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

[Errol]

[DurhamBorn]

2 hours ago, Talking Monkey said:

Worrying stuff DB for us that won't be able to access our SIPPs until well into the 2030s I wonder will they be confiscated by the government. From the ever increasing government debt load it does feel at some point it goes pop. The discussion on fiat collapse at the end of the next cycle sound very likely. On the policy options which might lead to a collapse being averted would you be able to elaborate on what they would be DB.

Even if collapse at the end of the next cycle is averted would that be only temporarily until the end of the cycle after that. ie 15 or so years from now

Western governments will never steal direct,they will use tax and inflation.They always try to use ways that doesnt affect them as much (the elite).Things that could stop things or make them bad,but not collapse would be not needing to print so much in the first place.Its the scale of printing that matters and we dont know that yet.Things like a citizens wage would also really help instead of welfare spending and also cutting back on government pensions etc.Its too far away though to spend more than a few minutes on we have enough to contend with now and we can worry about that in a good few years time.

[DurhamBorn]

53 minutes ago, Errol said:

Might it be the SP comes down 50%+ though and the service stocks are now fairly valued?.I bought a few like Schlumberger and they have bounced 15% and happy to hold them going forward,and some of the midstream pipeline companies.The tax position on them is a bit up in the air though hopefully ok in a SIPP.

[headrow]

Got my eye on Hunting and John Wood Group when we get a market correction. They seem very volatile at the moment , both huge drops today.

 

Bit put off by Wood Group holding £2bn of debt , but Hunting look well run.

[Solzhenitsyn]

1 hour ago, Errol said:

I've been taking a quick look at Wood Group - lowest price since 2010 and HL are posting over 5% yield. Lots of debt on the books though.

48 minutes ago, headrow said:

Got my eye on Hunting and John Wood Group when we get a market correction. They seem very volatile at the moment , both huge drops today.

 

Bit put off by Wood Group holding £2bn of debt , but Hunting look well run.

HA! Just posted similar about Wood Group without seeing your post

[MrXxxx]

8 hours ago, Harley said:

Sorry, I don't think I understand.  The three buckets all cover stock purchases, they just vary depending on the reason for the purchase.  I bought the "Initial" stocks when I spotted a stock I wanted to add to my portfolio (an initial stake) regardless of any buy signal.  The "Weekly" stocks were bought as a result of a weekly buy signal (using my system).  And the "TBD" stocks were bought on the basis of my old system (daily buy signals) or on emotion, etc (maybe "Other" would be better!).  All these purchases were buy and hold (not trades) and were done in normal hours.  The point to me is that having a system works as it removes emotion, although emotion, even with the best will in the world, clearly still creeps in.  I even did it yesterday with Petrofac (not investment advice) - bought because it was at a low and could be turning but not on a buy signal so could go lower.  The system maybe could be anything sensible (e.g. dollar cost average) but I like mine as it, on average, ensures I buy at intermediate lows.  The issue for me has been the need to get invested so I have not been optimal in my timings and therefore paid a bit more for some shares to get that income stream sooner.  This should ease off now I am close to my investment goal.

 

Perhaps I didn't explain myself very well...what I meant was that maybe one of the methods appeared more/less successful than the others due to a non-random effect in the buying I.e say in the first method (based on emotion rather than signal) you made the majority of your buy decisions on  Friday when you were carefree/happy (due to knowing you had no work for two days), this may correlate (and so bias) to higher share prices paid, whereas the other methodical may not...research has shown share prices and times od day/week/month are not randomly distributed...what is it they say "Sell in May, go away [for holiday]"?

[MrXxxx]

7 hours ago, Harley said:

I cannot offer advice nor can anyone without knowing more about your situation, goals, risk attitude, etc, plus having to be a registered advisor.  People regularly get ripped off on pension and other advice (I recently heard £80k on average).  TBH, the sort of questions you ask are classic ones to ask a (good) registered financial advisor.  Deciding on an asset allocation first sounds good though but I make no comment on your chosen one other than you have initially excluded bonds, etc which some would argue against, others not.  Regarding the rest you have decided on, you may want to consider a sub-allocation of the equity holding by sectors and/or geographic regions as well as some rules to limit exposure to any individual holding.  Depends on your attitude to risk, etc.  Regarding when to buy (including timing versus say dollar cost averaging), that's purely your call and possibly whether you're trading versus investing.

"Income versus accumulation shares" is a bit of a mix up if taken literally.  There are so-called income and growth shares and there are distribution and accumulation funds, investment trusts, and ETFs.  An accumulation fund/trust/ETF could be growth focused or income focused and its holdings will reflect this objective.  Same for a distribution fund/trust/ETF.  Shares are just shares, but some (e.g. some utilities) are considered more suitable for income (dividends) while others more suitable for possible growth in their share price (with maybe little to none in the way of income).  I believe the the tax treatment outside of a tax wrapper is different for a distribution versus accumulation fund/trust/ETF (e.g. income tax versus capital gains tax).  There may be other differences.  Distribution funds/trust/ETFs may be of particular interest to those living off the income as they avoid having to sell shares (capital).  Indeed, some pay out monthly to provide such an income stream.  Furthermore I believe some specialist funds/trusts/ETFs (e.g. REITs and MLPs?) are required to pay out most of their income as part of their tax registered status.  But there are also other considerations.  For example, I personally prefer distribution funds/trusts/ETFs because I like to control where to allocate the income, rather than plough it back into the same.  Other people (especially those who don't want to be that involved) would see this as an advantage.      

The above are just some initial random thoughts and is not advice.  You would do best to read up to find the answers and/or short-cut this with a chat with a financial advisor (having chosen carefully) who should look at the bigger picture context in which the questions are being asked.  This is just a message board to hopefully educate (by sharing experiences) but above all to stimulate thought.  It carries a bloody big wealth warning! 

Thanks Harley, wasn't looking for advice (why I put caveat at the end), just people's thoughts/opinions...and it wasn't pension based either, so no need for an FA; and with the small sums I am talking about it wouldn't make sense either!

As for the Q about Income/Accumulation shares I think I confused the issue by using the wrong terminology; think you realised this and interpreted correctly what I was actually talking about.

Most of what I was really asking was about timing purchases of specific equity types; yes I know you can't time the market exactly, but I think you can avoid buying right at the top hence my Q/statement regarding FTSE100/S&P500 ETF`s.

Thanks for your thoughts/time.

[BurntBread]

20 hours ago, Heart's Ease said:

Can't remember if Baltic Dry used to be discussed as an indicator on this thread or elsewhere on TOS (Suntory thread?).  

More grist to the mill.

My recollection from discussions on TOS years ago (when everyone was keeping a weather-eye open for the apocalypse) is that although the Baltic Dry Index is clearly related to amount of stuff being shipped, and it is therefore tempting to use its decline as an indicator for falling raw material usage (and therefore an economic downturn) it is, in fact, not a simple measure of that.

The problem is that it's just telling you the cost of shipping bulk dry materials, and that cost is related both to demand (how much iron ore, or whatever, is being shipped), and to supply (the capacity of the shipping fleet to move this stuff around).

Demand for shipping does indeed reflect economic activity that uses bulk raw materials; however the capacity of shipping is more subtle and interesting, and is determined by two things: Firstly, how many ships are in service, which doesn't stay constant. In particular, if transport costs (BDI) are high, there is a tendency for companies to invest in new ships, and these take a longish time to be completed. The number of ships in service at any time therefore reflects economic conditions several months or years previously, when the investment decisions were taken.

More interestingly, the shipping business is hyper-optimised. That means that if the price of oil falls, then shipping capacity immediately goes up, because it makes economic sense to sail the present ships slightly faster when you look at the optimum way to make money from your fleet.

I don't think anyone has tried to model or factor out those two effects on shipping capacity in order to measure actual amount of stuff moving around the world, but it seems difficult to do reliably.

If you don't know the different terms involved, then BDI is great "doom porn", however, as it frequently plunges wildly, giving the impression the world economy is about to implode. Apologies if that's a bit naive, but it was a long time ago I read the thread on TOS.

Question for the knowledgeable: is there a published statistic of dry shipped volumes out there - in other words the thing that people hope BDI to be measuring?

[subutai80]

How long before we start to see price action like this in gold/silver/platinum?

Taken from my kitco app. Rhodium was approx $5600 a few days ago, now >$7000.

 

longer term was as low as $575 (can't see recent price action from the chart below).

 

[DurhamBorn]

2 hours ago, Cattle Prod said:

Could be that all right - if they stay put through a crash, as in they've already had their crash, I'll be very happy. They won't stay put for much longer after that, and the divis will keep me happy in the meantine.

Indeed and iv been buying them myself as that could be the case.I wont be selling for a long time and they can go whenever they please.

[MrXxxx]

3 hours ago, BurntBread said:

don't think anyone has tried to model or factor out those two effects on shipping capacity in order to measure actual amount of stuff moving around the world, but it seems difficult to do reliably

Ok, I am not a statistician but I don't thik it would be that difficult..You need a denominator that represents the mean spend on orders placed in say the last three years, and then multiply this by a value for oil that accounts for inflation?...

[Sugarlips]

5 hours ago, MrXxxx said:

Ok, I am not a statistician but I don't thik it would be that difficult..You need a denominator that represents the mean spend on orders placed in say the last three years, and then multiply this by a value for oil that accounts for inflation?...

I believe the shear number of ships and containers in the fleets have grown hugely over the last decade as China have built so many, this is going to skew price and demand further.

Also the BDI graphic provided before only shows last 12 months, over that time period it looks more like a regular seasonal movement.

[MrXxxx]

3 hours ago, Sugarlips said:

I believe the shear number of ships and containers in the fleets have grown hugely over the last decade as China have built so many, this is going to skew price and demand further.

Also the BDI graphic provided before only shows last 12 months, over that time period it looks more like a regular seasonal movement.

True, so you would need you denominator to account for this...perhaps it would need to have its own denominator, say mean price covering the build price over the period of interest...hopefully there will be a mathematician/statistician along in a moment to relieve me of my suffering! :-)

[dgul]

On 08/01/2020 at 00:18, Tdog said:

Debts still lower than much of the 20th Century. I was in Thailand not long after things went tits up there and things carried on as usual ... though no doubt the shopping trips of the previous years were curtailed.

https://www.ukpublicspending.co.uk/uk_national_debt_analysis

debt:GDP doesn't make sense when each issuance of debt increases GDP.

[Majorpain]

https://www.cityam.com/john-lewis-managing-director-paula-nickolds-steps-down/

MD out after a crap Christmas, and who is the new chairwoman?

Quote

Despite the challenges facing White on her arrival, being an outsider could play in her favour. White has a civil service background, was a senior economist at the World Bank and sits on the board of Barratt Developments, but is notably lacking in retail sector experience. 

Just the sort of leadership a struggling retailer in the 21st century needs....

[Don Coglione]

43 minutes ago, Majorpain said:

https://www.cityam.com/john-lewis-managing-director-paula-nickolds-steps-down/

MD out after a crap Christmas, and who is the new chairwoman?

Just the sort of leadership a struggling retailer in the 21st century needs....

But she has a diversity vagina...

[Harley]

17 hours ago, MrXxxx said:

....what I meant was that maybe one of the methods appeared more/less successful than the others due to a non-random effect in the buying I.e say in the first method (based on emotion rather than signal) you made the majority of your buy decisions on  Friday when you were carefree/happy (due to knowing you had no work for two days), this may correlate (and so bias) to higher share prices paid, whereas the other methodical may not...research has shown share prices and times od day/week/month are not randomly distributed...what is it they say "Sell in May, go away [for holiday]"?

Ta. 

Actually a very intriguing point indeed.  Something in that which might explain some of my off piste behaviour.  This emotion stuff is clever and hard work to get on top of.  But good practice for life generally and why I enjoy this stuff as much for the personal development as financial security.

They say snipers make good traders.  I remember my basic training and getting really beasted for wiping sweat off my face during PT.  Thought it a bit daft at the time.  Later on I was being trained in some camo stuff and doing that then would have been fatal.

[Harley]

1 hour ago, Majorpain said:

https://www.cityam.com/john-lewis-managing-director-paula-nickolds-steps-down/

MD out after a crap Christmas, and who is the new chairwoman?

Just the sort of leadership a struggling retailer in the 21st century needs....

JL circling the bowl, waiting for M&S to get out the way.

[Harley]

17 hours ago, MrXxxx said:

Thanks Harley, wasn't looking for advice (why I put caveat at the end), just people's thoughts/opinions...and it wasn't pension based either, so no need for an FA; and with the small sums I am talking about it wouldn't make sense either!

As for the Q about Income/Accumulation shares I think I confused the issue by using the wrong terminology; think you realised this and interpreted correctly what I was actually talking about.

Most of what I was really asking was about timing purchases of specific equity types; yes I know you can't time the market exactly, but I think you can avoid buying right at the top hence my Q/statement regarding FTSE100/S&P500 ETF`s.

Thanks for your thoughts/time.

Sorry, forgot to turn <nanny mode> on and then off at the end!  Trouble these days is it seems people can say and do what they like and still be a victim.

My approach with those momentum indicators is exactly to avoid buying high.  The problem is over what term?  Daily is too short term for me.  I was getting in at a low but that was not a low over the intermediate term.  So I moved to weekly but have to wait longer, but with better results.  I hope to move to monthly when largely invested as I can afford to wait until then.  Trading is different though.

The point of my original post was that my data was suggesting this worked for me and the benefit of such reviews.  So something I'll keep under review.

[janch]

Card Factory isn't looking too clever today:

www.sharesmagazine.co.uk/news/shares/card-factory-folds-on-christmas-disappointment-and-dividend-concerns

[lid]

I can see them folding 

[sancho panza]

On 06/01/2020 at 16:48, Tdog said:

I made a handsome profit on it but sold too early. Live and dont learn is my motto.

Surely it cant all be down to catalytic converters as car sales are going through the floor.

 

On 06/01/2020 at 19:47, Harley said:

Another monthly chart, this one for the S&P.  Shows just how long the Stochastic indicator can stay in the "overbought" zone (over 80) once there.  The last time it was a clear initial buy was 2009!  The weekly chart was a little more forthcoming, but each buy signal there was not conclusive so a hard one to get into once it was off and away, especially as most would have expected a reasonable correction.  Insane!

I'm now starting to use the mponthlies for timing sales.Just cuts out a lof the nosie.The overbought nature of this market is incredible to behold.

On 06/01/2020 at 23:47, Harley said:

The monthly gold chart in USD.  Not much use to us as we need that in GBP but worth a look for the chart patterns. 

Strangely,just had a conlfab with dear ol Mum Panza and we were discussing the runs in gold in GBP/CAD/AUD versus USD,people focus on USD but the price action in otehr markets is probnably more telling at the moment.

 

On 07/01/2020 at 00:18, Harley said:

And onto the poor man's gold, silver.

It's wehn the goldsilver ration bottoms that gold becomes the poor relation for a period of time.back in 81 gold doubled,silver went up 10 times in the run up.

On 07/01/2020 at 12:51, Tdog said:

https://www.investopedia.com/terms/d/debtdeflation.asp

Where is it happening, as the mulitple bubbles ie overall stockmarket, property keep rising. As is consumer debt.

On bank balance sheets.

[Errol]

Deutsche Bank flatlining.

[sancho panza]

On 07/01/2020 at 13:38, Majorpain said:

https://www.constructionenquirer.com/2020/01/07/leeds-based-broadley-group-files-for-liquidation/

https://www.constructionenquirer.com/2020/01/07/clugston-job-toll-hits-280-as-axe-swings-again/

https://www.constructionenquirer.com/2020/01/03/civil-engineering-leads-december-construction-slump/

Take your pick, its not a good time to be debt heavy and cash light construction wise.

Its simply a matter of time before the wider economy begins to be affected IMO.

Thanks for the uopdates MP.Keep em coming.

 

How bad are things at the moment in the trade?Are these isolated incidences or is fear starting to spread amongst those smaller construction co.s?

On 07/01/2020 at 14:08, Tdog said:

Then on the other hand the big house builders are more profitable than ever.

BDEV balance sheet.Looks good doesn't it?

 

On 07/01/2020 at 20:59, Barnsey said:

Ties in with Neil Howe's Fourth Turning time frame. I think gov-coin is definitely coming and will be a means of resetting in such a scenario, huge debt forgiveness but controlled centrally, nowhere to hide, in the name of the common good. 2032 is when many had predicted China to become the no.1 global economy however that was based on an ever rising trend which is now going the other way, and you can be damn sure the Yanks will do their best to push it out as far as possible.

As I dwell on possible getting a 10 year fix, and perhaps longer if introduced this year, what good is it if the bank goes bust and I end up on a Gov bailed out one at a high rate like the Northern Rock customers.

There are few certainties but I can't live my life in perpetual fear either, as Mr Howe often says, these turning events are not the end of the world, just a necessary process to give way for a new positive direction.

It's a real dilemma barnsey.Youre one of the forewarned with that comment.Best go for the likes of HSBC if you can.Some of the smaller BS's are working off minimal net interest margins.Wouldn't want to see a 10% drop in prices.

Worth noting as ever that London appears to be deflating.Do you follow the LCP and LSL acadata series.?Has Leicester leading the pack in the east mids.Average hosue 10 times the average salary here.I jest not.

I've said to mrs P if we ever buy anywhere it's for 10+ years-buying costs/maintenance otherwise too much.But my problem is that I'm becoming obsessed with buying loads of commodity stocks and using them to pay the rent wherever we are.It's a very difficult call.But if you can get 15 years fixes out of HSBC then I'd be tempted to get one.

11 minutes ago, Errol said:

Deutsche Bank flatlining.

asystole Errol.Been getting CPR for ten years.A workld record.

I'd go for ventricualr fibrillation.Not sure there's a defib large enough to shock it back to life.

[sancho panza]

On 08/01/2020 at 01:18, Tdog said:

Debts still lower than much of the 20th Century. I was in Thailand not long after things went tits up there and things carried on as usual ... though no doubt the shopping trips of the previous years were curtailed.

https://www.ukpublicspending.co.uk/uk_national_debt_analysis

Imputed retns (if they even existed in 1924 were under 2% of GDP in the 1960's when I've read of them being around.Currentl;y 12%+

 

Also worth consdiering how quickly the debt was cleared that paid for WW".

If GDP properly calculated then the current ratio would be higher.

On 08/01/2020 at 01:46, Cattle Prod said:

Escalating in the Middle East tonight. I don't like making money like this. Again I'm shocked to see punters on lse message boards react with glee, get a grip ffs.

However I've been saying for over a year now that the oil markets have been complacent due to the perception of US supply, and that there is no risk premium in the market. So here we are, at the very time US supply is stuttering, as predicted, we have significant geopolitical risk, which is now going into price. It doesnt matter short term, it'll whipsaw according to news, what I'll be watching is where price settles in calm periods. Stocks are lagging because investors don't believe in a re-rated price. Yet.

I suspect the recent, unusual time of no spare production capacity and no risk premium in price is over. 

Was reassessing oru family strategy with my Mum this morning and (she's been around a few cycles) we were both agreeing how attractive oil looks from many different perspectives-demand, cash flow, production squeezed, govt money printing inbound.

We're buying for a year now(already hold 15% in big oilies),if we get a run up,quick move to cash,then get ready for a decade watching it grow.

We were reminscing about how you could have bought Billiton for £1.30 back in 99/00 and now their divi is what we paid for them.(we were all out by 2013 iirc)

 

On 08/01/2020 at 12:02, headrow said:

Just bought in on K&S AG at 10.80 , 200 shares. The share price has fallen every day for the last 5 days so perhaps i'm in a bit too soon , time will tell.

Sit on them.We're long this sector.Intedning to buy more.

On 08/01/2020 at 12:29, DurhamBorn said:

Stick another ladder at 10.00,then 9.20 etc and then forget about if it goes down.Whats going on at Sirius is actually a really good lesson for new investors (like the retail all getting skinned in it).Companies who have survived many cycles end up buying up assets on the cheap.Froneman did the same at Sibanye.

Outside of the deal itself this sends a message exactly what this thread is about.The next cycle is industrial and investment,the north will gain over the south etc.Here we have one of the best miners in the world,real blue chip looking to own and operate a huge mine in North east England.Behind closed doors the government are swinging into reflation.They must of assured Anglo on a lot of things.The UK is very well placed for the cycle,if we play our cards right.

We have a cross market indicator on the currency road maps that takes into account inward investment liquidity flows.A lot of that data is hard to pick apart to the none financial inflows,but deals like this would flick that indicator to a positive.

Was saying this to my Mum this morning.Big big news.I agree that the south will empty out a bit.All those overpaid finanacial jobs in places like reading are gone-as per spygirl thesis.Lot of the wealth in SE is an illusion based on back door public subsisdies.

I'm amazed that Potash miners are sinking to multidecade lows as Apple doubles in a year on a 2% increase in earnings.

On 08/01/2020 at 12:35, Craig said:

Cheers DB. Found them (with kudos to SP for the legwork):

"Coma scale scores on which I based our purchase from the SOIL ETF.dyor natch Tdog

Nutrien 18

yara 17

SQM 18

IPL 19

ICL 17

K+S 17"

Thyer're jsut my take aways Craig, not scientific.DYOR natch