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

[AWW]

1 hour ago, Popuplights said:

Lucky you. I'm 25% down on mine.

If it makes you feel better, I'm down now 

[TNS]

1 hour ago, Popuplights said:

Lucky you. I'm 25% down on mine.

+1 and more 

[Popuplights]

https://www.reuters.com/article/us-exxon-mobil-cuts-exclusive/exclusive-exxon-prepares-spending-job-cuts-in-last-ditch-move-to-save-dividend-idUSKCN24V2RP

 

Darren Woods has been a fucking disaster. 

 

[nirvana]

29 minutes ago, Popuplights said:

Darren Woods has been a fucking disaster.

he couldn't give a shit....

Exxon Mobil CEO Darren Woods received a 25% pay raise in 2019, boosting his total compensation to $23.5 million.

https://www.dallasnews.com/business/energy/2020/04/10/exxon-mobil-ceo-darren-woods-got-a-25-pay-raise-in-2019/

The corporate cunts are making out like bandits....

[Popuplights]

Exactly. Fucking cunts will fly the fucker into the ground, as long as they get their cut.

 

[MrXxxx]

Bought some PFC yesterday (LSE registered) and although above the £1k limit didn't get charged for Stamp duty like all other purchases, any idea why?

[CVG]

13 minutes ago, MrXxxx said:

Bought some PFC yesterday (LSE registered) and although above the £1k limit didn't get charged for Stamp duty like all other purchases, any idea why?

You don't pay stamp om smaller companies. Look up the criteria - I forget.

Here you go:

"as of 28 April 2014, you no longer have to pay Stamp Duty when buying shares traded on the London Stock Exchange’s AIM market or on Exchange Traded Funds (ETFs)."

[MrXxxx]

40 minutes ago, CVG said:

You don't pay stamp om smaller companies. Look up the criteria - I forget.

Here you go:

"as of 28 April 2014, you no longer have to pay Stamp Duty when buying shares traded on the London Stock Exchange’s AIM market or on Exchange Traded Funds (ETFs)."

Thanks CVG but PFC is a FTSE 250 not an AIM so couldn't be classed as small, its not an ETF either....this is why I am confused.

[CVG]

2 minutes ago, MrXxxx said:

Thanks CVG but PFC is a FTSE 250 not an AIM so couldn't be classed as small, its not an ETF either....this is why I am confused.

In that case I'm clueless. If you don't tell 'em then I wont either!

[Castlevania]

27 minutes ago, MrXxxx said:

Thanks CVG but PFC is a FTSE 250 not an AIM so couldn't be classed as small, its not an ETF either....this is why I am confused.

You only pay stamp duty on U.K. registered companies. Based on a quick Google Petrofac is a company registered in Jersey.

[Hardhat]

I ended up picking up some more RDSB around 1100p. My average is probably around 1300p now. Happy for a long term hold.

[reformed nice guy]

Gold at $1980 - will today see us go over $2000?

Silver near $25

Crude staying over $40

Bitcoin over $11,000

US dollar index 92.5

Large premiums to buy physical PMs

I think that general confidence in the economic situation is low

[DurhamBorn]

The interesting bit in BTs results today was the small comment that hardly anyone will notice 

"On Wednesday, Ofcom issued a consultation proposing to extend the regulatory enablers to rural parts of the country, following Openreach’s commitment to build to 3.2 million premises in these areas. If included in the final regulation this would see CPI indexation on Openreach’s legacy services across the whole of the UK, incentivising network builders to build and customer take-up in these areas."

Just as hoped/expected the regulators are allowing CPI indexing on price increases to get the build.Right now that doesnt seem much,after all the markets are looking backwards to dis-inflation,but once CPI hits 4%,5%,6% etc and these networks are being built out of earnings now and depreciated now,free cash will explode higher.This will feed to other telcos as well as it forces up base prices.

By 2025 i expect CAPEX to be falling hard at Telcos,while price increases are feeding through,possible free cash flow doubles or trebles over the cycle.Outlier even more.

Where telcos are in the cycle now reminds me of tobacco back during the tech boom.Nobody wanted them,but they consolidated the industry and ran prices up every year higher than inflation and delivered massive returns.I dont think telcos will do the same,but i do think they are now in a similar place and the market is missing it.

The dollar is getting really close to target now iv been lightening my silver miners as the dollar falls.I still think the 90 area is where things get interesting though 86 is an outlier still.

Governments are in a huge hole with massive changes jolting everything,as always happens at cycle turns.We are having to take some losses on some areas as we buy the ladders but easily outpaced by the areas that have doubled and more.

Here in the UK the changes will expose just how well off benefit claims (mainly with children) and government/council workers are compared to the private sector.There is zero chance the government get anywhere near the tax revenue they need,biggest structural deficit in history.Biggest cuts in history,or a huge run up in industrial investment and the inflation that goes with it.Thats where we are.The amount of liquidity building in the system is epic,prepare for the roaring 20s again.

[Donald McFlurry]

48 minutes ago, DurhamBorn said:

By 2025 i expect CAPEX to be falling hard at Telcos,while price increases are feeding through,possible free cash flow doubles or trebles over the cycle.Outlier even more.

Where telcos are in the cycle now reminds me of tobacco back during the tech boom.Nobody wanted them,but they consolidated the industry and ran prices up every year higher than inflation and delivered massive returns.I dont think telcos will do the same,but i do think they are now in a similar place and the market is missing it.

Good spot on the CPI stuff.

 

I think lot of capex in the last 20 years at telcos has been in dealing with two step changes in technology; the move to optical fibre, and the change in technology from circuit to packet switching.. Telefonica have been shutting down copper exchanges across Spain for the past few years and are ahead of BT that area, at least domestically. 5G networks are completely packet optical, so a lot of old equipment can be thrown away over the medium term as 2G and 3G networks are turned off. Another aspect of this has been the painful legacy of restructuring a business that has undergone huge changes in terms of staff and organisation. However, those big adjustments are all laying the groundwork for far lower expenditure in the future. Upgrades to capacity can be achieved on packet/optic infrastructure by swapping or adding equipment, rather than digging up the ground again. Operational costs are also reduced, with lower power footprint of exchange equipment, fewer active street cabs and increased reliability and quality of optical fibre.

Once those debt piles become manageable, they should generate very solid returns. Even more so in an inflationary environment.

[MrXxxx]

2 hours ago, Castlevania said:

You only pay stamp duty on U.K. registered companies. Based on a quick Google Petrofac is a company registered in Jersey.

Ah...just assumed the SD would relate to the stock market register rather than domiciled/registered country. Thanks CV.

[wherebee]

18 minutes ago, Donald McFlurry said:

Good spot on the CPI stuff.

 

I think lot of capex in the last 20 years at telcos has been in dealing with two step changes in technology; the move to optical fibre, and the change in technology from circuit to packet switching.. Telefonica have been shutting down copper exchanges across Spain for the past few years and are ahead of BT that area, at least domestically. 5G networks are completely packet optical, so a lot of old equipment can be thrown away over the medium term as 2G and 3G networks are turned off. Another aspect of this has been the painful legacy of restructuring a business that has undergone huge changes in terms of staff and organisation. However, those big adjustments are all laying the groundwork for far lower expenditure in the future. Upgrades to capacity can be achieved on packet/optic infrastructure by swapping or adding equipment, rather than digging up the ground again. Operational costs are also reduced, with lower power footprint of exchange equipment, fewer active street cabs and increased reliability and quality of optical fibre.

Once those debt piles become manageable, they should generate very solid returns. Even more so in an inflationary environment.

I understand the posivitity, but surely if we enter the 70's again, with people counting the pennies due to inflation and lack of jobs, surely the first to go will be the expensive mobile phone?  cheap plans, pay as you go preferred?  will that impact on the telcos?

[Hardhat]

.

[Donald McFlurry]

13 minutes ago, wherebee said:

I understand the posivitity, but surely if we enter the 70's again, with people counting the pennies due to inflation and lack of jobs, surely the first to go will be the expensive mobile phone?  cheap plans, pay as you go preferred?  will that impact on the telcos?

Presumably, the desired outcome for Central banks and governments is an environment of high employment where wages are able to keep pace with inflationary pressures. 

[Eventually Right]

1 hour ago, DurhamBorn said:

 

The dollar is getting really close to target now iv been lightening my silver miners as the dollar falls.I still think the 90 area is where things get interesting though 86 is an outlier still.

 

Hi DurhamBorn

I know David Hunter sees the dollar explode to 140ish in a secondary bust, after hitting 85, but I think you're less convinced of that second bust hitting.

 *If* he were to be right about about a worldwide secondary bust, I can see his rationale for the dollar spiking-do you think it would get near those heights before some kind of extreme central bank action/new plaza accord etc happened, and curtailed it?

Cheers 

[DurhamBorn]

38 minutes ago, Donald McFlurry said:

Good spot on the CPI stuff.

 

I think lot of capex in the last 20 years at telcos has been in dealing with two step changes in technology; the move to optical fibre, and the change in technology from circuit to packet switching.. Telefonica have been shutting down copper exchanges across Spain for the past few years and are ahead of BT that area, at least domestically. 5G networks are completely packet optical, so a lot of old equipment can be thrown away over the medium term as 2G and 3G networks are turned off. Another aspect of this has been the painful legacy of restructuring a business that has undergone huge changes in terms of staff and organisation. However, those big adjustments are all laying the groundwork for far lower expenditure in the future. Upgrades to capacity can be achieved on packet/optic infrastructure by swapping or adding equipment, rather than digging up the ground again. Operational costs are also reduced, with lower power footprint of exchange equipment, fewer active street cabs and increased reliability and quality of optical fibre.

Once those debt piles become manageable, they should generate very solid returns. Even more so in an inflationary environment.

thanks @Donald McFlurry for your knowledge and input,hopefully you can keep the thread up to date on what you see in the sector.Im a macro strategist in that i look at cycles and liquidity flows etc.Its funny but what i see in the numbers is what you have talked about in the actual physical.I think the market is looking backwards when for the reasons you put above they should be looking forwards.BT itself has good new management and they are playing a blinder i think.Stopping the divi to offer to speed up fiber and then getting the regulator to agree CPI across the entire legacy network for it is a lovely bit of work,especially as like you say the costs of that network will start to fall quite quickly.Debts in the sector are high,everyone knows that,but this forcing down the curve at the longer end is allowing telcos (and others) to lock in really low rates right across the cycle.Telefonica now has an average 11+ years debt profile and its growing.If OPEX and CAPEX start to fall as they will,maybe not both at the same time,and inflation increases kick in debts might be cut faster than people think.I expect debt cutting will translate to x2 in equity increases,so for TEF for instance i expect a 10 billion debt cut to increase the equity by 20 billion.

I sniff a structural undervaluation of the sector outside of the US.Short term could see more pain of course,but by the end of the cycle i expect the sector to outperform inflation by at least 2x,probably 3x and maybe 5x.

 

[DurhamBorn]

31 minutes ago, wherebee said:

I understand the posivitity, but surely if we enter the 70's again, with people counting the pennies due to inflation and lack of jobs, surely the first to go will be the expensive mobile phone?  cheap plans, pay as you go preferred?  will that impact on the telcos?

Yes that will hit them,but for 99% of the people i know something else would go first and their phone would go last.Plus individual consumers wont be driving the sector,the amount of SIMs and connections will explode as everything is connected.Telcos are approaching the point where they can increase prices again and CAPEX tops out,thats huge for free cash flow.

[DurhamBorn]

9 minutes ago, Eventually Right said:

Hi DurhamBorn

I know David Hunter sees the dollar explode to 140ish in a secondary bust, after hitting 85, but I think you're less convinced of that second bust hitting.

 *If* he were to be right about about a worldwide secondary bust, I can see his rationale for the dollar spiking-do you think it would get near those heights before some kind of extreme central bank action/new plaza accord etc happened, and curtailed it?

Cheers 

Im not sure at all,its a huge risk,but it depends where it hits and the structure.It could be some sectors hold up while over valued areas fall.The Fed is fully engaged so liquidity isnt a problem.Solvency is a problem though and governments need to keep pumping massive amounts of fiscal into the economy.

[AWW]

35 minutes ago, wherebee said:

I understand the posivitity, but surely if we enter the 70's again, with people counting the pennies due to inflation and lack of jobs, surely the first to go will be the expensive mobile phone?  cheap plans, pay as you go preferred?  will that impact on the telcos?

Most of their customers will be locked into long contracts, so it won't be quite that easy. I also think that a lot of people get an unseemly amount of pleasure from owning a new phone. Pleasure will be in short supply, and it'll only cost fifty quid... (per month, for the next two years).

We tight-arses with our 2 year old second-hand iPhones on the Smarty network are far outnumbered by the above people.

[ILikeCake]

22 hours ago, leonardratso said:

i am actually dead, im living in a hole behind a wardrobe.

Pulled the same stunt 20 years ago with a canoe and a reggie perrin type beach scenario, pissed all the insurance money away on venezuelan blow and hookers.

Just trying it again.

 

This still makes me laugh.

[Harley]

2 hours ago, DurhamBorn said:

The interesting bit in BTs results today was the small comment that hardly anyone will notice........