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


spunko
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wherebee
4 hours ago, Harley said:

True, but not an IB issue.  Yes, about options and taking delivery, although I'd just trade them through options anyway so no need to hold.

indeed.  I use IB here in Oz and can buy US ETFs no worries.

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16 hours ago, Don Coglione said:

What is that massive hand, with painted nails, all about then?

If you have to ask, then i'd venture you don't really want to know the answer!!

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4 hours ago, Lightscribe said:

Interesting quote there MP, follows on from what I said earlier. Brexit will be the focus.

You little englander Brexit bastards! See what you did? I couldn’t get any Kale this week for my morning smoothies in Waitrose because we no longer have any cheap EU labour to pick and transport it for us! Referendum now!!!

I notice that Gordon Brown has ventured out - he's getting vocal on wanting the UK to rejoin the EU. Nuff said... But must admit all this never-ending social/political division is getting to me big time.

Edited by JMD
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Hardhat
1 hour ago, sancho panza said:

 

Vodafone GBP 1.28 01/06/21 5 2 3 5 4 19
                 

Dammit I'm tempted to buy VOD again...

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DoINeedOne
1 hour ago, sancho panza said:

Just a thanks to everyone who contributed for the heads up on brazil telecoms.-I think it was @DurhamBorn  but anyone else too,I know there's been some chat.

                 

Curious if you have a moment how does Helios Towers and Vantage Towers score 

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DurhamBorn

@sancho panza love those coma scores.It would be interesting to see how it worked out if we take say £15k and split it between the 3 highest scores,then sell after 8 months and rotate it all into the then top 3 etc over and over.Its interesting that its showing Telia and Telenor as more expensive than others by a lot and il use that not to top them up.

Brasil two and Telefonica Germany look great.Im well up on Brasil ones,but id gladly buy here if i wasnt full,il add some TEF Germany though today.

Should add i think the divis from the Brasil stocks are withholding tax free in adrs in a SIPP,someone might want to confirm that,but its a big plus for longer term holdings.

Edited by DurhamBorn
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Lightscribe
1 hour ago, JMD said:

I notice that Gordon Brown has ventured out - he's getting vocal on wanting the UK to rejoin the EU. Nuff said... But must admit all this never-ending social/political division is getting to me big time.

Never let any of the bullshit get to you, we’re just spectators after all, just let it all wash over you.

Nothing we can do will change anything, just be content you’ll be in the drivers seat over the coming years whilst everyone else will be running about like headless chickens panicking that the sky is falling down.

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2 hours ago, JMD said:

Thanks Harley, I agree the detailed financial data is best to drill down into. But unfortunately I find i am not capable of doing that - i wish i were, but think my 'investor personality' is not that way inclined (important to admit weaknesses, my wealth is at stake after all!!). Instead i am trying to develop/settle on a few crucial ratios. You mentioned Simply Wall Street recently and i also use them because they present the data in graph form, which lends itself to my macro/ratio style of appraisal/decision making. 

I am not a trader, and am only looking for a personal 'BK wish list', which i would look to buy if/after prices fell. I mention this because the value proposition of a stock is not currently important to me (i.e. i am hoping/planning to buy after 80%? fall, as per DaveHunter), and so more interested in the reflation-cycle fundamentals of the stock as discussed on this thread. 

Though really wish there was a proxy/ratio to help in approximating a company's debt-profile - but asking for too much here i guess? Would like to find a simple way of discovering what proportion of company debt is actually long-term debt at hopefully low interest rate. This would really help me to derisk my stock selections.    

A bit contradictory - money at stake but not the type to do the detail?  The detail I do takes seconds.  I'll happily put a few £k down after a 5 to 10 minute review.  All I'm looking for are sound companies and I'm not into the valuation game either.  Plus I think as much about portfolio allocations and risk.  I also spend as much time on the technicals to make sure I'm buying cheapish with some upside.  I want some div's too so I guess I'm more a total return type.  Anyways, to your question, debt to equity is my go to ratio.  I prefer the total debt version but could be persuaded to use the long term version.  Simply Wall Street mention/review interest cover I think.  But I only care about the debt level not the fix, especially if there are similar better companies out there.  Above all, individual stock selection only accounts for a part of overall performance - sector, etc choice are just as important.  The key for me is to look at all these things in the whole, from the portfolio level downwards.  That helps tell me how much time I really need to spend on an individual stock.  Spend too long and the answer is probably unwelcome but obvious!

PS: Last I looked Morningstar age the long term debt balance.  But Simply also does that great interactive chart of the DTE figure.  

Edited by Harley
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3 hours ago, sancho panza said:

Just a thanks to everyone who contributed for the heads up on brazil telecoms.-I think it was @DurhamBorn  but anyone else too,I know there's been some chat.

I've had my head up my backside and haven't updated the coma scores for telecoms since mid march when quite a few still hadn't psoted full years.

You'll never guess what's top scoring this year after BT the last.

As ever,I use it with spray n pray.But this is my take on the sector and then adjust a little if the price has moved some.A score of 17 or over gets my interest,but a balance sheet score of 1 is a non non,as well,red balance sheet figure indicates goodwill over 75% equity,green over 50%.an attmept to avoid a repeat of teh scottish play.,dyodd.

On the back os this,I picked up some TIM SA,Telefonica brazil and will be doing Telefonica deutsche today

Company Share price       Date           Chart               Inc            BS              CF         Sector             SCS
Airtel Africa GBP 0.7785 10/06/21 3 4 1 5 4 17
Americ Movil MXN 15.78 10/06/21 1 3 1 5 4 14
AT&T USD 30.04 17/03/21 3 1 2 5 4 15
BT GBP 1.75 01/06/21 4 4 2 3 4 17
Deutsche tel E 16.655 17/03/21 1 3 1 3 4 12
Drillisch E26.36 10/06/21 3 3 5 3 4 18
KDDI Y 3632 10/06/21 1 3 3 5 4 16
Koninklijke E 2.923 17/03/21 4 3 2 5 4 18
KT Korea 26900 17/03/21 3 4 3 5 4 19
LM Ericsson B Skr 115.80 18/03/21 2 3 2 3 4 14
MTN ZAR 8809 18/03/21 3 4 2 5 4 18
Nippon Telegraph Y2874 10/06/21 4 4 3 4 4 19
Nokia E 3.505 18/03/21 4 1 3 3 4 15
Orange E 10.51 18/03/21 4 5 1 5 4 19
Proximus E 18.29 18/03/21 4 4 2 3 4 17
Singtel S$ 2.43 01/06/21 4 2 4 4 4 18
SK Telecom KRW 334000 11/06/21 1 4 3 4 4 16
Swisscom CHF 489.1 18/03/21 2 3 3 3 4 15
Telecom Italia E 0.4646 18/03/21 4 5 2 5 4 20
Telefonica E 4.077 18/03/21 5 3 2 5 4 19
Telefonica Brazil BRL 47.45 10/06/21 5 3 4 5 4 21
Telefonica Deutsch E2.264 10/06/21 5 3 4 5 4 21
Telenor Nkr 151.05 18/03/21 2 4 1 2 4 13
Telia Skr 37.06 18/03/21 3 1 2 4 4 14
Telkom Indonesia IDR 3480 10/06/21 1 3 3      
Telstra AUD 3.19 18/03/21 4 3 2 4 4 17
TIM SA YSD 12.83 10/06/21 4 3 4 5 4 20
Telus                
T-Mobile USD 146.89 10/06/21 1 2 2 1 4 10
Turkcell USD 5.55 18/03/21 5 5 2 5 4 21
United Internet             4 4
Veon                
Verizon USD 55.83 18/03/21 1 3 2 3 4 13
Vodafone GBP 1.28 01/06/21 5 2 3 5 4 19
                 

Beat me to it, just because you take a break from saving lives and I've got a paddock to sort out!  Not fair!   It was him what dun it, as usual!  First time I took his chat up after my pm miner debacle and up 7%+ (since moving accounts about a day or two ago!).  Got too cheap to resist and got a buy signal. I still must look at telco too, hopefully this weekend so I can compare, but me partner has ideas for me, not of the fun kind!

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sancho panza

 

37 minutes ago, DoINeedOne said:

Curious if you have a moment how does Helios Towers and Vantage Towers score 

Helios Towers chart 1 (not much history to look at),income 1,b sheet 1, FCF 1,sector 4=8

I haven't had a deep dive,but they're a risky punt due to size/positoning nayway.Coma scoring imho suits spray n pray investing across realtively mature firms with historic charts and financials to assess patterns.

23 minutes ago, DurhamBorn said:

@sancho panza love those coma scores.It would be interesting to see how it worked out if we take say £15k and split it between the 3 highest scores,then sell after 8 months and rotate it all into the then top 3 etc over and over.Its interesting that its showing Telia and Telenor as more expensive than others by a lot and il use that not to top them up.

Brasil two and Telefonica Germany look great.Im well up on Brasil ones,but id gladly buy here if i wasnt full,il add some TEF Germany though today.

Should add i think the divis from the Brasil stocks are withholding tax free in adrs in a SIPP,someone might want to confirm that,but its a big plus for longer term holdings.

It's how I'm working it,although we're keeping them.A mate was asking if we should buy more BT today(i let him knwo when we buy n sell) and I said there's better value elsewhere.I was stunned at the scores those three picked up when I checked their financials and we're looking to build out telecoms at the mo.I bought some straight away as we have some cash from sales.although broker is getting back to me on the German one(owns 02 in Germany....) as he may not be able to settle it.Wish I'd checked a few weeks back when you were buying:ph34r:o.O

The issue with telenor and telia-is the goodwilll issue-virtually 100% of telenor equity is goodwill and intagibnles(the latter might include some valuable patents etc).But this is a broad brush stroke type thing so doesn't allow for any company specific issues such as one off losses.It does seem somewhat useful in identifying value.

https://www.investing.com/equities/telenor-balance-sheet

image.png.a12cee05d6adbbcd084d8e207be55985.png

image.png.aec780d594e18acaf812a16bc3c11855.png

I'd like some Nippon telegraph/Korean ones but they're hard to get hold of

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16 hours ago, DurhamBorn said:

I think a lull is very likely and that might be where we see balance sheet events,a clean out,then inflation running up again.I dont tend to do much work on short term calls though as im not a trader and try to price out to 5 to 8 years.

Accepting everything in the end is a trade, you say you don't do much work short(!) term and am not a trader but you do seem to turn stocks over relatively frequently?  Not that there's anything inconsistent with long term macro work and relatively shorter term investing/trading.  No need to answer but would be interested to know your overall approach to your buys and sells (ladder in and out, value based sells, price target based sells, etc).  The selling bit is always the b*tch.

47 minutes ago, sancho panza said:

Nippon telegraph

I hold! :P.  I thought you had Saxo, although maybe they're one of the stocks you have to ask them to deal in?  I think so as they only dealt in about half my (large cap!) Japanese stocks which was far from what they imply on the tin.  IB no sweat, even Degiro should too but not II (in an ISA or not) as they don't do Japan.  Good news though as little WHT with Japan.  No-one I can find does Korea. 

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52 minutes ago, sancho panza said:

The issue with telenor and telia-is the goodwilll issue-virtually 100% of telenor equity is goodwill and intagibnles(the latter might include some valuable patents etc)

Yep!  Tough sector to navigate on fundamentals, that and the debt.  I might have bought Nippon, etc back in the day when my approach was to buy the best of the bunch in a strategic sector but I've changed my approach since then (good stuff missed due to a dodgy sector classification).   Generally, debt and intangibles are far less of an issue in Asia!

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2 hours ago, VeryMeanReversion said:

......

     - Expect America to play dirty to try keep its hegonomic status, try limit/control China. 

 .....

This is the sort of thing that piqued my interest.  That one short comment.  I listened to an hour long podcast interview with a geo-strategist on that one subject.  These were good headlines.  Maybe he's like some top guys I met who are a bit wiser and jaded but still generous - they say it, almost in passing, and then move on leaving you to decide whether to listen!

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17 hours ago, Harley said:

Is inflation really set to take off or will we see one broad jump/collection of jumplets (with no fall back) exacerbated by the base effect to clear the current build-up?  A jump maybe partly caused by the financial speculation on commodities as much as excess purchasing power at a time of supply issues?  For the monetarists  doesn't continued inflation require continued printing and are we not near the end of the print cycle, potential MMT not withstanding?  For the Keynesians, doesn't pull inflation require a questionable booming economy?  Or is the current emerging uptick the required kindling to start a spiral which feeds upon itself?

Apparently bad form to quote onself (:P) but a timely podcast from MacroVoices just in.  A necessary (as explained) but unpleasant (for a number of reasons) interview with Keen.

I would credit him for not being a stupid economist for his work on the role of banking and credit in monetary theory, the majority of the others just assuming it away.  Alas all that work IMO comes to the wrong answers but that's a separate anorak.

Regardless, he made a similar point about where is the consumer, etc power for sustained inflation after this initial wave?  I mentioned the need for a spiral (feedback loop) for continuing inflation and he rightly questioned the power of employees to create sustained wage push inflation which would be the most likely source.  The thought (per that other podcast) that commodities are now financially rather than fundamentally inflated is another contributor.

I still think we'll see inflation but am less certain why!

PS:  Nice when you listen with your own research/thoughts - talk about a possible bounce in bond prices - go figure! 

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DurhamBorn
1 hour ago, Harley said:

Accepting everything in the end is a trade, you say you don't do much work short(!) term and am not a trader but you do seem to turn stocks over relatively frequently?  Not that there's anything inconsistent with long term macro work and relatively shorter term investing/trading.  No need to answer but would be interested to know your overall approach to your buys and sells (ladder in and out, value based sells, price target based sells, etc).  The selling bit is always the b*tch.

I hold! :P.  I thought you had Saxo, although maybe they're one of the stocks you have to ask them to deal in?  I think so as they only dealt in about half my (large cap!) Japanese stocks which was far from what they imply on the tin.  IB no sweat, even Degiro should too but not II (in an ISA or not) as they don't do Japan.  Good news though as little WHT with Japan.  No-one I can find does Korea. 

No great shakes on sells Harley i tend to sell if i think something has run up to where its as high as i expected by cycle end,or well well ahead of itself.I sold a lot of Mosaic for that reason,it had more than trebled and it had become too big a holding and i thought other areas were cheaper.I havent sold any BT for instance as i think its going to £3 minimum this cycle,£4 likely and although overbought now i dont want to be out of it and risk not getting back in.In short i dont give a toss if i own Mosaic or not,i do want to own BT.

Others i have cut hard lately like Royal Mail and Drax were simply because i though Brasil was turning due to currency signals,again trebles on them both and i sold 2/3s.

I have individual roadmaps for almost all the shares i own.Royal Mail for instance i think £8 to £9 is likely by cycle end,but £6 was way ahead of things and i wanted the capital.I still own a decent amount.

Iv also sold a few at a loss.I bought some more Card Factory at 34p so when they ran up i sold for a couple of k loss.I also did the same with New River,bought a lot at 52p sold at 1.03p so cutting my loss on them to   couple of k and with divis actually only just over a k loss.

Only real nasty red now is the Scottish Play,but i actually bought a few the other day.I need that to go to 86p to break even now,lets see.

I also sometimes top slice things if iv got some divis sat to invest but want a bigger opening holding.Id sell 15% of BP for instance if/when it hits £4.

Im not using ladders as such at the moment because im happy with allocation,its more tinkering at the moment.

Iv found my skill is the macro and sector picking more than anything,the rest im ok at and im happy with that.

A lot of my selling is to keep holdings within a size im happy ,i never let anything get too big.% terms iv probably turned over around 14% of my portfolio this year,and thats the most since i sold almost 70% 3 or 4 years ago,and 30% when i took a lot of profits on the PM miners.However RM was getting on for 3rd biggest holding and Mosaic 2nd when they got sold down so outlandish affect.

 

 

 

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DurhamBorn

On stocks etc,its about time HL etc allowed direct buying in Japan and maybe other odd Asian markets.I think they avoid it because they really want people in funds so they can skim more fees.

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From wsj. Not sure it'll happen though

BP Considers Spinning Off Iraq Operations

Oil giant weighs whether to move its interest in the giant Rumaila oil field into a stand-alone company as it tries to pivot toward lower-carbon energy

 

LONDON— BP BP +0.35% PLC is working on a plan to spin off its operations in Iraq into a stand-alone company, according to people familiar with the matter, as the oil giant shuffles its assets and investment plans in its pivot toward lower-carbon energy.

The new company would hold BP’s interest in Iraq’s giant Rumaila oil field—one of the world’s largest—and be jointly owned by China National Petroleum Corp., one of the British company’s partners at the site, the people said. The new entity would hold its own debt, separate from BP, and distribute profits via dividends, the people added.

The plan aims to give BP more flexibility to invest in low-carbon energy by enabling it to reduce its spending on oil and gas, the people said.

Such a move would underscore how some European oil companies are backing away from decades of pioneering exploration in sometimes challenging locations to refocus on where future energy demand is expected to grow: low-carbon fuels and electricity.

 

The potential shift would have particular significance for BP because of its history in Iraq, dating to the 1920s. In 2009, BP was the first international oil business to return to Iraq after the U.S.-led invasion.

To advance its goal, BP would first need to secure the agreement of state-backed Basra Oil Company and Iraq’s national oil company, the State Organization for Marketing of Oil, or SOMO, which are part of the Rumaila Operating Organization.

BP’s plan for its Iraqi business is similar to what it recently said it was considering in Angola, the people familiar with the matter said.

BP and Italy’s Eni SpA last month said they had signed a memorandum of understanding to combine their oil and gas assets in Angola into a new jointly-owned company to save on costs and boost growth. The companies plan for the new entity to be self-funded, and have appointed advisers to help raise money for the new venture.

Any potential new company isn’t expected to change BP’s reporting of production and emissions for its Angola assets. It isn’t clear whether the plans for Iraq would affect BP’s production or emissions.

 

Consultants and analysts have said that they expect more oil companies to pursue similar deals as a way to free-up budget. Mature oil and natural gas fields, which don’t require large investments and provide a steady income, could be suited to such deals, they said.

“It’s the switch in mentality for the oil-and-gas operations from being a growth engine to a cash cow,” said Biraj Borkhataria, analyst at RBC Capital Markets.

Major European oil companies including BP, Royal Dutch Shell PLC and TotalEnergies SE have said they plan to reduce their dependence on fossil fuels in the coming years and curb emissions by shrinking their oil production and investing more in low-carbon energy.

BP last year committed to increasing its low carbon investments 10-fold to $5 billion by 2030, at the same time as reducing its oil and gas output by 40%.

Iraq’s Rumaila is one of the world’s largest oil fields and has been a cornerstone in BP’s portfolio. The company was involved in the discovery of the field in 1953, and the site now accounts for roughly a third of Iraqi’s annual crude production.

BP is one of Iraq’s largest foreign partners. The country has been attractive to major oil companies because its crude is relatively easy and cheap to extract, although political instability has at times tempered some interest.

In 2009, BP and CNPC won the rights to develop Rumaila, securing a 20-year technical servicing contract, which was then extended by 5 years to December 2034. BP is the lead contractor with 47.6%, while CNPC has 46.4% and SOMO has 6%.

In the past three years, some companies have left Iraq while others arrived.

Shell handed over its Majnoon field operations to Basra Oil Co. in 2018 and more recently Exxon Mobil Corp. has sought to leave. Earlier this year, Exxon held talks to sell its position in the West Qurna 1 field to the government, according to people familiar with the matter. Exxon and the Iraqi government declined to comment on those talks.

 

Meanwhile, Chevron Corp. signed a memorandum of understanding with the government last year including exploration activities in Southern Iraq.

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3 hours ago, Harley said:

A bit contradictory - money at stake but not the type to do the detail?  The detail I do takes seconds.  I'll happily put a few £k down after a 5 to 10 minute review.  All I'm looking for are sound companies and I'm not into the valuation game either.  Plus I think as much about portfolio allocations and risk.  I also spend as much time on the technicals to make sure I'm buying cheapish with some upside.  I want some div's too so I guess I'm more a total return type.  Anyways, to your question, debt to equity is my go to ratio.  I prefer the total debt version but could be persuaded to use the long term version.  Simply Wall Street mention/review interest cover I think.  But I only care about the debt level not the fix, especially if there are similar better companies out there.  Above all, individual stock selection only accounts for a part of overall performance - sector, etc choice are just as important.  The key for me is to look at all these things in the whole, from the portfolio level downwards.  That helps tell me how much time I really need to spend on an individual stock.  Spend too long and the answer is probably unwelcome but obvious!

PS: Last I looked Morningstar age the long term debt balance.  But Simply also does that great interactive chart of the DTE figure.  

10 minutes you say? In that case I might be underselling what I actually do, but then again I am slow! But yes I do use the S imply Wall Street dte chart, and also their historical earnings chart as it shows 5 year fcf, earnings, profit, etc all in one place.                                                                                                                                 Thanks for the tip - I shall defo take a look at Morning Star for their aged long term debt balance. I think it's one of the big debt gotchas to be aware of, as mentioned on thread regularly. I know the individual companies publish their detailed debt/corporate bonds, and @sancho panzakindly provided a link to Vodaphone's some time back, but when I attempted a read through I couldn't come to any conclusion in terms of short/long debt risk. 

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2 hours ago, JMD said:

10 minutes you say?

Closer to 5 minutes tbh!  I spend about the same on the chart/technicals.  That Morningstar debt was too much for me.  Just looking at the DTE and the 4 year history of debt movements on the cash flow statement is enough for me.  KISS!

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ThoughtCriminal

 Current gap between 10yr US yields (c.1.5%) and US CPI (5.0%) is 3.5%, the highest since 1980.

 

S&P at 3.2x LTM sales (versus 0.8x 100 year average)

 

Under normal circumstances it would be time to short the shit out of everything. 

 

But now? 

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JimmyTheBruce
18 hours ago, sancho panza said:

I'd like some Nippon telegraph/Korean ones but they're hard to get hold of

You can get KT and SK on Freetrade.

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1 hour ago, JimmyTheBruce said:

You can get KT and SK on Freetrade.

Ta.  Is that Freetrade UK?  I had a look but their website says they do UK and US.  Other than that, looks interesting.

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