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


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Castlevania
5 minutes ago, DurhamBorn said:

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.

 

Yeah. It has crossed my mind to become a financial advisor. The gap in the market as I see it is for those people (especially the self employed) on lowish wages that wouldn’t be materially worse off if they went on benefits I.e. if you earn £30k cut it down to £12k by putting £18k in a pension and get the government to top up your pay and pay your rent.

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34 minutes ago, Castlevania said:

Yeah. It has crossed my mind to become a financial advisor. The gap in the market as I see it is for those people (especially the self employed) on lowish wages that wouldn’t be materially worse off if they went on benefits I.e. if you earn £30k cut it down to £12k by putting £18k in a pension and get the government to top up your pay and pay your rent.

Nobody does this as nobody thinks it could possibly be legal. 

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1 hour ago, DurhamBorn said:

 

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.

I'm up 24% since June 15th.  That's insane when you think the rest of the market is down 20%. 

And it's not because I am smart, it's due to this thread and the general counter-culture approach of this site that has driven my views for years.

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22 hours ago, AWW said:

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.

Don't underestimate the contracts people sign up for.

I remember a while back being sat in an office with some CS girls - not highly paid. One was banging on about her great contract on the latest Samsung and about how it included Spotify... her monthly bill which she didn't seem to think was anything out of the ordinary... £80! Eighty fucking quid a month!

My 40% discount on Voda ran out a few months ago, and for the first time I've not been able to come to an agreement with the chatbot so have requested PAC codes for our 2 numbers. Not particularly annoyed as a Voda share holder as I doubt they make much out of me anyway! Sacking tight gits like me off can't be a bad thing :)

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Talking Monkey
14 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.

Interesting to hear oil is not your favorite sector DB, what would be your top 3 sectors. I do think oil is going to do incredibly well through this decade, like you I find it unbelievable that the mainstream narrative is vilifying and dismissing the sector so much.

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24 minutes ago, Cattle Prod said:

That sounds pretty accurate, I must dig into who wrote it, they know what they are talking about. I'm glad someone else is calling bullshit on opec spare capacity and is pointing out opec supply growth is flat. Also 100% the US no longer being the growth engine being profoundly important. It's why I go on and on about it (sorry! But it'll be a very big deal, you'll see). Doesn't mention the decline rates though, world supply is going to get "mugged" by this in a few months time. Rig count down 2 in the Permian again this week. I don't see it creeping up till $50-$55 WTI, and add c. 9 months to that for oil to start flowing, to go with 4 that have passed. So we are now at a 13 month time lag for production to respond to tight supply/higher prices. That's enough time for a 2008 style spike. It'll take a while to work through stockpiles first before the market starts adjusting prices, but another big drawdown next week I think. I think thats why price is so muted at the moment: it wants to fall, but market smells inflation. It wants to rise, but "meh, stockpiles". Won't last. 

Number 4 is the big question for me. Demand has been linearly increasing fir decades, but my own habits are changing so why not everyone elses. I suspect it'll be a "sector rotation" of oil demand from consumer to industrial. World energy needs have not decreased, they are just moving around (e.g need less jet fuel, need more long car journeys. Need less imports, need more domestic manufacturing).

Companies are reporting on their worst quarter in history, so share prices are dropping back. I'm happy to hold and will add add ladders too. I don't think this is the second shoe to drop. I'm increasingly buying into the sector rotation idea for the BK - Hedgeye are talking alot about stagflation and what sectors do well then/in the 70s. Includes tech, which hadnt occurred to me. I think DB is spot on to be focussing on corporate bond maturities and coupons. 

 

That is crucial going forward,the bond maturity profile and coupons.Big debt,big asset companies like oil and telcos are all rushing to re-finance and lock in really low coupons.The market is ignoring it because they think prices are going to keep falling.In macro terms there is actually a massive pincer movement forming.I cant stress highly enough how important this is for positioning for the cycle.In simple terms a telco is putting in fiber now with coupons of around 2.7% that the regulator is now flagging as allowing CPI price increases.Of course the regulator thinks who cares inflation is staying below 2%.However they are wrong,hugely wrong.Once CPI is 4% and your OPEX starts to fall,then margins are going to expand fast.I think we are in for a great cycle on here.Getting the silver run right is providing lots of extra capital to pick up areas on their backsides.

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2 hours ago, Cattle Prod said:

Fwiw it's not my favourite sector either 😁

A sector on decline can never be my favourite, but its the one I understand best so own the most. I think it's going to go out with a bang, hopefully stimulating the transition to better energy sources. I fully expect to be out of a job in 8 years time.

My favourite is precious metals. I think its going to go from being a laughing stock to one of the most important sectors in the world, like it always has been. I think this 100% fiat era since 1971 will be seen as an abberation. 

CP, sorry to hear that but wouldn't your employer retrain you in renewables, assuming of course that your skills are transferable? Saying this probably betrays my ignorance of the oil sector! (btw, PM's are not strictly a 'stock', but i did like what you did there! However, apologies if you were talking gold/silver miners?)

 

But in terms of favourite sectors and next-cycle-sectors that will run their assets/cash flow ahead of inflation, are there other ones apart from energy/telecoms/potash?

Health is probably another sector, but not so clear which parts of that industry will benefit.

...but beyond this, I guess much greater thinking has to be done into which (sub?) sectors might do particularly well from the coming industrial/infrastructure cycle boom. Steel/chemical has been mentioned before, but are there others to be aware of?

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2 hours ago, Cattle Prod said:

What version of the platform do you use? Ive tried mobile, web based or downloaded the workstation. All have been unsuable (for options) to me one way or another and Ive found myself going back to Saxo and their crap prices. Disclaimer - I didnt follow any tutorial 😁

I use the Trader Workstation desktop download. TBH it runs pretty painfully slowly on my 5 year old Macbook Pro.. better in the "Classic" look than the newer "Mosaic" look, and I needed to up the memory allocation too. Beyond that, it's about customising the layouts to give you what you need and no more.

It runs much faster on WvR's newish Macbook Air, so my computer has a lot to do with it.

It's not an easy platform to work out, but you get there eventually. 

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12 minutes ago, JMD said:

CP, sorry to hear that but wouldn't your employer retrain you in renewables, assuming of course that your skills are transferable? Saying this probably betrays my ignorance of the oil sector! (btw, PM's are not strictly a 'stock', but i did like what you did there! However, apologies if you were talking gold/silver miners?)

 

But in terms of favourite sectors and next-cycle-sectors that will run their assets/cash flow ahead of inflation, are there other ones apart from energy/telecoms/potash?

Health is probably another sector, but not so clear which parts of that industry will benefit.

...but beyond this, I guess much greater thinking has to be done into which (sub?) sectors might do particularly well from the coming industrial/infrastructure cycle boom. Steel/chemical has been mentioned before, but are there others to be aware of?

I did like transports,but after buying a lot in March i ditched them all for a decent profit,mainly due to the way this deflation is playing out.It still might be a very good sector,but i dont like the fact at the moment if the government pulled funding the whole lot would go bust.Im watching it like a hawk though because if passenger numbers do move towards normal id move quickly to buy a lot of the sector.

Alongside potash you also have side markets like supplying farmers etc,its why i like Nutrien.Fantastic position to gain margin from potash,and the middle man.

Military hardware might be able to do well,though not certain.Reflation means countries have to protect assets and with a new cold war starting,and maybe even hot proxy wars with China it could be a good area.I sold Babcock for a small profit,but looking to add some back now its fallen to around £3.

Once the debt deflation is over and systemic risk goes away insurers could prove very lucrative.Rising bond yields etc should really help them,and id be buying the likes of Aviva and Legal and General now if it wasnt for the risk of counter party risk etc.I might buy them later though.

 

 

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3 hours ago, Talking Monkey said:

Interesting to hear oil is not your favorite sector DB, what would be your top 3 sectors. I do think oil is going to do incredibly well through this decade, like you I find it unbelievable that the mainstream narrative is vilifying and dismissing the sector so much.

Silver,potash,gas,telcos,oil,are my favs in order.I own more in telcos and oil though now than silver as iv been selling a lot of miners during the big run.Sold no physical though and hold some miners still.

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reformed nice guy
1 hour ago, JMD said:

Health is probably another sector, but not so clear which parts of that industry will benefit.

I had similar thoughts and after a bit of research I bought into Siemens Healthineers.

They make big things like CT scanners, PET scanners etc 

I think that, like the thesis of the thread, they are benefiting from the low rates - cheaper for them to borrow but also for the hospitals that are buying them to finance

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https://www.amazon.com/Total-21st-Century-Trigger-Pandemic/dp/1892998262

Worth watching to see if we can get a copy in the UK easily.Iv read some parts of this and it looks like it really gets into where we are going.Likely this will provide lots of pointers to the cycle ahead.The west is going to re-tool and arm.Since the did what they did with China flu and Hong Kong,the UK will be using lots of soft power against China as well,and China is making a huge mistake thinking we are too small to worry about.

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Democorruptcy
2 hours ago, DurhamBorn said:

I did like transports,but after buying a lot in March i ditched them all for a decent profit,mainly due to the way this deflation is playing out.

Good job you ditched the laddering in approach and waited for the crash instead!

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Clueless Imbecile

Hi DurhamBorn (and any of you other great people on here who cares to comment)....

Just wondering what you think the prospects are for UK residential property?

I'm quite excited about the reflation stocks theme of this thread and the macro strategy. However, I'm wondering if it would be safer for me to just sell my equities and buy a house instead (perhaps less risk of it disappearing into a black hole, like I worry that cash savings and online shares & funds ISA investments might in the event of a "big kahuna" bust).

My situation:

Age: late 40's
Salary: £38K pa
Living cheaply (& happily) with parents
Don't own a house
No dependents
No debts
Do own and "investment pot" of cash, shares, funds (mostly in ISA)
My pot is big enough such that I could buy a modest house in the area I like with a very small mortgage which I could probably pay off in a few years.

Things holding me back from buying a house:

Don't fancy living alone (happy at my parents house)
Don't want to leave a house empty
Don't fancy hassle/risk of buy-to-let.
Don't fancy living with lodger. (Suppose I could live there a couple of days per week and get a lodger.)
I generally see owning a house as a big responsibility/burden.

I've been comfortable investing in shares/funds for many years, but I now worry about collapse of the financial system (as discussed on this thread).

Thanks in advance for any comments. I know it's not advice and that I should do my own research.

Cheers,
Clueless Imbecile

Disclaimer: I am not an expert. Anything I post here is just my opinions, which may not be factually correct. My posts are intended purely for the purpose of debate and are not to be taken as advice. If you act on any of the above then you do so entirely at your own risk. I do not accept any liability.

 

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8 hours ago, Clueless Imbecile said:

Hi DurhamBorn (and any of you other great people on here who cares to comment)....

I expect mean UK property to revert to aound 5x mean annual salary (Is that a 50% average drop?). I've given up guessing when, and you may also find prices go down much more than that before reverting to the new mean. Prices will differ in different regions. Where are you?

You don't mention a pension. In my book that comes first - sorting out your long term post work finances.

Given your happy state I'm tempted to say don't change it while you don't have to. You realise that can't continue indefinitely and are making plans. Good job.

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21 hours ago, wherebee said:

I'm up 24% since June 15th.  That's insane when you think the rest of the market is down 20%. 

And it's not because I am smart, it's due to this thread and the general counter-culture approach of this site that has driven my views for years.

Oh shut up you lot :-)...I wanted to gloat a month ago when I was up 20% and you were all down due to `The share that shall not be named`...and I thought "Wow this share buying stuff is `kids play` " and/or "I am the new Warren Buffett"...

...I now realize "Although the low price for PMs had gone they were still cheap" and/or "I am the `Son of @YRS" :-) :-) :-)

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16 hours ago, Cattle Prod said:

When prices rise and the bond coupon remains the same, they wont know what to do with the cash

Hopefully give it as divis rather than share buybacks!

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15 hours ago, DurhamBorn said:

did like transports,but after buying a lot in March i ditched them all for a decent profit,mainly due to the way this deflation is playing out.It still might be a very good sector,but i dont like the fact at the moment if the government pulled funding the whole lot would go bust.Im watching it like a hawk though because if passenger numbers do move towards normal id move quickly to buy a lot of the sector.

Interesting, I have looked at these and did a mid-week rush hour trip up through the UK last week using a variety of the UK providers Ie GOG train into London, NEX coach to Bham, FGP train to Carlisle. What I did notice were the incredibly low passenger numbers:

GOG was rush hour, normally rammed but only four in my coach; Clapham Junction like a Sunday Afternoon.

NEX paired seats were as a single and coach was two thirds full, so 20 passengers in a 55 seater coach.

FGP West coast train 3-4 in a carriage that normally has 60 min.

If governments pulls the pin and reverts back to normal running these are toast!

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16 hours ago, DurhamBorn said:

longside potash you also have side markets like supplying farmers etc,its why i like Nutrien.Fantastic position to gain margin from potash,and the middle man.

Thoughts on Anglo American?

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2 minutes ago, MrXxxx said:

Interesting, I have looked at these and did a mid-week rush hour trip up through the UK last week using a variety of the UK providers Ie GOG train into London, NEX coach to Bham, FGP train to Carlisle. What I did notice were the incredibly low passenger numbers:

GOG was rush hour, normally rammed but only four in my coach; Clapham Junction like a Sunday Afternoon.

NEX paired seats were as a single and coach was two thirds full, so 20 passengers in a 55 seater coach.

FGP West coast train 3-4 in a carriage that normally has 60 min.

If governments pulls the pin and reverts back to normal running these are toast!

Exactly.I really liked them for the cycle,but the nature of the end of this one has changed that.As always we have to deal with whats in front of us.I already owned quite a few that got smacked down 65%,but i bought a lot of GOG and National Express at the bottom,they then doubled and trebled,so i sold them all,apart from small holdings left in GOG and Stagecoach.In reality the bull case remains for them,but the slam way the crash arrived couldnt of been worse for the sector.

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13 hours ago, Clueless Imbecile said:

Hi DurhamBorn (and any of you other great people on here who cares to comment)....

Just wondering what you think the prospects are for UK residential property?

I'm quite excited about the reflation stocks theme of this thread and the macro strategy. However, I'm wondering if it would be safer for me to just sell my equities and buy a house instead (perhaps less risk of it disappearing into a black hole, like I worry that cash savings and online shares & funds ISA investments might in the event of a "big kahuna" bust).

My situation:

Age: late 40's
Salary: £38K pa
Living cheaply (& happily) with parents
Don't own a house
No dependents
No debts
Do own and "investment pot" of cash, shares, funds (mostly in ISA)
My pot is big enough such that I could buy a modest house in the area I like with a very small mortgage which I could probably pay off in a few years.

Things holding me back from buying a house:

Don't fancy living alone (happy at my parents house)
Don't want to leave a house empty
Don't fancy hassle/risk of buy-to-let.
Don't fancy living with lodger. (Suppose I could live there a couple of days per week and get a lodger.)
I generally see owning a house as a big responsibility/burden.

I've been comfortable investing in shares/funds for many years, but I now worry about collapse of the financial system (as discussed on this thread).

Thanks in advance for any comments. I know it's not advice and that I should do my own research.

Cheers,
Clueless Imbecile

Disclaimer: I am not an expert. Anything I post here is just my opinions, which may not be factually correct. My posts are intended purely for the purpose of debate and are not to be taken as advice. If you act on any of the above then you do so entirely at your own risk. I do not accept any liability.

 

Putting the financial aspects to one side, I think you provide all the reasons for not owning a property.

As for the fear of losing your assets, I don't know if others would agree, but I think this is overplayed by many (famous last words?), and as long as your assets are  well diversified you are unlikely to lose a large part of them in a SHTF scenario...and if this was the case, this would be the `least of your worries`. The greatest threat is probably inflation eroding your capital.

That said, I am not an financial advisor, this is not financial advice, and so what do I know?

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13 hours ago, Democorruptcy said:

Good job you ditched the laddering in approach and waited for the crash instead!

I was laddering in,in March most sectors fell through 3 ladders at once xD ,got lucky on them really,i bought decent whacks,but then thought this could be structural change and decided to sell and in the meantime they had rallied hard.I was going to hold National Express,but when the CEO jumped ship i decided to sell those as well.I still own some GOG down 55% and Stagecoach down 66%.I might top up at some point,but i dont like the fact they are 100% now depending on government.

 

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