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spunko

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

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No doubt this has been covered but is there a universally recommended share trading platform?

I know HL gets mentioned, is this better than say Hsbc due to fees per trade or do HL have a wider variety of options eg trading international shares etc?

In my case I’m non res for UK tax at present which may complicate things

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4 hours ago, Sugarlips said:

No doubt this has been covered but is there a universally recommended share trading platform?

I know HL gets mentioned, is this better than say Hsbc due to fees per trade or do HL have a wider variety of options eg trading international shares etc?

In my case I’m non res for UK tax at present which may complicate things

HL have a user friendly website. I’ve heard good things about AJ Bell and their fees are cheaper. The more trading minded seem to swear by Interactive Brokers who offer options; the ability to hold different currencies and you can enhance your yield on certain stocks by lending them out to shorters.

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Just to add re Intu Plc an interesting insight on commercial property from Shoezone - in BBC quote.

Ive not really seen much reporting of writedowns but it’s the other side of the rent reduction. I expect most are in denial / holding off (eg.what they can get past auditors). Becomes a problem for those that are highly leveraged. Everything is fine until suddenly the CEO/CFO mysteriously leaves and all the skeletons come out of the cupboard. 

I wonder if any the banks are deep into all this. 

“The company also revealed that its freehold property portfolio was worth £3.1m less than expected, and will write down the value of its 17 freehold properties to £5.3m. It blamed a "tough" property market for the decision.

The number of empty shops in Britain hit its highest rate in four years in July as shopper footfall fell by 1.9%, the worst decline in seven years.

But Shoe Zone said there was an upside to the difficult trading conditions on the High Street.

"The pressure on the retail property market has enabled Shoe Zone to achieve an average 23.5% fall in rents on renewal and average outstanding lease length of only two years," Mr Smith said.”

https://www.bbc.co.uk/news/business-49522479

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10 minutes ago, Ash4781b said:

Just to add re Intu Plc an interesting insight on commercial property from Shoezone - in BBC quote.

Ive not really seen much reporting of writedowns but it’s the other side of the rent reduction. I expect most are in denial / holding off (eg.what they can get past auditors). Becomes a problem for those that are highly leveraged. Everything is fine until suddenly the CEO/CFO mysteriously leaves and all the skeletons come out of the cupboard. 

I wonder if any the banks are deep into all this. 

“The company also revealed that its freehold property portfolio was worth £3.1m less than expected, and will write down the value of its 17 freehold properties to £5.3m. It blamed a "tough" property market for the decision.

The number of empty shops in Britain hit its highest rate in four years in July as shopper footfall fell by 1.9%, the worst decline in seven years.

But Shoe Zone said there was an upside to the difficult trading conditions on the High Street.

"The pressure on the retail property market has enabled Shoe Zone to achieve an average 23.5% fall in rents on renewal and average outstanding lease length of only two years," Mr Smith said.”

https://www.bbc.co.uk/news/business-49522479

The retailers with short leases are reaping far lower rents on renewal. Game before they got bought by Sports Direct weren’t even paying any rent on a decent chunk of their shops.

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5 hours ago, Sugarlips said:

No doubt this has been covered but is there a universally recommended share trading platform?

I know HL gets mentioned, is this better than say Hsbc due to fees per trade or do HL have a wider variety of options eg trading international shares etc?

In my case I’m non res for UK tax at present which may complicate things

Can't comment on tax position.

I have my ISA with HL and my wife's with iWeb (Halifax?). Trading fees are 12/9 GBP for each purchase/sell on HL plus other annuals, but can buy lots of different assets. Trading fees are 5 GBP for each purchase/sell on iWeb and no annual fee, but basic assets. Fine for FTSE 350 but starts getting ropey for ETF's and Gilts. Cost-wise I try to do as much on iWeb as possible.

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Posted (edited)
6 hours ago, Sugarlips said:

No doubt this has been covered but is there a universally recommended share trading platform?

I know HL gets mentioned, is this better than say Hsbc due to fees per trade or do HL have a wider variety of options eg trading international shares etc?

In my case I’m non res for UK tax at present which may complicate things

IG if you trade frequently, otherwise they will charge you a £24 quarterly fee which is crap... Good choice of instruments.

iwebsharedealing is cheap £5 per trade if you don't mind win3.1 style interface... poor fx rates and the choice of ETFs looks a bit limited.

 

On a side note, I've just opened a forex account with DukasCopy and was very surprised that by some means they knew a few (if not all!) my past employers! I didn't include my CV with the application and my Linkedin profile is impossible to find (different name and no references to the real one) How the hell they've got this info?

Edited by BearyBear

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9 hours ago, spunko said:

Most forums limit each thread to a certain number of pages to stop it lagging the database. Anecdotally I think a 450 page thread does slow the site down a bit, so trying to limit each thread to 100 pages per part. 

@Spunko, - I appreciate all the work you do to give us this fabulous place.   Could I make a plea about the page limit for next time?    Could you hold it to a higher limit than 100 if you think it feasible? 
This thread has me going backwards more often than any other I've ever participated in.  I've read the whole thing twice, bridged across two sites, and if I get a free weekend this winter, will likely do so again. 
The reason I ask though, is I often use the search feature.  I can remember someone mentioning 'Universal Widget Corporation', and so might type it in to bring up those posts, even though its months, and a few hundred pages further down the thread.
With best wishes - and thanks again for all your hard work.
 

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Just working my way through Andrew Craig's "How to Own the World". Great book, a lot of parallels with the material on here.

Thank you to whoever recommended it on here (can't find the exact post, sorry!). Would certainly suggest anyone looking for a primer in investment should give it a look. 

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Posted (edited)
1 hour ago, Democorruptcy said:

In t'other thread someone posted a link to a making the most of reflation pdf

That's got Telco's, Utilities, Transport all Negative?

reflation.jpg

Sectors are good, but I think we should also overlay company specific factors too (e.g. those thoughts people had that I tried to summarise in the old thread).  IMO, this will be (is) more of stock-pickers market, rather than a trackers market, whether that be at the whole index or sector level.

Then there's my recent comment on DB's post where he is thinking of things beyond a classic benign reflation - e.g. transport is listed above as being negative but DB suggested maybe it will do well if inflationary pressures force people out of their cars and onto public transport (more so if that sector is the recipient of government fiscal spending).

Edited by Harley

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17 minutes ago, Harley said:

Sectors are good, but I think we should also overlay company specific factors too (e.g. those thoughts people had that I tried to summarise in the old thread).  IMO, this will be (is) more of stock-pickers market, rather than a trackers market, whether that be at the whole index or sector level.

Then there's my recent comment on DB's post where he is thinking of things beyond a classic benign reflation - e.g. transport is listed above as being negative but DB suggested maybe it will do well if inflationary pressures force people out of their cars and onto public transport (more so if that sector is the recipient of government fiscal spending).

Agreed on company specific factors. The banks for example I’d expect to do well from a reflation. The only problem is that I see several of them going bust or needing a bailout before we get to that stage.

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14 hours ago, billfunk said:

I'm up 36% and I only bought it last week:D Funnily enough SLP is up by the same % but I bought that months ago.  I'm holding both for the long term (hopefully) and would love to be able to top slice profits as others have done for their miners but for the amount I have I will have to wait until they go much higher in order to justify the dealing costs...............

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The reflation ahead is going to be tricky.Most lists like the one above assume inflation means higher rates,higher rates mean higher interest charges for companies like telcos and utilities.That is true.

However what they miss is investment cycles etc.Vodafone has a lot of debt,but its debt profile is well spread out and at very low rates.If they had to roll over all that debt in a rising rate situation then it would be a negative.However i dont think they will.I think they will be able to cover a lot of the debt from cash flow as it comes due.I also think the whole industry is way undervalued.The next cycle will see more and more need of their networks.People say,"but everyone has a phone".Thats true,but does your street lamp?,car? etc,they will.Inflation will force companies to cut costs where they can and its highly likely a lot more will move to the cloud,but be on the networks.The companies will also see lots of mergers as there is a lot of fat that can be cut.I think telcos will deliver 300% + dividends in the next cycle.

Its likely the telcos would be smacked lower in a deflation event yes,but that will provide a superb entry point.However i dont know 100% if that will happen,so i buy when i think cheap and have ladders in place.

Utilities are tricky,but many are producers as well.SSE for instance could be considered to own the most electric battery storage in the country with its hydro power plants.They also own the cables to move offshore wind power to land.Those cables should see price increases way above the cost of capital as inflation runs.

I look at the cycle ahead and consider it towards my goals.My main goal is not to get wiped out by capital destruction or inflation.I then have,and am slowly tilting my assets to a broad spread of companies that i think will do well as a whole,some as a direct result of inflation,some due to the affect that inflation has.For instance iv got ladders in place for SSAB steel.They might get a real big kicking down in a deflation event,but if they survive that they should do very well given they supply the main tractor,digger and green energy companies.They are ahead of the curve on moving their blast furnaces to electric and that could make a massive difference back end of the cycle.

I think most investors,and i mean most pension savers with workplace pensions etc are about to face massive problems.Those in "lifestyle" pensions who have moved assets to bonds will see massive hair cuts.Those in stocks are mostly equity trackers,and they could really under perform by a long way.A distribution cycle alongside a reflation is going to be very hard to get through intact.All we can do is try to structure to at least capture the areas that should suck in the inflation.

We started with a superb call on the miners that has given us a big head start,but one swallow doesnt make a summer (as my favourite Club 18/30 holiday rep once said) and lots ahead.

 

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1 hour ago, Harley said:

Sectors are good, but I think we should also overlay company specific factors too (e.g. those thoughts people had that I tried to summarise in the old thread).  IMO, this will be (is) more of stock-pickers market, rather than a trackers market, whether that be at the whole index or sector level.

Then there's my recent comment on DB's post where he is thinking of things beyond a classic benign reflation - e.g. transport is listed above as being negative but DB suggested maybe it will do well if inflationary pressures force people out of their cars and onto public transport (more so if that sector is the recipient of government fiscal spending).

Transports also hedge oil between 3 and 5 years out.They will have a sweet spot where oil goes to $200 and they are paying $40.

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7 minutes ago, DurhamBorn said:

I think most investors, and I mean most pension savers with workplace pensions etc are about to face massive problems. Those in "lifestyle" pensions who have moved assets to bonds will see massive hair cuts. Those in stocks are mostly equity trackers, and they could really under perform by a long way. A distribution cycle alongside a reflation is going to be very hard to get through intact. All we can do is try to structure to at least capture the areas that should suck in the inflation.

 

You're really losing me on bonds. Like I said before my index linked trackers are doing well currently. If I were to purchase UK gilts, wither index linked or not, the price I pay is determined by the coupon. That doesn't change during the bonds lifetime. The price someone would pay for the bond in a secondary market is again determined by the coupon, so if interest rates rose then the coupon would yield less than alternative investments or newer issues so the price the bond could sell for would be lower. But the coupon wouldn't change and the redemption on maturity would still be at face value. Obviously the face value would be affected by inflation; that's why I've gone for index linked. It gives me more certainty than dividend yields, that's what I need at this stage of my investments. 

Secondly most bear markets tend to be short lived and share prices recover, at least nominally, within a year or less. 

To be honest I'm one of those stock pickers who've found out that stock picking is an art that most aren't capable of. I tend to buy and hold, over time most stocks I hold cycle between out performance and under performance. Surely most index trackers reflection of the market will compensate for the ups and downs of the constituent stocks?

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30 minutes ago, sleepwello'nights said:

You're really losing me on bonds. Like I said before my index linked trackers are doing well currently. If I were to purchase UK gilts, wither index linked or not, the price I pay is determined by the coupon. That doesn't change during the bonds lifetime. The price someone would pay for the bond in a secondary market is again determined by the coupon, so if interest rates rose then the coupon would yield less than alternative investments or newer issues so the price the bond could sell for would be lower. But the coupon wouldn't change and the redemption on maturity would still be at face value. Obviously the face value would be affected by inflation; that's why I've gone for index linked. It gives me more certainty than dividend yields, that's what I need at this stage of my investments. 

Secondly most bear markets tend to be short lived and share prices recover, at least nominally, within a year or less. 

To be honest I'm one of those stock pickers who've found out that stock picking is an art that most aren't capable of. I tend to buy and hold, over time most stocks I hold cycle between out performance and under performance. Surely most index trackers reflection of the market will compensate for the ups and downs of the constituent stocks?

linkers are fine,but most passive bond funds will be in long dated fixed stuff.Given inflation might go to 12%+ some of the long dated bonds could see 80% falls in value.Gilts might have to be issued at 8% even mid cycle.Given long dated bonds being bought now will yield around 8% over the full cycle when inflation might return 80%+ we see the scale of losses that might happen.

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20 minutes ago, Loki said:

@billfunk any other shares caught your eye recently?  xD:Beer:

There are three I am currently most interested in:

RRE - recent upgrade and has appeared to form a base (Bull Flag pattern) around at 1650-1850. P/E currently 2.1 with exceptional sales and profit growth anticipated (100% pa). Cannot see too much downside from here. Slow and steady growth.

HMI - Miner and processor of eco friendly fertiliser (less water usage, less leaching, more effective) on the cusp of showing a profit. 86% profit margin and situated in the heart of a major growing agricultural area in Brazil with a capacity of 450Ktpa which if all sold would mean $21.5 million of sales per year. Current MCAP of £8.5 million at (I'm estimating based on 3.33 A$ estimated profit) a P/E of around 5. Good sales and a bit of P/E expansion would see this valued above £100 million. Also they have other properties they are seeking to develop to extend the growth runway. Technically, the downside risk seems to have already happened and the share price appears to be forming a bottom. Pick the entry indicator/s of your choice and wait. Slow and steady growth.

ARB - Crypto Miner whose USP appears to be energy efficiency and low cost production. Recently bought new mining computers and paid them off in double quick time. Profitable at $2,600 bitcoin and above so currently a 70% profit margin. In July they mined 163 bitcoins > $1 million, current MCAP of £25 million. Bitcoin appears to forming a base at $9,000 dollars. ARB currently in a trend suggesting anything below 8p would be a good entry, currently 8.75p. A potential triple whammy of growth - in the underlying asset price, in the number of machines, and in P/E expansion of this market leader (of the publically listed miners). Obviously going to be an extremely volatile ride.

https://rockroseenergy.com/

http://www.harvestminerals.net/

https://argoblockchain.com/

Would welcome people's thoughts on any of these companies. I am a new investor looking to learn.

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Exactly as i predicted on the thread on the other place at the start.Governments borrowing at less than 1% over 50 years is insane,but happening.Those yields are yearly to maturity though,so the 2068 one would return 0.936 a year.3.5% x 50 years minus 100.36 above nominal bond price you lose at redemption.

The yields are right to signal a deflation event,but they are wrong to signal deflation to infinity.What the bond market is doing is acting as somewhere to park money.The £85k safety limit isnt much use to people with billions.Of course most of the shrewd ones have no intention of staying in those gilts or treasuries,they will sell,but they could see a quick 30%+ fall in a day once the printing starts.The velocity of the unwind will be incredible.Such are the deflation pressures though even that and massive stimulus might only see inflation get to 3%/4% at first.The real fun begins when rates fail to peg it back and it keeps running,as it will.

In lots of ways those yields show there is far too much "money" out there,but nothing to invest it in.Imagine when it looks for a new home,as it surely will.

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Just now, Tdog said:

When do you see the deflation hit to happen ... 6 month 12 months or no good to predict?

Its been happening for nearly 2 years now.Look at the share prices of cyclicals here in the UK.Many are down 60%+.The only question left is do the markets suffer big falls before the CBs go loose enough.In simple terms do the likes of BT go down another 30% to be down 80%+ from recent highs when the FANG stocks go south.

We cant be sure,thats why i like buying stocks i want that are mostly down 50%+ from recent highs and with ladders set in them.(some 80% down)

The market thinks individual companies have problems,when in reality they are simply having to deal with a deflation.Once the market understands they will value going forward at discounted cashflow and higher rates.When that happens,growth will be whacked down,and cyclicals run.

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3 hours ago, billfunk said:

There are three I am currently most interested in:

RRE - recent upgrade and has appeared to form a base (Bull Flag pattern) around at 1650-1850. P/E currently 2.1 with exceptional sales and profit growth anticipated (100% pa). Cannot see too much downside from here. Slow and steady growth.

HMI - Miner and processor of eco friendly fertiliser (less water usage, less leaching, more effective) on the cusp of showing a profit. 86% profit margin and situated in the heart of a major growing agricultural area in Brazil with a capacity of 450Ktpa which if all sold would mean $21.5 million of sales per year. Current MCAP of £8.5 million at (I'm estimating based on 3.33 A$ estimated profit) a P/E of around 5. Good sales and a bit of P/E expansion would see this valued above £100 million. Also they have other properties they are seeking to develop to extend the growth runway. Technically, the downside risk seems to have already happened and the share price appears to be forming a bottom. Pick the entry indicator/s of your choice and wait. Slow and steady growth.

ARB - Crypto Miner whose USP appears to be energy efficiency and low cost production. Recently bought new mining computers and paid them off in double quick time. Profitable at $2,600 bitcoin and above so currently a 70% profit margin. In July they mined 163 bitcoins > $1 million, current MCAP of £25 million. Bitcoin appears to forming a base at $9,000 dollars. ARB currently in a trend suggesting anything below 8p would be a good entry, currently 8.75p. A potential triple whammy of growth - in the underlying asset price, in the number of machines, and in P/E expansion of this market leader (of the publically listed miners). Obviously going to be an extremely volatile ride.

https://rockroseenergy.com/

http://www.harvestminerals.net/

https://argoblockchain.com/

Would welcome people's thoughts on any of these companies. I am a new investor looking to learn.

Thank you, I have no thoughts to add - how did you discover these companies?  If I know your procedure I may be able to suggest some.  Of course I understand if you don't wish to disclose trade secrets!

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Posted (edited)
57 minutes ago, DurhamBorn said:

Exactly as i predicted on the thread on the other place at the start.Governments borrowing at less than 1% over 50 years is insane,but happening.Those yields are yearly to maturity though,so the 2068 one would return 0.936 a year.3.5% x 50 years minus 100.36 above nominal bond price you lose at redemption.

The yields are right to signal a deflation event,but they are wrong to signal deflation to infinity.What the bond market is doing is acting as somewhere to park money.The £85k safety limit isnt much use to people with billions.Of course most of the shrewd ones have no intention of staying in those gilts or treasuries,they will sell,but they could see a quick 30%+ fall in a day once the printing starts.The velocity of the unwind will be incredible.Such are the deflation pressures though even that and massive stimulus might only see inflation get to 3%/4% at first.The real fun begins when rates fail to peg it back and it keeps running,as it will.

In lots of ways those yields show there is far too much "money" out there,but nothing to invest it in.Imagine when it looks for a new home,as it surely will.

I looked at yields to redemption somewhere well before the current bond run up and they were rubbish then!

Defo just being used as a place to park money (internationally in the US).  Best be by the exit though!  Not good for those buying into bond funds now for the long haul (lifestyle funds, etc).

Edited by Harley

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Posted (edited)
43 minutes ago, DurhamBorn said:

Its been happening for nearly 2 years now.Look at the share prices of cyclicals here in the UK.Many are down 60%+.The only question left is do the markets suffer big falls before the CBs go loose enough.In simple terms do the likes of BT go down another 30% to be down 80%+ from recent highs when the FANG stocks go south.

We cant be sure,thats why i like buying stocks i want that are mostly down 50%+ from recent highs and with ladders set in them.(some 80% down)

The market thinks individual companies have problems,when in reality they are simply having to deal with a deflation.Once the market understands they will value going forward at discounted cashflow and higher rates.When that happens,growth will be whacked down,and cyclicals run.

But up to this point there hasn't been a tightening of credit causing bankruptcies, job losses, and a "house price crash" which is the obvious sign to the man in the street of a debt deflation.

Edited by Tdog

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