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


spunko

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2 minutes ago, Harley said:

1835442736_Screenshot_2020-07-31SoYoureSayingThat-Sowhatyouresaying.png.c18da893cf1451319e563a0c21dc8d3c.png

I sure am Harley,im nearly finished on them now,but still some firepower mainly as the portfolio value went up a lot with the silvers meaning allocations can be increased.Room for them to be smacked more yet of course.It will be interesting to see how much their turnover is hit this year,anything under 10% would be very good and they might manage under 6%.What might set the sector off on a long upswing might be a deal that the regulators in Europe wave through.

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Heart's Ease
On 30/07/2020 at 11:06, jamtomorrow said:

Repsol tagged a rung on my ladder today, would be more than happy to see the oilies grind down a bit more and tag one more at EUR 6.38. Waiting on GBP 10.88 for RDSB.

Huge h/t to DB for educating me/us on ladders generally, feels like slowly building a position with good value, very few emotions involved.

Getting close! 

I just got next Repsol. Three more ladders to get in RDSB!  We will see how that pans out. 

I did not have the £ to buy in March. 

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jamtomorrow
18 minutes ago, Heart's Ease said:

Getting close! 

I just got next Repsol. Three more ladders to get in RDSB!  We will see how that pans out. 

I did not have the £ to buy in March. 

Well that's another grain on the pile then. Repsol is getting close to my next rung *already*, Telefonica is even closer, BP about 6% off.

Finding it v. interesting that my buy points are slowly getting hit, one by one. I set them thinking that would be it until the other shoe drops - if this *is* the other shoe, it's dropping sooner than I thought.

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Heart's Ease
22 minutes ago, jamtomorrow said:

Well that's another grain on the pile then. Repsol is getting close to my next rung *already*, Telefonica is even closer, BP about 6% off.

Finding it v. interesting that my buy points are slowly getting hit, one by one. I set them thinking that would be it until the other shoe drops - if this *is* the other shoe, it's dropping sooner than I thought.

The emotion-less trade.  

I also picked up some BT. Last bought at 150p. I allowed myself a bit of emotion then. 

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Bricks & Mortar
25 minutes ago, jamtomorrow said:

Well that's another grain on the pile then. Repsol is getting close to my next rung *already*, Telefonica is even closer, BP about 6% off.

Finding it v. interesting that my buy points are slowly getting hit, one by one. I set them thinking that would be it until the other shoe drops - if this *is* the other shoe, it's dropping sooner than I thought.

Could be an indication of DB's 'sector rotation' idea - which I think mean different sectors hit their lows at different times, rather than one big crash hitting everything?
 

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4 hours ago, Cattle Prod said:

Lah - dih - dah, how old is an iPhone 5? :D

I'm still on my Samsung S2. They make it so difficult/impossible to upgrade software and apps that I refuse to waste money to be made an idiot of. I still only pay for the calls I make after I have made them. My usual monthly bill is £0.00. I love it when I get a call from India promising to reduce my monthly bill! I'm a luddite and proud.

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12 minutes ago, CVG said:

I'm still on my Samsung S2. They make it so difficult/impossible to upgrade software and apps that I refuse to waste money to be made an idiot of. I still only pay for the calls I make after I have made them. My usual monthly bill is £0.00. I love it when I get a call from India promising to reduce my monthly bill! I'm a luddite and proud.

A purchased (sub £100) 2 to 3 year old Motorola plus £6 pcm for plenty of data and unlimited calls and messages.  £0 cap because if I have to pay to call then they're not worth it. No need to fix what ain't broken.  Just changed broadband to save over 50%.  Would have moved to mobile broadband but the prices aren't quite there yet for the two suppliers with the good signal.  Reminds me, time to sort out the electric again.....

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Transistor Man

Worth a read:

“We stand at the cusp of a new bull market for oil...

https://ninepoint.com/commentary/commentaries/2020/062020/energy-fund-market-view-july-272020/

There are 4 key elements to the thesis:

1) US shale hyper growth is over – going forward companies will set lower growth targets (~5%) and expressly maximize free cash flow to allow for return of capital in order to compete with other sectors given what is now an abhorrent record of shareholder capital destruction. This means that US shale production will be largely inelastic to a rising oil price and this is a profoundly important development since without US shale non-OPEC production would have been flat for the past 5 years (!)

2) Global offshore production (about 1 in 4 barrels produced today) is entering a period of stagnation/decline due to too many years of insufficient investment. Industry has now fully harvested the last of the mega projects that were sanctioned in a $100 oil price environment and new projects coming online should be insufficient to fully offset base decline rates.

3) OPEC spare capacity, adjusted for currently constrained production that will come online over the next 6 months as production continues to normalize, sits at around 2MM Bbl/d (at best) and resides in a country with meaningfully higher oil price desires hence their unwillingness to bring on production anywhere near current price levels.

4) Oil demand will continue to grow for at least the next decade despite continued electric car adoption and expansion of (supposed) green energy capacity due to population growth rates and an aggregate increase in net living standards (which has a very high correlation to energy consumption).

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5 hours ago, Cattle Prod said:

Wha heyyy! The EIA data finally catches up with what I said here a few months ago. US production down to about 10mbpd, down around 3.7mb since its peak, half a Saudi Arabia (as exporter). Its actually a little higher than this right now due to shut in production coming back on, and EIA will be celebrating this is three months or so when they catch up just as production starts to structurally crater due to natural decline in shale fields. Should be fun.

Leads and lags in action.

Screenshot_20200731-171725_Twitter.thumb.jpg.882dce6964c760af89c791166dbd81a5.jpg

I find it incredible that everyone is dumping,and has been dumping the very stocks that the next cycle will favour.Its almost like everyone simply thinks oil demand has gone forever,just like that.Although its not my favourite sector,i do think this is the one that will shock people how well it does.The fact NEST etc are dumping everyone out of big oil (and also the likes of BHP) when they are the very shares in the FTSE that will hedge inflation is mind boggling.They are probably going to buy Amazon with the money .Or Tesla.

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14 hours ago, Cattle Prod said:

Lah - dih - dah, how old is an iPhone 5? :D

Lah di dah I'm using the phone I got in 2013 after losing the last one in a Hong Kong taxi.

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4 hours ago, DurhamBorn said:

I find it incredible that everyone is dumping,and has been dumping the very stocks that the next cycle will favour.Its almost like everyone simply thinks oil demand has gone forever,just like that.Although its not my favourite sector,i do think this is the one that will shock people how well it does.The fact NEST etc are dumping everyone out of big oil (and also the likes of BHP) when they are the very shares in the FTSE that will hedge inflation is mind boggling.They are probably going to buy Amazon with the money .Or Tesla.

I've gone in on BHP and BP just due to this thread driving my thinking to clarity.  Amazing to see BP, for example, at prices last seen in 1995.

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15 minutes ago, JoeDavola said:

What do you lot use as a trading platform?

AJBell for the majority, some in HL and started using ii for this years ISA allowance as there are a few things I wanted that I couldn't get on AJ.

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UnconventionalWisdom
On 29/07/2020 at 13:13, DurhamBorn said:

70s where policy makers feared unemployment much more than inflation because they worried about the young going down a leftie/commie road

It is amazing to see how the policies influence popular opinion. Crazy that they know how to manipulate (virtually) the whole population.

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Castlevania
10 hours ago, DurhamBorn said:

I find it incredible that everyone is dumping,and has been dumping the very stocks that the next cycle will favour.Its almost like everyone simply thinks oil demand has gone forever,just like that.Although its not my favourite sector,i do think this is the one that will shock people how well it does.The fact NEST etc are dumping everyone out of big oil (and also the likes of BHP) when they are the very shares in the FTSE that will hedge inflation is mind boggling.They are probably going to buy Amazon with the money .Or Tesla.

I wish I was a fund manager. All you have to do is match the index (and the index doesn’t include dividends) and your fund collects your 1% so you keep your fat salary. Any year you out perform hello big bonus. It must be the best paid to effort job out there.

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10 hours ago, DurhamBorn said:

I find it incredible that everyone is dumping,and has been dumping the very stocks that the next cycle will favour.Its almost like everyone simply thinks oil demand has gone forever,just like that.Although its not my favourite sector,i do think this is the one that will shock people how well it does.The fact NEST etc are dumping everyone out of big oil (and also the likes of BHP) when they are the very shares in the FTSE that will hedge inflation is mind boggling.They are probably going to buy Amazon with the money .Or Tesla.

Ditto, but maybe `they` have got it incredibly right or `we` have got it incredibly wrong...only time will tell!

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37 minutes ago, Knickerless Turgid said:

Personally, HL and ii.

Don't do a Guitarman, Joe...

I've been trading on my own account ten years, and still see myself as a minnow in a sea of sharks.  I would be very very careful of starting to trade now when we are in the mother of all bubbles, to be honest.

Every penny I have in stocks my wife and I see as not existing until we pull it out and have cash in hand.  That's how little I trust the system.

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sleepwello'nights
10 minutes ago, MrXxxx said:

Ditto, but maybe `they` have got it incredibly right or `we` have got it incredibly wrong...only time will tell!

Would it have something to do with the Saudi listing their oil company?

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15 minutes ago, Castlevania said:

I wish I was a fund manager. All you have to do is match the index (and the index doesn’t include dividends) and your fund collects your 1% so you keep your fat salary. Any year you out perform hello big bonus. It must be the best paid to effort job out there.

I've known a few - the effort is immense.

 

Not trading - but cut throat political infighting to stop others taking your job and your clients.

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Don Coglione
7 minutes ago, wherebee said:

I've been trading on my own account ten years, and still see myself as a minnow in a sea of sharks.  I would be very very careful of starting to trade now when we are in the mother of all bubbles, to be honest.

Every penny I have in stocks my wife and I see as not existing until we pull it out and have cash in hand.  That's how little I trust the system.

The market is bent. The amount of insider trading that goes on, especially in the smaller stocks, is ridiculous and so blatant as to be taking the piss.

As a retail punter, accept that you will only ever receive the crumbs from the tables of the big boys; if you can get fat on those, then crack on.

That is not to detract from the core message of this thread, which has always been bang-on.

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1 hour ago, JoeDavola said:

What do you lot use as a trading platform?

Interactive Brokers.  Don't be put off by the complex platform. The low commissions, full range of global instruments and markets, and platform stability during market panics more than compensates for the steeper learning curve. 

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6 hours ago, wherebee said:

I've gone in on BHP and BP just due to this thread driving my thinking to clarity.  Amazing to see BP, for example, at prices last seen in 1995.

Look at Repsol,on January 1st 2000 it was 19.35,today its 6.58.

Now you could argue that these kind of stocks should trade in a range and the return is more from the divi,and that is party true.However the price the market is placing on their future cash flows is astounding.Of course the massive liquidity injections and the rise of passive and ethical investing etc explains a lot of the capital allocation.

Whats really happened is rates being so low and inflation so low has favoured companies that dont have massive capital assets.

The irony is Repsol is actually one of the leaders in green energy,it has a superb pipe network in Spain that could carry hydrogen and its refineries are the best in Europe.They also have a lot of hydro power,and coming on stream wind and solar and could be a huge player in Hydrogen down the lines.They are also probably one of the only big oil companies who gets easy access to South American for cultural reasons.

The facts are though the markets always hurt the most people they can.While everyone piles into the "future" companies they fail to understand in a rising inflation cycle they have zero chance of seeing cash returns even matching inflation,and once that sinks in the equity will fall to reflect that.

We are entering one of,or maybe the biggest industrial cycle since the war yet the markets are hugely underweight in the sectors who will gain.Going against the crowd takes focus,belief and skill,but when you have a macro road map you have confidence in its just a case of keep the emotion out,keep diversified .

The markets are down 20%+ in the UK,but most people on here should be ahead,even though they have many stocks down, due to gold and silver miner allocations and several others.Would i take 100%+ up in silver miners and others and down 10% in Telefonica,12% in Vod,15% in BT,2% in Shell,8% in Repsol ,and even some scattered 50% downs,any day of the week.So far we are navigating this cycle turn very well indeed.Some mistakes,some miss timing the odd scattered disaster,but in much better shape than most portfolios i suspect.

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1 hour ago, Castlevania said:

I wish I was a fund manager. All you have to do is match the index (and the index doesn’t include dividends) and your fund collects your 1% so you keep your fat salary. Any year you out perform hello big bonus. It must be the best paid to effort job out there.

Financial advisors have it even better.I had to use one earlier in the year to do a final salary transfer.The only way they will do it is if they think they get to manage the funds forever,so i had to go in and act like a punter who knew enough (to tick their regulator boxes),but let them think they would be managing the money.

The costs would of been 2.3% a year,and they pretty much bought things like Vanguard Lifestyle funds.In your 40s then 40/60,or 60/40 funds,a bond fund,a few equity trackers and thats about it.So a spread that over a very long period when not at the top of a cycle might bring in 6% a year before fees.The were taking over a third of the income.Take inflation and you would get about 1.5% and take a draw down of say 5% and its not good.

Of course the second the money arrived i started a transfer to my SIPP and hand delivered them a letter telling them not to invest as id decided to move to my SIPP and i wouldnt need their services anymore.In my SIPP once after dealing charges etc the fees are 0.1% a year for the amount in the transfer.

So lets say the transfer value is £200k and i invest in 40 stocks then leave those stocks alone for 30 years.The fees are 0.1% in a Hargreaves SIPP

The £200k left with the IFA.

That 2.2% difference in fees means that portfolio compounding those fees sees an extra £184k go in fees compared to the SIPP over 30 years.

So my Hargreaves SIPP starts at £200k

My IFA pension starts at £200k,

My IFA pension needs to get to £384k in 30 years just to cover the fees i dont pay in my SIPP.

 

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