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

[Harley]

Well I finally looked and a couple of FTSE based income portfolios down 40% each!  Probably too late to sell because I'll do an even worse job getting back in!  They are Upside (versus Floor) funds so that's the deal but I'm pleased I had that Floor v Upside strategy in place (i.e. means just less (a lot less!) discretionary income available).  I guess my only error was picking stocks to weather a deflation then inflation rather than a global pandemic.  Seems obvious now!  And maybe I could have slowed the purchases up a bit but then I pretty much bought at weekly lows which was optimal in a sub-optimal way!   

My balanced Floor funds are doing OK but the balancing effects from PMs is not that great at the moment and I hadn't fully allocated to 25% bonds so overall they're further down than they should be.  But those professional trusts aiming to hold value in such situations as now have done worse!  And I have cash available which is alas also problematic (timing purchases and concern about bank bail-ins).  I'm still busy looking for targets to buy and am prepared to take a bit of a hit to mitigate some of the bail-in risk.

I bought some silver coins, something I meant to do for years.  Taken a caning on that too but that's long-term insurance (like my generator, etc) so only an issue if I look at it with the wrong glasses on.

I'm not overly upset.  That's the way these things go and my strategies were reasonable at the time.  I could have done a lot worse at the worst time in my life.  The alternative would have been not to invest.  Beating myself up on timing is silly.  I only get upset when I action myself to do something and take to long to get it done, especially if that then costs me.  Plus I have been working higher priorities and that part looks quite good.  

I filled in my ditch and decided not to climb in!

[Democorruptcy]

33 minutes ago, Festival said:

Last 14 days have been brutal and I have taken significant losses on shares, partially offset by some gains in TLT and a relatively large cash percentage.  I have only bought a small oil holding in RSDB so far on the way down. My ladders in the FTSE are at the following levels:

4500

3750 

3000

I intend to employ equal amounts at each level and take shares up from 40% of portfolio to 70% of portfolio if we get to 3000.

Where are others setting their ladders and what are they planning to buy?

I'm still looking at what to buy as the market seems to be pricing in default in a large number of companies ATM but I want to try and focus on particular sectors (eg energy, telcos) to sit alongside current holdings in gold, oil, chemicals sectors.

I offset with a CINE short from last year and 3 virus plays CCL, EZJ and PRU. Last week I let the 30 year events influence me so went RDSB at 12.50 after the oil shock and said next at 9.95 which would have got hit today However I went buying Thursday afternoon and put that cash in UU, I decided I had enough oil. Also closed the shorts,  leverage worries me at times like this.

Do you see everything dropping in proportion to your FTSE ladders? I don't. I think selectivity/safety comes in now. Like your energy might drop less on bad days compared to say travel. UU is still up from Thursday, all that hand washing! Firms with high debt and now having less footfall are in a mess.

[JMD]

5 hours ago, MrXxxx said:

Like people's thoughts on a PM approach/sounding out my financial learning through scenarios...all assumes price remains constant...

...now, base scenarios on £3k/6k of an ETF [say SGPD] it has an initial purchase cost of 0.5, with an additional annual TER of ~0.5, this equates to £15/30 pa cost and gives a diversification across 51 holdings.

The alternative is to buy say £1k each of top 3 (~33%) or 6 holdings (~50%) (Newmont/Barrick/Franco/Newcrest/Agnico/Kirkland) where the initial purchase costs will be higher I.e.3x0.5%/6x0.5%, but as there is no annual TER the latter will be gaining an additional 0.5% from yr2 onwards.

Q1. Basically what I am asking is that what is the `sweet spot` where diversification is good enough to go for an individual share vs ETF approach?

Q2. PM`s in a portfolio are used as a hedge against inflation. As majority of PMs are traded in US$ in  a UK context is it better to buy a hedged ETF (sterling against dollar) or a non-hedged version?...trying to get my head around this one as for a UK resident (spending in a UK market) to me, the former would appear to be a double-hedge (£ vs $, PM vs UK inflation) where £/$ ex rate is irrelevant after you have shares in hand, and so unnecessary?!

Hopefully this makes sense?..Thoughts/comments?

MrXxxx, my thoughts on Q1 are that most would believe diversification to be single biggest crucial factor, fees can mostly be ignored if holding for long term. But i'm the least qualified here and still learning myself, so can't really give advice. I can say however, that I personally hold both spgp and gdx, and the interesting thing is spgp outperforms gdx (fees same for each), plus spgp is denominated in pounds so there is no currency risk. In terms of funds for me that's a big win-win.

The individual miners part is far more complicated (for me). Perhaps Kibuc, Majorpain, SP can help you in regards to 'good' silver/gold miner holds for the long term? 

[BearyBear]

20 minutes ago, Castlevania said:

Goldcore just sent me an email. They’ll buy silver coins at 10% over spot and 100 oz bars at 7% over spot. Downside is that they have to be in their vaults to begin with. However, something doesn’t seem right.

You can't buy silver coins anymore on GoldCore

Due to extreme demand our stocks of this product have been depleted. We are seeking new stocks.

[Harley]

25 minutes ago, Castlevania said:

Goldcore just sent me an email. They’ll buy silver coins at 10% over spot and 100 oz bars at 7% over spot. Downside is that they have to be in their vaults to begin with. However, something doesn’t seem right.

Any idea what's up.  I have some open orders, awaiting delivery.

[Harley]

5 minutes ago, BearyBear said:

You can't buy silver coins anymore on GoldCore

Due to extreme demand our stocks of this product have been depleted. We are seeking new stocks.

Same everywhere it seems.  Coins I bought a few days ago (available to order but waiting for stock) not even on the website any more.  And another has increased the delay from a few days to one to two weeks.  Royal Mint were selling tubes but at a far higher price (normal?).

[Agent ZigZag]

26 minutes ago, Castlevania said:

This market is way too volatile for short term trading. That is quite the swing. GDXJ is up 25% from it’s low.

Did I take the gamble when mulling it over yesterday to buy today. No I bottled it

[Castlevania]

6 minutes ago, Harley said:

Any idea what's up.  I have some open orders, awaiting delivery.

Seems to be some sort of decoupling. Others on this thread will know more than me but a couple random thoughts. The physical market is a price taker from the commodity exchanges which are paper based. Or the consumer is trying to buy coins whilst the bigger players are dumping 1000 oz bars, so a product mismatch. 

[Harley]

7 minutes ago, Harley said:

Same everywhere it seems.  Coins I bought a few days ago (available to order but waiting for stock) not even on the website any more.  And another has increased the delay from a few days to one to two weeks.  Royal Mint were selling tubes but at a far higher price (normal?).

 

[DurhamBorn]

19 minutes ago, Harley said:

Well I finally looked and a couple of FTSE based income portfolios down 40% each!  Probably too late to sell because I'll do an even worse job getting back in!  They are Upside (versus Floor) funds so that's the deal but I'm pleased I had that Floor v Upside strategy in place (i.e. means just less (a lot less!) discretionary income available).  I guess my only error was picking stocks to weather a deflation then inflation rather than a global pandemic.  Seems obvious now!  And maybe I could have slowed the purchases up a bit but then I pretty much bought at weekly lows which was optimal in a sub-optimal way!   

My balanced Floor funds are doing OK but the balancing effects from PMs is not that great at the moment and I hadn't fully allocated to 25% bonds so overall they're further down than they should be.  But those professional trusts aiming to hold value in such situations as now have done worse!  And I have cash available which is alas also problematic (timing purchases and concern about bank bail-ins).  I'm still busy looking for targets to buy and am prepared to take a bit of a hit to mitigate some of the bail-in risk.

I bought some silver coins, something I meant to do for years.  Taken a caning on that too but that's long-term insurance (like my generator, etc) so only an issue if I look at it with the wrong glasses on.

I'm not overly upset.  That's the way these things go and my strategies were reasonable at the time.  I could have done a lot worse at the worst time in my life.  The alternative would have been not to invest.  Beating myself up on timing is silly.  I only get upset when I action myself to do something and take to long to get it done, especially if that then costs me.  Plus I have been working higher priorities and that part looks quite good.  

I filled in my ditch and decided not to climb in!

Iv pretty much bought most of what i want,iv kept some cash back and going to leave that in cash.I want 5 years money in cash in case everyone stops paying divis.

Very unlikely il sell anything now until 2023 onwards.

The markets could fall a lot more,but my road maps mostly hit ladders so i followed them and bought.Some of the stocks iv bought today are down 80% from highs,incredible,and these are big companies.If you take tech out i think this is easily the worst bear market since the GD.

I think there will be a massive fiscal move from governments this week,or soon.That will sow the seeds of the next cycle.I doubt hardly anyone is looking past this virus out to 2027,but thats what iv been doing.Whats happening now was just positioning for the future.

Likely we will see some companies roll over,and maybe a few i own,but thats an unknown.

As far as im concerned this thread has proved 99% right.For me the next cycle is going to emerge from this,and it will be the reflation.

Im going to take a step back now ,but im going to do some work after a few months off on cross market affects in the next cycle.Im going to try to get a feel on the way sectors run,and what order,as it might be possible to run some sectors then switch into others who move later.Thats for the future though.

The initial work says telcos,followed by oil might be the order of the moves higher.

Time will tell.

 

[Harley]

11 minutes ago, Castlevania said:

Seems to be some sort of decoupling. Others on this thread will know more than me but a couple random thoughts. The physical market is a price taker from the commodity exchanges which are paper based. Or the consumer is trying to buy coins whilst the bigger players are dumping 1000 oz bars, so a product mismatch. 

Offering to buy 10% over spot is odd.  I believe most T&Cs allow them to cancel orders so no need to take a hit.  Do they see an opportunity to gain?  

[Majorpain]

6 minutes ago, Harley said:

Offering to buy 10% over spot is odd.  I believe most T&Cs allow them to cancel orders so no need to take a hit.  Do they see an opportunity to gain?  

Supply has dried up by the sound of it, it happened in 2008 as people are not daft and buy physical for protection at a premium to spot.  I think your right and they see an opportunity to stock up cheap and sell at a higher price in a few months after QE, but they need a decent stock of coins first!

[BearyBear]

8 minutes ago, Harley said:

Offering to buy 10% over spot is odd.  I believe most T&Cs allow them to cancel orders so no need to take a hit.  Do they see an opportunity to gain?  

It's not odd at all, they sell these coins 20% over spot so it's a quick gain for them to capitalise on the high demand.

[BearyBear]

Excellent read.

https://www.linkedin.com/pulse/implications-hitting-hard-0-interest-rate-floor-ray-dalio/

 

[Harley]

22 minutes ago, DurhamBorn said:

As far as im concerned this thread has proved 99% right

Whoops, to be clear, and just in case, I'm not having a go!  Just joking about me not allowing for a pandemic and all the other unknowns unknowns!  You do the best you can with what's in front of you and on that basis this thread is IMO doing well and these drivers will outlast the current black swan. 

I thought I was cautious about the income stocks I bought (like little retail) but have taken a caning at the moment.  But we're in the middle of a firefight so no time to count bodies!

Plus I wanted to remind myself, live, learn, refine, move on.

[Bobthebuilder]

20 minutes ago, DurhamBorn said:

Im going to take a step back now ,but im going to do some work after a few months off on cross market affects in the next cycle.Im going to try to get a feel on the way sectors run,and what order,as it might be possible to run some sectors then switch into others who move later.Thats for the future though.

Thank you for sharing all your hard work, enjoy the break i think you deserve it.

[DurhamBorn]

3 minutes ago, Harley said:

To be clear, and just in case, I'm not having a go!  Just joking about me not allowing for a pandemic and all the other unknowns unknowns!  You do the best you can with what's in front of you and on that basis this thread is IMO doing well and these drivers will outlast the current black swan. 

I thought I was cautious about the income stocks I bought (like little retail) but have taken a caning at the moment.  But we're in the middle of a firefight so no time to count bodies!

Plus I wanted to remind myself, live, learn, refine, move on.

Yes its been brutal,iv even bought a few shares i wasnt considering like ITV and WPP simply on valuation grounds,small amounts,but werent on my radar.

[Agent ZigZag]

24 minutes ago, DurhamBorn said:

Iv pretty much bought most of what i want,iv kept some cash back and going to leave that in cash.I want 5 years money in cash in case everyone stops paying divis.

Very unlikely il sell anything now until 2023 onwards.

The markets could fall a lot more,but my road maps mostly hit ladders so i followed them and bought.Some of the stocks iv bought today are down 80% from highs,incredible,and these are big companies.If you take tech out i think this is easily the worst bear market since the GD.

I think there will be a massive fiscal move from governments this week,or soon.That will sow the seeds of the next cycle.I doubt hardly anyone is looking past this virus out to 2027,but thats what iv been doing.Whats happening now was just positioning for the future.

Likely we will see some companies roll over,and maybe a few i own,but thats an unknown.

As far as im concerned this thread has proved 99% right.For me the next cycle is going to emerge from this,and it will be the reflation.

Im going to take a step back now ,but im going to do some work after a few months off on cross market affects in the next cycle.Im going to try to get a feel on the way sectors run,and what order,as it might be possible to run some sectors then switch into others who move later.Thats for the future though.

The initial work says telcos,followed by oil might be the order of the moves higher.

Time will tell.

 

Thank you Durham Born for sharing your knowledge and explaining how markets work. Enjoy your break

[Festival]

46 minutes ago, Democorruptcy said:

I offset with a CINE short from last year and 3 virus plays CCL, EZJ and PRU. Last week I let the 30 year events influence me so went RDSB at 12.50 after the oil shock and said next at 9.95 which would have got hit today However I went buying Thursday afternoon and put that cash in UU, I decided I had enough oil. Also closed the shorts,  leverage worries me at times like this.

Do you see everything dropping in proportion to your FTSE ladders? I don't. I think selectivity/safety comes in now. Like your energy might drop less on bad days compared to say travel. UU is still up from Thursday, all that hand washing! Firms with high debt and now having less footfall are in a mess.

I think debt levels are the single most important issue due to the market shorting companies with high debt and the unsustainability of cashflows. Reliance on footfall and having discretionary products are two other concerns. Having said that last time round in bear market rallies the stocks that did best tended to be those who had fallen furthest in the crash so if the market bounces i would not be surprised to see sectors such as oil do better than some others. This is not advice just my thoughts.

The ladders are only there to help me buying without emotion and rebalance between too high a cash position to a better long term stocks weighting given pricing levels. I dont know where the bottom is but these seem logical pricing points at 40, 50 and 60% falls. Even if divs fall 25-30% across the FTSE then buying at those points should ensure better value going forward or at least that is how i justify it.

[Democorruptcy]

3 minutes ago, Festival said:

I think debt levels are the single most important issue due to the market shorting companies with high debt and the unsustainability of cashflows. Reliance on footfall and having discretionary products are two other concerns. Having said that last time round in bear market rallies the stocks that did best tended to be those who had fallen furthest in the crash so if the market bounces i would not be surprised to see sectors such as oil do better than some others. This is not advice just my thoughts.

The ladders are only there to help me buying without emotion and rebalance between too high a cash position to a better long term stocks weighting given pricing levels. I dont know where the bottom is but these seem logical pricing points at 40, 50 and 60% falls. Even if divs fall 25-30% across the FTSE then buying at those points should ensure better value going forward or at least that is how i justify it.

I think of those as Beta shares and agree they gain more on the bounce than what say utilities might.

I've gone too early partly because I think the UK was nowhere near as overvalued as the US. I think Brexit held us back. Our QE and Cape was fair value at 7,400 while the US was way way overvalued. Although calculating value against future earnings can't be easy now!

If we did start getting nearer to 4,000 my NS&I money is coming over and I'm going all in all in, instead of just all in already on the ISA and SIPP. My issue is I don't work so don't pay tax and gains outside tax wrappers will mean getting back in the tax loop. Unless you think this is end of days, surely a temporary virus is a buying opportunity? Looking ahead I don't want too much cash after the way they will fight this one.

Good luck!

[Castlevania]

34 minutes ago, Harley said:

Offering to buy 10% over spot is odd.  I believe most T&Cs allow them to cancel orders so no need to take a hit.  Do they see an opportunity to gain?  

Aren’t most coins bought from the mint at slightly above spot, to cover the mints cost of minting them? They normally sell silver coins at 15-20% above spot. I imagine such is the demand that they can pay 10% over and sell for 20% over with minimal risk.

[TheCountOfNowhere]

FTSE regained a bit at the end

 

Pretty incredible sights we are seeing given what the criminal central bankers have done.

I think down tomorrow, rise on wed, then carnage on thursday and friday.

[JMD]

4 hours ago, BearyBear said:

I’ve explained that a few pages back

No bids at these levels, just vacuum

BearyBear, great call on today's silver price. Do you see a similar 'setup' (or lack thereof) driving silver again below £10 in the short term? (sorry, but cant recall the exact technicals you laid out in your post a few days back that predicted this).

btw did you trade this and make some money today (hope you did!) or are you waiting for something bigger? 

[headrow]

6 hours ago, DurhamBorn said:

 

My road maps prepared me for the falls to come and helped me side step the initial big hits.You then face into buying ,you accept the pain.I bought the last of my oilies today,potash finished,telcos mostly complete,and im looking at around 14% down on them at this stage on sectors down 60% to 80%.

 

I don't get this. You've been buying VOD for 2 years , since they dropped below 200p. How come you are only 14% down when the share price has halved?

[JMD]

1 hour ago, DurhamBorn said:

Iv pretty much bought most of what i want,iv kept some cash back and going to leave that in cash.I want 5 years money in cash in case everyone stops paying divis.

Very unlikely il sell anything now until 2023 onwards.

The markets could fall a lot more,but my road maps mostly hit ladders so i followed them and bought.Some of the stocks iv bought today are down 80% from highs,incredible,and these are big companies.If you take tech out i think this is easily the worst bear market since the GD.

I think there will be a massive fiscal move from governments this week,or soon.That will sow the seeds of the next cycle.I doubt hardly anyone is looking past this virus out to 2027,but thats what iv been doing.Whats happening now was just positioning for the future.

Likely we will see some companies roll over,and maybe a few i own,but thats an unknown.

As far as im concerned this thread has proved 99% right.For me the next cycle is going to emerge from this,and it will be the reflation.

Im going to take a step back now ,but im going to do some work after a few months off on cross market affects in the next cycle.Im going to try to get a feel on the way sectors run,and what order,as it might be possible to run some sectors then switch into others who move later.Thats for the future though.

The initial work says telcos,followed by oil might be the order of the moves higher.

Time will tell.

V. sad day, I may have already said this but thank you DB for giving your time and knowledge so generously. Looking forward to your return!

If you do obtain 'that book' for your Dad do let us know what he makes of it (that was an earnest post from me earlier today by the way, just in case it wasn't clear - I forget to use emojis, so risk of being misinterpreted). Of course most 'sensible' people consider such pulp books to be far-fetched nonsense, but I think entertaining none the less; and probably a lot more sane than our City of London system!