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


spunko

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5 hours ago, Ponty Mython said:

Anyone know what happened to K&S today?

Should be another ladder hit, at least!

They are all cutting production because they arent prepared to sell their assets at the price in the market.A lot is driven by farmers pushing out using the stuff because they cant get the prices for the produce,but that just depletes the land even more.We are close to a key inflection point in the industry.Of course most people are looking the wrong way as usual.Potash is late cycle,its price will explode higher during a reflation,it might actually be one of the main drivers after oil.

Id rather trust Mark Cutifani Anglos chief exec and probably the best exec among the huge miners.He isnt buying Sirius for the good of Whitby B+Bs,he knows there is a huge supply deficit coming down the road.It shouldnt be too long before BHP start to develop their Jansen prospect they have dragged their feet over.

The food retailers and the likes of fast food chains are going to find out soon what inflation is like.They will have zero control over it.

I got a ladder hit in K+S today,very happy,Mosaic is floating just above next ladder,hopefully it hits as well.

 

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21 hours ago, BoSon said:

Can get a 10 year fix for around 2.5% (though fees need to be taken into account) then look to overpay it significantly, so if interest rates do shoot up by the end of the fixed term the impact will be less than if on variable rate much sooner. If interest rates do rise significantly in a few years, put any surplus cash in savings at those higher rates and use to pay off the mortgage when the fixed term ends. Is this an idea worth pursuing?

What will force interest rates to rise? Whatever it is there's been no sign of it for over 10 years now. Why can't they keep things going as they are for another 10 years?

They will. 

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Food price inflation enough to destroy the likes of Lidl?

Maybe time to stock up on long life basics, both to edge against inflation, and to keep away from gen pop if the snake-flu virus in China goes pandemic. The reaction to close off a city makes me think they know the current and potential impact is much worse than being reported. 

Will have to see what basics last for years. I presume there's more than sacks of rice, dried pasta, and tinned stuff to consider. Maybe add bottled water and gas and other stuff to go full prepper. 

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8 hours ago, sancho panza said:
On 21/01/2020 at 11:32, DurhamBorn said:

HS2 is insane.Local metro systems on a loop would be far better linking provincial towns..The irony is they sell it as people wanting to get to London 20 minutes faster,when in 20 years it will be people wanting to be out of London 20 minutes faster.

Saw a news report saying the cost is going over£100bn......and thats before the actual overruns..politicians have forgotten the millenium dome.

I find it incredible that the majority of us have to be accountable for the slightest error in our jobs, but the Government and their suppliers (cronies) can treat billions of overspend as if its `short change` down the back of the sofa...

...the problem is nobody is accountable, or at best do a bit of `hand wringing`, offer a meaningless public apology/`say they are sorry` and then get away with it...

...how about if you `fu@k up on your watch` you get fired and your DB pension is reduced (and backdated) to that of someone on National Minimum Wage as its apparent from your results you were no better than them (and in many cases worse!) so didn't justify the premium?...

...this would go some way to `sorting the wheat from the chaff`!

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8 hours ago, sancho panza said:

 

Thyeve voted against the sytem and the Tories were the beneficiaries on this occasion.Lot of Tories I know think they plaed a brilliant game but as per the analysis in the political betting thread @Democorruptcy a lot of the tories wins were jsut tory numbers going up slightly or staying flat but collapsing labour vote.

 

Personally I think the UK will get another populist right party.Tories aren't it. 

I think we're headed for a period of political flux as long time tribal allegiances get left behind.lot of Northern/midlands labour voters are far more socialy conservative than the metorpolitian elite.

I think the tories winning the North was an abnormality. It won't last. Down to Brexit. Can't see them repeating it (unless Brexit is ongoing). 

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8 hours ago, sancho panza said:

Crucaily,he said some the prices  are similar in nominal terms to what they were getting in the 1970's.Seriously.......as we discussed,why would anyone farm in this country

Exactly, yet however much farmers complain they continue in the same business?!...from this fact I can only assume one of three things...either they are stupid (I don't believe this to be the case), they are lazy/reluctant to change, or its not as bad as they say...I often find those who plead poverty aren't, yet the real ones keep quiet.

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8 hours ago, sancho panza said:

Decompelxity.....basically,my view is that we are headed to much more regional markets primarily down to increased transport costs.This article has really altered the way I'm gauging the future in that as you allude DB,the way to trade this is not to worry about who's retail supply chain is more optimal,but rather protect yuourself witha decent position in the commodities that underpin the industry

Heard an interesting article this morning on BBC R4 Farming Today about this...a pro XR farmer very much espousing this viewpoint.

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11 minutes ago, MrXxxx said:

Exactly, yet however much farmers complain they continue in the same business?!...from this fact I can only assume one of three things...either they are stupid (I don't believe this to be the case), they are lazy/reluctant to change, or its not as bad as they say...I often find those who plead poverty aren't, yet the real ones keep quiet.

Or they have little choice.

Plus stubbornness and pride.

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47 minutes ago, BoSon said:

Food price inflation enough to destroy the likes of Lidl?

Maybe time to stock up on long life basics, both to edge against inflation, and to keep away from gen pop if the snake-flu virus in China goes pandemic. The reaction to close off a city makes me think they know the current and potential impact is much worse than being reported. 

Will have to see what basics last for years. I presume there's more than sacks of rice, dried pasta, and tinned stuff to consider. Maybe add bottled water and gas and other stuff to go full prepper. 

Lot of chat about that kind of aspect here...

 

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10 minutes ago, Ponty Mython said:

Or they have little choice.

Plus stubbornness and pride.

Everyone has a choice...if they are `up to their necks` in debt then continuing in the same diminishing market isn't going to help... they have the same choice as the rest of us I.e either sell up, get a `normal` job, and pay off their debts OR file for bankruptcy...

...I think there is an element of truth in your last statement, that and they like their lifestyle...unfortunately you cannot expect others to pay for this, although our benefits system seems to allow this for some elements of our society (at the moment)!

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9 hours ago, Bobthebuilder said:

https://www.bbc.co.uk/news/business-51206067

Getting rid of all overdraft conditions and moving to 40%APR, pretty big news imho.

Just as big is the new approach to persistent debt on credit cards, which could see cards frozen as of next month. The reigning in of easy credit has begun!

https://www.thisismoney.co.uk/money/cardsloans/article-7908411/Lloyds-Banking-Group-credit-card-customers-cards-cancelled-February.html

 

Trade body UK Finance told The Guardian last month: 'In some circumstances, where a suitable repayment option is not agreed, and in accordance with the new rules, cards might be suspended, so it is really important that customers do not ignore letters received.

'They should read them carefully to understand their options and contact their credit card provider at the earliest opportunity.'

 

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The Q4 reporting period is slowly passing by and so far there hasn't been too many fireworks. New Gold an absolute disaster as always, Wesdome guidance uber-conservative as per usual, First Majestic yaaawn... A slow season. At least drilling results provide some entertainment.

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15 minutes ago, Tdog said:

Their shite and no cheaper than Asda/Tesco food should be, but UK planning laws dictated to us by the Germans now means they're very convenient.

Id ban the lot of the for selling the crappiest food possible.

Iv got every UK supermarket apart from Waitrose within a mile and agree 100% Lidl isnt cheap.Its ok on some things,but their fresh food is  expensive.Tesco and Asda are now cheaper/same and much better quality.Aldi is still good on lots of items,Iv noticed Asda back to doing really good offers on tinned stuff etc again like they used to and the one near me is busy again.My son works for Aldi in their warehouse and they are an incredible business.Really well ran,long term thinking etc and they pay their staff well.Its hard work,but my son gets £13 an hour in the warehouse and works 5.30am and usually home just after 12.They also promote internal usually and if you work hard can easily get a supervisor job circa £30k or section leaders circa 45k.They even train up people from the warehouse etc to be their lorry drivers if you want to.I guess with family ownership they can play the long game.

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Democorruptcy
2 hours ago, BoSon said:

Food price inflation enough to destroy the likes of Lidl?

Maybe time to stock up on long life basics, both to edge against inflation, and to keep away from gen pop if the snake-flu virus in China goes pandemic. The reaction to close off a city makes me think they know the current and potential impact is much worse than being reported. 

Will have to see what basics last for years. I presume there's more than sacks of rice, dried pasta, and tinned stuff to consider. Maybe add bottled water and gas and other stuff to go full prepper. 

I love it when it goes all prepping!

I know all is not quite what it seems with them, but I've been watching some Ben Fogle programs this week on My5 catch up TV.

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Democorruptcy
39 minutes ago, DurhamBorn said:

 

 

Iv got every UK supermarket apart from Waitrose within a mile and agree 100% Lidl isnt cheap.Its ok on some things,but their fresh food is  expensive.Tesco and Asda are now cheaper/same and much better quality.Aldi is still good on lots of items,Iv noticed Asda back to doing really good offers on tinned stuff etc again like they used to and the one near me is busy again.My son works for Aldi in their warehouse and they are an incredible business.Really well ran,long term thinking etc and they pay their staff well.Its hard work,but my son gets £13 an hour in the warehouse and works 5.30am and usually home just after 12.They also promote internal usually and if you work hard can easily get a supervisor job circa £30k or section leaders circa 45k.They even train up people from the warehouse etc to be their lorry drivers if you want to.I guess with family ownership they can play the long game.

Lidl and Aldi have been taking market share every year and forced such as Tesco and Asda to try compete. Without Lidl and Aldi we would already have much higher food prices. Brexit might change things, I suspect the UK will have to be punished by the EU to try deter others. The food supply chain and prices are one way to do it? Lidl and Aldi are German and they would love us to have to come running back?

Brexit is a good cover for food price rises that might have been coming anyway. 

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Democorruptcy

This is bang on queue:
 

Quote

 

https://www.hl.co.uk/news/2020/1/23/leaders-at-davos-face-$12-trillion-imminent-economic-disruption?

Radical transformation is needed to address other environmental challenges such as global biodiversity loss, overuse of chemicals from fertilizers and pesticides, freshwater scarcity.

It will entail an unprecedented and radical transformation of 60% of our global economy over the next decade and the biggest sectors for disruption identified in the report include:

Food and agriculture

Energy and materials

Cities and urban growth

Health and well-being

Shifting demand

A younger generation – more united across international boundaries – are already showing vastly different value systems from previous generations. 73% of millennials are willing to pay more for sustainable products, they are more vegan, advocate for lower packaging waste, and are more aware of their carbon footprint.

 

Looks like the finance sector see a lot of money in it for the right faces

Quote

Former Governor of England and climate advocate, Mark Carney, was announced in a new role advising UK Prime Minister Boris Johnson on Climate Finance in the run up to the Glasgow Climate Summit in December, and this could yield stronger action to accelerate this transition toward a greener financial system.

 

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When people mention "K+S" are they referring to the ticker symbol SDF on the XETR exchange ("K+S AG NA O.N.")?  This stock (or derivatives of it) is on a number of exchanges as SDF and the US (OTC) as KPLUY.

Looking at SDF.XETR on the weekly is a good example of where my chosen technical approach fails to work sometimes!  The 16 Dec 2019 (as shown) looked like a good entry point for me with the stochastic breaking out above 20 (indeed 25) and the MACD also strengthening, only for it all to fail a few weeks later.  This sort of thing happens reasonably often, making this more of an odds based game, and hence the importance of "money management" to have a better chance of coming out ahead.  I take these events on board to see if I can improve my analytical approach but more often than not it's just the way it is, reminding me money management (including laddering) is king.  The one optimistic thing that sometimes emerges though is that things can eventually turn around to a profit.  Indeed some of the better runs have been in stocks that have first had a bit of a pull back from a possible buy signal.  That therefore suits a more intermediate term horizon which is my preferred approach (rather than frantic day trading, etc).  Looking at the MACD, it has flatlined a bit so maybe the bottom is near, even if it unfortunately wasn't a few weeks ago.

Capture.thumb.JPG.54ee7ed320b2ca6aa06580290ae1de1a.JPG

The monthly chart for a bigger picture (89% off its peak).  Will this dog have its day?  Parabolic stocks like this usually take a very long time to recover, if ever.  Maybe its time has come.  Just imagine the enormity of it all if some of the things mentioned on this thread come to pass and the baton gets passed from the FANGS, etc to companies like these.

Capture.thumb.JPG.6c7b3fe03913e42b2aca25aa4afefbf0.JPG

Time to look at the K+S fundamentals!

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@Harley below,

https://www.hl.co.uk/shares/shares-search-results/k/k-and-s-ag-npv2

Iv started to ladder into OCI as well,if you could maybe run the rule over the technicals,

https://www.hl.co.uk/shares/shares-search-results/o/oci-n.v.-eur20

 

My macro work says the sector will bottom in the next 5 months then a structural run higher hence me buying now (i expect we are bottom or within 16% of bottom on the sector).Im expecting some to 10x over the cycle,and thats some of the big ones.

 

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On 22/01/2020 at 10:06, BoSon said:

Can get a 10 year fix for around 2.5% (though fees need to be taken into account) then look to overpay it significantly, so if interest rates do shoot up by the end of the fixed term the impact will be less than if on variable rate much sooner. If interest rates do rise significantly in a few years, put any surplus cash in savings at those higher rates and use to pay off the mortgage when the fixed term ends. Is this an idea worth pursuing?

If it helps any... the consensus here re. possible solutions for mitigating against rate-rises is I believe to buy silver to act as a hedge. Of course how much silver to buy and hold for each £100k of mortgage debt, for say future potential 10/12/14/16% mortgage rates is an interesting question. 

 

 

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On 22/01/2020 at 10:33, Democorruptcy said:

There's talk of a lifetime fixed rate mortgage might be something about it in the budget?

Thanks Democorruptcy, I totally missed that article, but I have been expecting such products over here for us in the UK for long time (stopped clock is right eventually I guess!).

But more importantly if they do implement this I think it gives a great insight into current government thinking - and the type of interventionist polices they will do. 

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13 hours ago, sancho panza said:

and @Democorruptcy

I thought on that articale a lot yesterday as I was driving around..Baby Panza has chicken pox hence off nursery.Took her to a local farm park which was quiet and ended up chatting with the farmers son who runs the place(30 odd,chemistry grad).Had an intersting chat (I used to work on  a dairy farm 25 years ago) about how the milking inudstry has gone really down hill, also how the grains side of their business has struggled.On the latter point he was saying that even when the crop was poor a couple of years back,the prices of grains stayed low because the gubbermint jsut went abroad and imported a lot..Hence why they opened a imho impressive little farm park with play area-nice catchment area for the wealthy bits of the county.Very tidy operation-they're fencingwas immacualte.Also talked about how shops can import fresh veg from Egypt and South africa ie low transport costs

 

Crucaily,he said some the prices  are similar in nominal terms to what they were getting in the 1970's.Seriously.......as we discussed,why would anyone farm in this country.

 

Which brings me to my point.Decompelxity.....basically,my view is that we are headed to much more regional markets primarily down to increased transport costs.This article has really altered the way I'm gauging the future in that as you allude DB,the way to trade this is not to worry about who's retail supply chain is more optimal,but rather protect yuourself witha decent position in the commodities that underpin the industry.

 

My big big take home from my chat with that farmer,is that I think we're long overdue a period of rampant food price inflation.The govt is worreid about a debt deflation hence they're facing the worng way.Their solution to prevent a debt deflation almost guarantees food price inflation at some point.

Potash and oil....potash and oil....

 

He's fibbing.  Or doesnt know what nominal price means.

Stuff like milk was never sane.

Its also tracked:

https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/cznt/mm23

Heres price of beef, which is less prone to booms n bust like Pork

https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/czpf/mm23

UK farming since the late 70s has been about chasing subsidies, with a bit of farming on the side.

 

 

Id add that Labour input costs for farms has collapsed.

Even in the mid 80s the farms I knew employ farmer family + few people.

Now they barely employ a single farmer, yet produce more.

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11 minutes ago, spygirl said:

UK farming since the late 70s has been about chasing subsidies, with a bit of farming on the side.

That's what all my farmers say, at least those who fess up.  But really really the case for those with really big farms (some of who may surprise you).

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1 hour ago, DurhamBorn said:

Ta, looks like the one I charted.

The financials for the last 5 years (well last year compared to the last 4 years in particular) are not great.

But, this is a sector play so who knows.

If I take a nibble (to get on my radar), I would watch the price to see if that broken buy point holds (i.e. it starts ticking up back towards it).

There have been a few false buy signals recently on the weekly so I'm being cautious.

Probably one I'll use the monthly on.  Sure, I'll miss out on some profit but there might be plenty left given how low it is.

If indeed I even want to play!

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