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


spunko

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On 03/02/2020 at 15:35, JMD said:

SP, thanks for the info. its much appreciated. I will do more research. I have set out my thoughts below, as doing this helps me, and perhaps may inspire others to do same. As always, I welcome criticism, good or bad! 

Re. the gold/silver ratio: The I way I see it is that most on this blog intend holding their PM's until near the end of the reflation cycle/coming financial collapse, before which point they will personally judge when to sell all/most of their PM's. I will also do this, but this does inevitably involve correctly timing when to sell.

On reflection,GS ratio is onetiming indicator of many but main thing I'd take from my research is that actually the most important aspect of it's power is with regard to timing silver,not gold.As a silver timer it looks incredible.

Needs to be considered alongside DXY I think

On 03/02/2020 at 18:35, DurhamBorn said:

You input into this thread is invaluable Cattle Prod and will be crucial as the cycle unfolds,putting on the ground info on top of the macro work..Im really pleased that i have been able to show people how lags work in the economy.There are very few people these days who do that kind of work.My friend says 99% of the people who look at the numbers get it wrong because they simply look at the headline and think they understand it.He called them macro tourists.Standing on a beach looking at the sea coming in they think they know it,but they dont understand the currents,the underwater rocks etc.

I have no doubts about the returns in oil during the next cycle.Im just very pleased my road map has proved correct as im picking up the stocks as the price falls.

The big calls on the $,gold and oil on this thread have not been better anywhere on the market.

Cross market work says the contrarian position on clean energy is hydrogen not battery.If so big oil will control it.The fact the market is 100% ignoring this is really interesting me.Im actually leaning my oil/energy buys to the ones i think could get a lead in hydrogen.Lets see if BP mention it,or if they are happy to start investing,but keep it quiet.

 

Bit in bold is bang on,reminds me of when we wer discussing commericals being net long futures....about the only plave on the web anyone noticed

On 03/02/2020 at 21:41, Popuplights said:

Yes. I'm at XOM. Was Listening to the earnings call on Friday. We are fucking laughing with that one. It's the only thing making money. Trying to get on that project myself!!

 

what colours the boat house in Bay town?:ph34r:

 

23 hours ago, Barnsey said:

 

I like Tavi but his cahrts are sometimes a liberal abuse of straight lines.

14 hours ago, kibuc said:

 

Massive short covering perhaps? Anyway, it looks like TESLA is doing a bitcoin and the end must be nigh.

 

Any big news on the PM miners Q4 as yet?

I said on the big short thread,Tesla is a cheap way of squeexing the Dow higher given its price weighted.

8 hours ago, Barnsey said:

Nuff said...

 

Incredible..............................

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7 hours ago, Tdog said:

Any thoughts on Transocean ... i worked for them on a job overseas in 2013 and the rig manager was gutted that he'd just missed a dip in their share price ... if only he'd hung on another 7 years.

I'll be doing some work for them out in Guyana if i decide to go..

image.png.c5c48535546ecea9c3b3d7b0dfb217b1.png

Guyana XOM?Guyana Goldfields??

image.png.33e14473822253d6d6a5d683799bf64a.png

image.png.6a37a91af8f0fc0aff3a2001ff6b9197.png

 

If they survive the next year or two they could rocket......

7 hours ago, Loki said:

The 3 month chart shows a drop of about 25%, I guess that's what Starsend was looking at

Might be a good one for you and the other clever ones to demonstrate how you run the numbers on a stock though

Please? :D

I found this article about them

https://www.energyvoice.com/oilandgas/218855/schlumberger-posts-10-1-billion-loss-in-2019/

BP recovered after the Gulf of Mexico incident, I wonder if this will do the same

As above.Not one you'd put the pension on but one you might run as a small side bet off the main herd in case oil does go back to $100

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Wolf sums it up nicely

Decl:I've lsot a few quid on this beast.........Persimmon at £30 is jsut as incredulous imho

https://wolfstreet.com/2020/02/04/im-in-awe-of-how-tesla-is-now-a-supernatural-phenomenon/

I’m in Awe of How Tesla is Now a Supernatural Phenomenon

by Wolf Richter • Feb 4, 2020 • 93 Comments

The WTF stock chart of the year. And another WTF chart of just how tiny Tesla is compared to the top 10 automakers.

By Wolf Richter for WOLF STREET.

Tesla’s shares spiked another 20% this morning, or by $160, to $940 a share. Every time I write a few words, I have to go back and change the number again, because the price just keeps shooting higher. So far this year, TSLA has shot up 120%.

US-Tesla-share-price-2020-02-04-9-51am.p

Global-automakers-tesla-deliveries-2019.

US-Tesla-net-income-annual-2019.png

 

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https://wolfstreet.com/2020/02/03/chinas-crude-oil-demand-plunges-20-after-coronavirus-measures-industry-sources/

After Coronavirus Measures, China’s Crude Oil Demand Plunges 20%: Industry Sources

by Wolf Richter • Feb 3, 2020 • 73 Comments

“Probably the largest demand shock the oil market has suffered since the global financial crisis, and the most sudden since the Sept. 11 attacks.”

But the problem is that in China demand at the moment has dropped by 3 million barrels a day, while US production is still growing. And any OPEC cuts are just window dressing until Chinese demand resumes at a somewhat normal pace – and that is not yet on the horizon.

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9 hours ago, sancho panza said:

Any big news on the PM miners Q4 as yet?

I'm afraid not, it's The Boring World of Niels Bohr out there.

Guyana hasn't released production numbers in advance of financials, which would usually be a red flag but with the new CEO in charge maybe it's the new normal.

Great Panther has some money in the coffins after receiving $21m in advance payments for future gold deliveries and they also spend circa £500k de-risking, putting $1500 floor under the gold price for Q2 and fixing FX rates. Funny that a "silver" company should care so much about gold price :P Anyway, they are still a mess and one has to wonder what they are not telling us about aftermath from their Q4 fatalities.

Wesdome guided lower than expected and will beat as usual, so 100koz will be breached this year. Eagle River closing in on 1oz/t grade, absolutely bonkers. But you have to pay a top price for top assets with top management.

Fortuna announced they might have to pay $30m for overdue royalties they didn't feel obligated to honour, and the market ignored it.

No-one seems interested in the sector at the moment.

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IMB currently down 7% after AGM update:

 

Imperial Brands PLC today issues the following AGM trading update:

 

Tobacco trading remains in line with expectations, with a weighting to the second half as previously guided. However, following the US FDA's ban on certain flavours of cartridge-based vapour devices and weaker than expected consumer demand for vapour, we now expect constant currency full year Group net revenue to be at a similar level to last year and adjusted earnings per share to be slightly lower than last year.

 

First half adjusted earnings per share is expected to be down c. 10% at constant currency, due to the phasing of inventory write-downs, primarily relating to the US flavour ban."

 

Lower ladders coming up!!

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Democorruptcy

This coronavirus may or may not be a pandemic but whatever happens the end result will be inflationary and tie in with DB's roadmap. If it is a pandemic then we could get a deflationary episode but even if it isn't too bad it will change business minds. The pandemic or just the scare of it, will make firms want to be less reliant on China. The cheaper wages in China have kept prices down but if firms create more jobs in their own countries it will increase costs because wages will be higher.

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11 minutes ago, CVG said:

IMB currently down 7% after AGM update:

 

Imperial Brands PLC today issues the following AGM trading update:

 

Tobacco trading remains in line with expectations, with a weighting to the second half as previously guided. However, following the US FDA's ban on certain flavours of cartridge-based vapour devices and weaker than expected consumer demand for vapour, we now expect constant currency full year Group net revenue to be at a similar level to last year and adjusted earnings per share to be slightly lower than last year.

 

First half adjusted earnings per share is expected to be down c. 10% at constant currency, due to the phasing of inventory write-downs, primarily relating to the US flavour ban."

 

Lower ladders coming up!!

I own Imperial and i think the 10% drop at the open is a bit harsh , i am willing to add to my position but am waiting until the analyst downgrades have come , there is loads of coverage of this stock and if half a dozen of them downgrade it to sell i can see it having another day like today. 

 

The management of the company need sorting tbh , the share price has more than halved in the space of a couple of years.

Vodafone reported today as well , another stock i have an interest in . Look at that free cash flow.

 

StockMarketWire.com - Telecom giant Vodafone reiterated its full-year earnings guidance after it grew its revenue by 6.8% in the third quarter.

Revenue in the three months through December rose to €11.75bn, up from €11.00bn, on-year.

Organic service revenue rose 0.8%, with a decline in Europe more than offset by growth elsewhere.

Vodafone stuck to its full year guidance for earnings before interest, tax, depreciation and amortisation of €14.8bn-to-15.0bn, with free cash flow, pre-spectrum, of around €5.4bn.

During the third quarter, the company said an ongoing recovery in Spain and acceleration in the UK was offset by a tougher prior-year comparison in Italy.

Retail revenues grew in Germany, supported by strong cable broadband net adds, it added.

Chief executive Nick Read said Vodafone had maintained momentum in the quarter.

'Competition in Europe remains challenging, primarily in the value segment, however we continued to improve customer loyalty and to grow in broadband, and we achieved good growth in Africa,' Read said.

The company expected a further gradual improvement in service revenue growth in the fourth quarter, led by Europe, he added

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On Vod notice the bit about Amazon using their 5G network for edge needs.Massive growth in the future there and all extra for telcos.Imagine VODs free cash if they ramped down capex?.

Really like telcos.They are hated mostly,priced on backward measures etc.Nice spread of 5 big ones with ladders should do very nicely over the next decade.

Imperial wont do much going forward,but the managers need to simply steady things and increase revenue 2% a year.The market will value earnings like theirs higher during the cycle at some point.I prefer BAT,but happy to own a few below £19.

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13 minutes ago, DurhamBorn said:

 

Imperial wont do much going forward,but the managers need to simply steady things and increase revenue 2% a year.The market will value earnings like theirs higher during the cycle at some point.I prefer BAT,but happy to own a few below £19.

I think the dividend at Imperial is going to have to be cut , i reckon the two large quarterly payouts will be rerated to the same amount of the other quarters. The 72p ones cut in half.

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16 minutes ago, headrow said:

I think the dividend at Imperial is going to have to be cut , i reckon the two large quarterly payouts will be rerated to the same amount of the other quarters. The 72p ones cut in half.

Yes they might do that.They need to cut debt by around  £500mill a year really and with the dividend they dont have much headroom.They might get taken out though by someone at around £25 a share.Maybe Japan tobacco or the Chinese state one.

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2 hours ago, Democorruptcy said:

This coronavirus may or may not be a pandemic but whatever happens the end result will be inflationary and tie in with DB's roadmap. If it is a pandemic then we could get a deflationary episode but even if it isn't too bad it will change business minds. The pandemic or just the scare of it, will make firms want to be less reliant on China. The cheaper wages in China have kept prices down but if firms create more jobs in their own countries it will increase costs because wages will be higher.

Not the wage gap there once was, but absolutely right that this has already set some changes in motion regarding movement of supply chains out of China. In many ways this virus will provide not only a deflationary shock possibility in months ahead, but also the perfect reason for poor earnings going forward, along with more stimulus, such as:

 

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Researching commodities recently and found this, some might be interested - its Australian miner focused, but does have good global summaries including markets for the commodities (and cannabis!).

https://smallcaps.com.au/ultimate-guides/

Hundreds of companies listed and described, but if any are on peoples watchlists, please let us know. 

 

...picking up on the CoronaVirus talking points expressed here over recent days, I was struck when reading the site at how casually Australia's, lets say - 'tilt away' from China, is written about. As well as continual references to international reports of how national economies wish to secure new commodity supply chains away from the influence of China (good for the Aussies I suspect; but not something the media report on). Probably adds to the view expressed here that the so called 'US(Trump)/China trade war' (media focus on this aspect only) is just window dressing compared to the looming Cold War II (hopefully no impending Thucydides Trap).

  

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On the SIPP front - considering the types of reflation stuff mentioned in this thread - I understand laddering on the way down, but do people ladder on the way up, too?

I'll soon have my pension funds transferred to HL. I have a couple of watchlists on the go but am unsure whether to just fill up leaving a cash buffer and leave it for 6 months to review, or whether to gradually feed in to my chosen companies. 

Pros/cons?

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14 minutes ago, Tdog said:

Im in a similar situation in that ive 65% cash in my SIPP,. ... i'm opting for the leave it and wait for this. Bought about £3.5k worth of Potash companies recently in a moment of weakness .. and theyve dropped!

Got a tiny bit of cash to punt and was thinking of chucking it at Mosaic

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19 minutes ago, Tdog said:

Im in a similar situation in that ive 65% cash in my SIPP,. ... i'm opting for the leave it and wait for this. Bought about £3.5k worth of Potash companies recently in a moment of weakness .. and theyve dropped!

Yes I forgot to mention the option of cash until crash! 

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12 minutes ago, Tdog said:

More a case of chucking it in and forgetting about it for a good few years. For a punt infa has to be worth a look, as news on licences is due imminently.

I'm well down on Infrastrata, glad I just held.  I always think there's no point selling at a loss, when you've followed the number one rule and only invested what you can afford to lose.  

So in my case, only a small amount.

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why not sell those ladders that are actually in profit, ive just done that with cna, a few were bought at the bottom with it looking like its gonna take time to recover i just went thru the ones that are actually in profit or B/E at the current price and flogged them off to distribute over better plays, leaving the laggards to attempt a recovery on.

ill do the same with vod soon i reckons, you lose the divi of course on those, but theres plenty more losers to bet the farm on.

Ps. looks like bitcoin may actually make it to my sell all point and then ill wait for the tesla like drops and rinse and repeat, course the danger is it will just keep going and ill be left behind, but i wont be doing an isaac newton/South china sea on it.

 

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I thought these were long term buy and holds?

The dividend is pretty good on Centrica, although funnily enough today they have just fallen back to break-even point (In my holdings)

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