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

[Chewing Grass]

16 minutes ago, Cattle Prod said:

Thanks, that is surprisingly accurate for the Guardian. 100% correct that the Fed is responsible for the shale boom. Despite what Trump says, tight oil resources, like the Permian, have been known about since before world war 2 and the industry has been frscking wells since the 50s. I look at North Sea well logs from the 60s and 70s and a 'frac job' was fairly routine if the well didn't flow first time. Thats offshore, from a boat, 50 years ago.

Nothing about it is new, other than stupid money. When the stupid money goes away, so does shale oil. It's already started happening 

You will like this, until they discovered oil in Pennsylvania it was expensive and lamp oil was made from whale oil then somebody discovered shale-oil in the UK and it was briefly boom time for the 'Cannel Coal' industry in Scotland and a little corner of Wales.

During the mid 1860's, the Flintshire area of North Wales was scene of the one of the most extreme speculative bubbles in the history of the British oil industry. Shareholders invested close to a million pounds in a variety of Welsh coal-oil businesses that, within little more than a year, were to have almost no value.

While Scotland, experienced a similar "oil mania", the scale of investment in Welsh oil enterprises was far greater.

The reasons for the sudden collapse of the industry lie in the international oil trade.

In 1859, the first oil wells were drilled in Pennsylvania and soon afterwards the first barrels of American crude oil began to be imported into Britain. The outbreak of the American civil war severely disrupted north Atlantic trade and it was not until the end of hostilities in 1865 that unimpeded oil imports began to flood the British market. By 1866, oil prices had fallen to a quarter of their former value. This collapse in market prices led to a chain of debt and the bankruptcy of most coal-oil businesses.

https://www.scottishshale.co.uk/GazBeyond/BSWales/BSW_Flint.html

[DurhamBorn]

@Cattle Prod iv been buying South Western Energy Co SWN as a gas play,but only a small holding as very volatile and not for widows and orphans.

Do you have any other gas plays?.I was doing some cross market work on the sector and was thinking the LNG shippers might be good buys,problem is the chance they go bust first.What about the pipeline plays in the US?,do any of them ship gas from the Permian.I really like the Appalachia region for gas plays,i need to research the companies there and the pipeline companies.

[harp]

Good timing:

https://www.zerohedge.com/energy/2020-year-oil-bankruptcies

[DurhamBorn]

14 minutes ago, Cattle Prod said:

I'm not so good on the infrastructure or midstream side, but it makes alot of sense. I dont think LNG shippers will go bust; LNG is sold on long term 20 year kind of contracts, and I assume the shippers track that. But I don't really know how the shipping market works.

They are flaring gas in the Permian due to lack of pipelines. When the price supports it they'll build them, but that'll make it prone to boom/bust. Tricky. Appalaicha has hige resources but they are struggling with current local prices

Thats the thing, its not a true commodity yet, and local prices vary hugely. Some of the highest gas prices are in SE Asia. I like Indonesia as it's a big coal user with high gas prices, and some untapped gas potential so the trick would be to spot local producers with good assets (for growth) or the people building the infrastructure. Caveat - I've worked there, so recency bias. Same should apply to Thailand and Malaysia.

I should also say the UK is still interesting and local North Sea gas makes good money for local producers. If Centrica spins off Spirit I'll probably buy it/keep it.

Yeah i was thinking people piping from the Permian would be good plays.I guess the Appalachian plays mainly sell to the north east and dont sell LNG as i assume most of the shipping places are in the south.I went for South Western as its balance sheet seems decent even though they all losing money and i wanted to get some exposure to the area/sector.The shippers could do really well though,i used to buy the ETF SEA in the past but cant now thanks to the EU,but might go through the companies.Im not sure if @sancho panza has run his scores over that those companies or not.SEA did have 20% in Maersk though so probably better buying the energy plays.

[Noallegiance]

Something has been nagging me for months. Having meditated tonight, questions popped into my head while lying in bed that finally get to the heart of the niggle:

Are we and our sources simply a product of having found eachother out of a sense of being hard-done-by? Are we finding rationalisation for what irks us? Or are we actually going to be proven more right than we are wrong about the last quarter-century+ of financial crazy?

[leonardratso]

haha, wish id not heard of ngd though. still, got to have some fails, as long as they are outstripped by the wins.

[NogintheNog]

10 hours ago, Noallegiance said:

Are we and our sources simply a product of having found eachother out of a sense of being hard-done-by? Are we finding rationalisation for what irks us? Or are we actually going to be proven more right than we are wrong about the last quarter-century+ of financial crazy?

Very good question, personally I don't feel hard done by, but I do feel the road we have been forced to travel is the wrong road, and the consequences for some of the population has been theft by wealth transfer.

9 hours ago, Cattle Prod said:

I don't think we feel hard done by, we have all levels of income and portfolio size but there is no moaning. I think we found each other because this place feels sane! 

Agreed, my portfolios, property and pensions have all performed very well (without much input from me I would add!) I just don't feel comfortable about how we've arrived here....

9 hours ago, leonardratso said:

haha, wish id not heard of ngd though. still, got to have some fails, as long as they are outstripped by the wins.

Got plenty of losers, luckily plenty of winners to balance them out!

[MrXxxx]

18 hours ago, janch said:

People could be paid for the methane they produce

They are, its called a career in politics! :-)

[Noallegiance]

My situation is that I have no more funds to play with nor the confidence to tinker as I cannot afford to lose by being suckered into gambling, even with the info on here. My position is my position. My family is paycheck to paycheck and waiting. Some days it feels awful.

Thankfully my other half is as averse to debt as I am. She's a rare straight accountant and whenever we get to talking about government and central bank behaviour it fries her brain because it all makes no accounting sense.

[Lightscribe]

42 minutes ago, Noallegiance said:

My situation is that I have no more funds to play with nor the confidence to tinker as I cannot afford to lose by being suckered into gambling, even with the info on here. My position is my position. My family is paycheck to paycheck and waiting. Some days it feels awful.

Thankfully my other half is as averse to debt as I am. She's a rare straight accountant and whenever we get to talking about government and central bank behaviour it fries her brain because it all makes no accounting sense.

It all depends on your immediate priorities. If your living hand to mouth and have any debts obviously getting to grips with income/outgoing and paying off debt becomes priority.

Any surplus that you would otherwise be saving in a high street account with minimal interest then making use of a tax free stocks and shares ISA makes sense. 

Investing isn’t gambling over a longer time period, where dividends would make up in any shortfalls, in large established companies with healthy cash flow through peaks and troughs. It’s merely diversifying and hedging against inflation by buying units at that time.

A lot of people I work with make the mistake of thinking that investing is gambling and view it the same as spread betting and the such like.

If you need access to money invested over a shorter time period, then yes an easy access cash ISA or premium bonds would be preferable.

[janch]

2 hours ago, Noallegiance said:

My situation is that I have no more funds to play with nor the confidence to tinker as I cannot afford to lose by being suckered into gambling, even with the info on here. My position is my position. My family is paycheck to paycheck and waiting. Some days it feels awful.

Thankfully my other half is as averse to debt as I am. She's a rare straight accountant and whenever we get to talking about government and central bank behaviour it fries her brain because it all makes no accounting sense.

I've been in that situation too when my children were young and it's awful.  I used to worry constantly about money but at the same time I was disciplined about paying bills/not taking on debt and living within my means.  Gradually I put a very little away each week in a Building Soc account so as to have a fund for emergencies.

I lived like that for years and it was only as my children got older and could get some paid work for themselves (even while still at school) that the pressure started to lift. I now find that mindset I developed very useful as I realise my needs are minimal.  In fact I like living a frugal existence.  It feels good to be green..........not waste anything/walk everywhere/recycle and reuse etc.

I now have my state pension which I find more than adequate (it's that mindset) and my housing costs are small which helps and I have the headspace to try to develop investing as a hobby and hopefully earn a little in the process.  I wouldn't have dared when money was tight and I still haven't got a lot to play with.

In your shoes I'd get the small emergency pot in place first before even considering the stockmarket but there's nothing to stop you learning about it.  I used to read the financial press whilst I was poor as a church mouse as it interested me. 

 

[Harley]

IMO, this thread is for adults and a basis of discussion and thought, to be internalised to your own circumstances.  It puts us in the game, which is important.  Those with little to currently invest have the time to learn and even dummy trade.  Sure, not totally the same but better than nothing.  Several of my more successful trader friends each did that for over a year first even though they had the funds.  This thread also puts you ahead in terms of orientation before anything blows up.  Better to have visualised things a bit first.  I have access to other forums which each meet various objectives, but thanks to all here, especially the data led ones, there is nothing comparable.  I do pull my punches though.  Less of an issue on other boards with the required terms and conditions where I can happily share specifics.

[StrugglingMillennial]

So where are we at with shares prices at the moment, is there any corner of the market that is up as a group?

Ive been off thread for a few months due to work and i need to catch up.

[DurhamBorn]

This thread,and my outlook on life in general is about not being the victim.

The system is what it is.Do you want to lose your life on this planet to it or not?.Nothing wrong if you do,its just another way of living.Myself,i dont.I value my time above anything apart from my family,but time is crucial to them too.

Lets take an example.A year and three months ago i decided to go back to work because i saw some big potential in the PM sector,but i have strict investment rules about allocation.I already had my limit.So i decided instead id give up 8 month ish (ended up 15 months).The same day i started with a few other people.In that time i saved 90% of the salary,mostly into my SIPP.I invested most of that money into the PM miners,and they mostly doubled on average when i sold them.I saved £32k from my wages of £34k,and i nearly doubled that to £59k.I got laid off before xmas,job done.I paid zero income tax while there due to SIPP.

The guy i started the same day with saved zero.He bent over every day for his other half,spent on crap etc.When we got finished he was desperate worried,trying to find anything as his bills were £900 a month and zero savings.

That £59k is 1/3 invested in oilies now,with ladders in place for the rest.

Now today he will be looking for work,worried etc.Iv been making some nice healthy meals,batch cooking some nice veg stews from all the 19p veg they sell at this time of year.Iv just been out for a 1hr speed walk across the fields,got the heart pumping nice and fast.Getting on the right side of the curve meas you compound the benefits,the wrong side you do too.

He will say how cruel the system is,how terrible,how unfair,but the truth is he didnt (like most) educate himself.He let himself be a victim.Why?,mostly because not being is hard.Very hard,it takes time,it take a certain mindset,that you are prepared to think outside the box,learn to be frugal,not go without,but live smarter and healthier.Train your mind to be brutal so that is sees through the fog,sees through the bullshit.

I knew the day i went back to work id be gone by this xmas,because im a cycles guy.When i sat in the briefs with 300 other people listening to a factory manager say the work is going up and we expect it to continue,i knew he was wrong.The truth is that factory manager couldnt tie my laces on that kind of thing.

This thread isnt about timing the market to perfection,or never getting things wrong.Its about the likely road map ahead for the economy,and with that the likely affect on investments.Its not about getting rich quick (my aim is to simply beat inflation) its about avoiding getting poor fast.

Im convinced by the numbers im seeing,both economic and political and cross market work,that 99.9% of the media and investment community has things wrong.They think investment is easy if you hold a 60/40 portfolio or similar.Shares go down,bonds go up etc.The problem is they are ignoring inflation.Both bonds and shares go down in a reflation cycle.Shares maybe only nominal,bonds by eye watering amounts.Inflation cripples retirement plans.More so when also in draw down.

Im not putting everything on that that is how it plays out,im simply leaning my assets towards that.If im wrong i might underperform the market.If im right i dont become the other guy i worked with.

This thread has attracted some very interesting people with skills in different areas and knowledge.It also helps share the work when people pull up areas of interest etc.You simply wont find that in our own social networks.We are as rare as hens teeth to be honest.

Lets see what the new year brings.

 

 

 

[Eventually Right]

On ‎28‎/‎12‎/‎2019 at 23:33, DurhamBorn said:

I could scan in the contents of my Buffy the Vampire slayer file and jotter.For those who bought the goldies (or the UK cyclicals) with your hard earned i think i should mention most of the data points i used was based on some formula in-between photos of Buffy and Willow and iv been known to miss off the odd zero when looking at the photos of Buffy,,,,dont worry,it will be fine 

Haha, scan it in and I'm sure you'd have a macro bestseller on amazon-liquidity leads and lags sandwiched between pictures of Buffy and Cordelia in their prime!

[DurhamBorn]

29 minutes ago, Eventually Right said:

Haha, scan it in and I'm sure you'd have a macro bestseller on amazon-liquidity leads and lags sandwiched between pictures of Buffy and Cordelia in their prime!

Cordelia and Buffy in their prime,now your talking.I loved that show.I was 26 when it came out,crazy how quickly time goes by.Sarah still looks fantastic though.

[Democorruptcy]

Latest Hussman downdate:

Future generations, seeing the collapse of this bubble in hindsight, will marvel that today’s speculative extremes were ever possible; that they were ever invited and embraced by investors. They will look back on the entire episode, just as we look at the aftermath 1929, and 2000, and 2007, shaking their heads at the utter madness of it all. They will believe that they have actually learned something from history. And then, they will do exactly the same thing themselves, because they will imagine that this time, their time, is somehow different.

https://www.hussmanfunds.com/comment/mc191230/

[Castlevania]

2 hours ago, DurhamBorn said:

Cordelia and Buffy in their prime,now your talking.I loved that show.I was 26 when it came out,crazy how quickly time goes by.Sarah still looks fantastic though.

That reminds me, seeing as we’re talking about investing and Buffy the vampire Slayer, Robbie Burns aka the Naked Trader originally made his money by setting up the premium rate phone service that allowed you to listen to a pre-recorded message with details of next week’s episode of Buffy for £1.50 a minute. In the days before the internet people wasted money on such things.

[Loki]

16 minutes ago, Castlevania said:

That reminds me, seeing as we’re talking about investing and Buffy the vampire Slayer, Robbie Burns aka the Naked Trader originally made his money by setting up the premium rate phone service that allowed you to listen to a pre-recorded message with details of next week’s episode of Buffy for £1.50 a minute. In the days before the internet people wasted money on such things.

Have an ironic "Informative"!

[Democorruptcy]

Telcos:

https://dnyuz.com/2019/12/30/why-the-global-telecoms-dream-turned-sour/

[DurhamBorn]

11 minutes ago, Democorruptcy said:

Telcos:

https://dnyuz.com/2019/12/30/why-the-global-telecoms-dream-turned-sour/

I see the sector as structurally undervalued,though it might get cheaper yet.The key is they dont get the benefit for their capital investment and others use it.I expect we will see mergers though and a much bigger move to cloud based services on the edge of the networks.It could also see something like a big tech company move on a telco.Thats not as far fetched at it seems.Another big one for them is IOT as we could be about to see an explosion in devices.Risks are mainly around debt and satellites.Interesting sector and one im aiming for around 15% of my LNW in.

 

[Bear Hug]

3 hours ago, Democorruptcy said:

Telcos:

https://dnyuz.com/2019/12/30/why-the-global-telecoms-dream-turned-sour/

 

3 hours ago, DurhamBorn said:

I see the sector as structurally undervalued,though it might get cheaper yet.The key is they dont get the benefit for their capital investment and others use it.I expect we will see mergers though and a much bigger move to cloud based services on the edge of the networks.It could also see something like a big tech company move on a telco.Thats not as far fetched at it seems.Another big one for them is IOT as we could be about to see an explosion in devices.Risks are mainly around debt and satellites.Interesting sector and one im aiming for around 15% of my LNW in.

 

I thought I missed the bottom in Telefonica earlier this year when they were trading below 6 Euros in August.  However, it looks like we are pretty much in the same position now:  GBP compared to Euro increased more than the share price.

 I do still wonder how they make any money as cheap phones are still regularly available with O2 refresh trick: they sell a discounted phone with an expensive sim contract, but the airtime can be cancelled with (max 1 month) penalty. 

The discount is often substantial.  I don't personally do this to resell the phone on ebay, but I do try to buy top of the range phone cheap, use it for a year, then sell it close to the price it was bought for originally.  

But in general, it feels like there is a race to the bottom with (all but water) utilities:

- just got the cheapest for quite a few years now gas+electric fix (for 18 months)

- BT fibre renewal negotiated to £19.99 per month for 2 years (works out closer to £18 pm with landline rental prepay and cashback on it).  I did have this cheaper before, and the providers appear to be increasing various elements of prices (Labour made a huge deal out of it) but the cheapest price they are willing to do (whether with some cashback or retaining offers) is still drifting down

[Green Devil]

20 minutes ago, Bear Hug said:

 

I thought I missed the bottom in Telefonica earlier this year when they were trading below 6 Euros in August.  However, it looks like we are pretty much in the same position now:  GBP compared to Euro increased more than the share price.

 I do still wonder how they make any money as cheap phones are still regularly available with O2 refresh trick: they sell a discounted phone with an expensive sim contract, but the airtime can be cancelled with (max 1 month) penalty. 

The discount is often substantial.  I don't personally do this to resell the phone on ebay, but I do try to buy top of the range phone cheap, use it for a year, then sell it close to the price it was bought for originally.  

But in general, it feels like there is a race to the bottom with (all but water) utilities:

- just got the cheapest for quite a few years now gas+electric fix (for 18 months)

- BT fibre renewal negotiated to £19.99 per month for 2 years (works out closer to £18 pm with landline rental prepay and cashback on it).  I did have this cheaper before, and the providers appear to be increasing various elements of prices (Labour made a huge deal out of it) but the cheapest price they are willing to do (whether with some cashback or retaining offers) is still drifting down

Slightly off topic but where did you get fibre plus line for 19.99. What speed? 50mb?  I recently switched and the best I found was 31.99 a month, I thought that was cheap! 

[Bear Hug]

18 minutes ago, Green Devil said:

Slightly off topic but where did you get fibre plus line for 19.99. What speed? 50mb?  I recently switched and the best I found was 31.99 a month, I thought that was cheap! 

Called them.  Superfast Fibre 1 Unlimited.  Not sure what the exact Mbps label is, all these various numbers are quoted in the confirmation email:-

Quote

 

Estimated speed 27-45Mbps

- Stayfast guarantee 22Mbps

- Max speed: 45mbps

- On average customer, on the same broadband package get a download speed of 50Mbps

 

I have done a comparison on moneysavingexpert and knew I should be able to get something just under £20 (that is with price higher than £20 but various cashback/voucher offers on top).  I have offered them an option to upgrade slightly to Fibre 2 and keep the previous price (£23.99).  However, they helpfully explained to me that my address would be limited by the line, so there is no point going for a more expensive option. 

The customer support was quite entertaining: told me that it's just not possible to do anything under £23.99, then put me on hold, spoke to another team, and, convincingly sounding surprised himself, offered £19.99.

[DurhamBorn]

31 minutes ago, Bear Hug said:

 

I thought I missed the bottom in Telefonica earlier this year when they were trading below 6 Euros in August.  However, it looks like we are pretty much in the same position now:  GBP compared to Euro increased more than the share price.

 I do still wonder how they make any money as cheap phones are still regularly available with O2 refresh trick: they sell a discounted phone with an expensive sim contract, but the airtime can be cancelled with (max 1 month) penalty. 

The discount is often substantial.  I don't personally do this to resell the phone on ebay, but I do try to buy top of the range phone cheap, use it for a year, then sell it close to the price it was bought for originally.  

But in general, it feels like there is a race to the bottom with (all but water) utilities:

- just got the cheapest for quite a few years now gas+electric fix (for 18 months)

- BT fibre renewal negotiated to £19.99 per month for 2 years (works out closer to £18 pm with landline rental prepay and cashback on it).  I did have this cheaper before, and the providers appear to be increasing various elements of prices (Labour made a huge deal out of it) but the cheapest price they are willing to do (whether with some cashback or retaining offers) is still drifting down

Out of the big ones i think Telefonica has a lot to put right and might cut the divi,but also might have good potential in the longer term.I also like Telia.The key to them all isnt the consumer,thats bread and butter,its connecting up everything else.They should be able to skim a lot of free cash off the extra connections,plus they should start to see cap ex/op ex fall as depreciation tops out.

The sector is carrying too much debt,but the good thing about that is that its all of them,and so they will all cut it slowly.The next stage of the internet should see things being needed much closer to the network,so a lot of the cloud stuff might move onto the networks.They have a chance again to get a bigger bit of the pie.

The good thing is it wont take much for them to be trading around 6 times cash flow,so they might be able to return 12%pa over the cycle as an industry.There might not be many sectors get near that.

Of course rising rates will hit them being so indebted,so there are risks in the sector.They might get smacked down again as well in a sell off,hence crucial to have ladders in place.I think mergers are certain in the sector,its just when.