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


spunko

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17 hours ago, sancho panza said:

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.

thanks SP, appreciate very much your reply. I think its very useful to know something of the short and/or long term objectives of the author of a post in order to fully understand their particular post contribution.

Personally, I am investing (not trading) for the next cycle as per this (db's brilliant!) thread. I have been laddering into reflation stocks (hopefully Brexit  (if/when... how?) 'news' wont cause a market bounce). Anyway, i'm happy to continue buying incrementally over say next 12 months, and see how far I get before any global market corrections, after which I would aim to buy more whilst cheap.

I have already got my 'minimum' PM allocation of miners and physical. However, I find i'm now in the fortunate position of having 'surplus' cash savings, and so have decided to buy more commodities. This was partly the reason behind my initial question to you SP. Because what I am finding difficult to decide upon is a happy balance of risk/return. For example DB has estimated a reasonable chance for physical silver to 20x by year 2028 cycle end, and gold perhaps 10x - I think these were mid-point estimates (so could be more/less), though this did also include effects of inflation. I know nothing is guaranteed, but having even ball-park estimates helps evaluate investment risk, and this did help me arrive at decisions. SP, you provided an example stock with gains for what may play out over next 2-years... I realise we might not get weak dollar, or that short-term commodity effects might not play-out as expected - lots of possible permutations here - again nothing's guaranteed. Its about tolerable risk/return but this is where I find things difficult to gauge. I wonder do you have expectations of possible returns that we might see for oil&gas / PM's / copper / potash / rare earths, over say the next 2 years, if we were to get that sharp up/down spike in these commodities? The reason I ask about all these is in case you have differentiated figures/returns for these commodities, which in turn would help me in my allocations.  

SP, excuse my long question, but thought it important to explain where i'm coming from. Not asking for advise of course, as I say I have already decided to buy. So when you have some time, and if you can possibly share any work you may have done regarding possible short-term/spike returns, I would be very grateful to hear your thoughts.  

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2 hours ago, Loki said:

Just bit the bullet and bought CNA, so get ready for drops anyone else holding fire...

well ya got them with a 70% Yellow Reduced Sticker discount to want i paid!xD

i think they will come right BUT - it will take a long time...

anyway i'm keeping an eye out for the next Trading Update on: 21-11-2019 if things look to be improving i may well buy aonther block!

 

EDIT!

Forgot to mention and ask about this: BT is plotting a return to the High Street!?

personally i think this decision is CRAZY and will be disastrous for BT 

@DurhamBorn  & others thoughts...

 

spy started a thread here:

 

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21 minutes ago, Loki said:

Excuse the broad question, but in x years, how will we know when the deflation cycle is over? What should the layman like me be looking out for?

Fat people litter picking

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2 hours ago, Loki said:

Excuse the broad question, but in x years, how will we know when the deflation cycle is over? What should the layman like me be looking out for?

£75.00 Freddos and increased sales of wool for making thick Aran jumpers.

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12 minutes ago, Thorn said:

£75.00 Freddos and increased sales of wool for making thick Aran jumpers.

I'm not pay 75 quid for a freddo, no shitting way man

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3 minutes ago, Starsend said:

I'm not pay 75 quid for a freddo, no shitting way man

True. 

You wont be wanting to waste any money on such things.

...anyway with gas bills in the tens of thousands, my thatched cottage in Ireland knitting sweatshop will be exporting Superthick Aran jumpers at prices that will be only eyewatering. 

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30 minutes ago, Democorruptcy said:

With Parliament sitting Saturday, UK shares are going to be interesting today but particularly Monday morning?

 

is it worth buying some today with foreign earnings as a hedge against pound possibly tanking on Monday?

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12 hours ago, Noallegiance said:

Fat people litter picking

xD

 

on another matter,interesting piece here.Not sure the comparison with the 1920's reichsbank is valid,but inherently,at some point,printing money should create inflation.All it needs is a turn in velocity, but that's a more psychological phenomenon and one that CB's have completely got worng thus far given QE destroyed velocity.

http://www.myrmikan.com/pub/Myrmikan_Research_2019_10_11.pdf

QE for the People
Myrmikan’s
May letter
discussed how the Fed had already begun to ease financial
conditions, though the method was so subtle that few understood what the central bank
was doing.
Banks are required to keep required reserves at the Fed. Banks that find themselves
with a deficient reserve level have to borrow reserves from those with excess reserves,
and the interest rate they pay is called the fed funds rate. The fed funds rate thereby sets
the minimum level of funding for the banking system. The Federal Reserve used to set
this rate through open market operations: buying Treasuries would add reserves to the
banking system and lower the fed funds rate (and vice-versa).
Historically, reserves earned no interest, and so, before 2008, banks maintained
as few reserves as possible—they could always buy a Treasury bill with any excess
cash. After the Fed flooded the banking system with reserves during the 2008 panic,
banks found themselves with excess reserves, which peaked at $2.7 trillion. The Fed
sets the general reserve requirement at 10%, which means the banking system could
have added $27 trillion of credit to the economy. In fact, certain classes of assets (such
as Treasuries, mortgage-backed securities, etc.) have risk weightings that allow banks
to hold as little as 2% reserves against them, which enables 50 times leverage on such
assets (which is how, for example, Citicorp was able to be levered up 48:1 in 2007).
In order to keep trillions of levered up credit from crashing into the economy,
the Fed began paying interest on excess reserves (IOER). Given the level of excess
reserves, the Fed could no longer use open market operations to manipulate the fed
funds rate. The Fed thought it could control the fed funds rate by manipulating IOER
instead: Since Fed deposits are by definition risk-free in nominal terms, the fed funds
rate should never go below IOER because if it did, banks would withdraw their loans
to other banks and deposit the funds at the Fed instead. Similarly, the fed funds rate
should never go above IOER because banks could withdraw reserves and lend them to
other banks.
Various regulatory costs make it more expensive to lend to other banks than
hold funds at the Fed, so the fed funds rate persisted roughly 0.14% below IOER
(sometimes much lower) from 2009 to 2016. Yet in April 2019, the fed funds rate
burst to 0.06% above IOER, or at least 0.2% above where it should have been in
a smoothly functioning market. A fed funds rate above IOER means that the banks
carrying $1.4 trillion in excess reserves are declining to lend them into the market to
earn the spread. Myrmikan posited in April that the only reason a bank would forgo
such an opportunity was that fed funds loans are unsecured and potential lenders must
be worried about solvency risk—in other words the market was signalling that the
banking system had solvency issues.
Events in September proved Myrmikan’s analysis to be wrong, or at least
incomplete. Separate from the fed funds market is the asset repurchase market, or
repo for short. The repo market is the primary funding mechanism for the shadow
banking system. Repo borrowers tend to be broker-dealers, hedge funds, mortgage
REITs, etc., who need short-term money to finance long-term debt (a mortgage REIT,
for example, might roll 3-month repo borrowing to finance 7-year mortgage-backed
security tranches). Repo lenders are entities such as banks and money market funds,
who provide investors and depositors a return on their cash.
The way a repo transaction works is that the borrower agrees to sell an asset for
cash and to buy it back a short while later at a tiny premium. That premium, annualized,
is the repo interest rate. Only AAA-rated securities are active in the repo market, so (in
theory) the lender has no risk of loss.
On September 16, the overnight repo rate exploded to a 7% premium to the fed
funds market. In other words, banks were offered 7% to withdraw excess cash from
their Fed accounts to lend it into the repo market. The banks’ reticence to deploy their
cash cannot have been because of solvency concerns because such loans are fully
secured. The only explanation is that excess bank reserves are not, in fact, excessive.
It turns out that 90% of “excess reserves” are held by just five banks, and, under
Dodd-Frank, large banks must keep reserves sufficient to fund their “living will” plan of
rapid and orderly resolution in case of distress. Only reserves will do, not Treasuries.*
The following chart shows the growing stress in the fed funds market as the Fed
engaged in quantitative tightening and reduced the amount of reserves in the banking
system. This data suggests that the banking system requires at least $2 trillion of
“excess” reserves to keep funding costs stable.
image.png.95a624d574f60b8847218165fb06dbb7.png
The part of Myrmikan’s April analysis that was wrong was the motivation of
the five large banks not to lend to institutions that needed funding: it wasn’t that the
banks were worried about solvency; it was that they had no cash to lend. The part of
the analysis that was correct, however, is that the banking system in general, and the
shadow banking system in particular, is desperate for cash and willing to pay enormous
premiums to get it: the abnormal pricing in the debt markets reflects lack of liquidity,
not solvency.
And this is the distinction that the banks themselves are pushing. BNP Paribas, for
example, entitles a October 4 report: “LE Not QE, That’s Liquidity Expansion.” BNP
predicts that the Fed will have to add $400 billion to banking reserves over the next
year to eliminate banking reserve scarcity. In other words, looking at the chart above,
the Fed must buy assets to try to get back to that cluster of black dots. And the only way
to do that is through QE (
only don’t call it QE
).
Money printing has already started. In order to stabilize the $2.2 trillion repo
market, on September 17 the Fed itself began lending to repo borrowers. From mid-
September through October 2, the Fed’s repo lending balance has gone from nothing to
$181 billion, thereby expanding its overall balance sheet by the same amount.
There is little difference between lending funds and continually rolling them
(repo) versus purchasing them outright (QE), and on October 8, Fed chairman Powell
announced: “Increasing the supply of [bank] reserves or even maintaining a given
level over time requires us to increase the size of our balance sheet. As we indicated
in our March statement on balance sheet normalization, at some point, we will begin
increasing our securities holdings to maintain an appropriate level of reserves. That
time is now upon us.” QE is here. Trump has been proven correct once again.
The implications for gold are not obvious. Most gold investors operating under the
quantity theory of money believed that QE1, QE2, and QE3 were the fuel to launch
gold into the multi-thousands of dollars per ounce: more dollars meant each one was
worth less, so gold had to go up. That theory proved to be incorrect in dramatic fashion.
The Fed added reserves to the banking system through QE to entice banks to
increase lending. Discount rates fell, asset prices increased, and more assets were
constructed, increasing industrial commodity prices. Gold underperforms in real terms
during a boom whatever it may do in nominal terms. Overcapacity then
lowers
prices,
projects default, industrial commodities collapse, and gold outperforms.
This does not mean that the Fed is powerless to devalue the dollar. When the Fed
buys Treasury bonds (or entices banks to do so), the government spends that money
mostly as transfer payments for consumption, and few new assets are constructed. This
is, in fact, an explicit strategy that Bernanke advocated in 2002:
A broad-based tax cut, for example, accommodated by a program
of open-market purchases to alleviate any tendency for interest
rates to increase, would almost certainly be an effective stimulant
to consumption and hence to prices.
.
.
. A money-financed tax cut is
essentially equivalent to Milton Friedman’s famous “helicopter drop”
of money. Of course, in lieu of tax cuts or increases in transfers the
government could increase spending on current goods and services or
even acquire existing real or financial assets.
 
This quotation is especially relevant because it was corporate tax payments on
September 15 that led to the explosion of the repo rate: corporations wrote checks to
the Treasury Department, which withdrew the money from banks, which prompted the
funding stress.
Banks and shadow banks (e.g., money market funds) must of have known that tax
withdrawals were coming, yet they are so short of cash they had no way to prepare
for it. All markets consist of a bid and an ask—therefore, one should inquire: a cash
shortage compared to what demand? The larger picture is that repo borrowers have ever
more assets that they must finance. Since the latest debt-ceiling compromise in July,
Federal debt held by the public has soared by $517 billion. The Congressional Budget
Office (CBO) projects that that figure will increase by another $758 billion by the end
of 2020, by another trillion by the end of 2021, and by another $1.2 trillion in each
of the next two years. And the CBO assumes real GDP growth of 2.4%. Myrmikan’s
January 2019 letter
points out that historical trends suggest that a recession would
increase federal deficits beyond $3 trillion per year.
When the Fed lends newly-issued money into the repo market, it is effectively
financing federal deficits (most of the repos are Treasuries with a smattering of
mortgage-backed securities). Under the original QEs, the banking system received $2.8
trillion in new reserves and, over the ensuing decade, levered these reserves to provide
$20 trillion more in credit. These QEs occurred after a credit meltdown in which the
most speculative debt had been written off and during which the fed funds rate fell
from 5% to 0%, making marginal projects seem profitable in the new, lower interest
rate environment. The private sector thus was able to absorb half of the $20 trillion
in new credit growth, and the government squirted the other half into the economy
through deficit spending.
The new QE will take place near the end of a credit cycle, as overcapacity starts
to bite and in a relatively steady interest rate environment. Corporate America is
already choked with too much debt. As the economy sours, so too will the appetite
for more debt. This coming QE, therefore, will go mostly toward government transfer
payments to be used for consumption. This is the “QE for the people” for which left-
wing economists and politicians have been clamoring. It is “Milton Friedman’s famous
‘helicopter drop’ of money.” The Fed wants inflation and now it’s going to get it, good
and hard.
The Federal Reserve will then face the same Hobson’s choice that confronted
the Reichsbank in the 1920s: fund the Treasury market and drive continually rising
consumer inflation or don’t fund it and let interest rates rise, which would crush financial
markets and the economy. QE-for-the-people is the end game of the inflationary
economic cycle. Gold will anticipate it first.

 

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https://incakolanews.blogspot.com/2019/10/why-gold-mining-companies-habitually.html

I got a two word mail "nice interview", from An Industry Professional about half an hour ago. As I tend to pay heed when this particular industry pro recommends something, I've just finished watching this:
 
People, this is obligatory viewing for anyone who invests, trades or even works in precious metals mining companies. Mr. James Rasteh of Coast Capital Management speaks a tonne of sense on a whole range of topics around the central point of this interview, "Why Gold Mining Companies Habitually Destroy Capital". I found myself nodding in agreement all the way through, Rasteh has the clarity and delivery that I'd like when I grow up.

 

 

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Under the correlation isn't causation theme.

Worth noting that the volume of actual trades funded by margin is relatively small but they always say markets are set at the margins.

DYOR natch 

 

The Doug Short graphs are the best and it's a series he's been doing for eons.I can't get them to load across.

 

 

Decl:short UK buil;ders plus a few randoms/long oil/gas/gold/potash....and CNA

https://wolfstreet.com/2019/10/17/there-are-a-couple-of-things-not-coming-together-here/

 

Of the total shares outstanding of the SPDR S&P 500 ETF, only 2.6% were out on loan to short sellers this week, the lowest since early October 2018, and down from 7% during the summer, according to IHS Markit data cited by Bloomberg. Meaning that short-sellers who want to short the entire market, and not specific companies, are worried that the market will break out, powered by a Brexit deal or a miraculous US-China trade deal as per presidential tweet, or whatever, and rip their faces off if they’re short the market.

There are many forms of shorting the stock market. Short interest in the SPDR S&P 500 ETF serves as sentiment indicator about short bets more generally.

When short-sellers are not interested in shorting the market because they fear a potentially ruinous rally – that is a sign of stock-market optimism.

The last time short interest in the SPDR S&P 500 ETF was this low was in early October 2018, just when everyone was preparing for lift-off and the Santa rally and what not, and short-sellers didn’t want to be caught on the wrong side of the trade. But instead, all heck broke loose.

 

It turned into the worst October anyone could remember, and a near-20% sell-off of the S&P 500 Index by Christmas.

Short sellers borrow shares to sell them high, hoping for prices to drop so that they can buy them back later at a lower price, return them to their owners, and pocket the profit. They have to buy back those shares at market price in order to close the trade. When short interest is very high, this means that short-sellers who want to take profits after shares have plunged end up buying shares massively as shares are plunging, and they put a floor under the market.

But when there is little short interest, because short sellers are afraid that shares could surge and rip their faces off, that floor does not exist. And this is what happened last October. The market started dropping on little short-interest, and short-sellers weren’t around to buy back their shares to take profits.

Instead, short-sellers piled into the market to short the falling market as the month went on, and continued to do so through December before short-interest began to decline in early 2019.

Conversely, when short interest is low, as it is now, there isn’t going to be much support from short-sellers when shares do rise. Shorts would lose money on a rising market, and they have to buy shares to get out from under their trades, and this can trigger very sharp short-covering rallies. But with short-interest low, this isn’t going to happen on a large scale.

But it’s not that simple. Short-sellers are speculators that take big asymmetrical risks. There is another class of speculators, but they fear a sell-off and they’re deleveraging:

In September, margin debt – the amount individuals and institutions borrow from their brokers against their portfolios to increase leverage – fell by $9 billion from August to $556 billion, according to FINRA today, after having already dropped $37 billion in August, which puts the margin-debt level back where it had been at the end of December 2018, after the historic plunge in margin debt during the October-December stock-market rout.

At the end of last month, margin debt was down by $92 billion, or 14%, from a year ago, and down by 17% from the peak of $669 billion in May 2018. These investors are deleveraging.

US-margin-debt-2019-09_2016.png

Over the long term, the patterns emerge. Obviously, with a chart spanning decades, such as the chart below, the absolute dollar amounts are less relevant since the purchasing power of the dollar has dropped over the period. What is important are the movements, and how they relate to stock market events, which I indicated in white.

Margin debt is now back where it had first been in April 2015:

US-margin-debt-2019-09_1997-.png

There are many forms of stock market leverage, but margin debt is the only form that is reported on a monthly basis. So it serves as a sentiment indicator of stock-market leverage.

This leaves us with conflicted sentiments in the market:

  • On one hand, short-sellers fear a rally – market optimism – and so they don’t short the market, though they might short individual stocks for company-specific reasons.
  • On the other hand, investors are deleveraging because they fear a sell-off and don’t want to get hung out to dry.

This raises a question. Why is one group of risk-takers fearing a rally, while the other group of risk-takers is fearing a sell-off?

In this market that has been coddled for so long, and where fundamental considerations have long gone out the window because they’ve become irrelevant, maybe it’s the fear of the next surprise that can go in either direction, whether it’s a tweet or a Chinese announcement or something spreading from a tangled-up repo market, or whatever.

But even “fear” may not be the right word because the CBOE Volatility Index (VIX) is bouncing along at very low levels, below 14 at the moment, where “complacency” rules, and almost as low as early October last year, just before all heck broke loose.

 

https://www.advisorperspectives.com/dshort/updates/2019/09/23/margin-debt-and-the-market-down-6-2-in-august

The Latest Margin Data

FINRA has released new data for margin debt, now available through August. The latest debt level is down 6.19% month-over-month.

Margin Debt

 

The next chart shows the percentage growth of the two data series from the same 1997 starting date, again based on real (inflation-adjusted) data. We've added markers to show the precise monthly values and added callouts to show the month. Margin debt grew at a rate comparable to the market from 1997 to late summer of 2000 before soaring into the stratosphere. The two synchronized in their rate of contraction in early 2001. But with recovery after the Tech Crash, margin debt gradually returned to a growth rate closer to its former self in the second half of the 1990s rather than the more restrained real growth of the S&P 500. But by September of 2006, margin again went ballistic. It finally peaked in the summer of 2007, about three months before the market.

Margin Debt Growth

NYSE Investor Credit

NYSE Investor Credit Inverted

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Iv had a lot of direct messages lately asking what shares to buy etc and how to position.I simply havent had time to reply to them,and am unable to.Im not a financial advisor and to do it properly you need to sit down and look at all assets,goals,debts,health,job,relationships etc.

The process i use for myself isnt suitable for a lot of investors.For instance i get a lot of messages from people who fear losses and my process ignores losses from the emotional side.My PM shares were down £24k at one point and ended up returning £50k.Being down £24k  didnt bother me as i was laddering in,and those points were on my road map as possible.Some of the reflation stocks im buying have been sat in big reds (some still are),but are now mostly in greens,some big greens,but again it doesnt matter as im looking out to 2027/28.

I hate not replying to people,but i hope everyone understands i simply cant,and i hope everyone continues to engage with the thread,there are some superb people on here we can all learn from.

The main aim of the thread,and the reason i started it was to help people understand the likely cycle ahead.Most of the tools i use were from the macro strategists at Fidelity Investments,a team of people who traded the 70s,80s and some of the 90s and were the best macro team the game has seen for me.Only a few people probably have access to these tools now as they are considered redundant and most of the guys are dead.These tools were designed to work out the cycle position for inflation/deflation and the basis for cross market work,something pretty much nobody does anymore because they think inflation is dead.Most funds use a bond/equity/cash/emerging market model for pensions etc.That model looks very safe and right for pensions ,but it has little protection from the real killer of capital,inflation.That is what the next cycle will do i think,show the big problems with that approach.

I will continue to put forward what i see in the broad area and also some companies im interested in.For instance id say my call that UK cyclicals were about to run on a sterling bounce was a superb call,some have gone up 20%/30%/40%,but i would ask that people dont PM me asking for investment advice,as i simply cant provide it on an individual basis,and even if i could i simply dont have the time at the moment.

 

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@sancho panza love that first article,its exactly what we are expecting and the road map shows,QE direct funding government deficit spending flowing straight into the veins of the economy.It also points to a quick uplift in velocity due to everyone de-valuing their currency at the same time.That will push people to forward order for projects government is pushing,the classic buy before prices go up.Its crucial people own companies and assets as close to the inflation as they can.Its a line.The people at the end of it suffer the most from inflation,the people in the first quarter gain the most.

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6 minutes ago, DurhamBorn said:

Iv had a lot of direct messages lately asking what shares to buy etc and how to position.I simply havent had time to reply to them,and am unable to.Im not a financial advisor and to do it properly you need to sit down and look at all assets,goals,debts,health,job,relationships etc.

 

 

Sorry to hear that DB.All your logic gets put on thread and that's that.

If people are at the point of stating they're worried about capital loss then they shouldn't be investing it.Just my view.

One of the reasons I run a busy short term book is to keep myself used to being in the red.All blue books are easy to run, life's not like that.

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3 minutes ago, DurhamBorn said:

@sancho panza love that first article,its exactly what we are expecting and the road map shows,QE direct funding government deficit spending flowing straight into the veins of the economy.It also points to a quick uplift in velocity due to everyone de-valuing their currency at the same time.That will push people to forward order for projects government is pushing,the classic buy before prices go up.Its crucial people own companies and assets as close to the inflation as they can.Its a line.The people at the end of it suffer the most from inflation,the people in the first quarter gain the most.

Once velocity starts running all hell will potentially break loose .As a confirmed debt deflationista,I don't think it'll happen this side of a large credit event but thereafter,who know.s

As I posited a few days back,Japan has got away with it because for many years it was the only country trying it.

The bit in bold is where the money moment is.When people start fearing monthly and weekly devaluation then velocity could rocket and those at the BoE who created it will be cushioned pension wise by their exposure to RPI linkers. whilst Joe Public gets mauled.

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From https://www.marketcrumbs.com newsletter

Don't Kid Yourself, Banning Flavored Juul Pods Is All About Money


The U.S. government has nearly 13 billion reasons to see e-cigarettes die a quick death. Juul, with its 75% market share, has been the one company in their crosshairs due to the rapid increase in vaping among teenagers and more recently, the outbreak in illnesses and deaths associated with vaping.

According to a survey funded by the National Institutes of Health, the number of teens who vape nicotine hit a record high last year. The percentage of 12th graders who said they've vaped in the previous twelve months increased from 27.8% in 2017 to 37.3% in 2018. When asked if they've vaped in the previous 30 days, the percentage nearly doubled from 11% in 2017 to 20.9% in 2018.

The CDC has so far reported 33 deaths and 1,479 lung injury cases associated with the use of e-cigarette and vaping products. The CDC says "Most patients report a history of using tetrahydrocannabinol (THC)-containing products. Therefore, CDC recommends that you should not use e-cigarette, or vaping, products that contain THC." To cover their bases, the CDC also "continues to recommend that people consider refraining from using e-cigarette, or vaping, products that contain nicotine."

The problem is Juul is being specifically targeted amid the outbreak despite the evidence so far pointing to THC-containing vapes as the culprit. The outbreak has quickly led the Trump Administration towards banning flavored e-cigarettes. So why is there so much attention drawn towards Juul when the products they sell may not be causing the deaths and illnesses?

As is the usually the case, the answer is money. With cigarette use among U.S. adults at the lowest level ever, the government is losing billions in tobacco tax revenue. The decline in tobacco tax revenue likely won't be reversed, either. A large reason many have given up cigarettes is because they've switched to e-cigarettes, which are thought to be a safer alternative. Whether they are is debatable. Of course sales of Juul and other e-cigarettes provide states with tax revenue, but it likely doesn’t make up for the lost tobacco tax revenue.

Yesterday, Juul finally caved to the pressure. The company announced it would immediately suspend sales of fruity e-cigarette flavors in anticipation of a Trump administration policy that would take them off the market. Juul's spokesman said "We continue to review our policies and practices in advance of FDA’s flavor guidance and have not made any final decisions."

Of course the rise in teens vaping nicotine is worrisome, but teens have smoked cigarettes for as long as they've been around. Furthermore, the CDC also recommends that people refrain from smoking cigarettes, but the government hasn't drafted laws to remove cigarettes from store shelves.

There's one telling statistic that illustrates deaths are not what the government is most concerned about. According to the CDC, cigarette smoking is responsible for more than 480,000 deaths per year in the U.S. In comparison, the number of deaths from the recent vaping outbreak is about 0.005% of the total deaths per year caused by cigarette smoking. 

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iv been looking at the mid stream oil and gas companies in the US,if any of our balance sheet people would like to run the rule over Plains all Amercian Pipeline LP ,Endbridge Inc and Energy transfer LP units it would help,im leaning towards Plains all American .Are there others that look decent?.Does anyone know how these guys structure the contracts with the oil companies?,are they inflation hedged etc?.

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21 hours ago, Loki said:

Just bit the bullet and bought CNA, so get ready for drops anyone else holding fire...

Please don't let it go any lower, mine's down close to 50%.......................but on the plus side the divis are good (unless they decide to cut them!)

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2 hours ago, DurhamBorn said:

iv been looking at the mid stream oil and gas companies in the US,if any of our balance sheet people would like to run the rule over Plains all Amercian Pipeline LP ,Endbridge Inc and Energy transfer LP units it would help,im leaning towards Plains all American .Are there others that look decent?.Does anyone know how these guys structure the contracts with the oil companies?,are they inflation hedged etc?.

Quickly did some Coma Scale scores on the doors-and remember I've not run through the whole sectoral ETF for comparison(Scoring the sector 4/5 as I would big oil&gas,and oil services),so the comparison side is against general market levels not competitiors

Over 17 is where I draw the line.

Co            Chart       Income          BS              FCF       Sector

Plains       4                 4                   3                 4            4                 =19/25

Enbridge  2                 4                   2                  3             4               =15/25

Energy Tr 3                  3                   1                 4             4                =15/25

 

Any chance of an explanation for the ones at the back as to where these businesses sit ref big oil/oil services.I noted steady profits-not gleaming but steady even in 2015/16.

Is there an ETF I can run through?

I generally avoid any stock that scores a 1 in any of the sectionsDB.Plains only has 10% goodwill as a %age assets.Like the look of that one.

 

That plains looks a decent cash generative business with plenty of blue sky chart wise.

 

Obviously dyor natch

 

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45 minutes ago, janch said:

Please don't let it go any lower, mine's down close to 50%.......................but on the plus side the divis are good (unless they decide to cut them!)

We're down more than 50% but we've been taking scrip all the way through.Thems the breaks.Still can't get my head around how much theyve dropped ref a lot of other euro utilities.

 

on another matter anyone with a view on Osisko Royalties(aside from them owning 15% Minera Alamos),they've been battered recently. @@kibuc @Majorpain???

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