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


spunko

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UnconventionalWisdom
16 hours ago, Yellow_Reduced_Sticker said:

I've been reseaching away looking for a broadband deal for me new gaf, anyway got a deal with plusnet you get £70 cash back Unlimited Fibre broadband 36Mb 18 mth contract works out at £19.10 p/m AND that deal expires mid-night tonight, how odd for a tightWad like myselvf to bag that deal at the last minute!xD

I've just ditched my broadband to use smartie's unlimited data offer. £18.75 per month, 1 month contract.

I'm in a great area for coverage though but this'll be the future. No more line rental. 

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Gambling we have talked about William hill, play tech etc.... I was chatting to someone who works in online casinos that mentioned NetEnt anyone looked at or heard of https://www.netent.com/en/ its a Swedish company that provides gaming solutions to online casinos, at a quick glance they work with quite a few of the big players including William hill, Betfair etc..  also recently opened offices in London 

 

Will look further into it later.

 

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1 hour ago, UnconventionalWisdom said:

I've just ditched my broadband to use smartie's unlimited data offer. £18.75 per month, 1 month contract.

I'm in a great area for coverage though but this'll be the future. No more line rental. 

OK, who or what is "smarties"?

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6 hours ago, Moominpapa said:

I have had my eye on WNRG for a while. I will probably start laddering in around the 29ish mark, which is a 27% reduction from the highs.

SSGA SPDR ETFS EUROPE II PLC MSCI WORLD ENERGY UCITS USD (WNRG)

image.thumb.png.f0b5657e5272467a8b6fb718b145c372.png

Moominpapa, not a bad looking etf, especially as I believe its fallen more than most other energy etf's so prob offers good value investment potential wise. Would you know all its constituent stocks as I can only find its top 10?

 

On related subject - what do people here think of the South African producer Sasol? It appears cheap and the political risk i think can mostly be discounted, it is the only African energy company of note so huge potential especially if it were to come to an agreement with China. Also, it can be innovative, i.e. its liquid coal-tech (coal liquification) process in 1980's helped the old government/regime bust international oil sanctions, and with south Africa's massive coal reserves (200 years worth?) could be important asset/expertise in future... as energy demands rise across Africa, green/environmental concerns will take 2nd place to the political realities of providing Africa's rising population with energy. I believe Sasol is substantially a petro-chemical company today. Would welcome thoughts on this company.

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4 hours ago, DurhamBorn said:

BTW, I Cleaned up at TESCO this evening 4 packets of tesco finest pork sausages reduced to 65p LOVELY

That'll be the ones with meat in then, rather than pigs  ears and butchers sawdust?! :-) :-) :-)

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Yellow_Reduced_Sticker
5 hours ago, UnconventionalWisdom said:

I've just ditched my broadband to use smartie's unlimited data offer. £18.75 per month, 1 month contract.

I'm in a great area for coverage though but this'll be the future. No more line rental. 

its mobile which i do NOT want ...

Quote

Yes BT get the profits from Openreach,but there arent really any profits at the moment.The key is that the government allow better returns to roll out fiber as i think they will,inflation+ a few % would be very good.Im not getting down there much at the moment due to working,but as soon as i leave/get finished il be back.Still getting quite a bit though.

cheers @DurhamBorn

1 hour ago, MrXxxx said:

That'll be the ones with meat in then, rather than pigs  ears and butchers sawdust?! :-) :-) :-)

YES 92% pork in 'em sausages! and just to make things even better on that evening - the two Scavengers that are there every night were VERY pissed off cos there was ONLY 4 packets and I had the LOT!xD ...in fact i said to them in my dry humour ...if they would like to buy them off me at 2 quid a packet , you should of seen the RAGE in their faces, oh boy i'm i glad i'm out of this sh*HoleDUMP in a couple of weeks!:Jumping:

 

 

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UnconventionalWisdom
4 hours ago, Harley said:

OK, who or what is "smarties"?

Sorry, smarty. They run off of three's network. I've been with them for half a year and the coverage has been good. I always resented the broadband costs and the mobile. I dont game or download much- bit of surfing and streaming. The 4g works fine 

3 minutes ago, Yellow_Reduced_Sticker said:

its mobile which i do NOT want

I am keeping an eye on the research and do turn it off when I go to bed!

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30 minutes ago, UnconventionalWisdom said:

Sorry, smarty. They run off of three's network. I've been with them for half a year and the coverage has been good. I always resented the broadband costs and the mobile. I dont game or download much- bit of surfing and streaming. The 4g works fine 

I am keeping an eye on the research and do turn it off when I go to bed!

Thanks.  I've never heard of them so thought it was some sort of code and I just wasn't cool enough!  I've very keen to go that route once my fixed line contract expires.

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3 hours ago, JMD said:

Moominpapa, not a bad looking etf, especially as I believe its fallen more than most other energy etf's so prob offers good value investment potential wise. Would you know all its constituent stocks as I can only find its top 10.

Hopefully he doesn't mind me butting in, but the SPDR site links to this site which is the index it follows. If you select 'WRLD/ENERGY' in the index dropdown it will list the whole index it is trying to follow. There may of course be some small diffs in the %'s depending on when it rebalances, etc but should be roughly right. That's all I've been able to find.

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On 14/10/2019 at 10:23, spygirl said:

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/

It really is incredible .

On 14/10/2019 at 10:25, Harley said:

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!

I've reopened shorts today on HWDN/BKG/RDW/BDEV/RMV.My thinking is that these are about to enter structural bear markets.I normally short technicals, but I also short where I see a fundamental mismatch between asset prices/transactions/credit markets/demand etc

Short term there are technicals indicating overbought conditions for me to enter

plan A no deal occurs-they'll plummet

plan B we get a deal,sell the news

I'm not sure how sustainable those divis are.

 

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On 14/10/2019 at 13:46, 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. 

 

There's a difference between passive investing and buy n hold.

On 14/10/2019 at 13:57, JMD said:

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.        

firstly,,I'm not going to have time to run the utilities this week as I'm a bit time poor.

 

On the matter of the difference between me and DB's approach,I think you're right we have the same end destination although I likely won't be moving much outside oil&gas/PM's/copper/telecoms/utlities/potash/rare earths.DB does a lot more stock picking than I do,I rather pick a sector and spray n pray.

The big difference is that I'm looking to trade what me and @Cattle Prod discussed 'the june 08 moment'.I see a run up as the dollar weakens in commodity stocks and then looking to sell up and buy UST's,then buy the bottom.sounds idealistic but even if I only get us a portion of it,it could be very handy.My plan also stresses that if dollar doesn't weaken and we dont get the run,then I'll jsut sit in the commodity stocks we've got.

an example of the possible gains is the chart below.timely trading could have turned $30 into $360 over 3 years.I'm not after all of it,but I'm happy to have a bash at a chunk of it.

image.png.9bda9c20a1d271d2d8e66502cdb45ac4.png

 

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sleepwello'nights
4 minutes ago, sancho panza said:

There's a difference between passive investing and buy n hold.

 

Which is why my post mentioned moving into index trackers. What point are you making about my concerns?

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On 14/10/2019 at 19:49, Clueless Imbecile said:

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.

 

Passive investing works until it doesn't and then doesn't until it works again.Much like most things.But thats jsut my view,not looking for a huge debate.This a market timing thread ultimately.

As long as you have a idea of where we are in the long term charts.

image.png.0dcca95d4c81aceb77b81896b483ad84.png

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On 14/10/2019 at 20:30, Moominpapa said:

 

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

.

I pick through the etfs and buy a selection of stocks that pass msuter on the coma scale and then spray n pray.

On 15/10/2019 at 13:51, kibuc said:

Meanwhile, Guyana won't be releasing production numbers as usual and will conflate it with financials on the 31st of Oct. I'd like to be wrong, but I've already made my mind clear on why that might be.

Cheers for the update Kibuc.I'm long these boys..........

Looking at Wesdome and wondering if we should have a few.Share price hasnt risen much on the news

Reality is that portfoilios will contain losers in this bull run,you jsut got to hope the winners outrun them

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24 minutes ago, sleepwello'nights said:

Which is why my post mentioned moving into index trackers. What point are you making about my concerns?

I wasn't really making a point SWO.Just saying.Dind't mean to offend

I answered ref stocks and sectors in the psot below

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US inflation running

https://wolfstreet.com/2019/10/14/cleveland-fed-median-cpi-underlying-inflation-hits-3-0-percent-hottest-in-data/

Cleveland Fed’s Underlying Inflation Measure Hits 3.0%, Hottest in the Data.

“Soft inflation?” The inflation measure by the Cleveland Fed — the “Median CPI,” which is based on Consumer Price Index data but removes the outliers in the data to reveal underlying inflation trends — jumped 3.0% for September, the highest in the data series going back to the Financial Crisis, when this measure was launched.

By comparison, “core CPI,” which removes food and energy prices, hit 2.4% in August and September, the highest since September 2008:

US-CPI-Cleveland-Fed-median-CPI-2019-09.

 
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https://moneymaven.io/mishtalk/economics/world-dollar-liquidity-crashes-as-does-marginal-utility-of-debt-gOT1rgXjhE25TeUfgI4bvQ/

World Dollar Liquidity Crashes as Does Marginal Utility of Debt

https%3A%2F%2Fs3-us-west-2.amazonaws.com
 
Mish
byMish
5 hrs-edited
 

Lacy Hunt at Hoisington Management has another sterling post in its third quarter review and outlook.

Here are some snips from the latest Hoisington Management Quarterly Review by Lacy Hunt.

World Dollar Liquidity

The Fed’s balance sheet constriction reduced world dollar liquidity, which is defined as the monetary base plus foreign central bank holdings of U.S. Treasuries at the Federal Reserve Bank in New York. This quantity effect also served to underpin strength in the U.S. dollar, which has had the result of draining foreign central bank holdings of U.S. Treasuries impacting foreign financial markets.

World Trade Volume

 

https%3A%2F%2Fs3-us-west-2.amazonaws.com
 

 

The more restrictive monetary conditions spread worldwide as the velocity of money fell sharply in all their countries to levels far below the United States. Not surprisingly, global economic growth moderated in concert with U.S. economic moderation. World trade volume, which has fallen over the past year, clearly points to the universal nature of current global downturn and the result has been a disinflationary pricing of goods.

Debt Overhang

 

https%3A%2F%2Fs3-us-west-2.amazonaws.com
 

 

Despite the evidence that monetary policy works with long lags, the Fed appears to be waiting for a downturn in the coincident economic indicators before attempting to “get ahead” of where the market has priced interest rates. The lags between initial inversion and recession have been variable but the market is presently within the historical lagged periods. The current overrestraint of Fed policy is why 5, 10, and 20-year Treasury security yields have not set new record lows, but it is only a matter of time.

Slumping Marginal Revenue Product of Debt

 

https%3A%2F%2Fs3-us-west-2.amazonaws.com
 

 

For the current three-year period, using the partially available data for 2019, each dollar of global debt generated only $0.42 of GDP growth in the major economic sectors, which was down 11.1% from ten years ago. This deterioration was greater in all the major foreign economies than in the United States.

The largest percentage decrease in debt productivity, of more than 38%, was registered in China over the past ten years. The decline in the marginal revenue product of debt in Japan, the United Kingdom (U.K.) and Europe were all more than two and one-half times greater than in the United States. Over the current three-year period, the debt productivity in the U.S. was $0.40, versus $0.38, $0.36 and $0.34 in the Euro currency zone, the U.K. and China, respectively.

Outlook

The global over indebtedness has clearly restrained growth, and therefore has had a profound disinflationary impact on every major economic sector of the world. This fact, coupled with an overzealous U.S. Central Bank have created the conditions for an economic contraction in the U.S. and abroad. This has also created a worldwide decline in inflation and inflationary expectations.

A quick and dramatic shift toward greater accommodation by the Fed could begin to shift momentum from contraction toward expansion. However, policy lags are long and slow to develop, therefore despite the remarkable decline in long term yields this year, we are maintaining our long duration holdings. A shift towards shorter duration portfolios would be appropriate when the forward-looking indicators of expansion, in the U.S. and abroad, begin to appear.

Quiet Bond King

I am pleased to have Lacy Hunt as a friend. We chat frequently.

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1 hour ago, Yellow_Reduced_Sticker said:

"Centrica is pursuing a sale of its stake in Spirit, the deal could value the business at more than $2 billion"

https://www.bloomberg.com/news/articles/2019-10-16/centrica-said-to-pick-goldman-for-2-billion-spirit-energy-sale

@DurhamBorn & others thoughts...

Centrica would be able to clear their debt with that,then the nuclear might be worth £1.5 billion.They could probably return that to shareholders.However they might fancy the capital to roll out more in the electric vehicle space.I over paid for Centrica, but in context the loss where they stand was 9% of the PM profit already banked.

Happy to leave them there and see what happens.

 

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12 hours ago, sancho panza said:

US inflation running

https://wolfstreet.com/2019/10/14/cleveland-fed-median-cpi-underlying-inflation-hits-3-0-percent-hottest-in-data/

Cleveland Fed’s Underlying Inflation Measure Hits 3.0%, Hottest in the Data.

“Soft inflation?” The inflation measure by the Cleveland Fed — the “Median CPI,” which is based on Consumer Price Index data but removes the outliers in the data to reveal underlying inflation trends — jumped 3.0% for September, the highest in the data series going back to the Financial Crisis, when this measure was launched.

By comparison, “core CPI,” which removes food and energy prices, hit 2.4% in August and September, the highest since September 2008:

US-CPI-Cleveland-Fed-median-CPI-2019-09.

 

Going by US baed people I know, US inflation is raoring back.

Lots of factors, in no particular order:

1) Demographic change/low migration - or useless migration, Importing a few 100k of Soamils/muzzers just icreases bennes take.

2) CHina geting hammered *and* getting pricey, so the flood of chinky supply ends.

3)Opiods - ignore the deaths, the nubmer of logn term sick is massive.

 

 

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17 hours ago, Yellow_Reduced_Sticker said:

its mobile which i do NOT want ...

 

Just use a usb adaptor into a compatible hub (lots of them about) and shove it in the attic (ie, far enough away for the radiation to reduce to background levels).  

[I think this is good value.  I can't use it because my children just use too much data (ie a bandwidth problem, not a cost problem), but if it was just me & the wife in the house I'd use it.  And I'd use a usb connector into my current hub (which is compatible), so I wouldn't have to muck about with rejigging all the computer stuff in the house.]

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20 hours ago, S Brule said:

Hopefully he doesn't mind me butting in, but the SPDR site links to this site which is the index it follows. If you select 'WRLD/ENERGY' in the index dropdown it will list the whole index it is trying to follow. There may of course be some small diffs in the %'s depending on when it rebalances, etc but should be roughly right. That's all I've been able to find.

thanks S Brule, appreciate the site reference.

MSCI looks like an extensive index, so good I think for obtaining trends for many markets/themes, etc - it provides an easy way to view say relative company market caps, or if select a momentum etf, to discover what's 'popular' - e.g. in US visa/mastercard/Microsoft are top of list (btw def. NOT a recommendation as obviously goes against ethos of this thread, but interesting all the same; and also site warns data can be 2 months old).

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