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

[Sidd]

Lots of development in the last week and a lot of commentary on this board. Is it time to reflect on all of that now and understand what the next move should be?

 

A number of people on this thread have alluded to the idea of wanting to 'play' the BK wave (for want of a better word) and so on that premise are we at the point we should look to start exiting positions (e.g. into cash or IBTL) or do we continue to take the risk and ride a potential melt up scenario? Maybe sector rotation now is the way to play it if we don't believe a BK will take everything down in the same way?

 

I have commented previously that I am very heavily skewed towards the goldies and that whilst I have gone from a 120% paper profit from peak, I am still up around 40% (although gut wrenching to see how much of that I have lost for not timing my exit properly). My initial strategy was to rotate into the oilies and telcos but I clearly timed my sell strategy wrong (or not if the miners have one last big leg up). The mixed messages from commentators on twitters and MSM is adding even further to my nervousness and hence I turn to this forum as the place to smooth that noise out and focus on the macroeconomic analysis many of you are so good at providing whilst cutting out the emotions.

 

So on that basis it would be good to get ideas of what people are planning over the next 3 months, what is at stake, risk appetite and how we form the consensus opinions of all those in the macroeconomic world from Lyn Alden to Dave H and of course the analysis from this thread as it stands today, to better prepare us to set up for the next big event. 

 

For me I am personally 'hoping' (too much emotion at play when betting against hope which I need to change) for one more leg up in the miners with DXY dropping, at which point I will look to exit the majority of my positions and move to cash and IBTL. I am more worried recently on how that DXY fall might not play out and how I someone might have missed that when I was sitting comfortably on large paper profits only a few months back. It certainly has been a wake up call on how quickly things change. However sticking to my original strategy, I would have then rotated some of this back into the oilies and telcos and leaving much of the cash for after any BK event (DYOR).

 

[Gin]

"We have the energy price cap, we have the warm homes discount, to protect people at this particular time."

 

 

Industry group Oil & Gas UK said wholesale prices for gas are up 250% since January - with a 70% rise since August.

 

https://www.bbc.co.uk/news/uk-58615356

 

The gas price hike has caused two large fertiliser plants to shut down - which created knock-on shortages of its by-product CO2.

CO2 is used to stun animals before slaughter, as a coolant agent in transport and as a shelf life expending agent in food packaging.

BBC business correspondent Emma Simpson said one supermarket boss told her that unless the shortage is resolved the UK could start to see shortages of meat on shelves by the end of next week.

[Loki]

5 minutes ago, Gin said:

CO2 is used to stun animals before slaughter

They exhale CO2 though, just seal the room up.  Nitrogen would be far more humane anyway, no suffocation reflex or whatever they call it

Sounds like an excuse for meat shortages to me

[Gin]

7 minutes ago, Loki said:

They exhale CO2 though, just seal the room up.  Nitrogen would be far more humane anyway, no suffocation reflex or whatever they call it

Sounds like an excuse for meat shortages to me

I know little about it but it appears to be used when packaging meat to keep the traditional red colour and also to keep meat fresh and stable .

Why is carbon monoxide used in meat packaging?

The use of CO in fresh meat packaging gives promising results due to its positive effects on overall meat quality, enhancement red color, reduced lipid oxidation and microorganism growth inhibitions, which result in shelf-life prolongation during wider distribution of case-ready products.23 Jan 2018

 

Edit to add ...What I noticed that is extremely worrying is it is used in the brewing industry

[Loki]

1 minute ago, Gin said:

I know little about it but it appears to be used when packaging meat to keep the traditional red colour and also to keep meat fresh and stable .

 

Why is carbon monoxide used in meat packaging?

 

 

The use of CO in fresh meat packaging gives promising results due to its positive effects on overall meat quality, enhancement red color, reduced lipid oxidation and microorganism growth inhibitions, which result in shelf-life prolongation during wider distribution of case-ready products.23 Jan 2018

That's a different thing altogether, CO vs CO2 

[Errol]

9 minutes ago, Loki said:

Sounds like an excuse for meat shortages to me

For the poor only. Do you think Fortnum & Mason/Harrods will have a meat shortage?

[Gin]

4 minutes ago, Loki said:

That's a different thing altogether, CO vs CO2 

Whats an atom or two between friends ...

[Yadda yadda yadda]

23 minutes ago, Gin said:

I know little about it but it appears to be used when packaging meat to keep the traditional red colour and also to keep meat fresh and stable .

Why is carbon monoxide used in meat packaging?

The use of CO in fresh meat packaging gives promising results due to its positive effects on overall meat quality, enhancement red color, reduced lipid oxidation and microorganism growth inhibitions, which result in shelf-life prolongation during wider distribution of case-ready products.23 Jan 2018

 

Edit to add ...What I noticed that is extremely worrying is it is used in the brewing industry

If it is only used in packaging then the butcher shops will be fine. Larger supermarkets could open up their meat counters again.

[Noallegiance]

1 hour ago, Sidd said:

So on that basis it would be good to get ideas of what people are planning over the next 3 months

 

I shall mostly be getting drunk in my spare time.

[Shamone]

1 hour ago, Loki said:

They exhale CO2 though, just seal the room up.  Nitrogen would be far more humane anyway, no suffocation reflex or whatever they call it

Sounds like an excuse for meat shortages to me

When I was shown around the chicko there was no CO2 involved.

 

 

[Castlevania]

4 hours ago, ThoughtCriminal said:

Thanks DB, thats precisely what my "sell up" route would be. 

 

I thought SIPP tax advantage only came from salary sacrifice though? For all that ive seen SIPPs mentioned on here a thousand times ive never done any research to my shame. 

 

Sunday project. 👍

There’s a few SIPP related posts in the sub forums down here. Worth taking a look.

Generally speaking you can only put the higher of £3,600 or what you earn (from work, unearned income doesn’t count) up to a max of £40,000 into a pension and receive tax relief. You’ll earn tax relief at the basic rate even on earnings below the tax threshold which is nice. Those figures are gross. If you’re a lower rate tax payer it’s worth paying in via salary sacrifice as you’ll also obtain relief on the NICs you’d normally pay (so get 20% income tax and 12% NICs relief).

[DurhamBorn]

6 hours ago, ThoughtCriminal said:

Thanks DB, thats precisely what my "sell up" route would be. 

 

I thought SIPP tax advantage only came from salary sacrifice though? For all that ive seen SIPPs mentioned on here a thousand times ive never done any research to my shame. 

 

Sunday project. 👍

You save the NI on salary sacrifice,but if you have no chance with employer then you can still put all your taxable income up to £40k a year in your own SIPP.A few years would see you able to put the house money in and get the 20% tax relief back.Iv spent the last few weeks opening SIPPs for family members and working out with my dad ways to fund the kids so they can divert into their SIPPs.My partner is now putting everything in down to £1050 a month.

Bit of fun,not advice back of a fag packet DYOR etc 5%ish (theres 21) each into the below ,take divis as income or re-invest into any,but id probably be feeding divs at first into the Asian Trust and BAT.

Vodafone

Telefonica

Telefonica Brasil

TIM SA

Telefonica Germany

Orange SA

BT

BP

Shell B

Repsol

Chevron

Centrica 

Yamana Gold 

Barrick Gold

Newcrest

Harmony Gold

Buenaventura ADR

Pan American Silver

Henderson Asian Income Investment Fund

BAT Tobacco

Imperial Brands

 

[Volcanic]

We will be ordering Christmas hamper from butchers this year . Most of our meat from there anyway and as they have green grocery the veg included.

[leonardratso]

37 minutes ago, DurhamBorn said:

You save the NI on salary sacrifice,but if you have no chance with employer then you can still put all your taxable income up to £40k a year in your own SIPP.A few years would see you able to put the house money in and get the 20% tax relief back.Iv spent the last few weeks opening SIPPs for family members and working out with my dad ways to fund the kids so they can divert into their SIPPs.My partner is now putting everything in down to £1050 a month.

Bit of fun,not advice back of a fag packet DYOR etc 5%ish (theres 21) each into the below ,take divis as income or re-invest into any,but id probably be feeding divs at first into the Asian Trust and BAT.

Vodafone

Telefonica

Telefonica Brasil

TIM SA

Telefonica Germany

Orange SA

BT

BP

Shell B

Repsol

Chevron

Centrica 

Yamana Gold 

Barrick Gold

Newcrest

Harmony Gold

Buenaventura ADR

Pan American Silver

Henderson Asian Income Investment Fund

BAT Tobacco

Imperial Brands

 

are these HL sipps? or different providers?

 

[Bobthebuilder]

1 hour ago, Volcanic said:

We will be ordering Christmas hamper from butchers this year . Most of our meat from there anyway and as they have green grocery the veg included.

I think this is wise. Get to know your local butcher and if you don't have one nearby get to know one on the internet.

We talk a lot on here about Lidl / Aldi etc, but you cannot beat the quality of meat from a decent butcher.

I have a local butcher that sells pork from the Wirral, it's wonderful. Apparently the farmer has the biggest barn you have ever seen and raises indoor pigs for the supermarket chain. He feels guilty about this so raises a few in open field / woodland to massage his conscience, It's the best pork chops I have ever tasted.

[Hancock]

6 hours ago, Sidd said:

Lots of development in the last week and a lot of commentary on this board. Is it time to reflect on all of that now and understand what the next move should be?

 

A number of people on this thread have alluded to the idea of wanting to 'play' the BK wave (for want of a better word) and so on that premise are we at the point we should look to start exiting positions (e.g. into cash or IBTL) or do we continue to take the risk and ride a potential melt up scenario? Maybe sector rotation now is the way to play it if we don't believe a BK will take everything down in the same way?

 

I have commented previously that I am very heavily skewed towards the goldies and that whilst I have gone from a 120% paper profit from peak, I am still up around 40% (although gut wrenching to see how much of that I have lost for not timing my exit properly). My initial strategy was to rotate into the oilies and telcos but I clearly timed my sell strategy wrong (or not if the miners have one last big leg up). The mixed messages from commentators on twitters and MSM is adding even further to my nervousness and hence I turn to this forum as the place to smooth that noise out and focus on the macroeconomic analysis many of you are so good at providing whilst cutting out the emotions.

 

So on that basis it would be good to get ideas of what people are planning over the next 3 months, what is at stake, risk appetite and how we form the consensus opinions of all those in the macroeconomic world from Lyn Alden to Dave H and of course the analysis from this thread as it stands today, to better prepare us to set up for the next big event. 

 

For me I am personally 'hoping' (too much emotion at play when betting against hope which I need to change) for one more leg up in the miners with DXY dropping, at which point I will look to exit the majority of my positions and move to cash and IBTL. I am more worried recently on how that DXY fall might not play out and how I someone might have missed that when I was sitting comfortably on large paper profits only a few months back. It certainly has been a wake up call on how quickly things change. However sticking to my original strategy, I would have then rotated some of this back into the oilies and telcos and leaving much of the cash for after any BK event (DYOR).

 

If youd asked the same question in early 2020 everyone would have said a BK/stock market crash was inevitable.

Now the printing has been done its seemingly guess work, i don't believe any of the fin-twit experts are as confident as they make out. Many of them have been saying a deflationary bust is just around the corner since 2010, and have been perpetually wrong ... unless we had it in March last year and it was disguised as crashing due to covid.

Im about 37% shares and the rest in cash at the moment ... but waiting to "buy the dip" and put most of it in on oil shares and telecoms.

Surely the very nature of a BK of the kind being spoken about brings everything down, though obviously its a case of when it happens and how much oil/energy/metals go down from their pre BK price.

With the FED due to tighten in the coming months, surely the BK has to happen by early next year, as that is the sole premise a BK is based on. 

 

 

[Castlevania]

24 minutes ago, Bobthebuilder said:

I think this is wise. Get to know your local butcher and if you don't have one nearby get to know one on the internet.

We talk a lot on here about Lidl / Aldi etc, but you cannot beat the quality of meat from a decent butcher.

I have a local butcher that sells pork from the Wirral, it's wonderful. Apparently the farmer has the biggest barn you have ever seen and raises indoor pigs for the supermarket chain. He feels guilty about this so raises a few in open field / woodland to massage his conscience, It's the best pork chops I have ever tasted.

Related to the theme of people retiring early. My parents local butcher has retired. None of his employees wanted to take it on, so it’s now closed. They’re gutted. So am I. All the beef and lamb was reared locally and was always of a really good quality. He was in his mid fifties, his family have a long history of heart problems, so he thought he’d pack it in when he could guarantee to enjoy a retirement. 

[Harley]

6 hours ago, Sidd said:

So on that basis it would be good to get ideas of what people are planning over the next 3 months, what is at stake, risk appetite and how we form the consensus opinions of all those in the macroeconomic world from Lyn Alden to Dave H and of course the analysis from this thread as it stands today, to better prepare us to set up for the next big event. 

Do you just rely on macro commentary as the basis for investment plans and decisions?  I ask to better frame a response.

[Castlevania]

2 minutes ago, Hancock said:

If youd asked the same question in early 2020 everyone would have said a BK/stock market crash was inevitable.

Now the printing has been done its seemingly guess work, i don't believe any of the fin-twit experts are as confident as they make out. Many of them have been saying a deflationary bust is just around the corner since 2010, and have been perpetually wrong ... unless we had it in March last year and it was disguised as crashing due to covid.

Im about 37% shares and the rest in cash at the moment ... but waiting to "buy the dip" and put most of it in on oil shares and telecoms.

Surely the very nature of a BK of the kind being spoken about brings everything down, though obviously its a case of when it happens and how much oil/energy/metals go down from their price pre BK.

With the FED due to tighten in the coming months, surely the BK has to happen by early next year, as that is the sole premise a BK is based on. 

 

 

Without wanting to be too tin foil hat, Evergrande could be the canary in the coal mine. China isn’t looking healthy here. I don’t think they can devalue due to all the dollar denominated debt Chinese companies have.

[Hancock]

6 minutes ago, Castlevania said:

Without wanting to be too tin foil hat, Evergrande could be the canary in the coal mine. China isn’t looking healthy here. I don’t think they can devalue due to all the dollar denominated debt Chinese companies have.

So many potential reasons for a BK, but the one great big reason why it might not happen is the amount that has already been printed.

Are you selling up to get out of the market or do you have a substantial amount of your wealth in cash, in expectation for a BK?

Pound falling could be another reason to get sterling savings into the markets!
https://www.telegraph.co.uk/business/2021/09/19/mounting-fears-1970s-style-three-day-week-britains-energy-crunch/

[Democorruptcy]

On 18/09/2021 at 12:33, Yadda yadda yadda said:

Mixed shifts are worse than pure nights. I'd agree that £25k full time would be excellent for stacking shelves in the north east on days. £20-22k would be decent. On nights £30k.

With pure nights the important thing is consecutive working nights? 4 on the trot must be a lot better than 2 on 1 off 2 on 1 off etc

[Harley]

37 minutes ago, Hancock said:

Now the printing has been done its seemingly guess work,

It is but macro always is. But your point is key.  All this printing has distorted things making decisions based on the data very difficult.

I've tried to explain what's going on technically and how odd it is primarily because of this printing but this may only be meaningful to those who base their actions on the data rather than just the typically conflicting macro noise.

There has been no "investing" these last few decades for many, just buying trackers, etc and letting the printing float all boats over the intermediate to long term. 

Arguably that's over and the real investing has started.  Real investing is hard grunt work.  Anyone who has mostly relied on threads such as this as an investing approach would maybe be advised to refine their approach.

My main proviso though is that the printing has currently distorted things even for the hands on investor.  The market needs to shake out with a crash or blow off top to clear the current perversions.  It normally does, eventually.

PS:  To add, I have just completed the bulk of my weekly detailed review and I have so far never seen a set of markets so devoid of technically sound opportunities.  Surely we either crash or have a crack up. 

[Castlevania]

17 minutes ago, Hancock said:

So many potential reasons for a BK, but the one great big reason why it might not happen is the amount that has already been printed.

Are you selling up to get out of the market or do you have a substantial amount of your wealth in cash, in expectation for a BK?

Pound falling could be another reason to get sterling savings into the markets!
https://www.telegraph.co.uk/business/2021/09/19/mounting-fears-1970s-style-three-day-week-britains-energy-crunch/

I’m all in. Worst case scenario I can sell some value and reinvest in growth/cyclical. It’s what I did back in March last year.

[Castlevania]

13 minutes ago, Democorruptcy said:

With pure nights the important thing is consecutive working nights? 4 on the trot must be a lot better than 2 on 1 off 2 on 1 off etc

I had a Saturday job when in sixth form working in a 24 hour convenience store. I once made the mistake of agreeing to work the night shift (11pm to 9am) having done the 9am to 5pm shift earlier in the day. Never again. 

[Hancock]

7 minutes ago, Harley said:

Anyone who has mostly relied on threads such as this as an investing approach would maybe be advised to refine their approach.

Ive solely relied on this thread, but i bought a fair bit in March 2020 so no matter what i bought it would have gone up from then until now. 

Surely it'll be the same scenario if there is another BK, in that timing a crash is the all important factor.

I'm seeing house prices come down now, but i cant but help think having 220k in oil/silver/telcos bought at todays prices will give a far better return than buying a house over the coming years.