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

[DurhamBorn]

@Yellow_Reduced_Sticker who care about markets when i can watch Sally Geeson in a bikini 

 

 

[JMD]

20 hours ago, Noallegiance said:

All,

I've decided to stop visiting this site for a good few years.

My position is set. Aside from earn more and add to it there is nothing more that I can actively do. I understand the direction of travel. I can do no more. Continuing to beat myself over the head with multiple daily visits here is counter-productive.

I thank fortune to have stumbled upon tos and subsequently this site. I thank everybody's input. It's been part of my life for a decade.

Obvious thanks (which over the impersonal medium of t'internet is almost insulting given what I have learned) to DB. If you're still around toward the middle of the next cycle, and if I revisit here, then I look forward to your input again. If not, know that you've changed my brain in ways nobody else could that I would have otherwise come across in life.

Pretend I met you, slapped you on the back and bought you a pint.

#legend

Take care of yourselves. Sincerely.

N

Take care Noallegiance, i'm just catching up and so have only just seen your post.

Wow, frequenting for a decade you say? Personally, I hope to continue visiting and learning, i.e. some excellent posts in the last few days from the 'old hands' (you know who you are, so wont embarrass you by naming you!), including generous links and article 'copy/pastes' (again, you know who you are!!), which I think adds so much value to this forum.

Of course I think its also got to be said (btw, not saying you think same 'N'; I suspect perhaps too polite to comment on such, especially just before you close the door to this site) but along with the stated quality and good posts, I think there is an increasingly unfortunate noise from a few seemingly obsessive-convulsive types (deeply suspect they have absolutely no idea who they are!!!) that choose to visit here merely to pebble-dash the forum with their monotonous tabloid-style, graffiti-like mantras, of market daily ups/downs/every-which-way rants.

But who am i to criticise? - as I say i'm a novice here/still learning - its just that for me such posts detract very greatly from what DurhamBorn has uniquely created here. (Shoot me down anyone if you take issue... no need to kid-glove me if you disagree?)

[JMD]

20 hours ago, DurhamBorn said:

Learning macro strategy was the most liberating thing i have ever done.It let me imagine past the here and now. Direction of travel with a lag is what matters.Check back in around two years from now,we should be getting into the cycle by then and a lot of the smoke will of cleared.

Yep, reading and appreciating this forum is like having your very own HG Wells time machine, enabling you to peer into the future.

Really hope DB that you keep 'throwing the levers' of this time machine (cross market analysis think you call it!) well into this cycle.

I find it also aids one's sanity issues (I don't have any btw... issues, not (in)sanity that is!). After all it really helps explain and contextualise all the confusing political 'noise' bombarded at us daily by the catastrophising, but at the same time curiously infantile, news agenda/MSM. 

[Majorpain]

God, i wish i could print paper gold and make people think its related to the real deal.

Bankers making out like bandits!

[JMD]

20 hours ago, Harley said:

Looks like one of those ex-CIA opos. 

hmm, come on Harley, I think you might be putting the cart before the horse. With all that prior ex-army experience behind you surely the thought has occurred to you that Jeff Bezos might, back in the 90's, have been sponsored by CIA and then put into 'sleeper mode' (the KGB/FSB do it all the time apparently). After all, does JB really come across as a typical businessman to you? I'm joking of course... or am!  

[JMD]

19 hours ago, Harley said:

All the best.  For me this ain't over and there's certainly no steady state.  A lot to come over the next year or so so this thread could be very useful as we deal with the consequences of the macro picture outlined herein.  But I would like to be in more of a "going in" position like you seem to be.  I wonder what that is.

glad to hear that Harley.

I am not yet fully invested. Still learning, been a steep learning curve - personally for me its about recognising my investing limitations (too many to mention i'm afraid) but crucially also finding a strategy that works for me without taking too much additional risk. Anyway, if we do get another market smackdown (part deux) later on, I will hopefully be in a position to take advantage.

[Harley]

34 minutes ago, JMD said:

hmm, come on Harley, I think you might be putting the cart before the horse. With all that prior ex-army experience behind you surely the thought has occurred to you that Jeff Bezos might, back in the 90's, have been sponsored by CIA and then put into 'sleeper mode' (the KGB/FSB do it all the time apparently). After all, does JB really come across as a typical businessman to you? I'm joking of course... or am!  

Of course, hiding in plain sight.  So obvious now you mention it! 

3 hours ago, Harley said:

Should pay this month's leccy, or better, a refill of the oil tank!

Closed my trade.  I'll have to settle for the (lower) leccy bill!  Was off building a stone wall so forgot about it!  That's the problem - intra-day trading needs the attention I can't give.  Still, a profit's just that!   

[Talking Monkey]

1 hour ago, JMD said:

Take care Noallegiance, i'm just catching up and so have only just seen your post.

Wow, frequenting for a decade you say? Personally, I hope to continue visiting and learning, i.e. some excellent posts in the last few days from the 'old hands' (you know who you are, so wont embarrass you by naming you!), including generous links and article 'copy/pastes' (again, you know who you are!!), which I think adds so much value to this forum.

Of course I think its also got to be said (btw, not saying you think same 'N'; I suspect perhaps too polite to comment on such, especially just before you close the door to this site) but along with the stated quality and good posts, I think there is an increasingly unfortunate noise from a few seemingly obsessive-convulsive types (deeply suspect they have absolutely no idea who they are!!!) that choose to visit here merely to pebble-dash the forum with their monotonous tabloid-style, graffiti-like mantras, of market daily ups/downs/every-which-way rants.

But who am i to criticise? - as I say i'm a novice here/still learning - its just that for me such posts detract very greatly from what DurhamBorn has uniquely created here. (Shoot me down anyone if you take issue... no need to kid-glove me if you disagree?)

I always thought this thread was not about trading but rather positioning oneself for the deflation and then the subsequent reflation cycle. Therefore day to day movements of the constituents of my portfolio are irrelevant, I log into the SIPP/ISA once or twice a month. Day to day movements are irrelevant its more how portfolios will need to be fine tuned evolved in the years to come as the next cycle unfolds

 

[Ellandback]

1 hour ago, Majorpain said:

God, i wish i could print paper gold and make people think its related to the real deal.

Bankers making out like bandits!

Surely they can't continue forever 

Good interview below regarding COMEX:

https://www.tfmetalsreport.com/podcast/10110/pricing-system-broken-thursday-conversation-andrew-maguire

 

[Majorpain]

1 hour ago, Ellandback said:

Surely they can't continue forever 

Good interview below regarding COMEX:

https://www.tfmetalsreport.com/podcast/10110/pricing-system-broken-thursday-conversation-andrew-maguire

Maguire has been banging on for years about it, the problem is its market forces which will decide the end of the paper scam, and no-one can predict when enough people will pull the plug. However, i would imagine that the current virus turmoil and money printing is putting the system under quite a lot of strain.

[Jesus Wept]

2 hours ago, Talking Monkey said:

I always thought this thread was not about trading but rather positioning oneself for the deflation and then the subsequent reflation cycle. Therefore day to day movements of the constituents of my portfolio are irrelevant, I log into the SIPP/ISA once or twice a month. Day to day movements are irrelevant its more how portfolios will need to be fine tuned evolved in the years to come as the next cycle unfolds

 

I’m not so sure.

Tell that to someone who has bought Shell In 2020  at ladders £22, £20, £18 and £15 ......and then it drops to a £7 deflationary low by 2024.

Then we get big inflation and it goes up a massive 400% by 2028 to £28.......

(*Replace Shell with other ‘reflationary’ stocks and equivalent price points of you choosing). 

Its all very well knowing and being confident in the predicted cycle’ - however timing and buying at or close to the low is pretty important I’d say. Buying at £7 or £22 - pretty important -  Wouldn’t you say? 

Taking Shell in more detail....

12/02/20 Shell was 2021p.

18/03/20 - Shell - 4 weeks later - saw an intraday low of 889p

02/04/20 - 10 working days later it was hitting 1500p.

Daily movements can be pretty relevant - I’d say - if you bought big in early February you’d wish you’d waited a few days - no? 

 

 

 

 

[M S E Refugee]

9 hours ago, DurhamBorn said:

Certain to cut i think and hopefully they do.A good result would be 30%,but we might see 50%.Vod cut 40% last year so the question really is will they cut again?.Telcos are at or reaching the end of Capex growth mostly,BT needs more for fiber.They all need to de-leverage quicker.A few years out though Capex should be falling and income rising.Im expecting free cash to double to treble in the next cycle.I expect the main players to go up 150% to 400% before dividends for the cycle.Mergers in the sector are certain as well,though probably once debts are lower and equity higher.

https://uk.finance.yahoo.com/news/telefonica-liberty-said-weigh-combining-154536260.html

Another great call.

 

 

 

[M S E Refugee]

56 minutes ago, Vendetta said:

I’m not so sure.

Tell that to someone who has bought Shell In 2020  at ladders £22, £20, £18 and £15 ......and then it drops to a £7 deflationary low by 2024.

Then we get big inflation and it goes up a massive 400% by 2028 to £28.......

(*Replace Shell with other ‘reflationary’ stocks and equivalent price points of you choosing). 

Its all very well knowing and being confident in the predicted cycle’ - however timing and buying at or close to the low is pretty important I’d say. Buying at £7 or £22 - pretty important -  Wouldn’t you say? 

Taking Shell in more detail....

12/02/20 Shell was 2021p.

18/03/20 - Shell - 4 weeks later - saw an intraday low of 889p

02/04/20 - 10 working days later it was hitting 1500p.

Daily movements can be pretty relevant - I’d say - if you bought big in early February you’d wish you’d waited a few days - no? 

 

 

 

 

After selling all of my Oil stocks yesterday I have had a little nibble today,I couldn't resist.

I am going to use the dividends from my Tobacco stocks to top up my Oil stocks.

[Loki]

@Vendetta fair comment especially with cut divis.  My RDSB buys were total luck

I wonder if people are now concerned seeing the thread play out and stocks/PMs dropping.  I admit to having had an "Oh God what have I done" moment today.  It comes from a place of instinct, not rationale.

It's all good in theory but watching it actually start to happen is a little disconcerting.  

What will be will be.  We all stand a better chance than your man on the street.  The worst part for me is it all playing out so achingly slowly and erratically.  But as I know that concerns me, I choose to ignore it

[DurhamBorn]

50 minutes ago, Vendetta said:

I’m not so sure.

Tell that to someone who has bought Shell In 2020  at ladders £22, £20, £18 and £15 ......and then it drops to a £7 deflationary low by 2024.

Then we get big inflation and it goes up a massive 400% by 2028 to £28.......

(*Replace Shell with other ‘reflationary’ stocks and equivalent price points of you choosing). 

Its all very well knowing and being confident in the predicted cycle’ - however timing and buying at or close to the low is pretty important I’d say. Buying at £7 or £22 - pretty important -  Wouldn’t you say? 

Taking Shell in more detail....

12/02/20 Shell was 2021p.

18/03/20 - Shell - 4 weeks later - saw an intraday low of 889p

02/04/20 - 10 working days later it was hitting 1500p.

Daily movements can be pretty relevant - I’d say - if you bought big in early February you’d wish you’d waited a few days - no? 

 

 

 

 

Very true,though i doubt anyone was starting to ladder in at £22 on here.I set most of my ladders in all companies to buy mostly from 40% to 50% off highs (Shell was £13.60 to £9.24 so far.BP £3.22 to £2.23) to 80% off highs.I expect to be down 20% on average if most ladders hit before any dividends.I mainly buy blue chip to mid cap areas and very rarely buy small companies.I also think its prudent to take a few profits on wild swings.I sold a few BP and Shell when i was up 15% on them to beef up a few other areas (potash).Iv also sold out of a few stocks like National Express when they doubled in a few weeks.I allocated more to potash from that and a few none reflation areas on valuation/hunch,(WPP,ITV etc)

I think the key is that we know the end of cycle will be terrible and even strong companies will likely cut divis in half.At £25 getting 2.4% divi on Shell is terrible,but at £12.50 getting 4.8% at the start of a cycle should (should not will) prove fine.

I would never of paid £25 for Shell because my oil target was $15.Its hit $15 though hence me buying.My next target on oil is $35 WTI by autumn.I have no idea where oil companies shares will be.I have one ladder each in a few yet.

If my portfolio  ended  down 20% max before a long move up id be happy.So far im around 70% positioned and its up  a decent amount,though expect it will be quite negative and lots of swings ahead.

Iv never been good at trading,so never even consider it.Iv found starting ladders in areas i want when i think they have already suffered a large part of the falls suits me.Of course a big thing to remember during this crisis is if something is down 80% when you finish buying,its a 100% loss still if it goes under.Positioning is never easy under conditions like this even for the most experienced

Diverse is always crucial.

[MrXxxx]

9 hours ago, Hardhat said:

even at 2/3rds cut the divi is still higher than most savings accounts

But your savings account doesn't have equity risk...Shell goes bust (ok unlikely) and you could end up with nothing, your BS goes bust and the first £85k is (supposedly) covered by the Fscs.

[DurhamBorn]

 

 

36 minutes ago, M S E Refugee said:

https://uk.finance.yahoo.com/news/telefonica-liberty-said-weigh-combining-154536260.html

Another great call.

 

 

 

First of many i expect.Looks a good move,iv been buying Telefonica of course.Combining their mobile and fiber network will save a massive amount of Capex.It will put a lot of pressure on Vodafone,and make BT have to push fiber quickly.I could see BT being bought by the Germans,but its probably too political.We will need to see if it comes off and what the structure is.My bull case on telcos long term is Capex should fall going forward (some it will increase for a while) and mergers are likely a big part of the story.

[Jesus Wept]

13 minutes ago, DurhamBorn said:

Very true,though i doubt anyone was starting to ladder in at £22 on here.I set most of my ladders in all companies to buy mostly from 40% to 50% off highs (Shell was £13.60 to £9.24 so far.BP £3.22 to £2.23) to 80% off highs.I expect to be down 20% on average if most ladders hit before any dividends.I mainly buy blue chip to mid cap areas and very rarely buy small companies.I also think its prudent to take a few profits on wild swings.I sold a few BP and Shell when i was up 15% on them to beef up a few other areas (potash).Iv also sold out of a few stocks like National Express when they doubled in a few weeks.I allocated more to potash from that and a few none reflation areas on valuation/hunch,(WPP,ITV etc)

I think the key is that we know the end of cycle will be terrible and even strong companies will likely cut divis in half.At £25 getting 2.4% divi on Shell is terrible,but at £12.50 getting 4.8% at the start of a cycle should (should not will) prove fine.

I would never of paid £25 for Shell because my oil target was $15.Its hit $15 though hence me buying.My next target on oil is $35 WTI by autumn.I have no idea where oil companies shares will be.I have one ladder each in a few yet.

If my portfolio  ended  down 20% max before a long move up id be happy.So far im around 70% positioned and its up  a decent amount,though expect it will be quite negative and lots of swings ahead.

Iv never been good at trading,so never even consider it.Iv found starting ladders in areas i want when i think they have already suffered a large part of the falls suits me.Of course a big thing to remember during this crisis is if something is down 80% when you finish buying,its a 100% loss still if it goes under.Positioning is never easy under conditions like this even for the most experienced

Diverse is always crucial.

100% agree.

Great call on Telefonica. Up 7% today.

Just shows once again how timing the ‘low’ is very tricky! 

 

[DurhamBorn]

35 minutes ago, Vendetta said:

100% agree.

Great call on Telefonica. Up 7% today.

Just shows once again how timing the ‘low’ is very tricky! 

 

If that ADR price follows through on Monday id be up 1% on TEF as down 5% on it at the moment.Im treating the European big telcos as i treated the tobacco industry back in the day.Iv been buying most of them.That move from TEF might hit BT for instance.Im banking that the entire industry is structurally undervalued.

If they can cut their capex in half as i think they might be able to longer term and increase prices with inflation free cash might double to treble.Of course a good chunk will need to go to pay debts down so i doubt a dividend bonanza,but we might see a good re-rating.Still a rough couple of years for them probably.

[Jesus Wept]

43 minutes ago, DurhamBorn said:

If that ADR price follows through on Monday id be up 1% on TEF as down 5% on it at the moment.Im treating the European big telcos as i treated the tobacco industry back in the day.Iv been buying most of them.That move from TEF might hit BT for instance.Im banking that the entire industry is structurally undervalued.

If they can cut their capex in half as i think they might be able to longer term and increase prices with inflation free cash might double to treble.Of course a good chunk will need to go to pay debts down so i doubt a dividend bonanza,but we might see a good re-rating.Still a rough couple of years for them probably.

Again 100% agree. Diversity is the key. 

Within the TELECOMS sector - are you holding anything outside the list below ? 

Difficulty is ranking.

How will Vodaphone fare on the back of this?
 

[DurhamBorn]

Im holding Vodafone,Telefonic,BT and Telia in that order at the moment.Im wanting to add a couple more,but cant decide on who.Im trying to stick to Europe as i think there is a lot of potential for IOT and edge of network clouds etc and consolidation/capex savings.I have been looking at America Movil though and would like another couple of options.

[Jesus Wept]

1 minute ago, DurhamBorn said:

Im holding Vodafone,Telefonic,BT and Telia in that order at the moment.Im wanting to add a couple more,but cant decide on who.Im trying to stick to Europe as i think there is a lot of potential for IOT and edge of network clouds etc and consolidation/capex savings.I have been looking at America Movil though and would like another couple of options.

Do you think the Telefonica move (if comes off)  will negatively impact Vodaphone?

[DurhamBorn]

30 minutes ago, Vendetta said:

Do you think the Telefonica move (if comes off)  will negatively impact Vodaphone?

Yes,and BT,they will have a converged service like BT has.However i expect all of them to end up in the same place in time and all of them to save Capex.Id want to see the structure of the deal though.

[sancho panza]

4 hours ago, Vendetta said:

I’m not so sure.

Tell that to someone who has bought Shell In 2020  at ladders £22, £20, £18 and £15 ......and then it drops to a £7 deflationary low by 2024.

Then we get big inflation and it goes up a massive 400% by 2028 to £28.......

(*Replace Shell with other ‘reflationary’ stocks and equivalent price points of you choosing). 

Its all very well knowing and being confident in the predicted cycle’ - however timing and buying at or close to the low is pretty important I’d say. Buying at £7 or £22 - pretty important -  Wouldn’t you say

We got some RDSB,top price was about £23,bottom price was.jsut above £9.I suspect our average is probably under £15.If you'd offered me that a year ago I'd have taken it.I don't sit with a calucaltor working it out much.As @Talking Monkey said,these are medium to long term trades for us.

Part of life is reflecting what you did right and what you could have done better. Some of DB's calls have been amazing -particualrly the $15 call,how I wish I'd followed it to the letter-but we had a lot of cash last year and needed exposure to somethign that wasn't cash and some of the big oilies looked cheap last august and I was happy to pick some up at those prices.

AS the chasm opened up in March we added very heavily to our oilies positions such that we've ended up with a lot more oil than I would have anticipated and I'm happy with those calls, and realy happy with where we are in terms of gold and potash.You can't get it 100% right all the time.If I get it 51% right then I'm ahead of msot.

Much as it's easy to retrospecitvely trade ,I remember this thread in March and there were a few people thinking it was the Big Kahuna and dropping some exposure.You were quite brave imho if you added even a little exposure given the prevailing mood in the media.At the time,noone knew what was definitely coming,we were working with out best guesses based on the evidence we see.

Part of my attitude is not being greedy and ultimately making my own decisions so whne I look the family in the face I can jsutify why we did what I did with their savings,with some logic and rationale.

Let me tell you,when it's losses it's not nice.....but the markets aren't a welfare state.

 

3 hours ago, DurhamBorn said:

Very true,though i doubt anyone was starting to ladder in at £22 on here.I set most of my ladders in all companies to buy mostly from 40% to 50% off highs (Shell was £13.60 to £9.24 so far.BP £3.22 to £2.23) to 80% off highs.I expect to be down 20% on average if most ladders hit before any dividends.I mainly buy blue chip to mid cap areas and very rarely buy small companies.I also think its prudent to take a few profits on wild swings.I sold a few BP and Shell when i was up 15% on them to beef up a few other areas (potash).Iv also sold out of a few stocks like National Express when they doubled in a few weeks.I allocated more to potash from that and a few none reflation areas on valuation/hunch,(WPP,ITV etc)

I think the key is that we know the end of cycle will be terrible and even strong companies will likely cut divis in half.At £25 getting 2.4% divi on Shell is terrible,but at £12.50 getting 4.8% at the start of a cycle should (should not will) prove fine.

I would never of paid £25 for Shell because my oil target was $15.Its hit $15 though hence me buying.My next target on oil is $35 WTI by autumn.I have no idea where oil companies shares will be.I have one ladder each in a few yet.

If my portfolio  ended  down 20% max before a long move up id be happy.So far im around 70% positioned and its up  a decent amount,though expect it will be quite negative and lots of swings ahead.

Iv never been good at trading,so never even consider it.Iv found starting ladders in areas i want when i think they have already suffered a large part of the falls suits me.

Of course a big thing to remember during this crisis is if something is down 80% when you finish buying,its a 100% loss still if it goes under.Positioning is never easy under conditions like this even for the most experienced

Diverse is always crucial.

As above DB, we were buying the oilies mechanically(not all of them,mainly XOM,RDSB,ENI and EQNR) from august.I had price limits I didn't go beyond and I remember the spike in Dec /Jan when we stopped buying and I thought that was it they were going up....and then look what happened. thats markets..

We're relatively set now for the next twelve months apart from some window dressing(we sold up MAG silver today and boguth Newcrest for isntance),need to rearrange Guyana too but this thread has been amazing for us.WHat an education.And then all teh contributions from differnet people with different experiences...

I think that advice in bold is bang on.We woudln't have started laddering into the goldies if it hadn't been for this thread or it's predecessor on ToS.Back then people I know thought I was mad especially when some of them eg Goldfields suffered a 50% fall to $2....

I see @Loki has posted Lacy Hunt and David hunter podcasts to lsiten to over the weekend,that's why I hope this thread lives on for some time more.Every day is a learning day

[JMD]

11 hours ago, AWW said:

I don't think you can blame them - the questions they are asked are banal in the extreme, and the press just looking to pick on any small slip-up. I'd be in full-on arse-covering mode, too. Just look how much they're being pilloried for the death toll exceeding the 20,000 "good outcome" that was mooted several weeks ago - that death toll being people who died "with" (not of) CV.

The problem is that we have a bunch of useless political journalists covering what is essentially a specialist public health story.  Although it's always enjoyable to watch Peston get his arse handed to him by someone considerably cleverer than he thinks he is...

But I definitely do blame them. I find it scarry to see scientists morphing into politicians and that was the point of my post. Yes the journalists questions are mostly awful or boring, but they to are also political creatures, so it's all more than a little incestruous. They did however have an editor from New Scientist on last week but he hasn't been back since. 'Propaganda theatre' at a time of war (in this case fighting a virus) I get it, it happens and is to be expected, I just don't want technocratic scientists front and centre that's all. Oh and the amateur looking graphs could be smartened up, I mean who plots 4 shades of blue lines on same graph? '...above the light blue line you see the grey-blue line...', is actual quote, but I'll stop now as I'm merely ranting now!