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

[M S E Refugee]

I watched little bit of CNBC and Bloomberg for the first time in a few years and there was a distinct lack of interest in COV-19, apparently there in nothing at all to worry about.

[Chewing Grass]

5 minutes ago, M S E Refugee said:

I watched little bit of CNBC and Bloomberg for the first time in a few years and there was a distinct lack of interest in COV-19, apparently there in nothing at all to worry about.

Strange that Gold has been doing very solid returns for the last 2 months then and 1.4% up today.

[kibuc]

39 minutes ago, M S E Refugee said:

I watched little bit of CNBC and Bloomberg for the first time in a few years and there was a distinct lack of interest in COV-19, apparently there in nothing at all to worry about.

A nice lady at Bloomberg reassured me that it was a temporary issue and they were positioning themselves for H2 rebound. 

Interesting that it's not a Q2 rebound. While she might be correct, there's a looong way to go before H2. 

[Noallegiance]

This virus thing does seem to be sprouting some black feathers.

What a thing or would be if Amazon warehouses the world over started running out of 'made in China' shit come April.

[DurhamBorn]

Eldorado Gold  that old dog is barking now ,it ran down through my ladders like a steam train.Apple cant make its phones,and Eldorado going to the moon,lovely.

[DurhamBorn]

1 hour ago, Noallegiance said:

This virus thing does seem to be sprouting some black feathers.

What a thing or would be if Amazon warehouses the world over started running out of 'made in China' shit come April.

I was in the game.It was crucial you got your summer stock middle of March into April.If not you get it too late then you dont sell it in time (nobody buys garden furniture after August) then you dont get your cash in,or have space for the autumn stock.Retail is very just in time nowadays.My old account manager in China says ships are sailing from Ningbo with only 25% of the containers on board.The containers are booked on,just not turning up.

[kibuc]

3 minutes ago, DurhamBorn said:

Eldorado Gold  that old dog is barking now ,it ran down through my ladders like a steam train.Apple cant make its phones,and Eldorado going to the moon,lovely.

They delivered a killer 2020 guidance, upping production from 395 koz last year to 520-550.

[DurhamBorn]

Just now, kibuc said:

They delivered a killer 2020 guidance, upping production from 395 koz last year to 520-550.

Yep and that profit will mean they can open the Greek mines.Massive for them.

[headrow]

22 minutes ago, DurhamBorn said:

Eldorado Gold  that old dog is barking now ,it ran down through my ladders like a steam train.Apple cant make its phones,and Eldorado going to the moon,lovely.

Running through ladders all over the shop for me lately.

 

BP , Shell , Wynnstay , Babcock  have eaten a good chunk of my spare cash up.  All forever stocks but i wasn't expecting to have quite so many just yet.

[MrXxxx]

11 hours ago, DurhamBorn said:

Yes,i see it as paying most of my council tax,assuming they dont close that loop hole.I assume you simply pay £2880 into your SIPP even when in drawdown (i assume you can pay into your SIPP in drawdown?) 

Not sure of the proces, but was aware of it. I think Frank Hovis pasted a link to the details over in the pension thread if you want to take a look.

[M S E Refugee]

On 09/02/2020 at 22:15, Democorruptcy said:

Can you keep us up to date with any potential strike action or changes to the USO?

Royal Mail have offered us a pay deal,our Union Rep isn't happy but when are they ever!

The deal looks okay to me but we shall see.

[CVG]

12 hours ago, headrow said:

BP , Shell , Wynnstay , Babcock  have eaten a good chunk of my spare cash up.  All forever stocks but i wasn't expecting to have quite so many just yet.

I'm fully allocated in the first three of those. I'm now going to try a different ladder approach and add small additional investments as (if) the stocks fall through P/E levels. Shell just dropped to 10 for its 1 Year Rolling PE, so 1K there and another at 9, 8, 7 and 6.

[MrXxxx]

20 hours ago, Festival said:

he bond part really troubles me because whilst you can always find cheap shares finding cheap bonds is much harder atm. I will try rebalancing each year with a focus on reducing bonds as a percentage each year going forward i think.

This is where I may be missing something...if you don't want to buy bonds/guilts could you not buy established/big/low growth/non-cyclical stocks that generally always pay a regular/steady dividend as a surrogate?...ok, I accept a divi (and its amount) is not guaranteed as a coupon is, or that your capital return at a period x isnt either, but if you picked the right stock/company wouldn't it financially behaved in a similar way?

[Democorruptcy]

16 hours ago, Chewing Grass said:

Strange that Gold has been doing very solid returns for the last 2 months then and 1.4% up today.

[Errol]

Eldorado Gold is hilarious. I'm at 93% gain on the holding. I wonder what the percentage gain will be when gold is $5000+ an ounce?

[Barnsey]

17 hours ago, M S E Refugee said:

I watched little bit of CNBC and Bloomberg for the first time in a few years and there was a distinct lack of interest in COV-19, apparently there in nothing at all to worry about.

Bloomberg almost as embarrassingly perma-bullish as CNBC these days, tune in every now and then but realise they’re simply another arm of the Fed now.

[Barnsey]

1 hour ago, MrXxxx said:

This is where I may be missing something...if you don't want to buy bonds/guilts could you not buy established/big/low growth/non-cyclical stocks that generally always pay a regular/steady dividend as a surrogate?...ok, I accept a divi (and its amount) is not guaranteed as a coupon is, or that your capital return at a period x isnt either, but if you picked the right stock/company wouldn't it financially behaved in a similar way?

In theory yes, but we’re in a world of passive whole market ETFs now, once they all sell off it’ll inevitably hit some of the steady as she goes stocks too. Investing in single stocks other than FANG etc beyond the attention span of many.

I wouldn’t be surprised if we see free and fractional trading come over the pond.

[CVG]

1 hour ago, MrXxxx said:

This is where I may be missing something...if you don't want to buy bonds/guilts could you not buy established/big/low growth/non-cyclical stocks that generally always pay a regular/steady dividend as a surrogate?...ok, I accept a divi (and its amount) is not guaranteed as a coupon is, or that your capital return at a period x isnt either, but if you picked the right stock/company wouldn't it financially behaved in a similar way?

All you really want for the Bond element is 30 Year Gilts. These can be purchased thru Hargreaves Landsdown and presumably other platforms.

The philosophy behind the stratgey (I think) is that during a recession money floods out of equities and into safe harbours like gilts. Equities down - Gilts up. You already have an allocation to gilts so your losses on equities are offset by gains on gilts and hence your overall portfolio is less volatile. In addition, with rebalancing, you'll then sell Gilts (which are now overweight in your portfolio) to buy Equities (which are now underweight) to even up the allocations - thus selling high and buying low.

If you replace your Long Term Gilts with dividend paying stocks then you're defeating the object of the stratgey - diversification set up for any economic cycle. You're betting on a rising stock market and playing an 'edge'. And I confess that I do play the edges!

[Barnsey]

https://amp.cnn.com/cnn/2020/02/13/business/oil-prices-coronavirus/index.html

Global oil demand in the first three months of 2020 is expected to drop by 435,000 barrels per day compared to a year earlier, according to the International Energy Agency, the first quarterly decline in more than a decade. 

The agency also marked down its forecast for oil demand growth for the whole of 2020. It is now expected to increase by just 825,000 barrels per day, the weakest annual pace since 2011.

[Festival]

2 hours ago, MrXxxx said:

This is where I may be missing something...if you don't want to buy bonds/guilts could you not buy established/big/low growth/non-cyclical stocks that generally always pay a regular/steady dividend as a surrogate?...ok, I accept a divi (and its amount) is not guaranteed as a coupon is, or that your capital return at a period x isnt either, but if you picked the right stock/company wouldn't it financially behaved in a similar way?

I think that is a similar conclusion to how i've been thinking Mr Xxxx. I cant see any real value in corporate bonds for the risk you take (although there may be some value in EM bond funds) so tilt the portfolio towards shares and away from bonds. I think whilst there is more short term volatility in stocks if you plan to hold long term then the big companies bought at the right price probably offer better value provided they dont go out of business or the sector shrinks too quickly because of technology competition. 

[CVG]

24 minutes ago, Cattle Prod said:

I've not looked at Wynnstay before. It's had a marked increase in trading volume of the last few weeks and a very bullish candle this week. Insider buying, I wonder? Looks like a solid business, I need more agriculture. No net debt, whats not to like? Why has their share price been hammered?!

It got hammered last year (just after I started!) on the back of a mild winter. I'm also eyeing Camellia

[Castlevania]

31 minutes ago, Cattle Prod said:

I've not looked at Wynnstay before. It's had a marked increase in trading volume of the last few weeks and a very bullish candle this week. Insider buying, I wonder? Looks like a solid business, I need more agriculture. No net debt, whats not to like? Why has their share price been hammered?!

No more cheap unskilled labour?

Edit: scrap that. For some reason I thought they ran abattoirs. They are reliant on farmers though, who might struggle depending on the terms of how the U.K. leaves the EU.

[CVG]

9 minutes ago, Festival said:

I think that is a similar conclusion to how i've been thinking Mr Xxxx. I cant see any real value in corporate bonds for the risk you take (although there may be some value in EM bond funds) so tilt the portfolio towards shares and away from bonds. I think whilst there is more short term volatility in stocks if you plan to hold long term then the big companies bought at the right price probably offer better value provided they dont go out of business or the sector shrinks too quickly because of technology competition. 

Just to repeat what I said earlier. You want Long Term UK Gilts - not Company Bonds - if you are following the portfolio.

[MvR]

2 hours ago, MrXxxx said:

This is where I may be missing something...if you don't want to buy bonds/guilts could you not buy established/big/low growth/non-cyclical stocks that generally always pay a regular/steady dividend as a surrogate?...ok, I accept a divi (and its amount) is not guaranteed as a coupon is, or that your capital return at a period x isnt either, but if you picked the right stock/company wouldn't it financially behaved in a similar way?

If you're happy to give up unlimited potential upside ( as you are if you're considering bonds ) you can effectively exchange it for a small income by selling options.

e.g.   XOM, currently at $59.13, and has a dividend yield of £3.48 per share or 5.81% yield.

A slightly out-of-the-money (OTM) put option for March expiry, in this case a 57.5 strike, is priced around $0.81 per share, or 1.4% of the underlying share price. The delta on this option is around 0.2, which means there is roughly 20% chance of the put option ending up in--the-money (i.e. the underlying price falling below the option's strike price ) and being exercised.

So, you could sell a put, and either pocket the premium if XOM never drops below $57.50 ( but not ending up holding any stock ), or get put the stock at $57.50, having pocketed the premium, leading to a net purchase price of $56.69,  or $2.44 better than buying the stock at the current price. That's a 4.21% discount against the current price, almost matching the dividend yield. 

So it's either a discount purchase, or $0.81 per share for simply being willing to own the stock.  If the put isn't exercised before it expires, it becomes worthless and you sell another one for the next month.  If you are exercised and get put the stock, you can then sell a call option against it, expressing your willingness to have the stock "called away" at the call option's strike price.  ( or you could just hold on to it if you think it's bottoming out ).

Depending on how keen you are to actually hold the stock, you can choose strike prices that are more or less likely to be hit, or bias your position to be more or less bullish overall.

In the above example, the 20% chance of being exercised means you'd expect to have to sell a few put options over consecutive months before one is exercised, and often you end up collecting more in premiums before entering a stock than a year's dividends on that stock.

Depending on how things pan out, you can generate a decent "yield" on any US traded stock or ETF this way.. between 4-10% relatively easily, and often more. Of course the drawback is you may not be in the stock when it makes a big move up, and you're still exposed to the downside.. there's no free lunch, but in a way it's much like DB's laddering strategy, trading some potential upside for a potentially lower cost-basis on entry.

 

 

[subutai80]