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


spunko

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1 hour ago, M S E Refugee said:

I used to get some decent deals 10 years ago at auction but now it is almost impossible with the internet bidding and silly old farts that watch too much David Dickinson's Real Deal and Antiques Roadshow.

You usually get outbid by some old duffer that pays over the odds for a Sovereign that he could buy much cheaper online.

Not necessarily. I picked up some sovs last year whilst on holiday in Cornwall at a little below market price. The auction house made us pay in cash!

Amazingly I picked some up at about £290 each just before lockdown at a local auction house. If I'd been in the room I would have paid an unbelievable £265. It was the crazy week in mid March. The first two sovereigns went for £330+ and then that was it. Don't think people had clear heads that day.

However, ever since all coins have been way over market rates, including silver.

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Great Panther reports record net income in Q2 despite minimal silver production and with average gold price of $1,728.

We're at $2050/oz gold and their silver operations are back in full swing with silver touching $28.

Dirt cheap doesn't begin to cover it. They are an absolute shite company and are priced as such, but if they can put together just one more good quarter in the current price environment then it's a multi-bagger.

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reformed nice guy
1 hour ago, JMD said:

Reformed Nice Guy, re your earlier list... its a good selection of company stocks, and admit i have my eye on most of those ones also. But how did you calculate your buy prices? Are they based on 'fair value' (balance sheet fundamentals, etc), or just what you expect future market corrections to be? 

I based them on my previous ladders for shares that I had already decided that I wanted. I dont have a method to determine what a fair price is. Instead I just look at the chart and set a number based on recent performance. My current ladders are set low because I think (hope) that everyone is going to shit the bed at some point this year. I also set my ladders at round number because I think that they are psychological boundaries.

Shell is a good example. I bought for 1975 then 1750ish on a 10% ladder. It then went in free fall below my next ladder (1600) and I purchased at 1364. I then set a ladder at 1200 and got some at 1080, set next ladder at  950 etc.

Now that Shell and others that I fancy are higher than my previous lowest ladder rungs, I have moved them back up a little. I have set the ladders higher for the likes of Shell because I think there will be a dash for hard asset holders, so companies like Shell will not fall proportionally as much as Amazon for example.

Might just have been lucky and talking bollocks though, so take with a pinch of salt!

 

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13 hours ago, Hardhat said:

Worth mentioning the list of smaller silver miners that was posted a while back by DB as having the greatest beta to silver price, are any of these still buys at $27 silver?

Endeavour Silver

American Silver Corp

Fortuna Silver

First Majestic

Avino Silver

Great Panther

Couer Mining

 

Probably most of them :) It looks to me like the miners haven't really bought this silver rally yet, if the market believed the spot was sustainable I'd expect some of those companies to be up to a double of what they are now. It seems like a lot of money is still on the sidelines, waiting for the pullback in spot. We're definitely not in the miners mania phase yet.

That being said, Coeur is so desperately bad that I cannot trust them to mount a serious rally. At least with GPR I can see a turnaround (or an Indian Summer perhaps) going on at the moment although it's worth remembering they're a gold miner with a bit of silver dust on top. The solid big guys in FR and PAAS seem more expensive than their smaller and more troubled counterparts so may not provide as much leverage but I can still see room to grow. Avino has overshot recently imho but in the long run it should go higher still. I'd add Impact Silver to that list, too.

 

Disc: I'm balls-deep in silver miners, some of which are on that list, so there's a lot of bias obviously.

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2 hours ago, Vendetta said:

Currently I am using yearly ISA allowances for myself , wife and 2 kids... £20k + £20k + £9k + £9k a year = £58k per year one can invest without capital gains on selling growth, or tax on any dividend income.

So there is a benefit to getting married and having children then!....can I have the allowances without the rest? :-)

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9 minutes ago, MrXxxx said:

So there is a benefit to getting married and having children then!....can I have the allowances without the rest? :-)

In Hong Kong I took great pleasure in reminding my wife that each kid was about double her in terms of tax deduction rate. :P

 

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3 hours ago, Vendetta said:

Picked up some more SDF (K&S AG pot ash) and also some BP (oil) after the initial 3% drop this morning. 

They are both still relatively near their 5 year lows so even though I think if/when the NASDAQ market collapses - they will definitely take a hit but wont fall too much and may be much higher than where they are now if this ‘crack/melt up continues’.
 

Plus BP not ex dividend until 13th Aug.
 

Also I am trying to get my head around and reconcile buying with my ISA allowances. On one hand I would like to use up ISA allowance by April 2021 but on the other hand I would like to build cash and wait for (the inevitable??) big fall....

Currently I am using yearly ISA allowances for myself , wife and 2 kids... £20k + £20k + £9k + £9k a year = £58k per year one can invest without capital gains on selling growth, or tax on any dividend income.

Is there a better ‘tax vehicle’ I should be using? Both my wife and I are higher rate tax payers significantly above threshold and are in (don’t shoot me for this!) : part final salary/average earning ‘inflation linked’ pensions which can be taken at 55 onwards. 

We do not have any Sipps. 

I would be interested to hear how you guys structure your ‘tax affairs’ around your investments? 
 

PS: I wouldn’t be surprised if TPTB ‘rip the arse’ out of the government backed inflation linked pensions within next 15 years. They already started back in 2007 changing the finish date and changing  the final salary link to average earnings.

Hence why I am am taking out an insurance with these investments.

 


 

 

You can pop 3600 (you 2880, HMRC 720) into a SIPP each year for each child. I love 720 free money from HMRC!

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2 minutes ago, CVG said:

You can pop 3600 (you 2880, HMRC 720) into a SIPP each year for each child. I love 720 free money from HMRC!

Cheers @CVG

Would you explain a little bit more. 
 

How do you go about it? Do you have a preferred provider? Etc. Any other details greatly appreciated. 

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Any thoughts on the building materials sector?  Specifically brick makers like Forterra plc, Ibstock plc and Michelmerch Bricks, and a COVID recovery play?

Ibstock is on my technical buy screen today, and it's certainly taken a hit after reporting first half losses and redundancies. 

Maybe someone more knowledge than me on company accounts could take a quick glance at their financials?

https://www.expressandstar.com/news/business/2020/08/06/brick-sales-recovering-for-ibstock/

https://uk.finance.yahoo.com/quote/IBST.L/balance-sheet?p=IBST.L

 

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31 minutes ago, Vendetta said:

Cheers @CVG

Would you explain a little bit more. 
 

How do you go about it? Do you have a preferred provider? Etc. Any other details greatly appreciated. 

Google >> junior sipp :P

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52 minutes ago, Vendetta said:

Cheers @CVG

Would you explain a little bit more. 
 

How do you go about it? Do you have a preferred provider? Etc. Any other details greatly appreciated. 

I use HL but you could use others:

https://www.hl.co.uk/pensions/junior-sipp

Once it's set up (easy to do) you pay in £2880 and HL will claim the 720 from HMRC. Wait for it to turn up then invest in anything you like.

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Bobthebuilder

@DurhamBorn

Just to let you know my pension transfer request into my SIPP went through 100%.

Only a small amount sub £20K from an old opted out SERPs from the late 80s.

 

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Talking Monkey
5 minutes ago, kibuc said:

To emphasize my point that the miners are not buying this rally just yet, SILJ is ca 11% up this week with silver spot moving up 20%...

Today's epic move in Silver to above 28 is hardly being reflected. Interesting to see, it certainly wasn't what I expected to happen I thought the miners would be flying today.

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7 minutes ago, Talking Monkey said:

Today's epic move in Silver to above 28 is hardly being reflected. Interesting to see, it certainly wasn't what I expected to happen I thought the miners would be flying today.

Same thing yesterday. At some point something will have to give.

Correction in XAU is likely, but how low can it go and for how long? We're in a bull market. And while we wait for that correction, miners are making money each day.

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Eventually Right
1 hour ago, Talking Monkey said:

Today's epic move in Silver to above 28 is hardly being reflected. Interesting to see, it certainly wasn't what I expected to happen I thought the miners would be flying today.

People selling the miners into strength-they don't think the rises in gold/silver are sustainable, and are reducing their positions.

As Kibuc says, at some point something will have to give-if gold and silver keep going, there could be the mother of all spikes in the miners, if people decide gold at $2000+ and silver at $25+ are the new normal, and try to get back their prior positions-coupled with more generalist investors working out how profitable miners will be, and needing to increase their holdings.

Of course, if gold and silver fall back to where they were only 2 months ago ($300 and $10 less than they are now) it'll be a completely different story! 

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2 minutes ago, Cattle Prod said:

I like this very much! 

May I suggest changing it to STOMP as it's going to trample all over everything when it runs

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4 hours ago, reformed nice guy said:

I based them on my previous ladders for shares that I had already decided that I wanted. I dont have a method to determine what a fair price is. Instead I just look at the chart and set a number based on recent performance. My current ladders are set low because I think (hope) that everyone is going to shit the bed at some point this year. I also set my ladders at round number because I think that they are psychological boundaries.

Shell is a good example. I bought for 1975 then 1750ish on a 10% ladder. It then went in free fall below my next ladder (1600) and I purchased at 1364. I then set a ladder at 1200 and got some at 1080, set next ladder at  950 etc.

Now that Shell and others that I fancy are higher than my previous lowest ladder rungs, I have moved them back up a little. I have set the ladders higher for the likes of Shell because I think there will be a dash for hard asset holders, so companies like Shell will not fall proportionally as much as Amazon for example.

Might just have been lucky and talking bollocks though, so take with a pinch of salt!

Yes, buying those types of reflation stocks on your radar, and at decent prices/ladders (hopefully), definitely gives an investment edge. i.e. it is a great advantage over many investors who are still expecting (incorrectly) for growth stocks, consumer sectors, etc, to do well in the coming cycle.                                                                              But looking under the hood of a company, debt, fcf, etc - an area in which i am personally trying to learn more about - allows comparison between companies... Although i believe a useful rough-proxy for all/most metrics/ratios is the 'enterprise value/ebitda'? However, I admit i don't know enough about these things - so if anyone of the experts here are able to comment on that particular ratio it would be greatly appreciated.

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Any thoughts on buying something like this when we hit the deflation cycle, ready for inflation?

iShares $ TIPS 0-5 UCITS ETF


 

Quote

 

KEY BENEFITS

1 Targeted exposure to US Treasury inflation-protected bonds with maturities between zero and five years

2 Use to protect against potential increases in US inflation

3 Low-cost access to US inflation-protected bonds

 

 

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3 minutes ago, Loki said:

Any thoughts on buying something like this when we hit the deflation cycle, ready for inflation?

iShares $ TIPS 0-5 UCITS ETF


 

 

Decent buy,though they have short profiles in 0 to 5 years,5 to 10 years would be better if there is a fund like that on TIPS.

 

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1 minute ago, Loki said:

Any thoughts on buying something like this when we hit the deflation cycle, ready for inflation?

iShares $ TIPS 0-5 UCITS ETF


 

 

@Loki

I agree. We’ve talked a lot about STOMP (MPOTS! 😉) and a short term (Mar 20- Nov 20’) and long term (2021 - 2030??) inflation scenario....

......however it would be great to ‘steer the discussion’ toward investments that may give a good return in a deflationary bust scenario that ‘may occur’ in next few weeks/months.

Where to start? 

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2 minutes ago, DurhamBorn said:

Decent buy,though they have short profiles in 0 to 5 years,5 to 10 years would be better if there is a fund like that on TIPS.

 

Thanks - What do you think of this one mate?

https://www.fundslibrary.co.uk/FundsLibrary.DataRetrieval/Documents.aspx/?type=packet_fund_class_doc_factsheet_private&id=5c8a421d-d8a9-4583-8b4c-e665726c0f7e&user=KgzqQCEWTNgge%2bR4EZ2dx5xE7nYY6fmUcCpE012zVv%2bJ2xGYMUBSZ%2bmjCvsk9Bgy&r=1

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44 minutes ago, Eventually Right said:

People selling the miners into strength-they don't think the rises in gold/silver are sustainable, and are reducing their positions.

Exactly this, I've been watching FRES trading all day and it's mostly been selling.

I am very tempted to punt on 6-7 junior silver miners here. Can't buy anything Canadian though as I haven't filled out the NR301...

Personally I would not be surprised to see silver punch through $30 here, and then FOMO to follow.

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