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

[DurhamBorn]

7 hours ago, Viceroy said:

I came across these articles for today's homework. Thx for the tips DB

https://seekingalpha.com/article/4417956-top-contrarian-idea-buy-brazil-stocks

https://seekingalpha.com/article/4418552-ignore-and-t-buy-telefonica-brasil

Notice Steve Kaplan comments under the 2nd article.The reason Brazil is so cheap is currency,and its crucial people understand the risk of that.We are buying ADRs so sterling v dollar,and the ADRs are dollar v real.One of the reasons Telcos have sold down South American holdings is currency risk.However being a contrarian the fact their currencies have done so badly is another plus.They are commod currencies and should do well in a steady reflation.

 

[Harley]

8 hours ago, JMD said:

Thanks Harley for the detailed reply. I agree with the points you make. Have you considered using the 'momentum fund' site below? It provides weekly performance trend analysis stats on sectors and also for the funds within those sectors. All are UK accessible funds. Looks low risk/reward, has been running over 10 years, and appears 12% is the average investor return. It does cost £35/month, but get first 2 months free and can cancel anytime. The investors appear to be very inexperienced type investors, so could be scope for upping the average return. I am currently mainly waiting out for BK(?!), but may seriously consider "going saltydog' for say a year to test run (founder is ex navy, hence name, started scheme 20 years ago and operated strategy for just his own portfolio initially until 2010)                                    https://www.saltydoginvestor.com/home-more/

Apologies for the long posts but it helps me straighten things out and if things were that easy the professionals wouldn't work all the hours they do!

Thanks for the link.  I had a skim and will go back for a closer look as this is my style:  momentum investing.  Way back I read up on things like the Turtle Traders and Danielle Parks' book "Juggling Dynamite" (hilarious if you tried searching for that in the past!).  Plus many other momentum advocates.  I say I'm now a value investor, but I still play momentum when I talk about technicals.  I only buy a value stock when the technical momentum indicators show a good probability sustainable uptick from a low.  I do the same for trading, but then ease up on the value criteria.  My issue, like others is when to sell!  I like the top slicing approach you mention, or when I find better opportunities. 

Given what you're saying I think you might find this very interesting (ignore the title!):  Chris Vermeulen and his Best Asset Now (BAN) strategy.  I liked it a lot.  It's like I used to do but it involved US ETFs so I got really stuffed when KID came along (and I looked for alternatives).  However thanks to you I had a re-listen and noted his comment about using options which are allowed in the UK.  He has a service and website but a bit pricey and I can DIY.

PS: Lynn and Danielle - go you ladies, good on ya!

[Harley]

39 minutes ago, DurhamBorn said:

Notice Steve Kaplan comments under the 2nd article.The reason Brazil is so cheap is currency,and its crucial people understand the risk of that.We are buying ADRs so sterling v dollar,and the ADRs are dollar v real.One of the reasons Telcos have sold down South American holdings is currency risk.However being a contrarian the fact their currencies have done so badly is another plus.They are commod currencies and should do well in a steady reflation.

 

How often is a stock purchase as much a currency play!  I looked at the Brazilian Real when you mentioned those stocks and thought the same:  Been in the oversold zone (momentum wise) for a long time now and maybe a topping pattern starting to emerge.

 

[CVG]

27 minutes ago, Harley said:

"Juggling Dynamite" (hilarious if you tried searching for that in the past!)

I used to model billions of rows of data. Looking for new insights I searched for "Big Models". I confessed my sins to my manager before HR contacted me.

[Harley]

10 hours ago, Mapper said:

Right, I'm off to stock up some of them new fangled 'nylons' I've been hearing about. The ladies are gonna love 'em I reckon!

My new trading service is nearly ready to go live. 

One final decision:

Or:

Or:

[Talking Monkey]

On 10/04/2021 at 01:36, JMD said:

The great Felix Zulauf. Brilliant description of our 'new normal' economic paradigm. Well worth the hour listen.

Great interview, really interesting stuff. 

[DurhamBorn]

3 minutes ago, Harley said:

How often is a stock purchase as much a currency play!  I looked at the Brazilian Real when you mentioned those stocks and thought the same:  Been in the oversold zone (momentum wise) for a long time now and maybe a topping pattern starting to emerge.

 

Exactly.Those currencies are inflation currencies hence suffering for a decade/cycle.They suffer the double hit.Economy struggles and the currency.Of course it reverses in an inflation leaning cycle.People think tech has meant more developed economies will always outperform now,but thats not true IMO.They will get hit double in an inflation.Corned beef goes up 10% plus another 10% for currency.The seller gains both increases in buying power relative.Simplistic example,but i find simple transactions are what are magnified across economies once the macro points that way.

The 4th biggest telco in Brazil went under and the others have carved up the assets.Another tail wind for price increases going forward.

Iv sold a lot of my potash after huge runs and slowly placing a lot of that into Brazil.

 

 

[Harley]

1 hour ago, DurhamBorn said:

Notice Steve Kaplan comments under the 2nd article.The reason Brazil is so cheap is currency,and its crucial people understand the risk of that.We are buying ADRs so sterling v dollar,and the ADRs are dollar v real.One of the reasons Telcos have sold down South American holdings is currency risk.However being a contrarian the fact their currencies have done so badly is another plus.They are commod currencies and should do well in a steady reflation.

 

I hold the ETF LTAM but not enough.  Been waiting for a pullback.  51% in Brazil (partly through holding the iShares Brazil ETF!).  0.73% fees, 1.73% yield, but price to book of 2.08.  Can I do better if I cherry pick and can buy (only with ADRs as none of my brokers have direct market access)?

 

[Harley]

13 minutes ago, Talking Monkey said:

Great interview, really interesting stuff. 

Honest, I never listened to this before my post!  I'm massively behind on my podcast listening!

[M S E Refugee]

18 minutes ago, DurhamBorn said:

Exactly.Those currencies are inflation currencies hence suffering for a decade/cycle.They suffer the double hit.Economy struggles and the currency.Of course it reverses in an inflation leaning cycle.People think tech has meant more developed economies will always outperform now,but thats not true IMO.They will get hit double in an inflation.Corned beef goes up 10% plus another 10% for currency.The seller gains both increases in buying power relative.Simplistic example,but i find simple transactions are what are magnified across economies once the macro points that way.

The 4th biggest telco in Brazil went under and the others have carved up the assets.Another tail wind for price increases going forward.

Iv sold a lot of my potash after huge runs and slowly placing a lot of that into Brazil.

 

 

I have a small amount in Adecoagro, do you think they are worth a punt?

[Harley]

39 minutes ago, DurhamBorn said:

Exactly.Those currencies are inflation currencies hence suffering for a decade/cycle.They suffer the double hit.Economy struggles and the currency.Of course it reverses in an inflation leaning cycle.People think tech has meant more developed economies will always outperform now,but thats not true IMO.They will get hit double in an inflation.Corned beef goes up 10% plus another 10% for currency.The seller gains both increases in buying power relative.Simplistic example,but i find simple transactions are what are magnified across economies once the macro points that way.

The 4th biggest telco in Brazil went under and the others have carved up the assets.Another tail wind for price increases going forward.

Iv sold a lot of my potash after huge runs and slowly placing a lot of that into Brazil.

 

 

Without telling are you getting in to many more Brazilian stocks than VIV and TIMB?  ADRs, ETFs, funds, etc?

I just ran a screen for Brazilian companies listed on the US markets:

Plus a few additions on other exchanges (e.g. Spain but interestingly not Portugal).

[Majorpain]

10 minutes ago, Harley said:

Without telling are you getting in to many more Brazilian stocks than VIV and TIMB?  ADRs, ETFs, funds, etc?

I just ran a screen for Brazilian companies listed on the US markets:

Telefonica Brazil looks quite tasty, nice chunky free cash flow and high dividend yield.

[Harley]

51 minutes ago, Talking Monkey said:

Great interview, really interesting stuff. 

"The Emerging Markets are doing well, but only a few stocks".

[JMD]

On 01/04/2021 at 16:43, JMD said:

I think that's a really good idea. I will come back to you with some fund suggestions.

 

DoINeedOne, what's your tracker going to be called, after all it must have a name...  how about after its inventor, the 'DINO'? ...or is that too 'Flintstones'? Then again some on here think were going back to the stone-age come end of cycle!!

(...plus added bonus of ready made theme tune!! btw no sarcasm intended, actually quiet depressing that a 'mere' cartoon had higher production values than most of todays tv shows

The Flintstones - Dino the Dino (song) - YouTube)

DiNeedOne, sorry for the delay in coming back to you. I didn't see many suggestions from others so not sure if you are still intending to create a tracker/'dosbod super fund'? Anyway i personally found these ones useful.

Ninety-One Resource Fund is very good (for ideas, i wouldnt buy it), though the site doesn't seem to show full holdings now. Also appears very popular now (ie looks to be 'soft closed', with $3000 min investment and a 5% initial charge)... Global Natural Resources | Ninety One

Also, Horizon Kinetics have a range of funds, which i also gleamed some ideas from... Resources | Horizon Kinetics (kineticsfunds.com)

 

[JMD]

13 hours ago, MrXxxx said:

Understand completely what you mean, and it has got me thinking...I think your idea 'has legs' as long as you spread across several companies within each sector, or maybe follow the same approach but use sector specific ETF's to maximize diversity/'financial safety' within the sector at the expense/benefit of either not making/losing maximums.

Edit: Just seen @Harley's comment above regarding sectors ETF's and feeling pretty smug :-)...I have obviously absorbed more from this forum in the last two years than I realised! :-)

Maybe the expert traders here (btw not a critisicm of  others, i know my own limits) think it a bit clunkey/mickey mouse even? But i'm just attempting to fine tune (squeeze a little more performance from) the 'sector rebalancing' which should be done regularly anyway. I don't really want lots of sectors, ideally 6-8 max., so looking to identify the most uncorrelated (next cycle/dosbod reflation) sectors. 

[JMD]

10 hours ago, Rave said:

How do you think they'll hide it then, put a bit of camouflage netting over it and then tell the tax man "no land here mate"?

 

Not only could they be used for farming or forestry where that is possible, they mostly will be, because the alternative will be paying tax on an unproductive asset. A Land Value Tax encourages efficient use of land by discouraging hoarding.

 

As my facetious point above alludes to, the great beauty of LVT is that land cannot be hidden, and so it doesn't matter who owns it. If the owner doesn't pay the tax due on it the government simply requisitions it.

 

Maybe, but that isn't what's stopping the working man getting ahead- it's being priced out of a home that's doing that. We can always create more stuff, and hence more wealth. We can't create more land, that's why we should have a mechanism for sharing the land we do have out fairly.

I cannot stress enough that it is the Land Value Tax that will restore economic fairness, not the Universal Basic Income. And it follows that introducing a UBI without a LVT would be utterly bonkers- the money will immediately be captured by rent seekers if there's no mechanism to stop them.

Rave, i thought you were having a go at me at first, but i don't think you are(?). I agree with your points, my post was merely asking questions, hoping for readers to respond. But for the avoidance of dought, it is mainly the 'punishment of rent seeking' (a topic in itself, and a concept that horrified me once i became aware) argument that first got me interested in LVT, some 10 years ago now. Oh, and discouragement of pure speculation by the capitol rich, by just sitting on assets.

[JMD]

2 hours ago, Harley said:

Apologies for the long posts but it helps me straighten things out and if things were that easy the professionals wouldn't work all the hours they do!

Thanks for the link.  I had a skim and will go back for a closer look as this is my style:  momentum investing.  Way back I read up on things like the Turtle Traders and Danielle Parks' book "Juggling Dynamite" (hilarious if you tried searching for that in the past!).  Plus many other momentum advocates.  I say I'm now a value investor, but I still play momentum when I talk about technicals.  I only buy a value stock when the technical momentum indicators show a good probability sustainable uptick from a low.  I do the same for trading, but then ease up on the value criteria.  My issue, like others is when to sell!  I like the top slicing approach you mention, or when I find better opportunities. 

Given what you're saying I think you might find this very interesting (ignore the title!):  Chris Vermeulen and his Best Asset Now (BAN) strategy.  I liked it a lot.  It's like I used to do but it involved US ETFs so I got really stuffed when KID came along (and I looked for alternatives).  However thanks to you I had a re-listen and noted his comment about using options which are allowed in the UK.  He has a service and website but a bit pricey and I can DIY.

PS: Lynn and Danielle - go you ladies, good on ya!

Harley, these, see link below, are the other guys doing similar  momentum fund trading strategy here in the UK (they are also portfolio managers which their site kinda makes confusing, i.e. you don't have to assign portfolio funds with them to take up their separate momentum offering). They also appear to be a respected outfit, appearing occasionally on podcasts/articles, overall they appear more slick, but they charge more (of course!), £49, however always have a 40% discount running(?). They introduced investment trusts recently, but i guess for the momentum trade, this wouldn't really add much in terms of performance gain?

I think getting access and learning 'the methodology' might in itself be worth a years subscription. Just wish the potential gains were slightly higher... but for few hours/week 'work' (reading advise emails/selecting funds) shouldn't complain i suppose. Harley, imho you have a good understanding of risk/reward, so would be interested in your thoughts on the strategy. For example, might allocating part of a portfolio to momentum strategy actually diversify overall portfolio/actually reduce risk over long term? Hope i'm not going too granular here, but good to consider all attributes i think. I have personally held off so far because of the looming (if it should ever happen?!) BK. 

Fund Expert | homepage

 

 

[Rave]

4 hours ago, jamtomorrow said:

So with an LVT, would there be an "allowance" so to speak? Seems like there would need to be some notional untaxed allowance per-citizen or per-household to cover basic housing needs.

No, there's no need for an allowance- if you distribute the proceeds, or most of them, as a universal basic income. If you think about it it's quite obvious that if you tax people according to the value of the land they occupy and then distribute the proceeds equally amongst everyone, then there will be net contributors and net recipients. Someone who lives in a mansion in Mayfair will be paying a lot more than they get back- someone who lives in a former pit village in the NE or the Welsh valleys or whatever will receive a lot more than they pay in, because the value of the land they occupy is in reality close to zero. That income is likely to be enough for the pit village occupant to live on, if they're happy enough eating beans on toast and wearing Primark clothes.

In reality you probably wouldn't distribute all the revenue from LVT as UBI because government needs to be paid for, and even a fairly hardcore free market minarchist like me would accept that government should provide a justice system, defence, (obviously) HMRC, and possibly state education until the age of 16 etc. However it is important that if LVT is to be a success that it should replace, as much as possible, taxes on labour and consumption (income tax and VAT), so that earning and spending money is incentivised. Then the pit village occupant, if he fancies a Playstation, a ticket to the football, and a holiday once a year, can go out and work 20 hours a week or whatever is necessary to pay for that. If he wants a car and a bigger house as well he can work full time. It seems to me that most people would choose to do at least some work rather than go for the completely spartan existence, especially if there was little or no claw back of their earnings in taxes.

5 hours ago, jamtomorrow said:

households gives roughly £250,000 per household. I found that surprising, seeing as it includes commercial/industrial/agriculutural land in the numerator. I was expecting a bigger number.

So the rental income is, say, 5% of that and so would be about 12,000 per household. Seems reasonable. The fantasy paper valuation of the land would evaporate once it becomes a liability rather than an asset, of course.

5 hours ago, jamtomorrow said:

Where's a proper Georgist when you need one?

I was going to take this as a slight but then remembered that I still haven't actually read Progress and Poverty yet  .

[Rave]

57 minutes ago, JMD said:

Rave, i thought you were having a go at me at first, but i don't think you are(?). I agree with your points, my post was merely asking questions, hoping for readers to respond. But for the avoidance of dought, it is mainly the 'punishment of rent seeking' (a topic in itself, and a concept that horrified me once i became aware) argument that first got me interested in LVT, some 10 years ago now. Oh, and discouragement of pure speculation by the capitol rich, by just sitting on assets.

 

Not having a go at all, just trying to make the point using some humorous sarcasm that a lot of supposed objections to LVT, like the idea that people could somehow 'hide' land, don't actually make much or any sense when you dig into them a bit .

[Hancock]

2 hours ago, Majorpain said:

Telefonica Brazil looks quite tasty, nice chunky free cash flow and high dividend yield.

Unfortunately not listed on AJ Bell.

Thought AJ Bell were able to buy all companies listed on the NYSE?

[Errol]

 

[Majorpain]

1 hour ago, Hancock said:

Unfortunately not listed on AJ Bell.

Thought AJ Bell were able to buy all companies listed on the NYSE?

It is listed on II, although annoyingly the custodian is Citibank.  ADR's can be useful, but not if you don't want added exposure to the US financial system on top of the company itself.

I'm tempted just to pick up the main Madrid listing of Telephonica (which was itself mentioned earlier in the thread).  

[DurhamBorn]

4 hours ago, Harley said:

Without telling are you getting in to many more Brazilian stocks than VIV and TIMB?  ADRs, ETFs, funds, etc?

I just ran a screen for Brazilian companies listed on the US markets:

Plus a few additions on other exchanges (e.g. Spain but interestingly not Portugal).

CIG and ELP.I like Red Electrica as well as a play on SA,but its got a bit too much debt.

[Harley]

3 hours ago, JMD said:

They introduced investment trusts recently, but i guess for the momentum trade, this wouldn't really add much in terms of performance gain?

What you're doing with adding (truly) actively managed investment trusts to a portfolio is diversifying your strategies and mitigating the risk you're wrong.  It will cost in terms of fees, the risk they screw up, and missing that hot stock you just know you would have timed the most perfect of entries and exits!  But insurance costs.  How much insurance you need is a personal decision and depends where you are on your investment journey.  It depends on how you view a performance gain as for every gain there is an equal loss somewhere in some form to be avoided.  Not sure how easy it is to find the signals (my data provider doesn't provide them) plus there's the question of discounts and premiums.  Trusts have a good place for most.  MoneyWeek likes them and keeps a portfolio going.  Personally, I would primarily use Trusts as part of a de-risking strategy and is something I really should do as I don't see a future for passive (whole market, not necessarily sector) ETFs.

3 hours ago, JMD said:

I think getting access and learning 'the methodology' might in itself be worth a years subscription.

No harm in setting aside funds for investing in training!  Personally I would never sign up to a service that just feeds me trades, except maybe as an education and so I know what's out there rather than wondering all the time.  But will they ever share their secrets?  I've subbed to a few things in the past but nothing had much value for me except the more macro stuff and the sharing of thoughts and ideas.  DOSBODS is cheap.  Additionally open a new thread or two?  You could start with a momentum one.  Or just ramble on here.  People can skip.  For me, it's helpful just to write things down, and any constructive feedback is just a bonus.  Most people aren't jerks.

3 hours ago, JMD said:

Just wish the potential gains were slightly higher... but for few hours/week 'work' (reading advise emails/selecting funds) shouldn't complain i suppose.

Frustrating markets with all this liquidity in that most stuff is overbought and higher risk.  IMO that Zulaf Real Vision interview posted was right that we've had that first phase up when being asked where to invest now.  Better for trading but with a higher risk, depending on what you're trying to achieve.  Harder to invest when markets are like this and you only have a few entry points as an investor.  But we are moving from passive to active.  Some notable investors are saying it's crazy to do anything other than trade these markets atm.  So is it you or the market?  My performance is relatively shite (I assume!), but I'm only trying to generate income and preserve capital.  Too late and risky for me to trade too much.  It's worse going to the risk zone trying to make something out of nothing.  As one guy said once, sometimes better to get the basketball out!  TBH I do this stuff more because I love it and what it teaches me than any other reason.  Just remember survivor bias and how very few fund managers, etc stay at the top.  Play the long game?

3 hours ago, JMD said:

Harley, imho you have a good understanding of risk/reward, so would be interested in your thoughts on the strategy. For example, might allocating part of a portfolio to momentum strategy actually diversify overall portfolio/actually reduce risk over long term? Hope i'm not going too granular here, but good to consider all attributes i think.

Not too granular at all.  For some here maybe but others probably understand.  Funny as I've spent the day stepping back and looking at what I'm doing and decided to pare back my activities to free up time for other meaningful things.  Setting unrealistic and complex targets just stresses me out.  KISS it Harley!  That's key - you need to diversify not just your portfolio!  Whatever you do, it pays to step back from your chosen system(s) and validate they are working for you personally or if there are any tweaks that could be made.  That's part of the humility and acceptance of the constantly moving target we are trying to chase.

I've run several strategies at the same time, although you can over diversify (there is a personal "bliss point").  I did this to see which ones fitted me the best and to access several different risk levels (low for my floor funds, higher for my upside funds).  Nothing wrong with that as long as you know which hat you're wearing at any time and have the time to properly execute (I don't).  Always important to know what your objectives are so you stay consistent and with the chosen risk level.  Choosing strategies is like finding a suit(s) that fits.  Takes time and you need to kick the wheels in real life.  Some strategies work better for some people than others.  The important thing is to have one that you feel comfortable with and have confidence in, and above all stay consistent with.  Consistency is key to performance because like the double glazing cold caller, you have to invest in a number of duff calls before you hit gold.  Most edges are small so need plenty of volume (or time), and consistency is one of the better edges.

There is a clear order for diversification and that is asset allocations first and portfolios second.  So many jump straight to the glitter of specific stocks.  You need to have all your framework set out first according to what you're trying to achieve.  I'm trying to preserve capital so have not made out like a bandit but then haven't lost loads I would never have the time to get back.  Good luck to those that have, and even more luck to those that have but shouldn't!  For me it's something like the Permanent Portfolio.  The asset classes take turns riding point but net they hopefully keep you ahead in a Steady Eddie way.  I had to cut my cloth to fit what I had so frugal me.  But it's not actually that easy at this time.  The the validity/identification of the traditional asset classes are (and should be) challenged and same for past allocation models given the pervasive liquidity, etc.  Plus the apparent break down of traditional correlations between classes (e.g. bonds versus equity).  That's the area I've been focusing on because that's the most important.  It all seems up in the air atm.  Maybe a BK will reset the system back to a more normal, albeit different one? 

You can tell if someone has a handle on the big picture if they can tell you their required rate of return and they demonstrably work their risk to it.  That's the visible top of a large iceberg of personal financial planning work.  Like why would someone who had worked out (financial projection/plan, etc) that they will have enough capital to live off at say 1% return net take on risk of 10%, or vice versa?

You're taking a step back and having a think.  That's never time wasted.   Lots of rambling on my part, purely my personal thoughts and BS (DYOBS!), but I needed a break and to give time for the US to settle down and let the manics do their stuff!

[Harley]

2 hours ago, Hancock said:

Unfortunately not listed on AJ Bell.

Thought AJ Bell were able to buy all companies listed on the NYSE?

Things are not always as they seem and the devil is always in the detail!  AJ Bell provide access to US stocks..........listed as CDIs!!!!!!

https://www.youinvest.co.uk/our-services/international-dealing

"US and Canada.  We offer online dealing in the main US and Canadian markets for shares that are available as CDIs - CDIs are UK securities representing an underlying interest in an overseas security and can be bought and sold easily in the UK. Online quotes in these markets are generally available between 2:30pm and 9:00pm UK time on UK business days. However sometimes it might not be possible to get an online quote, if this happens then you can call our dealing services team between 8:00am and 7:00pm".