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

[leonardratso]

11 minutes ago, Bobthebuilder said:

I have a few telco shares but would like to add more. Anyone know a decent ETF that covers the sector well? Not advice etc.

iShares STOXX Europe 600

 

[Castlevania]

58 minutes ago, Mooping said:

I would like to purchase some Gold.  I believe that purchasing Sovereigns is the best way in order to avoid paying CGT.  Is that correct?  My next question is what's the best way of purchasing sovereigns ie to get the best deal?  Thanks.

Britannia’s (which are 1oz coins issued by the Royal Mint) are also CGT free and tend to have lower premiums.

[SpectrumFX]

48 minutes ago, Mooping said:

I would like to purchase some Gold.  I believe that purchasing Sovereigns is the best way in order to avoid paying CGT.  Is that correct?  My next question is what's the best way of purchasing sovereigns ie to get the best deal?  Thanks.

The cheapest way to get Soveriegns is to buy old circulated coins. Some people call them "bullion coins" as they have no numismatic value.

Use a reputable supplier obviously.

I haven't bought for a long time, but when I was last looking at such things there were loads of old circulated Victoria sovs. at places like Bairds & co.

 

 

[Hancock]

Get the impression lots of people on this thread now have a "Fear of Missing Out" and are pouring their money into PMs, commodities, miners, telcos and the various inflation stocks that have been mentioned.

Just curious to get a gauge of feeling for the BK, or is it a case of people merely hedging their bets.

I'm letting the shares in my SIPP run a little longer, then will make a decision of selling and buying back in on the presumption a BK happens.

But can't help thinking doing so would put me in a similar scenario to those who STR'd on HPC in 2004.

 

[DurhamBorn]

1 minute ago, Hancock said:

Get the impression lots of people on this thread now have a "Fear of Missing Out" and are pouring their money into PMs, commodities, miners, telcos and the various inflation stocks that have been mentioned.

Just curious to get a gauge of feeling for the BK, or is it a case of people merely hedging their bets.

I'm letting the shares in my SIPP run a little longer, then will make a decision of selling and buying back in on the presumption a BK happens.

But can't help thinking doing so would put me in a similar scenario to those who STR'd on HPC in 2004.

 

Iv been selling down some holdings that have doubled, trebled and more,but im holding my telcos,oil and tobacco through any BK,im not trying to trade in and out of those,but il happily top up if they get hit hard.I bought very very hard during the collapse and iv increased my capital by over 50%  since then,what i consider an amazing result considering i had around 35 investments and was quite conservative in allocation and a big portfolio.I did gain greatly though by having no 3 and no 4 sized holdings Mosaic and Royal Mail,and i tagged the bottom on both with big wedges.I also had a big holding in DRAX again tagging near bottom.

There is still the Scottish share though  and a few others with fat reds on.I also missed BAT and Imperial when i sold them,and although it was a superb move as i was very close to their all time highs, i was very glad to get my original holdings back for 50% of sold price in the case of BAT and 36% in the case of Imperial.I never expected that.Now il take the divis for as long as the companies survive and maybe just fade away from life together  

[arrow]

5 hours ago, Cattle Prod said:

I saw little political risk in Gazprom and said so here. Gazprom has been a totally reliable supplier to Germany and Europe since the 1970s, ie even when there were tanks on the border and nuclear weapons pointed at each other. The reason Nordsteam 2 is happening is because of this close and trusted energy relationship.

It's not too late though, if gas goes like DB suggest, Gazproms best days are ahead.

I agree about Europe. Political risk not from Europe but the US. I could be wrong.

I agree about Gazprom. I've got a fair bit in it already. But, dithering about whether to sell some of my western oilies and put more into Gazprom. I don't know. It's confusing me. All this green pressure could be temporary and fade away once they realise the supply/demand mismatch. Or they may double down inspite of recking their economies. I thought that xom would  be " my cold dead hands" share but Fink and the rest of the private/public elite have got me dithering again.

[Castlevania]

1 hour ago, Hancock said:

Get the impression lots of people on this thread now have a "Fear of Missing Out" and are pouring their money into PMs, commodities, miners, telcos and the various inflation stocks that have been mentioned.

Just curious to get a gauge of feeling for the BK, or is it a case of people merely hedging their bets.

I'm letting the shares in my SIPP run a little longer, then will make a decision of selling and buying back in on the presumption a BK happens.

But can't help thinking doing so would put me in a similar scenario to those who STR'd on HPC in 2004.

 

I’ve been building up a big position in precious metal miners since the start of the year and following some good gains in a handful of names over the past month now makes up 45% of my portfolio. Is it risky? Yeah. However, I do think they’ll run hard at some point this year. If they do then I’ll heavily cut my allocation to around 20% and have a fair amount of cash on the sidelines. If they don’t and they get hammered, so be it. I can always work for a few more years.

As for others, Telcos look cheap so unless they jump 50% from here then I’ll hold. Big oil I’m ok with at current prices. Again if oil runs and the share prices follow then will probably trim. Agriculture/Potash I’ve been trimming back following a strong YTD.

[Hancock]

1 hour ago, DurhamBorn said:

Iv been selling down some holdings that have doubled, trebled and more,but im holding my telcos,oil and tobacco through any BK,im not trying to trade in and out of those,but il happily top up if they get hit hard.I bought very very hard during the collapse and iv increased my capital by over 50%  since then,what i consider an amazing result considering i had around 35 investments and was quite conservative in allocation and a big portfolio.I did gain greatly though by having no 3 and no 4 sized holdings Mosaic and Royal Mail,and i tagged the bottom on both with big wedges.I also had a big holding in DRAX again tagging near bottom.

There is still the Scottish share though  and a few others with fat reds on.I also missed BAT and Imperial when i sold them,and although it was a superb move as i was very close to their all time highs, i was very glad to get my original holdings back for 50% of sold price in the case of BAT and 36% in the case of Imperial.I never expected that.Now il take the divis for as long as the companies survive and maybe just fade away from life together  

So i take it you still expect a BK, but not as confident as some on the twitterati that are quoted on here. Stands to reason that if interest rates go up then a correction will happen, but how much does the market go up until that happens.

I've done well, unfortunately the ones ive made no money on are BP (£10K), Shell (£10K) and Vodafone (£5K) which sadly were all my biggest holdings. A few percent ahead overall on those.

I've £110K in shares in my SIPP and in a couple of months with have 40/50K in cash .... happy to leave them be for now, but will pull some take profit from mining stocks should they run as CV suggests.

Its the funds that were set aside for my house of circa £250k that i'm wondering what to do with, maybe i will start with another round of BP (£10K), Shell (£10K) and Vodafone (£5K) and wait for a BK then jump in at that point. 

Late 2019 i was 100% certain of a BK, now i'm not as sure, as the central banks have gone in big.

[Hancock]

5 minutes ago, Castlevania said:

 If they don’t and they get hammered, so be it. I can always work for a few more years.

If they do get hammered, in a few more years its likely they'll rebound.

Take it if they do run and you make significant profit the money will go into something much less risky?

[JMD]

4 hours ago, S Brule said:

Sorry if a repost. But did anyone else notice that Shell Energy acquired the Post Office's telephone and broadband business this year? Didn't realise but Shell have been in the telephony business since 2016!

https://www.shellenergy.co.uk/blog/post/post-office-broadband-joins-shell-energy

Actually I think that's a timely reminder of how 'our' energy companies may actually evolve to become large diverse corporations, similar to the Japanese - Itochu, Mitsui, Mitsubishi...                       https://www.mitsubishicorp.com/gb/en/     (sectors include energy, mining, industry, tech, retail !!!)                                        It would fit my personal prediction of a future commercial landscape having less, but ever larger, mega-corporations - and this is surely already happening, eg not only is Amazon not going away, it last week bought MGM. I know it's cost base may be shaky, so Google/Alphabet might be a better example to cite.                                                                                                                                                                                                     @DurhamBornhas said before the oil companies may buy large chunks of the green sector, I wonder DB do you have any views on them also branching out into other utilities such as telecoms, or other sectors even? The Japanese corporate example is perhaps a bit extreme (unique to Japan maybe?) - but I think the concept here is to realise that the case for owing the energy sector might be far stronger than even many on here on this thread first initially thought?

[Castlevania]

 

1 minute ago, Hancock said:

If they do get hammered, in a few more years its likely they'll rebound.

Take it if they do run and you make significant profit the money will go into something much less risky?

It really depends on what happens to the economy and market as a whole, and that’s incredibly difficult to predict. So my initial thoughts are if they do run, sell, maybe buy some Big Tobacco, maybe top up my telcos, but hold most of the sale proceeds in a mixture of cash and long dated US Treasuries.

[Onsamui]

2 hours ago, AWW said:

Bit of anecdata from my bit of north London.

There has long been a property firm based near me that promises "5 years of guaranteed rent" to landlords. I always wondered exactly how they hedge the risk of a downturn in the rental market, or how big the premiums must be to guarantee such large sums of money. Well, it turns out they didn't hedge, and they didn't charge big enough premiums, as they went bust last week.

 

They owe money to a ton of landlords, including, surprise surprise, the council, which currently sits on a ton of distressed commercial property.

The company director has fled the country.

As my parents home is sstc my husband and brother and I are having to buy, we were caring for them for 12 years or more.  Husband and I have just bought a house on Nansledan, P. Charles' Newquay development (not really our kind of thing but very well built and a lock up and leave) as we were out bid 3 times in various locations in Cornwall. Just got in before the prices went up and one beside us went up it sold the same day for £75k more than we paid.  Complete madness and it is mainly out of towners.  So having bought after waiting since 2007 (had a ball travelling though when on respite time) the market will now crash.

[JMD]

6 hours ago, jamtomorrow said:

Seeing stagflation come up more and more at the margins of MSM e.g.

https://www.kitco.com/news/2021-05-15/We-re-returning-to-the-70s-era-of-social-decay-crime-and-stagflation-Scott-Rothbort.html

So MSM are cottoning on but still not quite on the same page as the thesis of this thread.

Got me wondering ... what *is* it that's different about today's macro set up and/or likely policy response that means we'll get reflation (i.e. inflation + increasing output) rather than a 70s-style stagflation?

Re stagflation vs reflation. The 70's got bogged down into useless ineffectual union/management in fighting. However this cycle we are meant to get massive direct spending driven by big government/corporatism 'love-ins'. You can tell I'm no technical expert on these things, but just my simple take... The thing is those 'love-ins' I describe will be pleasantly consensual for the elites, but I fear will be ultimately abusive for the rest of us!!                                                                                                          Btw, Lyn Alden's latest newsletter sets the various scenarios out properly by comparing the 40s/70s eras.

[Onsamui]

4 hours ago, Fully Detached said:

Similar to my scenario, except I don't work for other people on account of my natural aversion to authority. Or more to the point, my refusal to recognise someone else as my superior for no other reason than that they say they are.

First thing from my perspective has to be your health - there's no point working yourself to death just to try to make a life. And if you're incredibly stressed out that's going to affect the quality of your decision making - the world looks a whole lot different and a whole lot less complicated when you're relaxed. Like several others on this thread I've stopped working nearly as much - I do 5 days per month now as standard, sometimes 10-12 if it's busy and I want some extra money. I'm fucked if I'm going to work myself to death to give money to a government that they're going to actively use against me. And boy, them hamsters on their wheels don't half look funny when you're kicking back and enjoying life.

As for a house, well only you can decide that. We are actively looking at the moment after losing our private rental and having to go back to the open market. It's been a case of looking further afield in the hope of buying the sort of quality of life we want without having to take on any debt (actually we are looking at a small mortgage but offset 2x by other investments, so net zero debt). For me the potential loss to a HPC is less scary than seeing my money get eaten away by inflation. If we buy I will be doing so in the full expectation that the house will drop by 25% minimum at some point. I'm mitigating this by spending as little as possible to minimise the nominal loss. At the same time, I expect any such drop to be very temporary (perhaps so temporary that you'd be lucky to time the bottom and get the sale completed before prices started rising again), meaning that what I would really lose is the theoretical opportunity to buy more house for the same money. And I'm mitigating that by looking for a place that ticks the vast majority of our boxes, so that I'm not stuck in an unsuitable house and seeing suitable houses on the market for less than we paid. So in simple terms I'm looking further afield to get the features that we want at the lowest possible price.

Someone up thread commented on the attractiveness of cash buyers - I've put a couple of offers in at 10% below asking and cash has not been attractive enough to have those accepted yet. But I get a sense that the pool of cash buyers is drying up and that the market is starting to turn - not a chill wind yet, but the sun seems to have gone behind a cloud and everybody's looking up wondering where it went.

Good luck with whatever you decide to do. This clown world that the political class have created is hopelessly unfair and completely arse backwards, but all we can do about it is accept it for what it is and make the best of it. In the centuries to come I genuinely think the present time will be looked back on as the end of an empire, with all the lunacy and debasement that tends to go with it. So as shit as it often seems, we're living through a hell of an experience.

Down here in Cornwall and being  cash buyers which gave us first dibs for viewing even before a property hit the market, but alas every one we liked we were out bid, so cash is not king here at the moment just gets you in first.

[Castlevania]

22 minutes ago, JMD said:

Actually I think that's a timely reminder of how 'our' energy companies may actually evolve to become large diverse corporations, similar to the Japanese - Itochu, Mitsui, Mitsubishi...                       https://www.mitsubishicorp.com/gb/en/     (sectors include energy, mining, industry, tech, retail !!!)                                        It would fit my personal prediction of a future commercial landscape having less, but ever larger, mega-corporations - and this is surely already happening, eg not only is Amazon not going away, it last week bought MGM. I know it's cost base may be shaky, so Google/Alphabet might be a better example to cite.                                                                                                                                                                                                     @DurhamBornhas said before the oil companies may buy large chunks of the green sector, I wonder DB do you have any views on them also branching out into other utilities such as telecoms, or other sectors even? The Japanese corporate example is perhaps a bit extreme (unique to Japan maybe?) - but I think the concept here is to realise that the case for owing the energy sector might be far stronger than even many on here on this thread first initially thought?

The large industrial conglomerates fell out of fashion in the West. I don’t really see them coming back. There’s still the odd company that has several seemingly unrelated parts - such as Associated British Foods for example which makes a load of branded food; refines sugar and also owns Primark.

[JMD]

4 hours ago, DurhamBorn said:

Telcos are going to see massive moves at some point.The sector is ripe for buyouts etc.It only takes one pen stroke on legislation from regulators and governments and the telcos profits will explode if they can force more from heavy traffic tech company users.I think governments might.Its the easiest way to get more from these tech companies in tax and value for your economy.Wont pay tax,ok theres a 2x increase in your bill to the telco backbone owner and we will take that tax from them instead.

The sector is slowly de-leveraging even with massive CAPEX spending.I think we are looking at a tobacco situation back in the day.

Very interesting observation and great insight on the telecoms tax-take DB, another example of why for me this thread is so compelling.

[Fully Detached]

28 minutes ago, Onsamui said:

So having bought after waiting since 2007 (had a ball travelling though when on respite time) the market will now crash.

Yep, pretty much the view I am taking on it - but I've just shifted my mindset so that instead of trying to "win" I'm just trying to lose as little as possible whilst gaining in other ways. In my old HPC days I was far too interested in being proven right and "winning" the argument, and that has cost me in more ways than simply financial.

[JMD]

3 hours ago, AWW said:

Bit of anecdata from my bit of north London.

There has long been a property firm based near me that promises "5 years of guaranteed rent" to landlords. I always wondered exactly how they hedge the risk of a downturn in the rental market, or how big the premiums must be to guarantee such large sums of money. Well, it turns out they didn't hedge, and they didn't charge big enough premiums, as they went bust last week.

 

They owe money to a ton of landlords, including, surprise surprise, the council, which currently sits on a ton of distressed commercial property.

The company director has fled the country.

Best to rent direct with the council, many run the same guaranteed rent schemes, plus they can't go bankrupt... hmm, wait minute?!?... well, even if they did, they would at least get bailed out!                                   Btw, you say the co director has fled the county, what nationality was he? 

[Loki]

3 hours ago, AWW said:

The company director has fled the country.

 Must be serious then!

[Option5]

I'm seeing lots of adverts for investment apps, no broker fees etc aimed at the newby investor.

Am I wrong to suspect that the big players are trying to get the general public's money into their system so they can cash some out before  a big crash?

[Harley]

3 hours ago, Bobthebuilder said:

I have a few telco shares but would like to add more. Anyone know a decent ETF that covers the sector well? Not advice etc.

Go to justetf.com and select the sector to see all the allowable ones for us in the UK.  Be careful, the "Communications" ones often are not telco, having Facebook, etc.  The site will also give details like whether they hold stocks or synthetics, etc.  My opinion was the world wide sector was not well covered by those accessible to us (i e. Have a KID) so I went with individual stocks.

[Harley]

3 hours ago, Hancock said:

Get the impression lots of people on this thread now have a "Fear of Missing Out" and are pouring their money into PMs, commodities, miners, telcos and the various inflation stocks that have been mentioned.

Just curious to get a gauge of feeling for the BK, or is it a case of people merely hedging their bets.

I'm letting the shares in my SIPP run a little longer, then will make a decision of selling and buying back in on the presumption a BK happens.

But can't help thinking doing so would put me in a similar scenario to those who STR'd on HPC in 2004.

 

I've given up guessing the future.  I have a system to tell me when to buy and sell at the individual stock level.  I will get hit in a BK but not too badly and getting hit a bit is necessary to know it's for real rather than just a minor pullback.  Not that I would sell core holdings, maybe just a third.  My efforts now are more focussed on asset allocations and institutional and government risk.

PS: As mentioned upthread IMO most stuff is overbought so I'm at maximum risk atm.  It could easily stay overbought and go higher, especially if we have a crack up, but this is the volatile risk zone.  Buy cheap sell high so I'm closed for further purchases other than a very few areas showing promise (e.g. certain PM miners and recently crypto).

[Bobthebuilder]

Thanks, Harley, I will have a look.

[JMD]

1 hour ago, Castlevania said:

The large industrial conglomerates fell out of fashion in the West. I don’t really see them coming back. There’s still the odd company that has several seemingly unrelated parts - such as Associated British Foods for example which makes a load of branded food; refines sugar and also owns Primark.

Yes, you might be correct Castlemania. Though just something I've been thinking more about recently. It's just that even here in the West, we seem to be heading toward a Scandinavian type, big state and maybe big conglomerate scenario model emerging. For example Norway has its Aker AS, which is probably more like a investment holding company, but think corporate models like that one may come to dominate across the West (Alphabet?), along with many small companies, but with nothing in-between. Asia, Russia, S America seem to do this already. Hope this doesn't appear to be idle conjecture on my part, instead I'm trying to work out the even bigger investment case for owning potential future conglomerates such as the oilies?

[DurhamBorn]

2 hours ago, Hancock said:

So i take it you still expect a BK, but not as confident as some on the twitterati that are quoted on here. Stands to reason that if interest rates go up then a correction will happen, but how much does the market go up until that happens.

I've done well, unfortunately the ones ive made no money on are BP (£10K), Shell (£10K) and Vodafone (£5K) which sadly were all my biggest holdings. A few percent ahead overall on those.

I've £110K in shares in my SIPP and in a couple of months with have 40/50K in cash .... happy to leave them be for now, but will pull some take profit from mining stocks should they run as CV suggests.

Its the funds that were set aside for my house of circa £250k that i'm wondering what to do with, maybe i will start with another round of BP (£10K), Shell (£10K) and Vodafone (£5K) and wait for a BK then jump in at that point. 

Late 2019 i was 100% certain of a BK, now i'm not as sure, as the central banks have gone in big.

The CBs have put in about 70% of what i expected,so looking good there.The question on  BK is how it develops.If its derivative counterparties blowing up it would likely be everything going down a lot.However it could be we see hot sectors blowing up mostly and the areas of interest to us holding up well.They arent exactly well owned.Take Imperial,who actually owns that now,not many of these young ones gambling on pet digital rocks.Not the big passive funds.Big oil another.Telcos,market caps are nothing compared to bubble areas.10% of Amazon would buy most of the European telco sector.

The thing is,you can only buy what you think is value ,and will be a certain price in the future.The only real worry i have on some of the areas im holding is derivative risk on their big debts.However part of the investment thesis on those areas is inflation is about to see free cash shoot up and cut those debts.Imperial for instance paid down £3 billion over the covid year.Thats some performance,yet the market ignores them.They will be buying back 6% of their equity a year from about 12 months time.Even if they can only hold profits level with a slow 3% decline in smoking use and 3% price increases,they should still be able to grow the divi above inflation over the cycle.

Free cash flow is going to be king this cycle,and price increases above depreciating assets the key to outperforming.