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

[Barnsey]

 

[SillyBilly]

9 hours ago, DurhamBorn said:

The silver stocks i see with the biggest beta to the silver price (so most likely to outperform in a rising silver price,but bend you over and roger you in a falling one).This is not based on fundamentals quality,reserves or anything ,just beta to silver price.

Endeavour Silver 2.46 beta

American Silver Corp 2.32

Fortuna Silver 2.30

First majestic 2.17

Avino Silver 2.09

Great Panther 1.72

Coeur Mining 1.70

 

I own them in that order.I would add they are very very risky,and if silver falls they will inflict great pain.I could take an entire wipe out from them all without worrying much, and thats the way to view silver miners.However i think at least one of the above will 20x or even 50x in the cycle ahead and a couple probably fail.If i was young and only had a small amount of capital,but was prepared to lose it all,then thats where id put it for the cycle.

Not advice DYOR etc,

First Majestic is my second biggest holding so I don't do things by half. Like you say very high risk but I am prepared to have a punt on it and lose it all, if it scores I may get a house paid for by it...except I've got it all invested in my SIPP. Need to open up another position in PMs outside that wrapper...One of the benefits of lockdown is I haven't spend anything in 2 months apart from food and usual bills...so now building cash every week ready to go into more shares as they fall lower and lower.

[DurhamBorn]

1 hour ago, Barnsey said:

 

Like we expected from the start and really pleased its here.The risk is the government and BOE mistake long lines for a KFC as a v shaped recovery.Iv actually found it fascinating that the road map really did pick up the cycle would end with this all the way from 1982.Of course,that is if we do indeed see an industrial and inflationary  cycle.The political cycle is off my scale now for reflation,so i think its going to be even stronger than we expected.I had expected $200 for silver,but i think $300 is almost certain to be the minimum.

To stop this deflation will take 10s of Trillions of currency debasement.All commods will do very well,but i think silver,gold,potash and gas will be the standouts.

[Agent ZigZag]

38 minutes ago, DurhamBorn said:

To stop this deflation will take 10s of Trillions of currency debasement.All commods will do very well,but i think silver,gold,potash and gas will be the standouts.

Good and am well pleased that someone else thinks I am right as I am heavily invested in the lot. Only problem is I have been positioned since 2009 when I thought the last bust was the end of the cycle. I guess we all live and learn. I hope the wait will be worth it. Talking of potash I have topped up my holdings through  cutting  my losses with Centrica. It hurt but there are times you must get rid of the dead weight and look at areas that are likely to recover it. 

[Jesus Wept]

11 hours ago, JMD said:

Harley, you mentioned recently that you might be investing in bitcoin. Would you consider using the above Bitcoin etf?

I think I might already know your answer to this question - you having previously written about efts/synthetics/counterparty risks. I learned a lot from those posts, so was wondering what your thoughts were about this Bitcoin etf?

I think that Vendetta has already commented on the potential exchange hacking risk. Would be interested to hear if others own this etf.

Bitcoin ETF rising steadily...... 

Any thoughts out there on this?

The new Gold?

[DurhamBorn]

58 minutes ago, Agent ZigZag said:

Good and am well pleased that someone else thinks I am right as I am heavily invested in the lot. Only problem is I have been positioned since 2009 when I thought the last bust was the end of the cycle. I guess we all live and learn. I hope the wait will be worth it. Talking of potash I have topped up my holdings through  cutting  my losses with Centrica. It hurt but there are times you must get rid of the dead weight and look at areas that are likely to recover it. 

Yes exactly.I think velocity did for the reflation kicking in last time.Plus China was still exporting deflation for a good few years.The difference this time is the amounts going into the pipes will be so big that once it starts moving the CBs wont be able to stop it.Any divis that are landing now are almost exclusive going into silver/silver miners and potash.I noticed a gilt auction would of failed a few weeks ago,but the BOE stepped in.They are straight forward monetizing fiscal spending now.

[sancho panza]

2 hours ago, DurhamBorn said:

To stop this deflation will take 10s of Trillions of currency debasement.All commods will do very well,but i think silver,gold,potash and gas will be the standouts.

Looking at how inept they are,the fact we are where are in relation to the everything bubble and the way they reacted to where we were in 2009 means that currncy debasement will be the msot likely optionthat gubbermints choose.A few people lately have been on here getting all moralistic about it but it is what it is.We know their play book.

As per discussion the other day,I think inflation(well stagflation=credit deflation/price inflation)  is msot likely but I still have a niggling worry we may go Japanese which I'm working to reason through.I think

1 hour ago, Agent ZigZag said:

Good and am well pleased that someone else thinks I am right as I am heavily invested in the lot. Only problem is I have been positioned since 2009 when I thought the last bust was the end of the cycle. I guess we all live and learn. I hope the wait will be worth it. Talking of potash I have topped up my holdings through  cutting  my losses with Centrica. It hurt but there are times you must get rid of the dead weight and look at areas that are likely to recover it. 

You're the only one Agent Z.We made a big move out of banks and into cash post Northern Rock and never quite developed a viable plan in the interim(except for my non stock market specualtive activites).We did some trades,but ther ewas no conviction,no long term plan.I struggled to get past the fact that the cycle didn't end in a debt deflation.

51 minutes ago, DurhamBorn said:

Yes exactly.I think velocity did for the reflation kicking in last time.Plus China was still exporting deflation for a good few years.The difference this time is the amounts going into the pipes will be so big that once it starts moving the CBs wont be able to stop it.Any divis that are landing now are almost exclusive going into silver/silver miners and potash.I noticed a gilt auction would of failed a few weeks ago,but the BOE stepped in.They are straight forward monetizing fiscal spending now.

I think this is one of the few corners of the web where the impact of velocity gets discussed.The amount of economic mouthpieces that talk as if it's a cosntant is surreal.I think the aspect you refer to about CHina is crucial to understandign wher e the price inflation will come from.Rosenberg made a similar point t'other day that psot covid supply lines will get shortened geogrpahically,jobs bought home to the West,prices will rise.

Thought on Japan and why they haven't experienced price inflaiton despite the printing-they're export driven economy,any price rises get passed on.Difference is for the West we're mainly runnign trade deficits,so repatriating jobs will necessarily raise prices/weakening currencies will weaken currenceis.

[sancho panza]

questionDB

do you think we'll see higher UST rates as a consequnce of the $5tn? or will the excess jsut get sucked up by people seeking safe havens?

[JMD]

On 04/05/2020 at 11:57, Nicolas Turgeon said:

Hi All,

I don't post very often but I do keep checking in for all the latest deflationary chat. And pizza-making advice!!! Thought I might stick my head above the parapet as it seems I have a twin - paging @Knickerless Turgid LOL!!! Great username mate

ANyway back to investing....

DB have you looked into the bitcoin ETF available through Hargreaves Lansdown? Ticker is BIT-XBT

It's a Bitcoin tracker which I understand holds a 1:1 ratio of bitcoins proprtional to the money in the fund. Based in Sweden, priced in Kroner, low spread,2.5% fee. Seems to track the bitcoin price okay? The fee is a bit of a disadvnatge but compared to the hassle of using exchnages with bank transfers, wallets and the CAPITAL GAINS TAX when the ETF can be held in your SIPP.... Theres another BTC one priced in Euro (less volume I think) and ethereum ones too.

Anyone else looked into this? Pro's and cons? I know it got a mention on the old site.

As someone mentioned before, Plan B is on twitter and his stock to flow model is addictive and I read through his articel on medium. Amazing if the model continues to fit.

And I can't get over Bitcoin being a deflationary asset (or do I mean inflationary asset) i.e. the maximum supply is FIXED by maths. There will never be more then 21 million bitcoins! Fixed. Hard. No pritning more. And coins available for excahnge will only reduce after then as wallets get lost etc. Take that, fiat!

Nicolas Turgeon, do you own the xbt bitcoin eft in a sipp? Only I can't find it in my ii sipp. It would be a great option if you can hold it in sipp/ISA.

[The Idiocrat]

10 minutes ago, JMD said:

Nicolas Turgeon, do you own the xbt bitcoin eft in a sipp? Only I can't find it in my ii sipp. It would be a great option if you can hold it in sipp/ISA.

HL allow you to hold it in their SIPP, but not ISA.

[DurhamBorn]

29 minutes ago, sancho panza said:

questionDB

do you think we'll see higher UST rates as a consequnce of the $5tn? or will the excess jsut get sucked up by people seeking safe havens?

I think we will see slightly higher treasury rates as we move through the summer as the market starts to think we are entering inflation.I expect the $ to fall at the same time to the 90 area.There is a very real risk then though we get another leg down,treasuries go to close to zero rates and thats the end of the cycle.

The thing with the coming cycle is that the money wont go from CB to risk assets and sit there forcing dis-inflation.As prices start to move the money will move out into the real economy as companies start to re-tool,see profit etc.I dont think people understand just how much is sat in the pipes.Once it starts to move inflation will run.I wouldnt be shocked to see inflation top out above 20% by 2028/2020,though i think 12% to 15% is more likely.I think 8% on the US long bond is certain,maybe up to 12%.

Given the affects equity will replace debt again.

Notice today National Express is raising equity,not debt,

https://www.cityam.com/national-express-set-for-equity-raise-to-strengthen-balance-sheet/

Another bell ringing.

[leonardratso]

how does the bitcoin ETF map to BTC?

some profit taking going on at the mo, but good bull run last couple of days;

 

 

quite a bit of profit taking;

[TNS]

BT dividend scrapped till 2021. 

[TheCountOfNowhere]

2 hours ago, TheNickos said:

BT dividend scrapped till 2021. 

Ouch.

It's caught up on the share than no one dare speak for me.

[TheCountOfNowhere]

How low can easy jet go

 

easyJet plc

LON: EZJ

Follow

 

500.79 GBX −18.41 (3.55%)

7 May, 09:55 BST · Disclaimer

[PaulParanoia]

9 hours ago, leonardratso said:

good bull run last couple of days;

But will it break out the long term down trend this time?

[DoINeedOne]

BT has scrapped its dividend for the next two years as it copes with the fallout from the coronavirus lockdown and will instead increase its full fibre broadband rollout.

I do wonder if in a few years BT will still be talking about rolling out fibre seems like they have been talking about it for years already whilst i understand its not a simple task, also all these dividend cuts as others have said a lot people living or hoping on there dividend income 

[The Idiocrat]

4 minutes ago, DoINeedOne said:

BT has scrapped its dividend for the next two years as it copes with the fallout from the coronavirus lockdown and will instead increase its full fibre broadband rollout.

I do wonder if in a few years BT will still be talking about rolling out fibre seems like they have been talking about it for years already whilst i understand its not a simple task, also all these dividend cuts as others have said a lot people living or hoping on there dividend income 

 

Yes, a lot of oldies are goig to have problems what with this and Shell and others to come. Fuck all interest on cash in the bank and now fuck all on many blue chip shares.

I notice Telefonica have also reported today but have maintained dividend. There is also something from their CEO's statement (it's in Spanish) on reducing debt and free cashflow. I don't hold but am probably going to invest soon (price went up 3% first thing but has been creeping down and just turned negative).

 

[DurhamBorn]

2 hours ago, TheNickos said:

BT dividend scrapped till 2021. 

Good move by Jansen,im buying a lot this morning and keeping a bit back in case they dip another 10% as is quite possible.Should be looking at a 7.2% yield on a 7.7p divi after a year here.He knows he needs a good deal from the regulator and the best way to get one is cut the divi and offer to invest quickly.Government will take his hand off as they are desperate for investment.I expect BT will 4x from here over the cycle,,but 6x isnt out of the question.I reckon by 2028 BT are today trading on a PE ratio of 2.4 and maybe a cash flow available of 1.2

Of course people buying at £3+ for the then 5% divi wont be happy,and lots of people will sell and fill forums up with disgust about the divi.Jansen has made a fantastic move here though for longer term value creation.Government will give BT a good deal.It also means he can do any cuts etc without the screams of poor Susan who has 6 months sick a year losing her job while they pay fat divis.

The Telefonica deal today is also a very good move in the sector and should see more deals.The big telcos are starting to do a tobacco,consolidate,then as a group drift prices higher and simply pretend to compete.

As always most people will look the wrong way at a key inflection point.The main telco players look fantastic value as we enter the cycle,they are securing owing full networks that in a few years no new player will be able to enter without buying one of them.

It will be interesting to see if Vodafone cut again,they might do a no divis this year as well,and Telefonica should really cut at least a third and de-leverage a bit quicker,but havent.

The market if projecting a dis-inflation cycle to continue forever,when its ending all around us.

 

 

 

[DoINeedOne]

(Bloomberg) -- Telefonica SA and Liberty Global Plc have agreed to create the U.K.’s largest phone and internet operator, threatening their rivals and marking another industry-defining deal for billionaire John Malone.

The deal values the new company at 31 billion pounds ($38 billion), with Telefonica’s O2 being valued at 12.7 billion pounds and Liberty’s Virgin Media valued at around 18.7 billion pounds. The companies, which started negotiations in December, said in a statement Thursday there are 6.2 billion pounds in synergies.

The joint venture, first reported by Bloomberg, is a chance for both parent companies to rework two mid-tier rivals into a fully-fledged competitor to BT Group Plc in so called converged services, which combine fixed and wireless phone, broadband and television. It is also one of the largest deals since Covid-19 was declared a pandemic in early March.

Telefonica’s share rose as much as 4.4% as the announcement overshadowed mixed earnings, while BT revealed that it is canceling its dividend, causing shares to fall over 11%.

Telefonica will receive an initial payment from Liberty Global of about 2.5 billion pounds and another 5.7 billion pounds in future recapitalizations, and both companies will have equal stakes in the new venture. Each company will name half of the 8-member board, which will have a chairman who will rotate every two years. The deal is set to be completed in mid-2021.

The announcement is the latest deal for John Malone, Liberty’s billionaire chairman, who has been on a relentless M&A spree since selling cable provider Tele-Communications Inc. to AT&T Inc. for $48 billion in 1999. His track record took a knock late last year when his effort to sell UPC Switzerland for $6.4 billion fell apart.

For Telefonica Chairman Jose Maria Alvarez-Pallete, it’s also an opportunity to signal to investors he’s committed to restructuring the debt-laden company.

Investors have punished Telefonica stock since Pallete became chairman four years ago, as the Madrid-based company failed to deliver clear prospects for growth and cutting debt. The shares are down 30% so far this year, even after he introduced in November a strategy to focus on Spain, Brazil, the U.K. and Germany, which generate the bulk of sales, and place other Latin America activities into a separate division.

Key Terms

O2 will be debt-free, while Virgin Media comes with 11.3 billion pounds of net debtAny cash flow generation and financing needs will be divided equally between Telefonica and Liberty GlobalThe new unit will service over 46 million video, broadband and mobile subscribersBanks have underwritten 4 billion pounds for financing for O2 businessThe companies have yet to announce who will lead the new unit, with the board equally split, and the chairman to rotate every two years, first going to Liberty Global CEO Mike Fries.Both sides will have the right to kick off an IPO three years after the deal closes

By partnering with Liberty in the U.K., Telefonica puts Vodafone Group Plc in a difficult position. It deprives it of a potential partner which could have set it on the road to offering consumers fixed-line services wrapped into lucrative bundles at a national scale. And Virgin will no longer need to pay it for mobile wholesale access. That’s something Liberty would have needed to keep doing to capture potential new revenue streams from the next generation of wireless technology, such as the proliferation of smart devices. Analysts have not ruled out a fightback from the Newbury, England-based carrier.

While a potential IPO could provide “transparency” on the value of the new venture, the two companies aren’t “entering the deal with the idea of leaving,” Mike Fries, CEO of Liberty Global said. He added the transaction is a huge vote of confidence in the U.K., in spite of the uncertainties surrounding Brexit, which will “occur, and everyone will manage their way through it.”

The tie-up comes at a crucial moment for Virgin. Rival BT is the only U.K. operator to own both a mobile and fixed network, and it’s been investing to upgrade to fiber optic broadband. This threatens one of Virgin’s key selling points -- the speed of its internet services. It also gets a partner with significant experience in convergence and building and operating fiber network

[The Idiocrat]

Wow, BT at practically the Covid low price!

[DoINeedOne]

I will be buying Telefonica and BT today i am just amazed at how crazy this has all become

@DurhamBorn or anyone else do you have any views on the likes of Greggs and WH smiths 

this did make me chuckle 

Greggs has pulled back on plans to reopen its first sites to the public next week over fears it could attract crowds.

 

Also McDonalds 

 

Working in Advertising i love human behaviour but this virus is fascinating to watch how people are behaving

[TheCountOfNowhere]

12 minutes ago, DurhamBorn said:

Good move by Jansen,im buying a lot this morning and keeping a bit back in case they dip another 10% as is quite possible.Should be looking at a 7.2% yield on a 7.7p divi after a year here.He knows he needs a good deal from the regulator and the best way to get one is cut the divi and offer to invest quickly.Government will take his hand off as they are desperate for investment.I expect BT will 4x from here over the cycle,,but 6x isnt out of the question.I reckon by 2028 BT are today trading on a PE ratio of 2.4 and maybe a cash flow available of 1.2

Of course people buying at £3+ for the then 5% divi wont be happy,and lots of people will sell and fill forums up with disgust about the divi.Jansen has made a fantastic move here though for longer term value creation.Government will give BT a good deal.It also means he can do any cuts etc without the screams of poor Susan who has 6 months sick a year losing her job while they pay fat divis.

The Telefonica deal today is also a very good move in the sector and should see more deals.The big telcos are starting to do a tobacco,consolidate,then as a group drift prices higher and simply pretend to compete.

As always most people will look the wrong way at a key inflection point.The main telco players look fantastic value as we enter the cycle,they are securing owing full networks that in a few years no new player will be able to enter without buying one of them.

It will be interesting to see if Vodafone cut again,they might do a no divis this year as well,and Telefonica should really cut at least a third and de-leverage a bit quicker,but havent.

The market if projecting a dis-inflation cycle to continue forever,when its ending all around us.

 

 

 

Given that Centrica ( soz ) is down 41% for me and so is BT, I've sold half my Big C and bought BT with the proceeds. I see more upside for BT

Just now, DoINeedOne said:

I will be buying Telefonica and BT today i am just amazed at how crazy this has all become

Im tempted by easy jet again.

 

If it get's in the 4's Im having it.

[DurhamBorn]

5 minutes ago, DoINeedOne said:

I will be buying Telefonica and BT today i am just amazed at how crazy this has all become

@DurhamBorn or anyone else do you have any views on the likes of Greggs and WH smiths 

this did make me chuckle 

Greggs has pulled back on plans to reopen its first sites to the public next week over fears it could attract crowds.

 

Also McDonalds 

 

Working in Advertising i love human behaviour but this virus is fascinating to watch how people are behaving

I dont go to Greggs anymore everything is too small and too expensive.I go to Cooplands instead who are much cheaper and are expanding all around up here.

There are lots of disinflation stocks that might be very cheap and im sure some will perform very well,but im sticking to the sectors i think a reflation loving,with only the odd small holding on value ground on others.

[DurhamBorn]

@TheCountOfNowhere you know not to mention the name on here,unless it gets back over a squid minimum.Im tempted to sell it and buy back just so i dont have to look at the -5130 red.If it was the old days and i had the share certificate id frame it in the house.Please dont mention it again.