Jump to content
DOSBODS
  • Welcome to DOSBODS

     

    DOSBODS is free of any advertising.

    Ads are annoying, and - increasingly - advertising companies limit free speech online. DOSBODS Forums are completely free to use. Please create a free account to be able to access all the features of the DOSBODS community. It only takes 20 seconds!

     

IGNORED

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


spunko

Recommended Posts

  • Replies 35.1k
  • Created
  • Last Reply
36 minutes ago, Thorn said:

You might check out COB see what you think

Thanks.  Had a look but will pass as my target yield is 4%+, ideally 5%.  Has run up 33% though but probably never met that target.  Never say never though - may come into range one day.

I wonder if my other criteria are reasonable:

. Div cover > 1.25

. 5 year rising +ve operating cash flow

. Reasonable div history

. Divs covered by cash flow

. Reasonable debt profile

. Reasonable intangibles

. Reasonable interest cover

. 5 year net profit history

I'm prepared to relax some criteria for good reasons, although less so on cash flow so COB struggles there on 5 year history, and profit.

Think I'm done with 44 holdings on FTSE div players, except maybe some preference shares. 

Time to go overseas for divs (subject to witholding taxes and a strengthening GBP) and move onto value stocks here and abroad.

Link to comment
Share on other sites

3 minutes ago, Loki said:

Has anyone any thoughts on rising food prices within the context of this thread? 

Yes, but agri commodities are quite cheap ATM.  More due to sterling falls which may have bottomed now.  I'm looking for agri and food processing companies but little at good divs.  Looks better with my value investor hat on though.  Also ready to jump on commodities should that time come.  Holding PMs has been a good sterling hedge but any further rise may more be due to fundamentals (i.e gold in USD goes up faster than cable).

Link to comment
Share on other sites

2 minutes ago, Harley said:

Yes, but agri commodities are quite cheap ATM.  More due to sterling falls which may have bottomed now.  I'm looking for agri and food processing companies but little at good divs.  Looks better with my value investor hat on though.  Also ready to jump on commodities should that time come.  Holding PMs has been a good sterling hedge but any further rise may more be due to fundamentals (i.e gold in USD goes up faster than cable).

Good point about gold.  What are your criteria for commodities if you are happy to share details?

Link to comment
Share on other sites

3 minutes ago, Loki said:

Good point about gold.  What are your criteria for commodities if you are happy to share details?

High risk trade only, preferrably with options or covered warrants.  I'm using the Wisdom Tree commodity ETFs until I'm up and running with these alternative instruments.

I currently avoid the composite ETFs like the industrial metals one as I prefer the individual commodities.  PHPP being a legacy exception.  I might buy and hold a general commodity ETF though if I see a persistant rise.  I look at the CRB each week to check. 

My trading record to date has been mostly rubbish!  Good on the four precious metals, rubbish on livestock, natural gas, and most metals.  But only small sums for now.

Link to comment
Share on other sites

18 hours ago, DurhamBorn said:

In short yes i did set it up to exploit the cycle.I saw many companies closing and moving production there,so i decided to learn all i could,do the whole lot myself and undercut them and thats what i did.In affect i had to be an expert in about 10 different jobs that would be senior manager level in a big business.I challenged myself in that business to a really high standard.I actually started to run it down when it was doing very well,and iv just stopped now and sold my last stock.I now have no ongoing costs apart from some income tax and NI.

Its a very good question about the next cycle.I live a very frugal life and i have enough to retire.I enjoy many things that are free and have lots of interests.However there is a part of me that says really i should do something else once i leave where im working at the minute (bust should hit them hard soon,nobody sees it coming and i feel sorry for workmates etc,though i keep quiet of course).Im not sure what though.With the standard of people on this thread perhaps we could all set up a small Ltd company doing something and see where we can take it.

I thinka UK based manufacturing concern in a couple of years time will do well.There are going to be a lot of opportunities out there.

14 hours ago, Thorn said:

DYOR etc but I think CNA is finally turning up after all... and got back into pm miners today ahead of the Fed next week. 

Has anybody been following these lads?

https://www.google.fr/search?q=petropavlovsk+stock&ie=UTF-8&oe=UTF-8&hl=en-fr&client=safari#mie=l,/m/0ckpkz6,Petropavlovsk PLC,POG,LON,Petropavlovsk PLC,/m/0ckpkz6,0

small market cap but then again check out the chart set to max time...that’s some long base for a Goldie and the TA books I’ve started say stuff like ‘The Longer The Base The Higher In Space’

I like that turn of phrase.Very apt.

We hold POG but a very small sum

Link to comment
Share on other sites

3 hours ago, Harley said:

DYOR and all that but I think William Hill has the best looking financials.  I needed another one from the sector but not comfortable so used IG Index, spread betting being a form of gambling for most!

Dread to think what the rest look like lol

I was talking to someone in the trade the other day and they were saying these companies will shrink a lot due to growing prevalence of online and the limits on the crack machines.

DM you got a view with your history in the indrusty?

@Democorruptcy

image.png.79f5c705f3dca4f85d60ce15770059e8.png

image.png.3aa6918782be2974879517a15f7e3de0.png

Link to comment
Share on other sites

44 minutes ago, Loki said:

Has anyone any thoughts on rising food prices within the context of this thread? 

Forgot to mention.  I keep an eye on the Aldi product mix and have seen some trends over the last few years, namely shrinkflation and changing suppliers (presumably fail to renegotiate new contracts at higher prices and switch suppliers).  What I have seen recently is a move towards more processed foods (easier to change the mix, etc?).  I would expect prices to stay high even with a GBP rise given the contracting (at lower a GBP) lag.

Link to comment
Share on other sites

29 minutes ago, sancho panza said:

Dread to think what the rest look like lol

In my defence(!):

. £900m write down in intangibles in 2018.

. £209m net borrowing on £1.5bn total assets in 2018.

. Stable 5 year revenue and pre exceptional (see above write down) profit.

. Reasonable 5 year cash flow history, apart from a 2016 cash drawdown.

. Industry changes priced in?

. Some on-line players takeover candidates with their own problems.

. Like DB says, similar to the tobacco sector.

. Buy and hold div player investment objective (my lens).

But yes, I found the rest of the sector financials to be mostly worse (at least on the things I focus on) or were not in my div yield target zone.

But maybe I should be looking at the 2019 data!

Link to comment
Share on other sites

Meanwhile at ECB...

https://www.ecb.europa.eu/press/pr/date/2019/html/ecb.mp190912~08de50b4d2.en.html

At today’s meeting the Governing Council of the ECB took the following monetary policy decisions:

(1) The interest rate on the deposit facility will be decreased by 10 basis points to -0.50%. The interest rate on the main refinancing operations and the rate on the marginal lending facility will remain unchanged at their current levels of 0.00% and 0.25% respectively. The Governing Council now expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.

(2) Net purchases will be restarted under the Governing Council’s asset purchase programme (APP) at a monthly pace of €20 billion as from 1 November. The Governing Council expects them to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates.

(3) Reinvestments of the principal payments from maturing securities purchased under the APP will continue, in full, for an extended period of time past the date when the Governing Council starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.

(4) The modalities of the new series of quarterly targeted longer-term refinancing operations (TLTRO III) will be changed to preserve favourable bank lending conditions, ensure the smooth transmission of monetary policy and further support the accommodative stance of monetary policy. The interest rate in each operation will now be set at the level of the average rate applied in the Eurosystem’s main refinancing operations over the life of the respective TLTRO. For banks whose eligible net lending exceeds a benchmark, the rate applied in TLTRO III operations will be lower, and can be as low as the average interest rate on the deposit facility prevailing over the life of the operation. The maturity of the operations will be extended from two to three years.

(5) In order to support the bank-based transmission of monetary policy, a two-tier system for reserve remuneration will be introduced, in which part of banks’ holdings of excess liquidity will be exempt from the negative deposit facility rate.

Separate press releases with further details of the measures taken by the Governing Council will be published this afternoon at 15:30 CET.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.

 

Currently EURUSD & EURGBP down, Gold & Silver up, FTSE100 & SP500 up.

Link to comment
Share on other sites

Decl: own wmh 

Online already huge and there has been a couple of waves of consolidation. See Betfair/Paddy 2015.  Probably one of the more mature online industries.  There is a long history to online books, from when the Vegas casinos thought they wanted an online presence.  So some mainstream have a presence near 20 years and they’re got very good at it, but as always it’s mobile/apps that expanded online business more recently.   Particularly in-play.   

They (industry in general) are in a position with a lot of high street stores from past consolidation that aren’t worth the rents now that the money laundering business has gone away.  My opinion – they’re beaten down because of this.   I think Democorruptcy worked in a shop, he maybe able to indicates how profitable they are without the machines.  

DB’s opinion on further consolidation maybe right.  But either way number of high street stores will fall markedly.   

There has been a lot of talk recently about the US opening up, but there has been that for 20 years as well, so I wouldn’t put too much in it.
 

Link to comment
Share on other sites

Donald Trump said Wednesday his administration will propose banning thousands of flavors used in e-cigarettes to combat a recent surge in underage vaping.

The Food and Drug Administration (FDA) will develop guidelines to remove from the market all e-cigarette flavors except tobacco, the health and human services secretary, Alex Azar, told reporters during an Oval Office appearance with the president, Melania Trump and the acting FDA commissioner, Ned Sharpless.

 

interesting video from the Guardian article

 

Link to comment
Share on other sites

reformed nice guy
42 minutes ago, BearyBear said:

Meanwhile at ECB...

https://www.ecb.europa.eu/press/pr/date/2019/html/ecb.mp190912~08de50b4d2.en.html

At today’s meeting the Governing Council of the ECB took the following monetary policy decisions:

(1) The interest rate on the deposit facility will be decreased by 10 basis points to -0.50%. The interest rate on the main refinancing operations and the rate on the marginal lending facility will remain unchanged at their current levels of 0.00% and 0.25% respectively. The Governing Council now expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.

(2) Net purchases will be restarted under the Governing Council’s asset purchase programme (APP) at a monthly pace of €20 billion as from 1 November. The Governing Council expects them to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates.

(3) Reinvestments of the principal payments from maturing securities purchased under the APP will continue, in full, for an extended period of time past the date when the Governing Council starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.

(4) The modalities of the new series of quarterly targeted longer-term refinancing operations (TLTRO III) will be changed to preserve favourable bank lending conditions, ensure the smooth transmission of monetary policy and further support the accommodative stance of monetary policy. The interest rate in each operation will now be set at the level of the average rate applied in the Eurosystem’s main refinancing operations over the life of the respective TLTRO. For banks whose eligible net lending exceeds a benchmark, the rate applied in TLTRO III operations will be lower, and can be as low as the average interest rate on the deposit facility prevailing over the life of the operation. The maturity of the operations will be extended from two to three years.

(5) In order to support the bank-based transmission of monetary policy, a two-tier system for reserve remuneration will be introduced, in which part of banks’ holdings of excess liquidity will be exempt from the negative deposit facility rate.

Separate press releases with further details of the measures taken by the Governing Council will be published this afternoon at 15:30 CET.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.

 

Currently EURUSD & EURGBP down, Gold & Silver up, FTSE100 & SP500 up.

It is strange that the mainstream/legacy media bash Brexit for reducing the pound against USD, EUR etc when the ECB are doing desperate policy to devalue their currency.

Link to comment
Share on other sites

1 hour ago, Harley said:

In my defence(!):

. £900m write down in intangibles in 2018.

. £209m net borrowing on £1.5bn total assets in 2018.

. Stable 5 year revenue and pre exceptional (see above write down) profit.

. Reasonable 5 year cash flow history, apart from a 2016 cash drawdown.

. Industry changes priced in?

. Some on-line players takeover candidates with their own problems.

. Like DB says, similar to the tobacco sector.

. Buy and hold div player investment objective (my lens).

But yes, I found the rest of the sector financials to be mostly worse (at least on the things I focus on) or were not in my div yield target zone.

But maybe I should be looking at the 2019 data!

I get you Harley.But the FOBT ban came in in Apirl and I think a lot of these High St bookies have made a lot of moeny through them.I suspect it will eb more damaging than many predcit because the offices that hosue these machines will have rent/staffing liabilities whilst profitability has dropped.My contact was saying some of these small offices were turning over mega money in FOBT income-drug money laundering/gambling addicts.

 

Since I got my betfair restrcition I've had to use High St bookies and there online offering is genereally ok but they could really do with a proper chalenger to betfair.Betdaq is ok but lacks liquidty and the specialised markets.

 

Intagibles and goodwill still make up 45%(£685mn/1511£mn) of assets but possibly accum deprc has been run too hard-in a company where there's 298mn£ equity

 

I think for me,a lot would depend on the the FOBT revenues and how far they fall.

 

https://www.bbc.co.uk/news/business-46205812

1 hour ago, feed said:

Decl: own wmh 

Online already huge and there has been a couple of waves of consolidation. See Betfair/Paddy 2015.  Probably one of the more mature online industries.  There is a long history to online books, from when the Vegas casinos thought they wanted an online presence.  So some mainstream have a presence near 20 years and they’re got very good at it, but as always it’s mobile/apps that expanded online business more recently.   Particularly in-play.   

They (industry in general) are in a position with a lot of high street stores from past consolidation that aren’t worth the rents now that the money laundering business has gone away.  My opinion – they’re beaten down because of this.   I think Democorruptcy worked in a shop, he maybe able to indicates how profitable they are without the machines.  

DB’s opinion on further consolidation maybe right.  But either way number of high street stores will fall markedly.   

There has been a lot of talk recently about the US opening up, but there has been that for 20 years as well, so I wouldn’t put too much in it.
 

Good psot.could have saved five mins replying to H if I'd read it.

Link to comment
Share on other sites

1 hour ago, sancho panza said:

I get you Harley.But....

Moving on (but very much appreciating your feedback), I found this interesting as a general example (and one I acted on)

Capture.thumb.PNG.d9715dbbe4372ed2ffad552aedb1e837.PNG

A weekly divergence between price and MACD in the period noted (between the two vertical lines).  Often ends with a move one way or the other, upwards in this case.

I took a stake earlier on (C), but maxed out at the 140 level (A), 70% below the all-time peak and 45% above the all-time 08 low.

The monthly has also turned.  Also note the small pull back after A.  I find this a common confirmation signal for strong upcoming moves (or not!).

B is my classic trading quandary - everything turning down just before (stochastics peaking) but turned out to be just a pull back for an equal (even bigger?) move up (take profits too soon). 

A good example of where to take some profit ("fade out").  I have never found a timely enough indicator(s) to signal when to sell so fading out seems the only option.

Except this is a buy and hold, although the approach still works quite well for me.

Funny that a gambling stock should be such an exemplar!

Maybe I should settle for it as a trade rather than buy and hold div stock.

Link to comment
Share on other sites

51 minutes ago, Durabo said:

Do you have a link to Draghi's response? I'd be interested to see it

He said he doesn't care about the exchange rate, also that his job is not to weaken euro.

Link to comment
Share on other sites

Shaun Richards.One the money as ever.

 

https://notayesmanseconomics.wordpress.com/2019/09/12/the-madness-of-central-bankers/#comments

The madness of central bankers

Posted on September 12, 2019

Today will depending on what time you read this either have seen yet more monetary policy accommodation by the European Central Bank or be about to get it. It;s President Mario Draghi is too smooth an operator to so strongly hint at it for nothing to happen, especially as in my opinion he feels the need to set policy for the new incoming ECB President Christine Lagarde who he knows well. That is quite a damning critique of her abilities if you think about it which is in line with her track record. But as to the action further confirmation has been provided by the way that markets have been toyed with by leaks from what are known as official “sauces”.

For those unaware the “sauces” strategy is to suggest lots of action as I pointed out on the 16th of August.

Investors currently expect the ECB to cut its key interest rate to minus 0.7% and to hold rates below their current level through 2024, according to futures markets. Mr. Rehn said those market expectations showed that investors had understood the ECB’s guidance.

Actually even this position had its own contradictions.

So will he now be overshooting -0.5% or -0.7%? Actually it gets better as -0.6% is in there now as well.

Later we get told that much less will happen as we saw earlier this week as the last thing central bankers want to see on their big day is the word “disappointment”. So we get this.

Oh, the grand old Duke of York
He had ten thousand men
He marched them up to the top of the hill
And he marched them down again
And when they were up, they were up
And when they were down, they were down
And when they were only half-way up
They were neither up nor down

The whole plan here is under the category of “open mouth operations” which might serve the purposes of the ECB but anyone in the real economy is being actively misled. The only saving grace is that most people will be unaware but there have been real world effects on mortgage rates and the rates at which companies and countries can borrow.

Where are we now?

Joumanna Bercetche of CNBC has summarised the expected position.

Here’s what analysts are expecting:
1) Majority expect 10bps rate cut to -50bps (minority 20bps cut)
2) Tiering
3) Restart of Asset Purchases : sov +corp bonds of EUR 30bn x 12 months (risk of LESS given recent hawkish commentary)
4) Enhanced Fwd Guidance

Interest-Rates

Let us address this as it clearly fails Einstein’s definition of madness. As to doing the same thing and expecting a different result well how about cutting interest-rates by 0.1% four times as has happened to the Deposit Rate and then adding a fifth! Or adding another 0.1% ( or even 0.2%) to a sequence of cuts amounting to 3.65% so far and expecting a different result.

Oh and I see more than a few saying the ECB interest-rate is 0% as indeed one of its interest-rates is. However I use the Deposit Rate because the amount of money deposited with the ECB at this rate is some 1.9 trillion Euros.

Next there was a stage where the madness went even further and we were told that shifting the differences between the various ECB interest-rates was a big deal. For example the minimum lending rate has fallen by 4% so 0.35% more than the Deposit Rate. This has an influence for financial markets but little or no impact on the real economy.

It all seems rather small fry compared to this from President Trump.

The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet………The USA should always be paying the the lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of “Boneheads.”

The problem for the Donald is that if negative interest-rates were any sort of magic elixir we would not be where we are.Sadly the ECB proves this as it ends up having to keep cutting to keep up what I have previously described as a type of junkie culture.

On the upside the “once in a lifetime” reference may mean he is also a Talking Heads fan.

Tiering

This is another sign of central banking madness where their policies are essentially always aimed at the banks. The interest-rate cuts and QE were to help bail them out but went so far that they now hurt the banks. For newer readers this is because the banks are afraid to pass on the negative interest-rates to ordinary depositors in case they withdraw their money.

So we seem likely to see an effort to shield the banks by some of their deposits at the ECB not having the full negative rate applied. The real economy gets no such sweetners.

Again if the policy of protecting “The Precious” worked these new policies would not be necessary would they?

QE

Exactly the same critique applies here. Up until now some 2.6 trillion Euros of bonds has been bought for monetary policy purposes or Quantitative Easing. So what difference will another 360 billion Euros make? Especially if we remind ourselves that the original programme only ended last December so even fans of it have to admit the sugar high went pretty fast.

There is a subtler argument here which is that the ECB is really oiling the wheels of fiscal policy by making debt cheap to issue for Euro area nations. But what difference has this made? Some maybe at the margins but the basic case of Germany is a fail. In spite of its ability to be paid to issue debt Germany still plans to run a fiscal surplus.

Enhanced Forward Guidance

in 2019 this led many ECB watchers to expect an interest-rate rise and instead we are getting a cut. I am not sure how you could enhance this unless they expect to do even worse!

Comment

My critique has so far looked mostly at the ECB but whilst in some areas it is the leader of the pack there are plenty of other signs of madness. After two “lost decades” the Bank of Japan cut interest-rates by 0.1% to -0.1%. Then it introduced Yield Curve Control which in recent times has been raising bond yields rather than cutting them in a complete misfire. In my home country the UK we saw the Bank of England plan to cut interest-rates by 0.15% in November 2016 before fortunately realising that it had misjudged the economy and abandoning the plan. They end up singing along with Genesis.

You know I want to, but I’m in too deep…

As to the situation the immediate one is grim as this from Eurostat today reminds us.

In July 2019 compared with July 2018, industrial production decreased by 2.0% in the euro area.

But this is a “trade war” issue which has very little to do with monetary policy. As to the domestic impulse the money supply figures have picked up in 2019 so the ECB may be easing at exactly the wrong moment just as it turned out it ended easing at the wrong moment. So let me end with the nutty boys.

Madness, madness, they call it madness
Madness, madness, they call it madness
It’s plain to see
That is what they mean to me
Madness, madness, they call it gladness, ha-ha

Number Crunching

This tweet has gained popularity.

“£4,563,350,000 of aggregate short positions on a ‘no deal’ Brexit have been taken out by hedge funds that directly or indirectly bankrolled Boris Johnson’s leadership campaign” ( Carole Cadwalladr)

I took a look at the article referred to in the Byline Times and if you read it then it conflates being short the UK Pound £ with being short individual shares which is bizarre. Next it has no mention at all of any long positions these companies may have.'

 
 
Link to comment
Share on other sites

3 hours ago, sancho panza said:

Dread to think what the rest look like lol

I was talking to someone in the trade the other day and they were saying these companies will shrink a lot due to growing prevalence of online and the limits on the crack machines.

DM you got a view with your history in the indrusty?

@Democorruptcy

 

A couple of years ago I spoke to a friend who still manages a Coral shop and he told me they were taking more money from the machines than they were over the counter. I think the industry will cull a lot of unprofitable shops but given the rise of online betting it's no surprise. I left before the machines came in and the hours were much less. They open earlier on a morning now, are open on evenings and have Sunday racing. I think the hours have been extended and so costs increased for people to play on the machines. When I worked in the bookies they were more like social clubs with a core of regulars. According to my friend it's completely changed now and the older ones dying off aren't being replaced by young ones, who use internet betting instead. The remaining shops need the mug punters to come find them when the other local shops close!

Link to comment
Share on other sites

Archived

This topic is now archived and is closed to further replies.

  • Recently Browsing   0 members

    • No registered users viewing this page.

×
×
  • Create New...