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

[DurhamBorn]

5 minutes ago, Green Devil said:

What do you think of the US tech plays? Ie T or VZ? They seem to offer and decent div yield and arent really sky high like the hot tech stuff.

Id be happy to own both.VZ has more focus,but T might be decent value given youl get the spin off media company and can always sell that after it runs for a few weeks and buy more T.Remember though even after that T is cutting the div and all things equal likely comes out around 5%.I intend to buy them both,but i bought Brazil telcos and utilities first and il sell some of them and switch at some point.

[sancho panza]

2 hours ago, Lightscribe said:

Yup I’ll chime in there, thanks CP. That’s really hit the ground running and is leading in my portfolio in that sector.

I suspect because it contains a broad range of the sector as well as the smaller holdings in other countries that don’t give a shit about the narrative. I suspect some may have sneaked past media backlash while big oil has been in the firing line.

Their report for may is interesting.

As @Cattle Prod pointed out very early on in our campaign,'best cure for cheap oil is cheap oil.'

https://www.guinnessfunds.com/wp-content/uploads/2021/05/2021.05_Guinness-Global-Energy_Monthly-Update_GBP_EN.pdf

33 minutes ago, DurhamBorn said:

@feed you have ,without care covered the thread with that banned name.It has been my worst buy for at least 10 years in £ loss terms,and yet you happily shove it into our faces 

Mind you maybe there is hope,maybe its a sleeping giant,maybe now its balance sheet is nearly clean there is great value.Should i pull the trigger on some more?,i have none in my SIPP,and then it might even show as a + 

The bull case is as the above says and they are surely a sitting duck for a takeover,though the nuclear side puts everyone off bidding i think.Though surely Shell or BP must run the rule over them every so often.

See what you have done now,the thread might pile in 

The only good thing to come out of the Scottish play for me was that it forced me to develop the coma scores,on which basis,I wouldn't have invested in it.,

But then,one of the benefits of having losing trades is that they make to reflect on what and how you're doing things.

I look back now and I was so wrapped up in the recovery story,I went easy on the finanicals.Probably stops me buying barclays shares at £1-50,so no bad thing maybe.

More braodly,there are l,aods of similar balance sheets soaked in debt in that sector.

[DurhamBorn]

https://www.dailymail.co.uk/news/article-9664623/Pay-furloughed-staff-sofa-says-BofE-chief-economist.html

Even the BOE are now saying workers need pay increases to tempt them back to work,not to mention all the inflation 

Good to see Brexit forcing up wages as well by locking out EU workers,exactly what the Red Wall voted Brexit for.

[janch]

I have recently ditched CNA, SGC and GOG as all 3 were annoying me in their stubborn redness.  I bought some  iShares MSCI Brazil UCITS ETF USD (Dist)    IBZL    instead.  So far this is proving far more worthwhile.

My (worst) non-performers now are those old favourites FRES and HOC with CEY but I live in hope tney will take off soon.

[Mapper]

1 hour ago, DurhamBorn said:

my worst buy

My worst by a country mile.

Here I am chasing it to the bottom.

[reformed nice guy]

"The Energy Information Administration's (EIA) Crude Oil Inventories measures the weekly change in the number of barrels of commercial crude oil held by US firms."

They were expecting a drop of 2M but got a drop 5.241M!

 

[JMD]

4 hours ago, NogintheNog said:

I think it is important to remember that some of that cost is the charges on your holdings in say a SIPP by your holding company, say HL.
The ongoing charge on that fund is actually 1.26% pa, which is higher than some others but not out of the way considering the diversity of the holdings and the fact I can't even buy some of them on my platform!
That diversity also gives you some protection.

If two years ago you'd have plugged £5000 into the SCIN and £5000 into RDS-B, the SCIN would be worth 3.3% more + the dividends, whilst RDS-B would be worth 48% less + the dividends.
If there is gonna be a BK, I think these trusts will suffer again, but not as much as some individual stocks.

Declaration: I do own some SCIN, but I own a lot more RDS-B!

All very valid points. Personally I buy the shares direct for the oil sector because i am averse to paying fund charges. However, for other sectors, for example EM's, i look to buy an actively managed fund plus a sector etf, so that my average total charge is lower. I do first compare the past performance of each over say 3/5/10 years, but as this will normally always show a difference, i then compare the holdings of each because further diversification across the two funds should indicate i am 'buying' more value/less risk. An added benefit whilst holding, is if one fund goes on to do a lot better that the other, you can at least review early, and perhaps sell/change funds. Also, Investment trusts bought below NAV are good, plus they benefit from being able to borrow so their leverage should increase performance. 

[Harley]

One of those podcasts/videos (both available) you decide to listen to twice.  Some interesting perspectives from a long time metals guy Simon Hunt.  I've thought the behavior of the central banks (printing, etc) signals they know this is the end game of the current regime and are making the best out of it while they can so nice to hear someone else say it.  I'm already preparing as he (generally) recommends!  I just hope there is a USD bounce so I can load up on commodities.

A summary of the interview here:  https://palisadesradio.ca/simon-hunt-chinas-gold-and-digital-currency-reset/

 

[Loki]

2 minutes ago, Harley said:

One of those podcasts/videos (both available) you decide to listen to twice.  Some interesting perspectives from a long time metals guy Simon Hunt.  I've thought the behavior of the central banks (printing, etc) signals they know this is the end game of the current regime and are making the best out of it while they can so nice to hear someone else say it.  I'm already preparing as he (generally) recommends!  I just hope there is a USD bounce so I can load up on commodities.

A summary of the interview here:  https://palisadesradio.ca/simon-hunt-chinas-gold-and-digital-currency-reset/

 

I really like the Palisades channel, I don't listen to every interview but Tom clearly puts a lot of work in

[Harley]

4 hours ago, DurhamBorn said:

@feed you have ,without care covered the thread with that banned name.It has been my worst buy for at least 10 years in £ loss terms,and yet you happily shove it into our faces 

Mind you maybe there is hope,maybe its a sleeping giant,maybe now its balance sheet is nearly clean there is great value.Should i pull the trigger on some more?,i have none in my SIPP,and then it might even show as a + 

The bull case is as the above says and they are surely a sitting duck for a takeover,though the nuclear side puts everyone off bidding i think.Though surely Shell or BP must run the rule over them every so often.

See what you have done now,the thread might pile in 

Bit hard on @feed as he seems to have only showed a logo?  Others have actually said the unsayable, haven't they @Loki !.  I'm only down £4k, much less than some others (several of which you once mentioned like CARD !).  Our scottish has had a bit of a bounce lately on the monthly but may be weakening now (although the daily is approaching oversold).  Another I'll just hold and see, maybe!

[Harley]

On 08/06/2021 at 09:50, DurhamBorn said:

BAT and BT doing nicely today,doubled BT bottom buy today, and Brazilian telcos still catching a bid 

 

Not advice etc,but iv been buying some Ingredion Inc with a few potash profits.They have been slowly growing their plant protein side for meat alternatives etc.As the roadmap moves along likely meat alternatives will grow hugely,government will push the health and environment side,but really its because meat is going to get expensive and hit lower earners.

This is a cross market buy from work on the lags of inflation,not inflation itself.Im looking more mid roadmap now as the primary areas are/have already delivered big profits,or decent.

Id rather buy it in a BK of course ,but see a chance this area becomes a hot one later in the cycle,and these are a quality company.DYOR etc,not advice.

Fully loaded on BATS and two thirds on BT.  BATS has seen some odd monthly price action and the March 21 breakout has so far been muted.  BT has been better and is approaching overbought but likes to stay elevated and may have more room to run.  No idea why I didn't top up on the Dec 20 break with it's classic pullback (long term support/resistance) before popping.  BT is a classic example of one of the stocks I was mentioning where momentum seems to have run ahead of MACD to put me into a quandary where it is overbought but relatively not moved that much on the average.  Pullback or stay elevated momentum wise while MACD catches up?  DYOR but I'm favouring staying elevated given its prior chart action. 

Ingredion .  Ta for the heads up.  So why has it not come up on my screens?  Cap is over £1B, cash flow seems stable, and the current ratio just about scrapes over 1,......but......div is a bit below 3% (good enough though), intangibles are c.30% of equity, price to book getting a bit pricey at 2.7 but above all total debt to equity is 87%!  I do worry sometimes you seem to like the debt junkies!  But then long term debt to equity is only 28% and I still haven't worked out which metric of the two I should use.  Technically (monthly) interesting to see March 20 did little damage in its long run.  Very close of overbought now though, although its momentum seems to like staying elevated and MACD has more room to run.  Maybe worth a position to see if it breaks current resistance, but that debt!

Pretty close to being fully allocated to our two Brazilians, with a top up this week.  One is a bit hit and miss SIPP eligibility wise.

[Harley]

43 minutes ago, Loki said:

I really like the Palisades channel, I don't listen to every interview but Tom clearly puts a lot of work in

Yep, he does a great job (I like his style) and yes, some are so-so but then some real gems pop up.  Overall excellent.  And the "gold" in the name is a bit misleading.

[leonardratso]

if you mention the scottish play 3 times in succession while looking in a mirror, then......

[Loki]

[Harley]

 

5 hours ago, Green Devil said:

What do you think of the US tech plays? Ie T or VZ? They seem to offer and decent div yield and arent really sky high like the hot tech stuff.

I appreciate I wasn't asked but I wanted to say - "******* *****"!  On the basis of the fundamentals I look at.  Eye watering debt, poor current ratios, and very negative equity if you take out intangibles.  I haven't even bothered looking at the rest of the data.  The only good part is the yield, but then I haven't checked whether that's sustainable (or even borrowed!).  Classic examples of many US blue chips atm.  Of course none of that means the prices can't rocket in this insane market!

PS:. Maybe I just don't have a handle on this stuff.

[Lightscribe]

3 hours ago, DurhamBorn said:

https://www.dailymail.co.uk/news/article-9664623/Pay-furloughed-staff-sofa-says-BofE-chief-economist.html

Even the BOE are now saying workers need pay increases to tempt them back to work,not to mention all the inflation 

Good to see Brexit forcing up wages as well by locking out EU workers,exactly what the Red Wall voted Brexit for.

Here lies the tipping point for me.

Obviously we’re already seeing panic for skilled employment and the subsequent raising of offers to get it (as DB and others have referenced themselves).

But does cut throat sectors like service, hospitality and restaurants etc follow? I can’t see them raising salaries beyond what tax credits can achieve. It will either be functioning on minimal staff and dropping everything aside core service or go bust. 

IMO it will massively accelerate the race for automation in line with the 4th industrial revolution roadmap. US is the one to watch here, it’ll be a case of adapt very quickly to determine who sinks and who swims.

https://www.foxbusiness.com/technology/former-mcdonalds-ceo-15-minimum-wage-automation

And it will be happening globally at the same time.

https://innovateuk.blog.gov.uk/2017/03/28/what-does-the-fourth-industrial-revolution-4ir-mean-for-uk-business/

https://www.industry.gov.au/data-and-publications/industry-40-testlabs-in-australia

https://www.twi-global.com/what-we-do/research-and-technology/technologies/industry-4-0

 

 

[Lightscribe]

1 hour ago, Harley said:

Bit hard on @feed as he seems to have only showed a logo?

I thought you meant the C&A one, it brought back immediate memories of being dragged around in there with my mum in the 80’s. Clock House were ‘with it’ I seem to remember. 
I always wished I could go home and just get on the Spectrum but a trip to BHS or Woolies would always be next...

[feed]

I

5 minutes ago, Lightscribe said:

I thought you meant the C&A one, it brought back immediate memories of being dragged around in there with my mum in the early 80’s. Clock House were ‘with it’ I seem to remember. 
I always wished I could go home and just get on the Spectrum but a trip to BHS or Woolies would always be next...

 

It's was the centrica logo, in the Ford pic with the Ford/CNA EV partnership.  The C&A pic, well it's not like people say C ampersand A is it.  

 

[Don Coglione]

3 hours ago, Mapper said:

My worst by a country mile.

Here I am chasing it to the bottom.

#MeToo

[leonardratso]

surely T & A would be more in keeping with this fora

[Harley]

5 minutes ago, feed said:

It's was the c****** logo,

[BurntBread]

1 hour ago, Harley said:

One of those podcasts/videos (both available) you decide to listen to twice.  Some interesting perspectives from a long time metals guy Simon Hunt.  I've thought the behavior of the central banks (printing, etc) signals they know this is the end game of the current regime and are making the best out of it while they can so nice to hear someone else say it.  I'm already preparing as he (generally) recommends!  I just hope there is a USD bounce so I can load up on commodities.

A summary of the interview here:  https://palisadesradio.ca/simon-hunt-chinas-gold-and-digital-currency-reset/

 

Thank you Harley! It's interesting to listen to someone with a different macro view and timings. His (Simon Hunt's) perspective is that there will be a crash in commodities in Q4 this year, especially of copper, because speculative investment has run way ahead of industrial demand, and then there will be more stimulus from the West, pushing up equities for the next couple of years. So far so similar to DB/DH.

However, he has two very different views: one on timing, and one geopolitical. On timing, he things the big reset / debt deflation is 2024, and then things power ahead in a commodity super-cycle, with 2030 being great, in that respect.

The more geopolitical point he makes is that he is much more positive about China than anyone I have read recently. He thinks that China now is working hard to prepare for the 2024 event, in particular deleveraging across the board, and sorting out its balance sheets (which will be tied in with a gold-backed CBDC). They will then be in great shape to buy everything up in 2024. China is then aiming for a multi-pole world, not to replace America's hegemony.

In contrast, what we have been hearing from various other commentators is that China will probably become old before it is rich; that its leverage and malinvestments are teetering on the edge even now, and that it will struggle for energy. The idea being that there may well be a fall from hegemony of America, but it is far from obvious that China will be able to step into the space, even if it wanted to.

Anyway, even if he didn't say much about his reasoning (other than that he has analysed historical trends for the last 120 years), it's good to hear radically different viewpoints, so as not to give too much credence to one only, for want of anything to compare it against.

------

@Harley, on your point about the sketchiness of the balance sheets of US telcos (and almost every company in the US), I am guessing that the DB thesis is that provided the debt has fairly long maturity, then a high-inflation, negative-real rate environment will erode it ... provided the company in question can at least match inflation in the prices it charges for its products. The big risk, of course, is how well it gets through any debt-deflation in the short term. I think the David Hunter view is to wait for the BK before buying US industrials, and I've been trying to sit on my hands to do just that. What worries me is DB's comment that most companies go bust during the recovery. I can see myself loaded up with lots of yellow-sticker stocks, only to find half of them have fallen through the holes in my shopping basket on the way home.

[Lightscribe]

54 minutes ago, Harley said:

Should I mention that I’m up on C*******? (Not by much but I didn’t have much invested in the beginning)

[DurhamBorn]

3 hours ago, Harley said:

Fully loaded on BATS and two thirds on BT.  BATS has seen some odd monthly price action and the March 21 breakout has so far been muted.  BT has been better and is approaching overbought but likes to stay elevated and may have more room to run.  No idea why I didn't top up on the Dec 20 break with it's classic pullback (long term support/resistance) before popping.  BT is a classic example of one of the stocks I was mentioning where momentum seems to have run ahead of MACD to put me into a quandary where it is overbought but relatively not moved that much on the average.  Pullback or stay elevated momentum wise while MACD catches up?  DYOR but I'm favouring staying elevated given its prior chart action. 

Ingredion .  Ta for the heads up.  So why has it not come up on my screens?  Cap is over £1B, cash flow seems stable, and the current ratio just about scrapes over 1,......but......div is a bit below 3% (good enough though), intangibles are c.30% of equity, price to book getting a bit pricey at 2.7 but above all total debt to equity is 87%!  I do worry sometimes you seem to like the debt junkies!  But then long term debt to equity is only 28% and I still haven't worked out which metric of the two I should use.  Technically (monthly) interesting to see March 20 did little damage in its long run.  Very close of overbought now though, although its momentum seems to like staying elevated and MACD has more room to run.  Maybe worth a position to see if it breaks current resistance, but that debt!

Pretty close to being fully allocated to our two Brazilians, with a top up this week.  One is a bit hit and miss SIPP eligibility wise.

I think on the debt its to be expected at the end of dis-inflation and actually a good signal,though crucial the companies can generate good free cash even in a big downturn,and also that the debt is structured well and not lumpy.Im watching all mine now as they should mostly be de-leveraging ,even if slowly.Ingredion id prefer lower,but opened small position.Im full on the Brazil telcos,i didnt use ladders on them i just bought them a while ago in two tranches.Im going to enjoy that interview you put up as i i think you make a very good point about the fact they are doing as much as they can because they know its nearly the end game.I still expect its at the end of this cycle,but open to it being sooner.

[Harley]

3 hours ago, BurntBread said:

Thank you Harley! It's interesting to listen to someone with a different macro view and timings. His (Simon Hunt's) perspective is that there will be a crash in commodities in Q4 this year, especially of copper, because speculative investment has run way ahead of industrial demand, and then there will be more stimulus from the West, pushing up equities for the next couple of years. So far so similar to DB/DH.

However, he has two very different views: one on timing, and one geopolitical. On timing, he things the big reset / debt deflation is 2024, and then things power ahead in a commodity super-cycle, with 2030 being great, in that respect.

The more geopolitical point he makes is that he is much more positive about China than anyone I have read recently. He thinks that China now is working hard to prepare for the 2024 event, in particular deleveraging across the board, and sorting out its balance sheets (which will be tied in with a gold-backed CBDC). They will then be in great shape to buy everything up in 2024. China is then aiming for a multi-pole world, not to replace America's hegemony.

In contrast, what we have been hearing from various other commentators is that China will probably become old before it is rich; that its leverage and malinvestments are teetering on the edge even now, and that it will struggle for energy. The idea being that there may well be a fall from hegemony of America, but it is far from obvious that China will be able to step into the space, even if it wanted to.

Anyway, even if he didn't say much about his reasoning (other than that he has analysed historical trends for the last 120 years), it's good to hear radically different viewpoints, so as not to give too much credence to one only, for want of anything to compare it against.

------

@Harley, on your point about the sketchiness of the balance sheets of US telcos (and almost every company in the US), I am guessing that the DB thesis is that provided the debt has fairly long maturity, then a high-inflation, negative-real rate environment will erode it ... provided the company in question can at least match inflation in the prices it charges for its products. The big risk, of course, is how well it gets through any debt-deflation in the short term. I think the David Hunter view is to wait for the BK before buying US industrials, and I've been trying to sit on my hands to do just that. What worries me is DB's comment that most companies go bust during the recovery. I can see myself loaded up with lots of yellow-sticker stocks, only to find half of them have fallen through the holes in my shopping basket on the way home.

I read his bio saying he spends a fair amount of time each year in China so attach some credence, combined with the general impression I get of someone reasonably well connected. 

Heard today about a company filing going concern due to lack of liquidity.  Maybe the start of the trend?  I still hold this time will be about the neglected subject of balance sheets.

DH does not profess to be a great timer and timing, rather than sequencing, is a mugs game.  So I thought they were similar.

Another reason I had the impression the gentleman knew his stuff was how he wove together a number of areas I had only heard disparately from detailed geo-political strategists and the like.  Mr Hunt was generous with his time and knowledge.

But it was his upfront point that they (I should have said governments not CBs) are crashing the system because they know it'll be replaced resonated and had me hooked.

I'm in an odd place at the moment.  The markets are stuffed overbought or (crypto) consolidating with the risk of more shocks and shakes.  So very quiet for me and my past instinctively tells me this is the time to worry, to make final preparations, and then he says the same thing!  Says we've got two years.  I'm working to less.  And this time I'm no bunny in no headlights and it feels good.

It's all lying there, in the open, for all to see if we so choose.  The political, the macro, the social.  I've been thinking and worrying about the right things, at the right time, and I'm on it.