is at the start imho,the Big Kahuna is yet to come.Govts-who are on mnaouvres here-will spin the wheel and get it going again but the psychological damage has been done in a way I'm not sure they get.There are the shrot term issues with getting people back to work,but there's a possibility that Joe Public will become increasingly debt averase and that's something govts haven't dealt with in 80 years.

The interesting thing with the panic buying is that its actually made the population much more resistant to shocks than previously, there cant be many people not trying to get two weeks of food in the house.  Goes to show how quickly things can change if the population wills it, all it takes is a big enough shock.  The unemployment rates from the US indicate that people are in line for a good dose of financial reality, where loading up on debt and you lose your job is not a good situation to be in.

[JMD]

On 12/04/2020 at 23:45, sancho panza said:

 

 

Terrifying how quickly the British public have turned into the eyes and ears of the police when it comes to people sunbathing inparks.Terrifying how quickly the police have taken to clearing sunbathers off parks.

Police are too political these days (although to be fair this 'political virus' has infected all areas of modern life, where people are shuned for voicing opposite opinions or even lose jobs for holding incorrect beleifs) and police have distanced themselves from average public norms of fairness, letalone law... I'll feel safer when they change back to wearing blue uniforms, for me 'our boys in black' just doesnt fit with them being a civilian force - which is what their meant to be.                                                                                                                                                                                  Anyway for me we have witnessed the hive mind at work with the recent mass acceptance of the shutdown of our economies, and I have hinted at my fears over this recently. Then again I admit to being somewhat conflicted here, mainly because I have longstanding doughts over the value of Western liberal democracy (ie continually voting for ever higher spending programs) - for me rule of law and property rights provide better safeguards for securing our individual rights... Anyway so much happening at the moment and I suppose mostly not strictly discussion for this thread.

[JMD]

12 hours ago, Hardhat said:

Sometimes it's hard not to take things personally, especially as for many of us, what the govt. decides affects our real, day to day standard of living etc.

However, we also need to realise that we are living inside a huge financial system, involving billions of people, that is at best fairly chaotic. The CBs do what they can to stop the entire thing collapsing, but for every rich and powerful organisation invested in maintaining the status quo, there is generally an equally powerful and rich organisation or individual invested in collapsing the whole thing for their personal gain ("disaster capitalism").

Realistically most of us on this forum are fairly average income wise, but what we do have is curiosity about the system we live in instead of blind acceptance. This, really, is the thing that sets this thread apart from a standard "how to invest your money" stock tip kind of forum - we are looking at the whole system and how the cycles inside it will play out.

As @DurhamBorn often says - "take the emotion out of it". To me that applies equally to laddering into stocks as it does to watching the govt. decisions on monetary and fiscal policy. It's not about you, it's not about me, it's about the structure of the system. Once you start looking at it like that, your thinking is ahead of 99% of people on this topic, and you will start to see what is actually going on.

I agree Hardhat, I viset here to attempt to learn how to position financially for the next cycle. The macro insights are fascinating to read and although sometimes posts appear to verge on the political, I don't think this is intended and in fact it's mostly more to do with explaining behavioural economics and human psychology, and therefore important in understanding how/why cycles play out. As you say this makes this blog pretty much unique. Of course, the economy doesnt occur in a vacuum, and capitalism and communism are both 'isms', so views of how these systems will morph in future is also of great pertinance.                                                                                                                                          Many thanks again to DB for starting this blog endeavour.

[Harley]

Some cheer for me!  This chart is one of utter beauty!  As I said many months ago, a very long term cup and handle chart pattern on the monthlies with a monthly buy signal in Oct 18 and a subsequent 42% rise to date.  If you were looking in USD though you might have missed it!  Perfect ballast for a balanced portfolio allocation.  Of course, that was then and this is now

.

 

[MrXxxx]

54 minutes ago, Harley said:

Some cheer for me!  This chart is one of utter beauty!  As I said many months ago, a very long term cup and handle chart pattern on the monthlies with a monthly buy signal in Oct 18 and a subsequent 42% rise to date.  If you were looking in USD though you might have missed it!  Perfect ballast for a balanced portfolio allocation.  Of course, that was then and this is now

.

 

I was and I did!:-[

[Harley]

11 minutes ago, MrXxxx said:

I was and I did!:-[

A weak buy in USD at the same time which turned out to be the real thing.  I need to analyse some more as I'm seeing the same today on some stocks and indicies.  A strong (but not guaranteed) buy signal for me is three out of three indicators.  The problem is when I get a weak two out of three - could go either way.   

[PaulParanoia]

34 minutes ago, Harley said:

A strong (but not guaranteed) buy signal for me is three out of three indicators.

Would you mind sharing what your indicators are ... or linking to an old post if you've done so before?

[Barnsey]

 

[TheCountOfNowhere]

41 minutes ago, Barnsey said:

 

Unprecedented in our times.

[DurhamBorn]

38 minutes ago, TheCountOfNowhere said:

Unprecedented in our times.

As will be the liquidity injected 

[reformed nice guy]

Gold futures at 1784.85 

[Majorpain]

China's GDP forecast to grow?  Are the IMF getting their figures direct from the CCP's propaganda department?

[DurhamBorn]

@Cattle Prod really good info thankyou.I really like the fact you mention that they have an open door on South America for historic reasons.They also seem to be interesting in Asia in places.They should have plenty of options to buy up some reserves as you would think a lot of E+P companies will be rolling over.Although its a waste of capital in many ways i also like the way the have started to invest in all sorts of areas like car share ,hydro assets etc.It means as cash explodes in the cycle they will at least have options.They do seem to have a lot of gas,but thats a good thing.They also seem to have low debts and a nice downstream business.I notice they are expanding that as well in Latam .I didnt notice they were looking in Russia,but thats interesting.

Another big plus is the Spanish government has put in legislation to stop people outside the EU taking more than a 10% stake in certain companies.Repsol and Telefonica are two.Most people would see that as bad as it stops takeovers,but im glad because it means all the value can out over the cycle for longer term shareholders.

[Harley]

3 hours ago, Cattle Prod said:

... I hope @Harley would approve!

Approved!

[Democorruptcy]

5 hours ago, Barnsey said:

 

Why is India going to do so well?

[DurhamBorn]

10 minutes ago, Democorruptcy said:

Why is India going to do so well?

Everyone is moving their factories there as they tell China to do one.

[Castlevania]

47 minutes ago, Democorruptcy said:

Why is India going to do so well?

Demographics. Median age is 28. 

[DoINeedOne]

In regards to Repsol @DurhamBorn you mentioned that they offer dividends as cash or shares and the shares option is a way of avoiding tax but how does this work does HL contact you asking with option you want or?

[DurhamBorn]

10 minutes ago, DoINeedOne said:

In regards to Repsol @DurhamBorn you mentioned that they offer dividends as cash or shares and the shares option is a way of avoiding tax but how does this work does HL contact you asking with option you want or?

Im not sure as i havent had a divi yet.I would expect something along the lines of you get a corporate action highlight on your holding to take action.If you do nothing you get the shares,if you opt to sell you get the cash.Im going to simply take the shares for now though in future id simply take the shares and then sell them.You have the dealing charge of course,but nothing compared to the divi.Im not 100% certain you dont pay tax on the divi even as shares,but it looks like a way to get around,i guess we will find out.