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

[Jesus Wept]

46 minutes ago, JMD said:

Vendetta, I'm not too proud to ask!!, and i guess I really should know, but for mpotis - what does the 'm' and 'I' stand for?

@JMD

M- Miners

P - Potash

O - Oils

T - Telecoms

I - Infrastructures

S - Silver

 

Or STOMPI ..... 

 

[Democorruptcy]

8 hours ago, DurhamBorn said:

https://news.sky.com/story/bt-group-board-on-alert-for-15bn-takeover-approaches-12054366

This sort of thing is interesting,not because it might come off (£1.50 a share is half what they will be probably in 8 years),but because it shows how undervalued whole sectors are at the end of this cycle.Governments in lots of ways have created massive problems.The best way for governments to stop their telcos getting taken out is to allow a higher return on equity deployed and thats exactly what i think will happen.Hopefully there is no bid as id rather not have the profit as it might re-rate the sector and stop higher profits longer term.

 

 

That article says the CEO and finance chief waived their entitlement to cash bonuses for 2 years, it doesn't say they are taking the bonuses in shares instead because the price is so low!

There's been talk about security risks involving 5G with Huawei/China, there's a certain irony if Germany's Deutsche Telecom finish up owning a lot more than their 12%!

[MrXxxx]

12 hours ago, DurhamBorn said:

Including DB pensions and that will see deficits fall overnight by a lot.Public sector is still a massive gravy train,but might see changes.My partners boss gave voluntary redundancy to a guy at 55 massive pay out,then advertised the job with a slightly different job title and took on a new person.Council tax payers fleeced for £30k plus allowing early pension.The fiddling in councils is endemic.

But will this make much difference if we get the high inflation rates predicted, as a lot of DB pensions now have an inflation payment ceiling I.e full up to 5%, then half up to 10%, and then nothing after.....so RPT or CPIh, both are going to be above 10%.

[The_Doc]

13 hours ago, DurhamBorn said:

Including DB pensions and that will see deficits fall overnight by a lot.Public sector is still a massive gravy train,but might see changes.My partners boss gave voluntary redundancy to a guy at 55 massive pay out,then advertised the job with a slightly different job title and took on a new person.Council tax payers fleeced for £30k plus allowing early pension.The fiddling in councils is endemic.

A similar "scam" is all too prevalent in the private sector too. I worked for an Investment Bank, was made redundant. Within 9 months I was taken back on doing a very similar but slightly different role. I took home more as I became a Limited Liability Company contractor. The bank saved as it paid no Employer NICs or other employee benefits. We both gained. Who lost? HMRC. Or basically the tax payers. 

Out of my original team of about 10, this happened to 5 of us. It is endemic at least in the banking industry. And that is why IR35 is now happening.

 

[DurhamBorn]

10 hours ago, leonardratso said:

Your not kidding, this looks apt from the article. A lot of them really are rather weak with a weak govt to boot.

"City bankers believe the coronavirus crisis has exposed the financial frailty of many of Britain's most important companies, and anticipate a string of bids for them during the months ahead."

 

 

Its always amazed me how government here have allowed massive council tax increases etc yet have done everything to keep a mobile bill at £12 a month instead of £14,gas bill £50 a month instead of £60 etc.They have regulated those companies so hard that outside companies can buy them cheap,split them up and asset strip.

I mention back in the thread telco chief execs could say to governments we arent investing,we are running the business for cash,return 12% a year to shareholders and slowly liquidate the company.

Royal Mail is similar,the foreign business is worth more than the market cap.Buy it,split in two,shareholders get their money back and more in the profitable bit,the other bit (UK postal service) they can say to unions and government we are running it down,go work for Herpes.

This is rife across our companies.Look at the FTSE 100.Its full of dross,thats the biggest companies in the country.Blair and Brown turned the UK into benefit central and that is the root of the damage.Id prefer BT wasnt taken out,mainly as it will boost the sector and the option of dripping in more would be nice,but i do think the sector is structurally under valued,so deals are certain.

What this does do though is send a message to the government and OFCOM (and other governments) that they need to get their telcos return on capital and share prices up,or suffer the political damage.

[DurhamBorn]

2 hours ago, Democorruptcy said:

That article says the CEO and finance chief waived their entitlement to cash bonuses for 2 years, it doesn't say they are taking the bonuses in shares instead because the price is so low!

There's been talk about security risks involving 5G with Huawei/China, there's a certain irony if Germany's Deutsche Telecom finish up owning a lot more than their 12%!

Youd think if there was a bid Deutsche might counter bid.Telefonica and Vodafone cant really for debt reasons.

A curve ball could be a big tech company.

[Democorruptcy]

1 hour ago, The_Doc said:

A similar "scam" is all too prevalent in the private sector too. I worked for an Investment Bank, was made redundant. Within 9 months I was taken back on doing a very similar but slightly different role. I took home more as I became a Limited Liability Company contractor. The bank saved as it paid no Employer NICs or other employee benefits. We both gained. Who lost? HMRC. Or basically the tax payers. 

Out of my original team of about 10, this happened to 5 of us. It is endemic at least in the banking industry. And that is why IR35 is now happening.

 

A few years back it turned out that the governbankment were using tax avoidance schemes to employ civil servants as one-man companies. The head of the student loans was earning £182k through a limited company.  Other fiddles include them not paying tax on benefits £172k for a car and chauffeur would be a £49k tax bill.

There is so much tax avoided at the top we had better watch out!

[DurhamBorn]

Iv been looking at a few funds this weekend for my dad as he has asked me to get him a fund leveraged to energy.He isnt bothered about risk,he has always invested with the idea they make him money or they go bust,he never sells anything underwater.He has been buying Shell and BP this last week but wanted a fund without the big boys.

Anyway iv decided to buy him this Schroders fund

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/s/schroder-isf-global-energy-class-z-income

There are a few questions on it,i dont like fees etc,but for a higher risk play on the cycle this looks a nice fund.Concentrated,but still enough depth..Might be of interest to people here who perhaps have less to invest but are prepared to take higher risk for maybe much higher returns,

Not advice,do your own research etc.

 

[Jesus Wept]

13 minutes ago, DurhamBorn said:

Iv been looking at a few funds this weekend for my dad as he has asked me to get him a fund leveraged to energy.He isnt bothered about risk,he has always invested with the idea they make him money or they go bust,he never sells anything underwater.He has been buying Shell and BP this last week but wanted a fund without the big boys.

Anyway iv decided to buy him this Schroders fund

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/s/schroder-isf-global-energy-class-z-income

There are a few questions on it,i dont like fees etc,but for a higher risk play on the cycle this looks a nice fund.Concentrated,but still enough depth..Might be of interest to people here who perhaps have less to invest but are prepared to take higher risk for maybe much higher returns,

Not advice,do your own research etc.

 

Very informative. Thanks @DurhamBorn

I have never bought a Fund - just shares and ETFs.

Looks like it could be turning very soon. 

 

 

 

[DurhamBorn]

@Vendetta i used to use funds a lot when we could buy the US ETFs.I avoid now for lots of reasons,but wouldnt mind a small percentage in a few areas.Higher risk that fund,but potential higher reward for anyone who does fancy a fund and happy with the risk.Nice its spread between producers and some service areas as well.Adding some of the bigger individual oil companies and then the fund gets a good spread.

[AWW]

3 hours ago, The_Doc said:

A similar "scam" is all too prevalent in the private sector too. I worked for an Investment Bank, was made redundant. Within 9 months I was taken back on doing a very similar but slightly different role. I took home more as I became a Limited Liability Company contractor. The bank saved as it paid no Employer NICs or other employee benefits. We both gained. Who lost? HMRC. Or basically the tax payers.

I pay far more tax contracting via Ltd Co than I would doing the same job as a permy on PAYE. A good rule of thumb when moving from permanent to contract doing the same job is to divide salary by 100 to get the day rate as a contractor. In percentage terms, you pay less tax, but the uplift in earnings means the amount paid is far bigger.

Let's do some sums:

£75k a year on PAYE means you pay £17.5k income tax + NI. Your employer pays just over £8.5k NICs. HMRC gets £26k.

Same person doing same job on a contract will be on £750 a day if they can negotiate well.  Say 220 days worked, that's £165,000.  They'll be charging VAT on that too, but the client will claim that back, so we'll ignore it. Contractor takes £8.5k salary so that they earn a year of stamp, and pays no tax on it. They might charge travel and lunch, if they can, and a laptop to the Ltd Co, plus use of home as office. Let's say £11.5k of tax deductible stuff. Company profit is therefore £145k. 19% of that goes on Corporation Tax, that's over £27k. HMRC have already taken more tax and that's before we get into the tax that will be due on any dividends taken, which could be anywhere between zero and forty grand, depending on how much is taken.

[DoINeedOne]

I was watching an interview with Rick rule and at one point he starting talking about how he has been buying farmland and leasing it out, good interview too worth the watch

 

Then in this weeks money week was a piece about farmland and woodland which some have mentioned here

 

[CVG]

1 hour ago, DurhamBorn said:

@Vendetta i used to use funds a lot when we could buy the US ETFs.I avoid now for lots of reasons,but wouldnt mind a small percentage in a few areas.Higher risk that fund,but potential higher reward for anyone who does fancy a fund and happy with the risk.Nice its spread between producers and some service areas as well.Adding some of the bigger individual oil companies and then the fund gets a good spread.

I use the H20 ETF for my water exposure

https://www.hl.co.uk/shares/shares-search-results/i/ishares-ii-plc-global-water-ucits-etf

[JMD]

1 hour ago, DurhamBorn said:

Iv been looking at a few funds this weekend for my dad as he has asked me to get him a fund leveraged to energy.He isnt bothered about risk,he has always invested with the idea they make him money or they go bust,he never sells anything underwater.He has been buying Shell and BP this last week but wanted a fund without the big boys.

Anyway iv decided to buy him this Schroders fund

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/s/schroder-isf-global-energy-class-z-income

There are a few questions on it,i dont like fees etc,but for a higher risk play on the cycle this looks a nice fund.Concentrated,but still enough depth..Might be of interest to people here who perhaps have less to invest but are prepared to take higher risk for maybe much higher returns,

Not advice,do your own research etc.

 

Hargreaves do the iShares etf, SPOG. It's just mid caps, though no service co's, but only costs 0.55%.

[JMD]

DB, you recommended 'The New Total War of the 21st Century... Fear Pandemic' book recently, at the time I don't think you had read it, only extracts I believe - have you now, or others here perhaps read it? Only someone posted a link here, which I cannot now find, to allow its purchase for £20, and just wondering if it was worth spending the money on?

[The_Doc]

1 hour ago, AWW said:

I pay far more tax contracting via Ltd Co than I would doing the same job as a permy on PAYE. A good rule of thumb when moving from permanent to contract doing the same job is to divide salary by 100 to get the day rate as a contractor. In percentage terms, you pay less tax, but the uplift in earnings means the amount paid is far bigger.

Let's do some sums:

£75k a year on PAYE means you pay £17.5k income tax + NI. Your employer pays just over £8.5k NICs. HMRC gets £26k.

Same person doing same job on a contract will be on £750 a day if they can negotiate well.  Say 220 days worked, that's £165,000.  They'll be charging VAT on that too, but the client will claim that back, so we'll ignore it. Contractor takes £8.5k salary so that they earn a year of stamp, and pays no tax on it. They might charge travel and lunch, if they can, and a laptop to the Ltd Co, plus use of home as office. Let's say £11.5k of tax deductible stuff. Company profit is therefore £145k. 19% of that goes on Corporation Tax, that's over £27k. HMRC have already taken more tax and that's before we get into the tax that will be due on any dividends taken, which could be anywhere between zero and forty grand, depending on how much is taken.

An employee on £75K will not get anywhere near £750 per day these days. I have plenty of colleagues who have gone down this route so know what is being paid in Investment Banking. 

Even in the unlikely event they could get £165K , using company pension contributions, partner salary, (not even making use of carry forward pension annual allowances), the net take home pay of the contractor + partner would be £88K, plus a pension  pot of £40K (as opposed to around £52K take homeif the employer was PAYE). HMRC take goes from £23K to £25K, admittedly more in this case. A more realistic £550 per day would see HMRC take go down to 14K (from 23K) and the contractor + partner take home £55K + a pension pot of £40K (up from £52k).

Even then there are still more ways to avoid tax. This is all legit and is simple tax avoidance which is not illegal. The rules are there and benefit the higher paid contractor over the PAYE employee. Why else would Rishi continue with the plans for IR35?

[DurhamBorn]

18 minutes ago, JMD said:

DB, you recommended 'The New Total War of the 21st Century... Fear Pandemic' book recently, at the time I don't think you had read it, only extracts I believe - have you now, or others here perhaps read it? Only someone posted a link here, which I cannot now find, to allow its purchase for £20, and just wondering if it was worth spending the money on?

Iv only read extracts but im hoping to get the book at some point.I think that will be a big story of the cycle.

[Clueless Imbecile]

DurhamBorn, just wondering if you ever looked at either of these?....

https://www.hl.co.uk/shares/shares-search-results/h/hsbc-etfs-plc-msci-russia-capped-ucits-etf

https://www.hl.co.uk/shares/shares-search-results/i/ishares-vii-plc-msci-russia-adrgdr-ucits

Last time l looked, they seemed to have a lot of oil & gas companies (Gazprom, Lukoil, Novatek, Tatneft, Rosneft) and also some metal mining/production (MMC Norilsk Nickel PJSC, Polyus PJSC).

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.

 

[DurhamBorn]

54 minutes ago, Clueless Imbecile said:

DurhamBorn, just wondering if you ever looked at either of these?....

https://www.hl.co.uk/shares/shares-search-results/h/hsbc-etfs-plc-msci-russia-capped-ucits-etf

https://www.hl.co.uk/shares/shares-search-results/i/ishares-vii-plc-msci-russia-adrgdr-ucits

Last time l looked, they seemed to have a lot of oil & gas companies (Gazprom, Lukoil, Novatek, Tatneft, Rosneft) and also some metal mining/production (MMC Norilsk Nickel PJSC, Polyus PJSC).

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.

 

No i havent looked at those.I dont usually use funds anymore.Iv been looking at a few Japan shares but its not east to buy them.Fancy some Mitsubishi Corp,but looks like the only way is an over the counter ADR in the US.

[reformed nice guy]

28 minutes ago, DurhamBorn said:

No i havent looked at those.I dont usually use funds anymore.Iv been looking at a few Japan shares but its not east to buy them.Fancy some Mitsubishi Corp,but looks like the only way is an over the counter ADR in the US.

You can call up HL and they will buy them for you. I bought Fanuc that way for example. Have the phone dealing fee though

[AWW]

1 hour ago, The_Doc said:

Why else would Rishi continue with the plans for IR35?

Because it was lobbied for by the big consulting firms who don't like their £1500/day PowerPoint artists being undercut by genuine industry expertise.

[DurhamBorn]

2 hours ago, reformed nice guy said:

You can call up HL and they will buy them for you. I bought Fanuc that way for example. Have the phone dealing fee though

Thats great,i take it il have to get the ADR not sure they can buy in Japan.

[MrXxxx]

9 hours ago, DurhamBorn said:

always amazed me how government here have allowed massive council tax increases etc yet have done everything to keep a mobile bill at £12 a month instead of £14,gas bill £50 a month instead of £60 etc.They have regulated those companies so hard that outside companies can buy them cheap,split them up and asset strip.

One I an optional spend the other isn't...they can pretend to be on the consumers side with the former as it doesn't cost them anything!

[Castlevania]

5 hours ago, DoINeedOne said:

I was watching an interview with Rick rule and at one point he starting talking about how he has been buying farmland and leasing it out, good interview too worth the watch

 

Then in this weeks money week was a piece about farmland and woodland which some have mentioned here

 

Do you have a screenshot of the listed investments in agriculture?

[wherebee]

10 hours ago, The_Doc said:

An employee on £75K will not get anywhere near £750 per day these days. I have plenty of colleagues who have gone down this route so know what is being paid in Investment Banking. 

Even in the unlikely event they could get £165K , using company pension contributions, partner salary, (not even making use of carry forward pension annual allowances), the net take home pay of the contractor + partner would be £88K, plus a pension  pot of £40K (as opposed to around £52K take homeif the employer was PAYE). HMRC take goes from £23K to £25K, admittedly more in this case. A more realistic £550 per day would see HMRC take go down to 14K (from 23K) and the contractor + partner take home £55K + a pension pot of £40K (up from £52k).

Even then there are still more ways to avoid tax. This is all legit and is simple tax avoidance which is not illegal. The rules are there and benefit the higher paid contractor over the PAYE employee. Why else would Rishi continue with the plans for IR35?

I was going to say that I though Doc's figures were very kind to the PAYE drone.  As a simple example, lets assume that the PAYE drone is working at canary wharf.  They commute in from Southend.  That's going to be 5k a year commuting.  add in 10 quid a day for lunch/coffees (which is usual), not counting odd days out with work colleagues.  Thats another 2k a year.  So that's 7k of spend which the contractor can claim as an expense.  The PAYE drone pays in post tax income, the contractor pays in pre-tax income, effectively.

Plus in terms of daily rates, long term gigs tend to pay less; I'd agree that the 1/100 rate is fair for short, intense pieces but for 6-12+month gigs you're looking at less.

Also - things like professional memberships, training courses, all of which the PAYE drone often has to pay themselves can be tax deductible.  There are also other benefits - once travel is back on, I will go to some conferences in foreign countries where the entire trip is tax deductible.  Funnily enough, these conferences just happen to be close to family and I pop in to see them for a couple of days.  That's thousands saved.  if I was even harder nosed, I would stay with family and have them charge me room rent and then make that tax deductible as well, whilst their income (many are retired) is tax free.