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

[DurhamBorn]

Yes this thread is about road maps.I have no concerns over price today,none.My concerns now are about positioning.Im tracking the liquidity in the plumbing because i know the lags on that roughly.The more that builds the more certain sectors will gain.Of course everyone would love to pick the bottom,but iv never met anyone who can,and i never will.I have zero idea if oil stocks will be down 20% of up 20% in a month,or a year.I do have pretty high confidence oil will be over $100 by the end of the cycle,much more likely $200 and an outside chance of $300.

Telcos i feel are massively undervalued.I dont know if they go down a lot more or not.I do think inflation will help them.Vod for instance.I have zero idea about price this year.I do think they will be between £3 and £4 + divis by 2029.

This threads whole train of thought was that the consumer would be swept away and we are being proved 100% right on that.We didnt guess on what would cause it,but that is why now we need to change positioning in some areas.

Shell have said this below.Obvious big shareholders have let the board know they expect the divi to go back up as things improve and if not well new board members will be needed.The tone is different from the results,then it was the divi cut is permanent,now its not,

https://www.bnnbloomberg.ca/shell-gives-hope-for-dividend-boost-once-oil-market-rout-is-over-1.1435739

our outlook stabilizes and our balance sheet is in the right position, then we should be in a very strong position to increase shareholder distributions,” Chief Financial Officer Jessica Uhl said Wednesday on an investor call, citing the potential for both dividends and share buybacks.

 

[JMD]

1 hour ago, Harley said:

Yes, yes, and maybe voluntary at first (patriotic, can banging, "War Bonds"), like say the current cv tracing app, but then......The past subtle financial repression may no longer be sufficient, indeed necessary atm.  Too good an opportunity to let go to waste?  Tbc, we were entering a storm before cv.  The recent media uptick in facilitatory (sic) "talk" on the financial implications of cv, as opposed to the medical ones, as mirrored here, should be a canary.  Are we being softened up, again?  Emergency budget?  I started a thread a while back on risk management where I tried to start a dialogue.  Was not too early, just we, including me, too late?  Here's one:

https://www.dosbods.co.uk/topic/6958-financial-risk-management-case-hardening/?do=findComment&comment=323143

PS:  The smart money has not been late, especially given the additional last few months.  They've since followed their money out of the country.  Easy for the rest to maintain their summer hols - easy to isolate in their own villa.  Thank you Mr & Mrs taxpayer.  If you don't know what this picture is all about, then the time is ripe and history knows it.....

 

Thanks Harley, I have posted several times about CV19 as the political manipulation and/or mismanagement has troubled me greatly. (i'll take your photo trigger/bait above - is corona the 'agent orange' of our times?, No!! - I don't think that, but thought you'd appreciate the joke).

In terms of being 'softened up', I think the government has run that experiment and the results came back positive - i.e. the public are extremely suggestible when it comes to health scares. In fact most seemed completely fixated with mental/physical health issues before CV struck, and now 'we' appear to be totally and hypochondriacally gripped, addicted even... But never mind, as we appear easily pacified with repeated instructs to Stay Safe, and as luck would have it, we also have a Big Brother to protect us!

I'm quiet prepared to accept that the above might say more about me than about the current reality of the situation. Actually I do hope so because to be clear, I'm not into conspiracies. I'm more in DB's camp, where he rejects the pointless tribal political bun-fight, and instead follows the economic fundamentals to discover answers.

 

Harley, you have created your own nearly self-sufficient homestead, sorry don't know how to properly describe it, as quiet jealous if truth be known. I think many here would also like to exit the financial system with its risk of financial repression (stealing), not that you yourself have exited I accept. However, the last few months have made me question what 'level' of my wealth (quarter/half/more..?) I want to commit to the market, given its so very difficult to predict in terms of massive downside risks - but staying in cash is not an option either. Its a dilemma. So perhaps the simplest ideas are the best, perhaps I should just buy and stack (bury!?) gold. Or should I shake myself out of this stupor and devout more time researching the 'de-complex trade' ideas?  

Oh, and thanks for the link, i'll def. have a read.     

[Sasquatch]

28 minutes ago, JMD said:

I want to commit to the market, given its so very difficult to predict in terms of massive downside risks - but staying in cash is not an option either. Its a dilemma. So perhaps the simplest ideas are the best, perhaps I should just buy and stack (bury!?) gold. Or should I shake myself out of this stupor and devout more time researching the 'de-complex trade' ideas?  

I am quite concerned at the moment of staying in cash. This is on both the personal and business side of things (with more cash 'exposed' with the latter). I accept it's a nice problem to have but it's a problem nonetheless. I sincerely believe that we are now at a point in history where anything can happen, socially, politically, financially. Despite the FSCS £85K scheme, I remain to be convinced that this is entirely watertight if more than one bank happens to go under. Our business cash is our pension but it not yet fully 'made up' in that we need 3 more years of earnings nor is the current balance ready to be deployed into the right areas (which might include property). I've moved a tranche into bullionvault but I'm not confident enough to chuck it all into PM. Bought some stocks as well but again it's too volatile at the moment. If there was a NS&I scheme for businesses I would probably move all surplus cash into there (but there isn't).

I was very interested to catch up with David Hunter's latest macro blog and his prediction of a final melt up to labor day and then the big slide downwards for stocks (and also temporarily for PM). However, even that brings problems if one was to temporarily cash out before going back in later. eg even more cash in the bank just when the wheels are falling off.

It's going to be a bumpy ride for the next 2 to 3 years. I think the path will be clearer by then (even if it's full of burning wreckage)

[nirvana]

Trump must be short the markets again....

TRUMP SAYS WE COULD CUT OFF WHOLE RELATIONSHIP WITH CHINA: FOX EXCLUSIVE

[nirvana]

7 minutes ago, Sasquatch said:

I am quite concerned at the moment of staying in cash

Au contraire.....I'm not worried about having cash at all, I think my buying power will increase exponentially over the next few years as ALL the economies implode and all the debt loving loonies get exposed.....

[JMD]

4 hours ago, DurhamBorn said:

Huge stink isnt there.Companies raising quick money they say even though they have liquidity and shares issued to who knows who,but ordinary investors cant even take part.

In a way they are locking in losses for ordinary share holders.

The divi cuts are another huge problem.Companies slashing to nothing who dont need to etc.Another problem of passive investment.Legal and General,Standard Life etc would be pushing execs to get divis flowing,but passives wont.

Equity investment is one of the only ways an ordinary person can access an income with a few hundred investment the same as the rich. Are the elite trying to remove that route?

DB, sounds a very worrying 'trend', is it a trend? Do you think this could ultimately lead to a future where many companies are 'taken private'?

I cant remember where I read it, but was shocked to read that over last 20 years, fewer IPO's on yearly basis, have been bought to market. Public offerings are now I believe at record lows, with only 200 approx. happening last year. Whereas private equity capitalisation in total is growing at a faster rate year-on-year, compared to the total value of stock market (with the bull run we've had that is saying something). 

You have written previously about your concerns of shareholders becoming less and less valued by their companies, and by government. Now dividends are being cut, is this the new normal?  With Japan, and recently even the US, buying up shares/junk bonds, could this be the beginning of the small investor being 'locked out'. I note Harley posted recently his own concerns that even the big oilies might one day be taken into private hands.

[JMD]

3 hours ago, sancho panza said:

@Harley it's as if the market gods were reading the thread last night.

SP, did you see the recent BBC series DEVS? I thought it was great btw, but anyway if you did see it, then surely you realise already that everything is/has been written in our 'stars'  - or in our 'simulation'!... makes your head hurt if you dwell to long on this kind of stuff (if you didn't watch it, please excuse my strange interjection).

[nirvana]

@Cattle Prodi agree, globalisation and offshoring has fucked so much up......this is a scary chart......I'm a 'technology lover' but frankly these 5 corporates pedal 'shite'.....too many 'dislocations' out there.....

and lots of pain ahead methinks

 

 

[nirvana]

@JMD agree re DEVS, very entertaining and maybe an insight into the future  For those who want more insight into what the one percenters get up to and pizzagate, watch 'Out of shadows' 

[Craig]

11 minutes ago, 5min OCD speculator said:

@Cattle Prodi agree, globalisation and offshoring has fucked so much up......this is a scary chart......I'm a 'technology lover' but frankly these 5 corporates pedal 'shite'.....too many 'dislocations' out there.....

and lots of pain ahead methinks

 

 

There's a great video of the largest US companies over time. Fascinating to see hiw we've shifted from oil, cars, chemicals, heavy industry etc to entertainment and technology. 

Found it - 

 

[JMD]

3 hours ago, Harley said:

It was the run up to that photo that was the most prescient.  The fall of Saigon was proceeded by a "stay calm, all is OK" mentality within the city promoted by the media, etc.  A veneer of normality was created on the surface ("keep the City tidy"). Meanwhile, as the VC infiltrated and the frogs boiled, the smart folk moved out.  It is the human condition, hope to the very end. Never be on the last helo, possibly unless they are paying you mega bucks and you have at least one alternate bug out route.  

Harley, you are writing about the past as it relates to our present. I get that and do enjoy the helo ride! However, while reading your post I was struck by the phrase highlighted - i.e. in our strange times it sounded somehow eerily familiar to me. Anyway, I continued to read on, only to subconsciously(?) transpose those letters... I shan't get too freaked out, and won't labour the point if it is not obvious to others... but isn't this what they call synchronicity?!

[JMD]

3 hours ago, 5min OCD speculator said:

Any dip buyers today?

I know I said I'd buy BT at 99p but I'm having second thoughts now 

so you think WW III incoming? 

Not actual war. Hopefully not anyway. But heightened geopolitical tensions. Trade/sea route protections, etc.

[Harley]

1 hour ago, JMD said:

...is corona the 'agent orange' of our times?

That'll be that other cancer inducing thing called debt!

1 hour ago, JMD said:

I'm quiet prepared to accept that the above might say more about me than about the current reality of the situation. Actually I do hope so because to be clear, I'm not into conspiracies. I'm more in DB's camp, where he rejects the pointless tribal political bun-fight, and instead follows the economic fundamentals to discover answers.

Sounds sane to me.  All this was never about tribal politics though, just the political economy, where politics is really just one mass.  It was very liberating when I realised my issue is with the complete political class, having stepped through the mirror of fake choice they had created.

1 hour ago, JMD said:

Harley, you have created your own nearly self-sufficient homestead,

I've been at it for many soul searching years and have a long way to go.  Hardly a homestead atm but that is now my clear dream, and my key search term on Youtube!  But independence (at least the liberating mental kind) can take many forms.

1 hour ago, JMD said:

....but staying in cash is not an option either. Its a dilemma.

That's the rub, the one that's killing me right now.  Still waiting for a messiah to pop up and put me out of my misery!

1 hour ago, JMD said:

Or should I shake myself out of this stupor and devout more time researching the 'de-complex trade' ideas?  

Maybe a little bit of everything?  What's for certain, after many profitable brainless years, now is the time to switch, and protect.

[Harley]

1 hour ago, JMD said:

I note Harley posted recently his own concerns that even the big oilies might one day be taken into private hands.

I wasn't limiting myself to the oilies, by a long way.  I once had cause to trace an ownership chain as part of an acquisition and ended up with a secretive private equity company resident in the Caribbean.  All sorts could be going on, including secretive shares for favours.  Great if you are on the inside proper (i.e. not a patsy just thinking you are).  There's also a TED talk on the matter by a biologist(?) who leveraged their trace techniques to look into who owns what in the financial world.  Ultimately came down to a handful, like 60 or 600 odd people/organisations/families.  Max Keiser has been all over this subject.  

[JMD]

2 hours ago, Transistor Man said:

There are doing a lot for the Tempest programme — eventually the  Eurofighter replacement. 

And the submarine reactor/ propulsion. 

Relatively Small numbers in these, of course.

10 years ago they tried to get into new build civil nuclear, but I don’t think that really went anywhere. 

Are Rolls-Royce jet engines part of Rolls-Royce cars, and all/both owned by BMW?

I'm thinking if Rolls-Royce jet engines are a separate company, and not foreign owned, then their 'mini off-the-shelf' nuclear technology might be of interest to British government.  

[Harley]

1 hour ago, 5min OCD speculator said:

Trump must be short the markets again....

TRUMP SAYS WE COULD CUT OFF WHOLE RELATIONSHIP WITH CHINA: FOX EXCLUSIVE

Australia is in an increasingly tough place.

[TheCountOfNowhere]

What happened at 3pm to make various share prices jump back up ????

 

 

3 hours ago, 5min OCD speculator said:

Any dip buyers today?

I know I said I'd buy BT at 99p but I'm having second thoughts now 

so you think WW III incoming? 

It's a fair bet.

[Transistor Man]

13 minutes ago, JMD said:

Are Rolls-Royce jet engines part of Rolls-Royce cars, and all/both owned by BMW?

I'm thinking if Rolls-Royce jet engines are a separate company, and not foreign owned, then their 'mini off-the-shelf' nuclear technology might be of interest to British government.  

No, rolls Royce cars are owned by bmw.

They licence the name. A funny thing happened with VW buying Bentley and the “winged woman”, but not the name RR. I forget the details.

Aero Engines and submarine nuclear are separate. 

[DurhamBorn]

1 hour ago, Cattle Prod said:

That's interesting DB, I can only imagine what a royal kicking the big pension funds have been giving them. Perhaps BP has played the smarter hand: wait till next quarter and see if the smoke has cleared. That said, the BP CEO is making some odd noises, for example about peak demand. I need to hear more strategic clarity from him too. 

Yeah,i think its certain big shareholders have warned them.I think the divi should of been cut at Shell,but 30% cut not 66%.I expect it will go back to what will be a 30% to 40% cut.

Im really pleased that Trump is now putting it out there about China,a key part of the inflation road map is that this would happen and force both blocks to put the pedal to the metal.Uk should be able to supply lots of arms to the Aussie's they will want ships for certain.

I think a lot will come back west,but the easy stuff will go to India.Expect moves soon where the US and the UK really start to big up India.They hate the chinks and a strong India is a nightmare for China.

[nirvana]

5 minutes ago, TheCountOfNowhere said:

What happened at 3pm to make various share prices jump back up ????

the PPT jumped into action 

it is interesting that it bottomed exactly on the hour, don't you think??

the markets are rigged for sure!! ......this is why you'll never get rich on Gold or Silver.....as long as US $ hegemony remains intact....I'm convinced of this 

[Harley]

21 minutes ago, JMD said:

....but isn't this what they call synchronicity?!

Thanks, I'll have to look that up and learn.  I do know that history often rhymes in its own off-beat way.

24 minutes ago, JMD said:

I shan't get too freaked out

Good lad!  As in my diver days when things got a bit hairy, just hug yourself!  This could be one freaky ride.  And as DB says, the main (maybe most realistic) objective is to just to manage to do less bad.  I've suffered paralysis for too long and am now royally sick of it.  This stuff is really hard mentally but I've got better support and recognition this time round and maybe more (slowly accumulated) critical mass to build on.  I've banked too many good (non-material) things in life to be scared anymore so "whatever".  Bring it on, if the cowardly bullies dare!   I may crudely go on about such "off topic" shite but getting in the right head space is paramount.  Too many castles have been in built in the sand.   Resilience.

3 hours ago, 5min OCD speculator said:

 

Squeaky bum time or what?!!!

[Harley]

3 hours ago, sancho panza said:

Trying to pick the winning complex trades here is insomnia inducing to me.

Yup, that and trying to work how to get a bit more off grid financially has been doing my head in.  I finally had enough and did what they shouted at me all those years ago "Just effing do something Harley, effing anything, just effing do it".  And then I fell asleep!

[TheCountOfNowhere]

11 minutes ago, 5min OCD speculator said:

the PPT jumped into action 

it is interesting that it bottomed exactly on the hour, don't you think??

the markets are rigged for sure!! ......this is why you'll never get rich on Gold or Silver.....as long as US $ hegemony remains intact....I'm convinced of this 

The more shares I've looked at most of them shot up at 3.

Something must have been announced.

[JMD]

2 hours ago, DurhamBorn said:

Yes this thread is about road maps.I have no concerns over price today,none.My concerns now are about positioning.Im tracking the liquidity in the plumbing because i know the lags on that roughly.The more that builds the more certain sectors will gain.Of course everyone would love to pick the bottom,but iv never met anyone who can,and i never will.I have zero idea if oil stocks will be down 20% of up 20% in a month,or a year.I do have pretty high confidence oil will be over $100 by the end of the cycle,much more likely $200 and an outside chance of $300.

Telcos i feel are massively undervalued.I dont know if they go down a lot more or not.I do think inflation will help them.Vod for instance.I have zero idea about price this year.I do think they will be between £3 and £4 + divis by 2029.

This threads whole train of thought was that the consumer would be swept away and we are being proved 100% right on that.We didnt guess on what would cause it,but that is why now we need to change positioning in some areas.

I concur completely with what you say DB. For me, this forum is about the macro trends and which I find fascinating and really do help 'illuminate world events' - but more importantly from an investor perspective, such insights help me to position my portfolio. In turn, I hope this can deliver the practical 'edge' traders talk so often about - though i hasten to add that i am a mere investor, not a trader.

I have sometimes asked for clarification about future prices (but only if such info. has been offered/discussed prior) - but this is only so that i can calculate my personal risk/reward. Too be honest, this is the area where i struggle. Risk/reward is a crucial thing to get right (feeds into portfolio balance, asset allocations, etc), but is so often ignored. Anyway, I am still learning and note that over the last few years i have become more and more risk averse, and now find i'm fully 'subscribed' to the de-complex trade.

I'll sign-off by saying big thanks DB for starting (and sticking with) this excellent forum, i think at the start of this blog you said that it would be a rollercoaster and you weren't wrong!

[Harley]

22 minutes ago, DurhamBorn said:

They hate the chinks and a strong India is a nightmare for China.

Indeed.  They still have an unfinished war!