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

[TheCountOfNowhere]

2 hours ago, JMD said:

Your correct, have you read the book? That was the conceit of the story, but I didn't want to spoil it for anyone... oops too late!

Now you mention it, i remember. 

 

How true 

[Jesus Wept]

58 minutes ago, Errol said:

Take a look at Freeport for a copper play as well.

FCX down 10% on yesterday an hour ago.

Many of these commodities are probably a good bet long term - however where to catch a falling knife? Where is the bottom.

If we have a major deflationary bust one could see all these stocks dropping another 30%++ easily.....

Oils: RDSB, BP, PSX,

Potash: MOS,

Copper: FCX,

Gold: GPM, GDXJ, 

Timing the bottom is the tricky bit.

Who wants to catch the falling knife? 
 
Shell could see sub £10 again in a few weeks...

The trick is to keep drip feeding in to long term solid bets every 3-4 weeks. 

[Errol]

I agree - the market will drop and I'm waiting to see how much Shell goes down from here, for example (hoping to get it for under £10 again !).

I purchased Freeport for $6.65 recently, but wouldn't be surprised to see it fall lower (or go higher). I'm not buying for now or even for 1-2 years from now. I'm thinking more 5 years plus and then we'll see where the price is.

I'm only investing money that I can afford to lose as well.

[Jesus Wept]

20 minutes ago, Errol said:

I agree - the market will drop and I'm waiting to see how much Shell goes down from here, for example (hoping to get it for under £10 again !).

I purchased Freeport for $6.65 recently, but wouldn't be surprised to see it fall lower (or go higher). I'm not buying for now or even for 1-2 years from now. I'm thinking more 5 years plus and then we'll see where the price is.

I'm only investing money that I can afford to lose as well.

Yes definitely - glad to have it in my watch list. 
 

Palladium interesting too...

[Errol]

COVID-19 risks shut down U.S. Mint gold silver bullion production at West Point

https://www.kitco.com/news/2020-04-15/COVID-19-risks-shut-down-U-S-Mint-gold-silver-bullion-production-at-West-Point.html

[Democorruptcy]

On 08/04/2020 at 10:53, NogintheNog said:

One share (trust) I would look at for a safe option is The Personal Assets Trust LON:PNL

It does pay a tiny 1.3% dividend but that may get pulled in the current environment, maybe not. The trust is there to protect and grow wealth, in that order.

I've compared it to a traditional defensive share LON:GSK below.

Declaration; I own both GSK & PNL

Just got a Troy investment update that includes a bit about PNL. I was going to copy some text for you but cannot seem to select text in the pdf?

https://www.taml.co.uk/Portals/0/Literature/Investment_Report/Investment Report No 64.pdf

It was also on thread about governbankment spending and inflation.

 

[Democorruptcy]

3 hours ago, DurhamBorn said:

 

Im trying to look at that over time TM,but yes i think that is likely.Powell and the Fed are up to speed in that they are up with the curve,but they will need to do a lot more still.The ECB is nowhere near,so Europe is likely a basket case.The BOE is behind as well.Thats more the governments fault though and their cack handed fiscal injection,or the lack of it.Reflation is certain now (not yet of course) and the scale should be towards the top of the road map.I dont think it will over shoot much,if at all,but 20% inflation isnt out of the question in a spike.I think 10% is almost certain ,and rates in double figures.

The structure still looks like a slow build in inflation though,it only goes parabolic towards the end,say 27/28.

Whats changing due to the nature of the way the cycle ended is that instead of companies rolling over,or paying down debt,they are instead all drawing down credit facilities they had in place.This means those that survive will have to use cash flow to pay this down.Less to invest and less for dividends.To be blunt most chief execs have taken companies into the end of cycle in a very poor shape.Distribution cycle is certain.Principal will need to be sold to provide income.I expect equity release is finished as well.Leveraged BTL will be the biggest loser once things get going.Everything will be against it,rates,social house building,tax,lack of finance etc.

Due to that i think government will be taking an even bigger part in the cycle than expected,at least at first.

Same old same old... governbankment in discussions to extend Help to Buy. They could be using that money to build social housing instead of lining the pockets of developers. Though given they are on the hook for 20% in the regions and 40% in London, what else can they do but dig a bigger hole?

Quote

 

According to The Times the government is currently considering an extension as one of a number of measures aimed at kickstarting the building industry after the COVID-19 crisis recedes. 

Craig McKinlay, new business director at Kensington Mortgages, said: “A potential extension of the Help to Buy scheme makes complete sense at this time.

“Builder and consumer confidence could struggle post-lockdown and this will certainly boost both.

“Construction jobs are not just vital to the housing market, but our economy too, and maintaining these is crucial to keep it running and helping us recover. In our current world of uncertainty, any certainty is extremely welcome.

https://www.mortgageintroducer.com/help-to-buy-extension-discussions-welcomed

 

 

Payment holidays for the Interest on existing HTB loans

Quote

 

Yesterday the Government announced mortgage lenders had agreed to support customers experiencing personal financial difficulties as a result of Coronavirus (Covid-19), including through payment holidays, among other options.

This approach will also be adopted where necessary for Help to Buy customers paying interest on their Equity Loans.

Help to Buy: Equity Loans are interest-free for the first five years. Therefore, today’s announcement will apply to those who took out the loan before 31 March 2015.

https://www.gov.uk/government/news/payment-holidays-offered-to-help-to-buy-homeowners-affected-by-covid-19

 

 

 

[Loki]

2 minutes ago, Democorruptcy said:

Same old same old... governbankment in discussions to extend Help to Buy.

FFS

[Harley]

6 hours ago, MvR said:

Sensible.

One thing I'd consider for investment shares I planned to hold for the long term would be to convert them to certificated shares and take them out of my broker's hands. My own holdings are too small to be worth it, but if I had say £5000 or more in an individual stock I wanted to keep, I'd definitely get the certificates.

Not that I'm particularly worried about my brokers.. Interactive Brokers seems very stable and secure, and the elites need functioning financial markets ( including brokerage services ) to be able to take advantage of opportunities, but you never know.

In the meantime,  "stuff I'll need anyway" / tools / spares etc, are moving up my list of investment priorities. Some of these things could get very cheap in a debt deflation, but some won't, and I'm at an age where I won't need to buy these things again if I buy quality now. ( currently eyeing up a DeWalt 7492 table saw ).

Tidy.  I must look at certificates.    And funny - I'm looking for a table saw too but nothing as posh!  Nagged my partner today as I was making her gardening stuff and she starts talking about my birthday.  Eff that, time's too short!   

[sancho panza]

6 hours ago, Talking Monkey said:

DB would the need for CBs to inject even more mean that the inflation towards the latter part of the decade will be very likely at the upper end of the range discussed here or would the upper end have to be revised upwards.

I just get the feel with the impact of CV, lockdown etc on top of the originally anticipated credit deflation means the associated policy responses now potentially lead to an even more brutal collapse around 2028 than has been discussed on here the past couple of years

A few day ago the discussion on here and elsewhere was Powell finally right sizing the Fed response and was coming  up to speed, is that still the case or is he now slipping back in light of the revised amounts of QE and its associated sequencing through time that may be needed

Herein lies the problem for the CB's.They've been used to declining velocity for 25 years.As per discussions on here ref behavioural economics,right sizing the pie is one thing,getting the pastry right is another.

The amount of money they've printed in the last 12 years and will do in the next 3 or 4,could create a wage/price spiral that's hard to control once it's running.

In much the same way as a caravan travelling at high speed starts getting minor wobbles ,then all of a sudden,boom,it's a roll over

[Harley]

4 hours ago, Loki said:

I've said before that I never really had a plan beyond that, never had any interest in shares, just hard work.  So it's been a big learning curve.  Again, that feeling of having a plan is priceless.

Indeed.  I didn't but on paper would have.  But that's the way.  Too busy and wrapped up in the system.  If this thread makes some younger types take a step back, leverage the wisdom of the farts and compounding of time, and plan their way forward rather than plod on as expected, then that's a job very well done.

[sancho panza]

4 hours ago, DurhamBorn said:

 

Im trying to look at that over time TM,but yes i think that is likely.Powell and the Fed are up to speed in that they are up with the curve,but they will need to do a lot more still.The ECB is nowhere near,so Europe is likely a basket case.The BOE is behind as well.Thats more the governments fault though and their cack handed fiscal injection,or the lack of it.Reflation is certain now (not yet of course) and the scale should be towards the top of the road map.I dont think it will over shoot much,if at all,but 20% inflation isnt out of the question in a spike.I think 10% is almost certain ,and rates in double figures.

The structure still looks like a slow build in inflation though,it only goes parabolic towards the end,say 27/28.

Whats changing due to the nature of the way the cycle ended is that instead of companies rolling over,or paying down debt,they are instead all drawing down credit facilities they had in place.This means those that survive will have to use cash flow to pay this down.Less to invest and less for dividends.To be blunt most chief execs have taken companies into the end of cycle in a very poor shape.Distribution cycle is certain.Principal will need to be sold to provide income.I expect equity release is finished as well.Leveraged BTL will be the biggest loser once things get going.Everything will be against it,rates,social house building,tax,lack of finance etc.

Due to that i think government will be taking an even bigger part in the cycle than expected,at least at first.

When you lookat a lot of companies,years of share buy backs have done nothing but flatter otherwise flat earnings.Years of QE/ZIRP have encouraged over leveraging without either the revenues or assets to run it off.

AS I've said,we're centred on some decomplex trades eg big oils and PM miners for those reasons.The balance sheets of a lof of big goldies have to be seen to be believed.Either they didn't want to borrow money over the last 5 years(unlikely) or noone would lend them any.

What do you mean by distribution cycle again please?

Must say,I agree on the UK govt.Stories of their incompetence in managing Le Covid will be passed down the generations-testing(or rather how not to test during a pandemic)/PPE/stopping treatments of terminally ill cancer patients like my friend while the hospitals are empty/shutting down the economy and creating even more illness than we were trying to cure etc etc.

[sancho panza]

2 hours ago, Vendetta said:

FCX down 10% on yesterday an hour ago.

Many of these commodities are probably a good bet long term - however where to catch a falling knife? Where is the bottom.

If we have a major deflationary bust one could see all these stocks dropping another 30%++ easily.....

Oils: RDSB, BP, PSX,

Potash: MOS,

Copper: FCX,

Gold: GPM, GDXJ, 

Timing the bottom is the tricky bit.

Who wants to catch the falling knife? 
 
Shell could see sub £10 again in a few weeks...

 

Divi's are what it all about for me.Growth is great but I would always sell it to buy yield.

WHen you're buying in the section of the chart that you are,I wouldnt worry about trying to get the bottom.MY Grandad used ot say to me,'leave the bottom 10% and the top 10% for the gamblers'

Sage advice.We've been beaten handsomely by some of the traders on here.If we're sub £15 on RDSB,I'd be delighted.I can't work it out because it's all certificated and I'd have to get my calculator out.

I think if you're buying FCX below $7 then you're getting a lot of bang for your buck.Maybe consider a second ladder at $6 or $5.50.

We're starting buying call otpions on their Jan 21 strike.I think copper could really run the otehr side of this as the Chinese gear up.

[Harley]

2 hours ago, Democorruptcy said:

....governbankment in discussions to extend Help to Buy.

Graft?  Add HS2 and construction firms exempt lockdown.  A gifted sector.  The country is rife with it.  Taxpayers money.  Not on services, etc but into the hands of the spivs?  Lots more to come as govt takes an increasingly active role?  Not just polos though, the whole "Administration"?

PS:  Add 5G.  Listened to a radio presenter get taken in (again) by the daftest of justifications for the China deal.  Journalists used to check people out first.  I did it once for a pro Russia bod on the radio in real time by looking up his name at Companies House.  It was all there.  Took seconds.

[Harley]

1 hour ago, sancho panza said:

In much the same way as a caravan travelling at high speed starts getting minor wobbles ,then all of a sudden,boom,it's a roll over

We used several similar metaphors in our Advanced Economic Theory studies.  That's exactly how a lot of disequalibria play out.  Not linear in any fashion.  No warning.  Nothing much and then a flip over point.  That's why markets tend to hurt the most people most of the time.

[Viceroy]

7 hours ago, MvR said:

Sensible.

One thing I'd consider for investment shares I planned to hold for the long term would be to convert them to certificated shares and take them out of my broker's hands. My own holdings are too small to be worth it, but if I had say £5000 or more in an individual stock I wanted to keep, I'd definitely get the certificates.

Not that I'm particularly worried about my brokers.. Interactive Brokers seems very stable and secure, and the elites need functioning financial markets ( including brokerage services ) to be able to take advantage of opportunities, but you never know.

In the meantime,  "stuff I'll need anyway" / tools / spares etc, are moving up my list of investment priorities. Some of these things could get very cheap in a debt deflation, but some won't, and I'm at an age where I won't need to buy these things again if I buy quality now. ( currently eyeing up a DeWalt 7492 table saw ).

I’ve briefly looked into the Direct Registration System which allows you to take your stock out of street name and into your possession electronically. 

https://www.thebalance.com/what-is-the-direct-registration-system-or-drs-for-stocks-357536

‘the DRS was created for people who didn't want their stock registered in the name of their brokerage firm. This gave investors several options: buy or sell directly from the transfer agent, work with their favorite stock-broker to arrange trades registered through the DRS, or work solely through their broker.’

Interactive Brokers does offer this so it’ll be something I’ll consider down the line.

https://ibkb.interactivebrokers.com/article/2192

[Bobthebuilder]

1 hour ago, Harley said:

I'm looking for a table saw too but nothing as posh!

Dont waste your money,buy a Festool TS55 rail saw, way better and has much more uses than a table type. Trust me, you will never look back. Got the t shirt and all that.

[Hardhat]

4 minutes ago, Bobthebuilder said:

buy a Festool TS55 rail saw

Seconded. Incredible tool. 

[Barnsey]

MUST READ! (a report from Vincent Deluard which fits this thread’s thesis almost perfectly, we’re starting to have company in the macro world)

https://www.dropbox.com/s/2g92gazyrpdwfyk/MGM_0420.pdf?dl=0

 

[Agent ZigZag]

1 hour ago, Barnsey said:

MUST READ! (a report from Vincent Deluard which fits this thread’s thesis almost perfectly, we’re starting to have company in the macro world)

https://www.dropbox.com/s/2g92gazyrpdwfyk/MGM_0420.pdf?dl=0

 

Good find Barnsey. . I enjoyed his conclusion especially the social impact the current financial path has had on the younger generation. Overall a positive read and a bright future.

[Harley]

9 hours ago, Bobthebuilder said:

Dont waste your money,buy a Festool TS55 rail saw, way better and has much more uses than a table type. Trust me, you will never look back. Got the t shirt and all that.

My neighbor was a convert too.  But £660?  I must be the poorest/tightest fart in the village!

[MvR]

9 hours ago, Bobthebuilder said:

Dont waste your money,buy a Festool TS55 rail saw, way better and has much more uses than a table type. Trust me, you will never look back. Got the t shirt and all that.

I'd thought about these after using one when re-lining my boat a couple of years ago. They're great for ripping big sheets but not ideal for me now given the space required, and things I'll need to do ( e.g. dados, plus lots of smaller, repeatably identical pieces etc ).

Like you say though.. a great tool.

[TheCountOfNowhere]

17 hours ago, DurhamBorn said:

This is not advice,do your own research etc,

Shell B £1500

Telefonica £1000

Mosaic Company £500

GDXJ £500

DRAX £500

Repsol £500

Vodafone £500

 

 

This'll make you laugh....

If you'd bought this lot 3 days ago you'd now be losing money.

If you'd bought centrica yesterday, you'd be up.

 

Nothing makes sense in this false economy.

[kibuc]

15 hours ago, Bricormortis said:

I think  the US jobless stats come out on Thursday. Hardly going to be happy reading. Mr Market might throw a wobbly.

 

I don't know, good news is good and bad news is even better these days, as it means more stimulus.

[JMD]

16 hours ago, DurhamBorn said:

Fed is near the curve now,problem is the ECB isnt.The EU is proving a disaster.Once they start to rightsize the $ should fall.Over 100 and i think there are still systemic risks somewhere and the Fed will need to keep pumping.Once things settle and the world wakes up to the fact the super powers are going to face off for a cycle there will be a dash for real assets.

Its so fascinating to hear that said, but i'm sure it's true and that most retail and institutional investors are still looking the wrong way.  

DurhamBorn do you think the reason why the EU is so slow in reacting is because they (Germany) want to nail down a new integrated EU tax deal for all members to sign up to (at least a draft agreement in principle) before agreeing more bailout money for Italy, Spain, etc?