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

[MrXxxx]

15 hours ago, DurhamBorn said:

dont think thats the main issue,i think its bonds paying 1%/2% when inflation runs to 8%+ that will destroy draw down pots.People seem to think its bonds up shares down,shares up bonds down,but they are forgetting their is another scenario that comes along now and again,stocks down,bonds down more ,commods up

Q. Cyclicals I understand, but broad based value shares?, can you give examples?

OK, follow your argument but surely would prices of gilts and index trackers not just offer the respective % points above the safe cash rate (this being dictated by inflation rates) to reflect the risk element in all its forms?...as in all `open` markets.

[Harley]

4 hours ago, Castlevania said:

That sounds a lot like Harry Brown’s Permanent Portfolio.

It is!

Note:  Other allocation models are available!

[spygirl]

10 hours ago, sancho panza said:

BoE is 50% index linkers iirc.Youre in good company........do as they do not as they say.

 

......tell the public inflation is dead then load their pension und the other side of the trade.

IIRC BoE pension is 100% indexed link Gilts.

Nope. 60% IL gilts + IL company debt.

https://www.spenceandpartners.co.uk/archives/what-can-we-learn-from-the-bank-of-england-pension-scheme/

[Harley]

On 11/10/2019 at 23:26, sancho panza said:

....Check out the insanity.Berekely....

This'll make you laugh but I bought Berkley and Crest a few weeks back for my income portfolio!  Yes, I've run out of UK candidate stocks.  Maybe I should cash in my profits.  At least my loss will be your gain.  You can buy me a pint some time!

[Castlevania]

18 minutes ago, Harley said:

It is!

Note:  Other allocation models are available!

I’m surprised more people don’t adhere to it. I like it because it’s mechanical in that you rebalance once a year, and it forces you to sell the winners and buy the losers.

[Harley]

1 minute ago, Castlevania said:

I’m surprised more people don’t adhere to it. I like it because it’s mechanical in that you rebalance once a year, and it forces you to sell the winners and buy the losers.

Suits me for my "floor" fund where tge historic data looks good for capital preservation.  Income portfolio for my upside fund. I would have a different allocation model if I was younger and/or still accumulating capital through work.

I don't strictly adhere to the Permanent Portfolio holdings, just the allocations so may be going off piste and at risk of losing the alledged objective.  So, for example, I intend moving from some ETFs to individual overseas stocks in my SIPP given (tbc) the exemption from US withholding taxes and to reduce counterparty risk.  I already hold regional ETFs as opposed to all in the FTSE.  Also NS&I index linked bonds form the main bond holding.

But yep, great to get sn allocation you personally feel comfortable with.  For me, that's the place to start my investment journey.

[DurhamBorn]

4 hours ago, MrXxxx said:

Q. Cyclicals I understand, but broad based value shares?, can you give examples?

OK, follow your argument but surely would prices of gilts and index trackers not just offer the respective % points above the safe cash rate (this being dictated by inflation rates) to reflect the risk element in all its forms?...as in all `open` markets.

yes,in every cycle apart from an inflation cycle.People think bonds and shares equal each other out,thats why 99% of pensions are invested like that,but during inflation they can all under perform as money floods into commods.The key thing is that IF we do indeed get an inflation cycle,that right now hardly anyone expects,or has even invested through one then the asset allocation will prove very poor.Dont forget in draw down a portfolio losing money + fees + draw down is a toxic brew.

[DurhamBorn]

Queens speech

 "set out a long term vision to improve the nation's digital, transport and energy infrastructure".

[sleepwello'nights]

6 hours ago, MrXxxx said:

Q. Cyclicals I understand, but broad based value shares?, can you give examples?

OK, follow your argument but surely would prices of gilts and index trackers not just offer the respective % points above the safe cash rate (this being dictated by inflation rates) to reflect the risk element in all its forms?...as in all `open` markets.

I'm still puzzled by the drop in the UK Index Linked Gilt holdings I've got. The increase over the last year was pretty much halved in the day.

I chose them partly influenced by the inflationary scenario you're painting. I'm in the wind down from work situation, I need to protect my capital to use for income in retirement. The micro businesses I own are in run down phase, the income from them together with state pension is enough to live on so I'm looking to structure my savings to provide an income in retirement. No way am I going to purchase an annuity at current rates. 

My share portfolio is a rag bag of mainly privatised stocks that I've held since they were issued. I started moving into passive trackers when Vanguard allowed retail investors to purchase direct. I'm happy to keep them as they may give some diversification if things work out differently to your thoughts.

What's really concerned me is the article posted by @sancho panza  last week: Hussman Funds Proposition for a Recessionary Bear Market; in which there is a section Passive Investing  is a Form of Capitulation,  that ends with a comment "it will end badly". Which I take to mean is resignation that the market is going to suffer a dramatic plunge from its record highs. Much as you forecast.  

Reading through the two parts of this thread is making me lose track of the core investments you think will offer protection. There are numerous investments mentioned from many on how to position themselves to suit their interpretations of how the economy performs. I'd welcome a brief recap of the stocks and assets you are thinking would do well in the scenario you envisage. 

 

[JMD]

14 hours ago, sancho panza said:

I'll have a look on those utilities next week when I have time. 

I wouldn't be nervous if by late Dec 19  (around current prices) we were around 20% PM miners, 35% big oil&gas (BP,RDSB etc), 3% potash, 5% copper, 3%oil services, 10% mid tier US oil & gas producers...off the top of my head. I'll take our chances. Generally we build positions slowly but then sell in a oner. When these get shifted on, hopefully next year, it'll be fore UST's and cash

DB is buying reflation stocks,I'll generally be buying back the ones we sell next year for hopefully a lot less than we sold.

As ever, all the best laid plans etc.

thanks SP, I will look out for your utility scores.

Below is a new question from me which hopefully you can help me with...  but I have just read sleepwellonights question in the thread above and think there is some (coincidental) overlap... I think its important to understand that people have different investment aims/investment time horizons/attitudes to risk/how simple or complicated they want it to be - and these combine to create different strategies depending on the individual - not rocket science I know, but worth re-stating now and again.

 

SP, If i understand, you are currently mainly positioned for anticipated commodity gains over next 2 years approx., but are flexible and may buy into USTreasuries next year. Reflation stocks will be cheaper after global correction - maybe 2020 crash event / or perhaps just market sliding ever lower - however, by say 2021, you plan to buy back big into the cheap reflation stocks.

I think DB has said that his own portfolio may be approx. 20% down (including divis) in two years time, but will amply recover during next cycle and that for DB positioning early for cycle is the most important consideration.

I believe both you and DB have same 'final destination' target of buying and holding reflation stocks for the next cycle. But in simple ('istic') terms if I contrasted the two approaches of you and DB, big difference might be that you are attempting to take advantage of the short-term market swings (including I think dollar fluctuations) during the next 2+ years before committing to reflation stocks. Whereas DB is positioning long from the start, as he favours working/refining his proven macro/cross market strategy.     

I hope I have not misunderstood you or DB. I don't think so, but would be embarrassing if I have!? However, with so much information and valuable opinion expressed on this forum, it helps me (as a newbie) fully appreciate peoples posts if I also understand their investment perspectives/goals.        

[Harley]

22 minutes ago, sleepwello'nights said:

I'd welcome a brief recap of the stocks and assets you are thinking would do well in the scenario you envisage. 

IMHO, a sensible ask (and good explanation why) as a periodic recap is good given the pace and breadth of this thread, although specific stock picks are not really appropriate (examples maybe). 

However there is no substitute for doing the legwork, some context and opnion on direction maybe, but no cookie cutter approach for all as that does not exist.  I think that is the key as simple trackers have been fine and bonds a one way bet to date.  But I think those days may be passing and only those looking deeper and harder will find value, as defined by their own circumstances.

I was hoping to plough through the thread one wet and windy day to pull out past comments with a view to it giving me an idea of where to look as much as the specifics but will wait for any sages to speak before jumping in!

[MrXxxx]

4 hours ago, sleepwello'nights said:

I'm still puzzled by the drop in the UK Index Linked Gilt holdings I've got. The increase over the last year was pretty much halved in the day.

I chose them partly influenced by the inflationary scenario you're painting. I'm in the wind down from work situation, I need to protect my capital to use for income in retirement. The micro businesses I own are in run down phase, the income from them together with state pension is enough to live on so I'm looking to structure my savings to provide an income in retirement. No way am I going to purchase an annuity at current rates. 

My share portfolio is a rag bag of mainly privatised stocks that I've held since they were issued. I started moving into passive trackers when Vanguard allowed retail investors to purchase direct. I'm happy to keep them as they may give some diversification if things work out differently to your thoughts.

What's really concerned me is the article posted by @sancho panza  last week: Hussman Funds Proposition for a Recessionary Bear Market; in which there is a section Passive Investing  is a Form of Capitulation,  that ends with a comment "it will end badly". Which I take to mean is resignation that the market is going to suffer a dramatic plunge from its record highs. Much as you forecast.  

Reading through the two parts of this thread is making me lose track of the core investments you think will offer protection. There are numerous investments mentioned from many on how to position themselves to suit their interpretations of how the economy performs. I'd welcome a brief recap of the stocks and assets you are thinking would do well in the scenario you envisage. 

 

I think you are getting my posts confused with DurhamBorn; he has a far greater financial understanding than I will ever have (but mine improves by the day reading this site with the generous advice/answers provided by others).

Regarding your ILG, could it be thats is an ETF of varying maturity dates and as they update these the prices paid have changed I.e they are now in greater demand in the market place and so are more expensive?...just a guess.

Agree regarding an update...what about it DB, SP or Harley?

 

[MrXxxx]

7 hours ago, DurhamBorn said:

People think bonds and shares equal each other out,thats why 99% of pensions are invested like that,but during inflation they can all under perform

If my memory serves me correctly this is exactly what happened in 2008; details in a book I reviewed in The Library thread.

 

7 hours ago, DurhamBorn said:

en the asset allocation will prove very poor.Dont forget in draw down a portfolio losing money + fees + draw down is a toxic brew

I assume in such a scenario the best policy is to cut drawdown rate by either a) reducing spending/luxuries, or b) `drawdown` from an emergency cash float?

[Errol]

The Dutch Central Bank Endorses The Gold Standard

“De Nederlandsche Bank (DNB) holds more than 600 tonnes of gold. A bar of gold always retains its value, crisis or no crisis. This creates a sense of security. A central bank’s gold stock is therefore regarded as a symbol of solidity. Shares, bonds and other securities are not without risk, and prices can go down. But a bar of gold retains its value, even in times of crisis.”

The quote above is from the “Payments” section of the Dutch Central Bank’s website. Incredibly, it goes on to suggest the possibility of  a systemic collapse: “If the system collapses, the gold stock can serve as a basis to build it up again.” Quite stunning, in my opinion, coming from the Central Bank of a country that was first to offer a negative interest rate mortgage…

http://investmentresearchdynamics.com/the-dutch-central-bank-endorses-the-gold-standard/

[Clueless Imbecile]

5 hours ago, sleepwello'nights said:

What's really concerned me is the article posted by @sancho panza  last week: Hussman Funds Proposition for a Recessionary Bear Market; in which there is a section Passive Investing  is a Form of Capitulation,  that ends with a comment "it will end badly". Which I take to mean is resignation that the market is going to suffer a dramatic plunge from its record highs. Much as you forecast.  

Reading through the two parts of this thread is making me lose track of the core investments you think will offer protection. There are numerous investments mentioned from many on how to position themselves to suit their interpretations of how the economy performs. I'd welcome a brief recap of the stocks and assets you are thinking would do well in the scenario you envisage.

The comment about passive investing caught my attention. I've been a firm believer in low cost equity index-tracker funds with dividends re-invested (typically called "accumulation units" nowadays) ever since I read "The Motley Fool UK Investment Guide" nearly twenty years ago. However, reading DurhamBorn "Credit deflation and the reflation cycle to come" thread (first on TOS and more recently on here) has really shaken my faith in index-tracking as an investment strategy. When I first saw the thread I was hoping that I'd be able to dismiss it, but... every time I read a post by DurhamBorn it seemed to make sense and he seems to have a similar attitude to money to what I have (e.g. live within your means, don't waste money, save & invest spare income with the aim of ultimately being able to retire and live off investment income without having to work). Also, I think I've seen some of his predictions come true, which makes his comments seem all the more compelling in my opinion.

I also recently read a book called "The End Of Indexing" (sub title: Six structural mega-trends that threaten passive investing) by Neils Jensen. The book seemed very much in tune with a lot of what has been discussed on this thread.

This all gave me a huge dilemma; what to do?

What DurhamBorn has said, and also what I read in the "End Of Indexing" book, all seems to makes sense. However, in order to follow the kind of strategy being talked about requires stock-picking knowledge that I don't really have. I dabbled in the PM mining stocks and also bought some "reflation stocks" but whenever I a made a decent profit on one stock, it seemed to be offset by a similar size loss on another. That said, I appreciate that the idea of the reflation stocks is to buy and then hold for, say, ten years whilst hopefully collecting good dividends from them. All the while I've also been racking up trading fees because my account charges about 11 or twelve quid per trade. It adds up when laddering in with relatively modest amounts like I have been doing. I feel like I've been doing all the things that passive investing theory advises against; stock-picking, active-management, trying to time the market, and just plain gambling. It's an uneasy feeling for a risk averse person such as myself!

What I've learned from my recent dabblings in this stuff over the past 12 to 18 months (motivated by what I read on this thread and in the book) is that it really helps to ladder in (although I guess that is assuming that the price is falling, not rising!). However, I don't have his knowledge to know what is a good share price to set the first ladder at (I think the rest are easy; just set them each at a 8 to 10 percent lower share price than the previous ladder price, with a total of maybe 5 ladders). By the way, it would make more sense to me to call them "rungs" and use the word "ladder" to refer to the five rungs as a whole.

All this stock-picking really goes against the grain for someone like me who has spent years learning about passive investing (buy and then hold for long-term, dividends reinvested, pound-cost averaging, don't try to beat the market, time-in-the-market not timing-the-market, etc). If I abandon my index-tracking strategy, the two main worries I have are:

1) Things might not be as bad as predicted for index-trackers (e.g. maybe the markets won't crash so severly, or if they do then maybe they might recover within, say 6 to 8 years rather than staying low for decades like Japan).

...or...

2) Things might play out just like DurhamBorn and the book suggest, and I might try to follow his strategy, but I might execute it poorly (due to lack of knowlege/experience) such that I end up worse off than if I'd just stayed invested in index-tracker funds.

A third option might be if I just sold my tracker funds and then waited for the deflationary bust and then bought back into tracker funds when the markets are down. However, that would be attempting to "time the market" and I'm not sure how the currency-debasement might play out due to predicted massive money-printing ("QE").

One more thing I'm not sure about is: what about US Treasury bonds (or funds that invest in those bonds)? I think I read on DaveHcontrarian's twitter that USD and US Treasuries might be among the few assets that don't get hit quite as hard in the deflationary bust. However, I don't know what the right timing is to invest in them.

This is all a huge headache for me (metaphorically speaking).

My current thinking is that I'll probably keep some of my ISA pot invested in equity index-tracker funds (but maybe not as much as I have right now) and use the rest to try to follow DurhamBorn's strategy (at least what I can gather from reading this thread). I am quite worried about it all though. I guess we won't know how things play out until they do play out, which could take maybe ten years. This means my "headache" is not likely to go away any time soon.

Cheers,
Clueless Imbecile

Disclaimer: I am not an expert. Anything I post here is just my opinions, which may not be factually correct. My posts are intended purely for the purpose of debate and are not to be taken as advice. If you act on any of the above then you do so entirely at your own risk. I do not accept any liability.

[MrXxxx]

16 minutes ago, Clueless Imbecile said:

My current thinking is that I'll probably keep some of my ISA pot invested in equity index-tracker funds (but maybe not as much as I have right now) and use the rest to try to follow DurhamBorn's strategy (at least what I can gather from reading this thread). I am quite worried about it all though. I guess we won't know how things play out until they do play out, which could take maybe ten years

This was going to be the fourth option that I was going to suggest...investing doesn't have to be all one or the other approach, just in the same way that you dont have to buy just equities or bonds...its your money so you can make it your approach!

...and as for what/when is right, all economists/investors are doing is just making educated guesses on historical events, but ask yourself `How accurate is the view of the road ahead when I am looking in the rear view mirror?!`

[Moominpapa]

On 07/10/2019 at 15:21, JMD said:

thanks Moominpapa, the graph was useful, and I am always on the outlook for 'good ideas' for selecting the correct asset allocation strategy, particularly in order to help fully exploit the next cycle.

In fact I think its mostly the reason for my earlier reference to those reflation divi equities as being bond proxies (though I admit I should have said 'alternatives'), I realise bonds/equities function in different ways, its just that the forum consensus seems to be that selecting a broad spread of good reflation utility/infrastructure stocks - ones that can be argued as becoming the 'bed-rock' of the next cycle - is as secure as buying bonds (I think the idea is the bond coupon remains intact but its capitol value is eaten by inflation; i think you were talking specifically of linkers, but aren't these always time limited?, in which case renewing them would be a problem). I guess I look at the pending performance divergence between the majority of stocks that are massively over-valued and will get cheaper over time (with/without a market crash), and the reflation type stocks that will mostly outperform, as being kinda analogous to two different asset classes, not in the long term of course (as everything reverts to the mean over time), but for approx. the next 10 years.  

IN respect of linkers being time limited, you're absolutely right. The question is how long do the linkers have until maturity and how long the inflationary cycles last for. I might buy a ladder of linkers or buy a fund that has an average maturity date that suits my belief of how long the inflationary stage will last - I am still working out the best way to do this. If it could be timed properly i would move from linkers to fixed once the cycle is over; but the cycle could last 5 years or 30, just look at the disinflation from 80s to now!

I also agree that commodity related equities are an alternative to the commodities themselves, which is why i'll be buying them. I've already sarted to adjust my portfolio allocation to include more equities and less linkers - i haven't started buying my none gold miner equities so don't need to worry right now about final allocations.

 

On 11/10/2019 at 03:15, Sugarlips said:

From Dale at Hedgeye:

Growth accelerating, Inflation slowing (QUAD 1);

Growth accelerating, Inflation accelerating (QUAD 2);

Growth slowing, Inflation accelerating (QUAD 3);

Growth slowing, Inflation slowing (QUAD 4)

Consensus is we are in Quad 4 but DB suggests we are heading for Quad 3 next.

interesting that they want to be underweight telcos in Quad 3 which goes against the popular consensus here?

Those quads look familiar! (although numbered a bit differently). I had a look at telcos and i am in two minds about adding them to my own portfolio. During the last inflationary period telcos suffered as they weren't able to pass on the costs to the consumer, business and private so if history repeats itself profits may not increase with prices. I understand that particular companies may low debt and already have upgraded infrastucture so this may negate the pitfalls. On the other had 4g to 5g when its works properly has the ability to have a huge impact. in the carribean they are already looking at going wireless 5g instead of running cables as the cost to plonk a mast down instead of running new cable across the islands is far cheaper for the comparable or better results.

 

On 11/10/2019 at 22:52, sancho panza said:

bit in bold 1: Commercials  had been for some time long sterling.I've said before how C4 news found a trader from some big bank to come on and say how she couldn't find/didn't know anyone long sterling.Clearly doesn't understand what equilibrium is and secondly hadn't even bothered to look on the comex which takes two seconds.

bit in bold 2:$ weakening not weakening is the major call ahead of the big kahuna.June 08 anyone?

 

I should have declared an interest.My apologies.

Over the last week we've bought shares that are part of XES/OIH(oil services) and also shares that are part of XOP/XLE/FCG(oil&gas).Devon Energy was one of those

As I've said before,I go through the ETF and give each a Coma Score out of 25,then weight purchases of the ones over 17 by market cap(generally).

XES/OIH-SLB,BHGE,TS,HP,RPC,HLX(pondering some of CLB,PTEN,PUMP)

XOP/XLE/FCG-PXD,CXO,DVN,ECA,PE,ENBL,EQT,XEC (pondering some of CNX,AR,SRCI,HESM,ERF)

We dipped into RDSB as part of our current programme but also BP to add.I'm hoping we get decnet run dwon in the next month or two to flush out some cheap big oilies,which we'll buy heavily if we can.

I'm gradually gearing our portfolio to be probably 70% commodities-oil,gold,copper,gas,potash.

PM's look good to go.

That's a bit like thinking the patients heart failure has been cured because they've managed to medicate away the oedema in the legs.

I was looking from a coma score perpsective at some European utilities yesterday and couldn't help but wonder why CNA has dropped as hard from 140 as it has.Soem Euro utilities are in much deeper doo doo than CNA and have dropped far less.

Super post Kibuc.As MArk TWain said, 'a gold mine is a hole in the ground with a liar at the top'

Was looking at co.s like FRES/HOC and refercing their share price versus the underlying.AS you say,there's a few looking very cheap on that basis.

didn't know we could buy XES/OIH over here - i had a look and it wasn't option - have you bought these already.

22 hours ago, sleepwello'nights said:

Can anyone explain what happened on Friday. My UK index linked gilts fell from a unit price of £220 to £208, whilst a number of the shares I hold jumped. Also Gold and Silver fell.

I think this was brexit related. It was announced we were close to a deal so pound gained, higher pound means lower prices for goods and commodities priced in dollars meaning a lower sterling denominated inflation. Gold is a commoditiy/currency so higher pound means lowers gold prices ditto for silver. Not sure about the shares without knowing what they are.

This is an interesting point you allude to though. What if we get a rising pound after the dollar hits its highs and begins to fall - what effect will this have on the inflationary theory for us sterling holders. Can we have rising inflation and a rising pound against the dollar (as a smoothed out average) unless we sell more of our property -actual and intellectual - to foreign 'developers'. Our currecy needs to be cheap and remain cheap because our productivity isn't great.

[leonardratso]

anyways, heres a recap of DB;s earlier portfolio splits fro his pops, i already had some of these and some pure gamblers, some im  not too keen on, others i like the look of but never considered before. Anyway, i added SSE and DRX but as they fall i move the regular investement down another week to try and catch the lower prices, might miss some 'noise; up/down, expect a kicking at some point, but like the fat bloke losing weight - youve got to start somewhere.

"

reflation portfolio
 % Weight
	Sector
1 	IMPERIAL BRANDS 	10.6% 	 
2 	VODAFONE GROUP 	9.9% 	 
3 	BRITISH AMERICAN TOBACCO 	7.9% 	 
4 	CENTRICA 	7.4% 	 
5 	CARD FACTORY 	7.2% 	 
6 	NEWRIVER REIT 	7.0% 	 
7 	ROYAL MAIL 	6.7% 	 
8 	STANDARD LIFE ABERDEEN 	6.6% 	 
9 	GO-AHEAD GROUP 	6.5% 	 
10 	STAGECOACH GROUP 	5.6% 	 
11 	BT GROUP 	5.6% 	 
12 	PLAYTECH 	5.1% 	 
13 	SSE 	4.7% 	 
14 	TUI AG 	4.3% 	 
15 	Cash 	3.7% 	 
16 	WILLIAM HILL 	1.3%

 

My dad sold his gold miners for a 36% profit and added it to the dosh he made selling Anglo American for a 300% gain 
and BHP and Rio.He asked me to build a divi portfolio with 15 to 17 stocks from the money with a max weighting of 
20% in any one sector .Iv been building it over the last 3 months and its nearly finished.The cash was meant 
for William Hill but they bounced too much as i was laddering so it will stay as cash for now.The portfolio is 
as above.He said the income over 10 years needs to cover any capital falls.

He has a bigger portfolio and other investments,the above one was built from profits in the above and 
an extra £20k.He tagged the bottom on Harmony Gold with a decent stake and took 50% profit from them in 
a few months. 


Euro


@Harley on Germany can you run the rule over Solvay SA , Evonik Industries , Bayer AG , Covestro and BASF  
im setting up ladders in all of them if balance sheets look ok.Also in Finland i think Cargotec Corporation 
,another im starting to buy once balance sheet looked over.

Some of these are big in animal feed chemicals,animal health,oil field drilling chemicals 
,port and timber transport infrastructure etc,all getting hit and all might be big winners in a 
reflation as they feed into the high inflation areas and likely demand areas that outrun production.

Oh and Telefonica though im exposed to telcos already,their chart looks like capitulation. 


OIL

@Cattle Prod i agree to avoid shale.Im really interested in the decent sized companies.
I want the ones who might double the divi or treble it in the next cycle.
Been looking at the ones SP put up.Like Equinor and Repsol for starters.

FOOD

 Iv started to look at food companies where input costs shouldnt hit them as hard as the output increase in prices.

Mowi ASA is one il be buying,one of the biggest farmed salmon producers.

Also Leroy Seafood. 

STEEL

I look at the cycle ahead and consider it towards my goals.My main goal is not to get wiped out by capital destruction
 or inflation.I then have,and am slowly tilting my assets to a broad spread of companies that i think will do well 
as a whole,some as a direct result of inflation,some due to the affect that inflation has.
For instance iv got ladders in place for SSAB steel.They might get a real big kicking down 
in a deflation event,but if they survive that they should do very well given they supply the 
main tractor,digger and green energy companies.They are ahead of the curve on moving their blast 
furnaces to electric and that could make a massive difference back end of the cycle. 

 

"

 

[DurhamBorn]

Its very difficult to put forward full portfolios because my own is still in build mode and indeed wouldnt be right.I often top slice,sell,buy etc over the build period.People are on their own really with their own assets.This thread is more to bounce ideas around,and then to go off and do more research.

In simple terms the areas of interest are where government investment will push up demand and pricing and long bear markets will end.The things to avoid are areas that rely on the consumer,or on inflation staying low.

People shouldnt worry too much,but simply tilt their portfolio to inflation loving areas.Its not about all in on a couple of sectors,its about having a diverse portfolio that will probably under perform if dis-inflation continues,but should/will outperform by a very decent amount if we get inflation.

[Lightscribe]

Not all passive funds are weighted in such a way that would suffer as much as others through a financial shit storm.

I’m about 60/40% cash/equities in my pension at the moment (with a view to fully invest in stages in a downturn), through L&G in a low cost FTSE 100 tracker (plus I haven’t got many options through work). The weighting of the fund consists of quite a few of the energy/infrastructure/telecoms mentioned here, and with sterling taking a battering the last couple of years, the FTSE looks good value. 

There are rumblings that the 2015 changes to DB public sector pensions could be reversed however. If this was to happen and effected me (not just those at the 10 year taper) I would go back into the DB scheme (I came out when it got linked to state pension age).

[MrXxxx]

2 hours ago, Sideysid said:

e are rumblings that the 2015 changes to DB public sector pensions could be reversed however. If this was to happen and effected me (not just those at the 10 year taper) I would go back into the DB scheme (I came out when it got linked to state pension age

Can you give the source for these rumblings, as I have heard this mentioned a number of times now. ...and as for getting back into the DB scheme, are you sure that this is possible?...most employers have closed such schemes for new entrants and/or are trying to lose such liabilities by encouraging existing members to leave.

[Democorruptcy]

This was a thing I posed about reflation sectors earlier in this thread (or part 1). 

 

[UnconventionalWisdom]

7 hours ago, DurhamBorn said:

In simple terms the areas of interest are where government investment will push up demand and pricing and long bear markets will end.The things to avoid are areas that rely on the consumer,or on inflation staying low.

Great post. 

I found TOS after looking at flats in the south east on an above average salary- saw how crap they were and thought, "no, not what I think life should be like". 

I have little faith in the central banks after reading/watching a lot of stuff. I think we are at an inflection point (taken a long time to get here) and that's why I like gold/silver. This thread and the one from TOS helped me get my head around the miners- although I've stuck to gdx and gdxj as I dont know enough about individual cases. 

Having met a few city boys, I see that they want to continue with what they know, dont want to think out of the box and dont want to consider a Minsky moment. Seems they are mainly trained to do one job under certain conditions.

My belief is that the status quo  cant remain forever. Speculative investments are rife and it's impacting the productive economy and debt repayments cant increase forever. People's standard of living reduces and they wont stand accept that for long. Brexit, Trump, Paris, Hong Kong are happening because people arent happy. I work with young innovative companies where the guys fueling the developments are living with strangers or prob paying half their income on someone else's mortgage. Myself included in that. This will change or everyone will down tools.

With zero interest rates, the only way to combat a recession and keep people happy is fiscal spending. Inflation follows spending (US after the 60s) so this thread is a welcome change to the widespread belief that normalisation of low interest rates is occurring and that FAANG stocks are the future. 

I'm loving the discussions on companies with good cash flow and minimum debts- sounds like how a company should actually be run. Just trying to work out a strategy for that. 

My approach is to invest in what I believe is happening and how I see it playing out. That viewpoint is influenced by discussions here, along with a load of background reading/ videos. That way if I'm wrong, at least I learn from it for the future.

[CVG]

Neil Woodford's flagship fund to be shut down

https://www.bbc.co.uk/news/business-50052945

[Democorruptcy]

Re differing opinions about what sectors are good or bad in a reflation, could it partly depend on how old school the views are? Traditionally good or bad sectors could change with the times. For example telcos, in the past people might cut down on calls when they paid per call. Now people pay a monthly amount for inclusive calls, texts, data on their mobiles. They won't stop using their mobiles/broadband so will just pay the bit extra per month. It's partly different now because of the social media addiction factor. Walking about now a mobile phone seems to be an extension of a lot of people's arm. Mobile phones have tobacco type addiction pricing built in?

Disclosure: I own some BT.