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

[sancho panza]

16 minutes ago, Harley said:

Seeing as you're busy doing a proper job (at least the second one in your life!), I went through the US Basic Materials ETFs (top 10 holdings) from etf.com.  A mix of industries but here are the chemical companies:

We're coming to the enxt phase of our portfolio build where we spread out from the oilies.We're still taking scrip for now where we can but it's now about starting to plan spreeading the divi's out from them so we can diversify.you've often posted variously on the benefits of diversity and we are a little too oil/gold centric for now but I jsut can't draw myself away from big oil while we're at these prices with these sort of yields.Even if we get cuts-and I'm not sure we will,10% compounded is a much earlier retirement than 5%(and that's without capital growth.We're nearing full alcoation on the oilies and it is time for me to start working on other areas.I'm happy to pay more in a rising market if I'm doing it with divi's from other areas.

Thanksfor this post as I'm very interested in this sector and it's the a logical progression from the oilies.I was particualrly interested in @Cattle Prods point re BASF.....

[Harley]

8 minutes ago, sancho panza said:

We're coming to the enxt phase of our portfolio build where we spread out from the oilies.We're still taking scrip for now where we can but it's now about starting to plan spreeading the divi's out from them so we can diversify.you've often posted variously on the benefits of diversity and we are a little too oil/gold centric for now but I jsut can't draw myself away from big oil while we're at these prices with these sort of yields.Even if we get cuts-and I'm not sure we will,10% compounded is a much earlier retirement than 5%(and that's without capital growth.We're nearing full alcoation on the oilies and it is time for me to start working on other areas.I'm happy to pay more in a rising market if I'm doing it with divi's from other areas.

Thanksfor this post as I'm very interested in this sector and it's the a logical progression from the oilies.I was particualrly interested in @Cattle Prods point re BASF.....

Total return me son!  My div portfolio is in the dustbin and now they want to can the divs!  I'm going to run out of bins!  Shows the benefit of another form of diversification: style.  So diversified Income portfolio for the ISAs, diversified Total Return Portfolio for the SIPPS, and "hellforleatherwhateveryoulikeincludingvalue" for the Trading portfolios!  The trick then is how much to allocate to each style (and then within style to each stock)!

PS:  Now off to press the "Buy" buttons and then woodchips and allotment.....!

[sancho panza]

11 hours ago, DurhamBorn said:

I also picked up some BHP just below £10,they have a decent oil exposure.I didnt go for many ENI i went more for Repsol.Noticed tonight Mosaic moved into a decent profit.Volatile of course,the internals are starting to show a move to reflation areas.Its below the radar,but ongoing.

During the sell off i also got my full holding in amount of shares back in BAT that i sold when they went over £50.Iv had them and Imperial all my investing life,and actually glad to have them back to full allocation again.Only 6th biggest holding now though where in the past it was always no1.

As per my psot to Harley,need to start loking at these.I'm a bit frit of the big diversified miners because of their exposure to things like coal/iron ore

Tobacco is a differnent game.Very cvompelling.Although Imperial is much deeper in the hole than BATs.Have you looked at Japan Tobacco?

https://www.investing.com/equities/japan-tobacco-adr

[sancho panza]

3 hours ago, MrXxxx said:

Probably an obvious question but why is this, is it because if bad news broke they wouldn't be able to get out of their position quickly thus reducing their losses?

Absolutely.All it'll take to send this market down is some bad data on CV spread.For generational buyers ie those like us,who might be happy to sit in for 10 years that's a buying opportunity.For those with annual returns to best,then it's squaeky bum time come friday afternoon in New York.I think it will be thus until we see a peak in CV charts in NY state.As soon as that happens it's game on.

Monday was a bit like a farmer I once worked with who said you should always try to buy the first two cows at an auctionas they always put good cows up and the bidders are waiting to see how they sell.By the time the direction w as established as upwards monday,the bargains were gone and my three year old had found his mtoehrs new work iphone on the top shelf in the living room.His face lit up like he was lifting the FA cup

[DurhamBorn]

2 minutes ago, sancho panza said:

As per my psot to Harley,need to start loking at these.I'm a bit frit of the big diversified miners because of their exposure to things like coal/iron ore

Tobacco is a differnent game.Very cvompelling.Although Imperial is much deeper in the hole than BATs.Have you looked at Japan Tobacco?

https://www.investing.com/equities/japan-tobacco-adr

BAT is a superb company,and as a contrarian i would love the irony if its them who has discovered the vaccine to stop Covid.Imagine if it was tobacco that saved everyone lungs 

The tobacco companies are similar to oil in that they have massive free cash flow.High debts of course as they consolidated the industry,but very likely over time they will expand into lots of areas.BATs Glo heat not burn tobacco has 3x the margins of a ciggie.

Imperial has made mistakes and hasnt invested enough in next gen products,and also lacks the developing world exposure of BAT,but they still have huge free cash and will catch up mostly,though they might have to trim the divi.

Big tobacco has done what it always does,its lobbied and managed to get massive regs on vape.Soon they will control that market again.

I think BAT are a nice entry into any portfolio at this level.

 

[sancho panza]

2 hours ago, Simon said:

What does the hive mind think about the share that cannot be named now? I only have a very small amount to invest. Missed the biggest dips in the big oilies since at the time wasn’t sure if still getting paid.FOMO is strong now. Not looking to trade but hold, I’m sure I should still be getting some shell/ bp while still relatively low. Also tempted by K + S a bit. After thoughts rather than advice obviously.

I'm the last person to advise on THAT share.AS worng as I've been on hosue prices.

I still wouldn't dismiss RDSB/BP at these levels where they're yielding 10%.If you jsut use the divi fro reinvestment,it'll build nicely over a decade.

For multi bagging then DB's potash theory is a better play especially as the dollar weakens.Other shares that offer decent potnetial in the sector imho are ICL and Yara,Nutiren.ICL/Nutrien offer 5% divi's.but probably less mulitbag potential to Mosaic.Classic investors qunadary.

DYOR natch

[Talking Monkey]

1 hour ago, DurhamBorn said:

If i only had a small amount and was prepared to hold and accept the risk,and hope for maybe a 4x + increase id probably buy Mosaic Company.Potash is very very cyclical,but its highly likely we are close to a turn in the cycle,given that inflation expectations should start to increase it might get a fundamental run,and then some speculative rocket fuel added.There is a chance it outruns the big oilies by a large margin and then could be sold and switched in oilies.I think oil will run up with small drops most of the cycle,but potash might see a big up,then down ,then up.

Not advice etc,just a thought.

Makes total sense, in the past when they have run they have really run. In terms of the potential scenario you see why the down leg in between, is that a sell off in a big Kahuna later this year/next year or is it something  much further out

[DurhamBorn]

Just now, Talking Monkey said:

Makes total sense, in the past when they have run they have really run. In terms of the potential scenario you see why the down leg in between, is that a sell off in a big Kahuna later this year/next year or is it something  much further out

I just think they might run hard and then fall before the big run in inflation happens.I see inflation growing slowly at first then speeding up,but by 2026 it still might only be 6%/8%,it will likely go parabolic in the last 18 months,perhaps to 12%,but 20%+ isnt out of the question given the macro picture.Sounds crazy at the moment,but the road map is clearly showing the direction and thats the range towards the end of the cycle.50% stock market falls from peak are hard on people who bought at the top.80% inflation over a cycle though is what destroys capital on a permanent basis.

Deflation is the systemic risk right now,yet its the time you position for inflation.

[Shamone]

1 hour ago, DurhamBorn said:

If i only had a small amount and was prepared to hold and accept the risk,and hope for maybe a 4x + increase id probably buy Mosaic Company.Potash is very very cyclical,but its highly likely we are close to a turn in the cycle,given that inflation expectations should start to increase it might get a fundamental run,and then some speculative rocket fuel added.There is a chance it outruns the big oilies by a large margin and then could be sold and switched in oilies.I think oil will run up with small drops most of the cycle,but potash might see a big up,then down ,then up.

Not advice etc,just a thought.

Thanks, DB. Mosaic is one on my watch list. 

[Loki]

1 hour ago, DurhamBorn said:

is going down 10% i expect around 91 or lower.Lets see.

Wow that's a colossal shift!

[Talking Monkey]

8 minutes ago, sancho panza said:

I'm the last person to advise on THAT share.AS worng as I've been on hosue prices.

I still wouldn't dismiss RDSB/BP at these levels where they're yielding 10%.If you jsut use the divi fro reinvestment,it'll build nicely over a decade.

For multi bagging then DB's potash theory is a better play especially as the dollar weakens.Other shares that offer decent potnetial in the sector imho are ICL and Yara,Nutiren.ICL/Nutrien offer 5% divi's.but probably less mulitbag potential to Mosaic.Classic investors qunadary.

DYOR natch

I used the same logic, allocated to Oil, Tobacco and Telcos last week with the logic that the divis would be used to invest in other areas

[Harley]

3 hours ago, Boon said:

TBH I think the recent bounce is a bit of a dead cat bounce.

Am saving any purchases for the FTSE 5,000 and 4,500 levels. I think sentiment will get worse with the US results and there will be a lower bottom than what we have seen already.

Right now me technicals giveth and might be ready to taketh away!  So much so I've decided to take time out in the allotment!  Many of my targets showed fake buys from their lows on the daily charts and indeed did pull back.  But then started to rise quite a lot from say mid March (but sans buy signal).  However the weeklies, where maybe we now have enough data to examine post crash, are not agreeing.  And the daylies are approaching overbought.  So a tough one as maybe the weeklies aren't yet ready to rely on and as things are so extreme such noise on the daylies is to be expected.  So I'll ladder in (opening some new small positions) but need a work out to get the gumption!  The last thing I want is for things to run ahead, but a V recovery seems a bit optimistic.  Some things have run ahead but it's a game of priorities and confidence right now so some of that lost gain is potentially an investment.  The daylies IMO are really for trading, not long term holds.  I could trade a bit more and do well (i.e. compensate for some losses) but I also have other priorities and, as usual, the big (easier) money is made in the intermediate to longer term (weeklies but preferably monthlies).  And then there's BTC!

At least these are my excuses!     

[Shamone]

9 minutes ago, sancho panza said:

I'm the last person to advise on THAT share.AS worng as I've been on hosue prices.

I still wouldn't dismiss RDSB/BP at these levels where they're yielding 10%.If you jsut use the divi fro reinvestment,it'll build nicely over a decade.

For multi bagging then DB's potash theory is a better play especially as the dollar weakens.Other shares that offer decent potnetial in the sector imho are ICL and Yara,Nutiren.ICL/Nutrien offer 5% divi's.but probably less mulitbag potential to Mosaic.Classic investors qunadary.

DYOR natch

Thanks, SP. Yara, Nutrien and CF are also on my watch list. Never heard of ICL but looking at it. I have a combination of FOMO and investor's paralysis. And too much time on my hands.

[Talking Monkey]

8 minutes ago, DurhamBorn said:

I just think they might run hard and then fall before the big run in inflation happens.I see inflation growing slowly at first then speeding up,but by 2026 it still might only be 6%/8%,it will likely go parabolic in the last 18 months,perhaps to 12%,but 20%+ isnt out of the question given the macro picture.Sounds crazy at the moment,but the road map is clearly showing the direction and thats the range towards the end of the cycle.50% stock market falls from peak are hard on people who bought at the top.80% inflation over a cycle though is what destroys capital on a permanent basis.

Deflation is the systemic risk right now,yet its the time you position for inflation.

Thats the main one for me avoiding the worst of the inflation and getting something that is a liveable income from the SIPP.

 

[DoINeedOne]

14 minutes ago, Cattle Prod said:

I used to work on some of their fields, and know them quite well. A lot of them are old with declining production, so I will watch to see if they abandon them in the current price environment. But they have a few jewels, including equity stakes in a few giant Russian gas fields run by Gazprom. I can't remember how they got into them, as it is unusual, but I think ultimately it is part of the Russia-Germany energy cosyness. So with BASF, you are actually getting exposure to Russian gas too. Which IMO is a good thing.

interesting also didn't know till the other day that BP owns 20% well 19.75% stake of Rosneft

[DurhamBorn]

41 minutes ago, Cattle Prod said:

I used to work on some of their fields, and know them quite well. A lot of them are old with declining production, so I will watch to see if they abandon them in the current price environment. But they have a few jewels, including equity stakes in a few giant Russian gas fields run by Gazprom. I can't remember how they got into them, as it is unusual, but I think ultimately it is part of the Russia-Germany energy cosyness. So with BASF, you are actually getting exposure to Russian gas too. Which IMO is a good thing.

They did it to ensure supply to their chemical plants i think.They figured if LNG took a spike it would cushion them.

[TheCountOfNowhere]

Worth noting that the Spain and Italy new cases graphs have definitely flattened out and could be heading down.

[JoeDavola]

Does anyone else think that the DOW's performance over the coming 2-4 weeks will tell all with regards to how low it can go and how well stimulus can prop it up, i.e. as morbid as this sounds during the time when deaths are at their highest?

[NogintheNog]

34 minutes ago, TheCountOfNowhere said:

Worth noting that the Spain and Italy new cases graphs have definitely flattened out and could be heading down.

This is of course great news, but what does it prove? It means that a total lock down will keep the numbers flattened out to a manageable amount but only if the lock down is maintained.

So what's the bad news. Well what is the economic damage being done here, productivity is being crushed and someone needs to pay? Who is it gonna be, not just in Italy and Spain but everywhere?

I was at Gatwick just last week with my old work colleagues and they were talking about the Summer when everything gets back to normal. They just don't get it! I told them they were in denial. Just spoken to one of them and half of them are being 'fur-longed' next week. I suspect some of them won't be coming back until 2021! It's the same with the airlines, they are probably not going to need a third of their crew this Summer or next Winter. What is the industry gonna look like after this virus has taken it's toll??

[TheCountOfNowhere]

What's going on with Galliford their share price is lower now than the 2008 collapsed price after a similar sized peak in 2007/2015?

 

Market Summary > Galliford Try plc

LON: GFRD

Follow

 

131.98 GBX +0.42 (0.32%)

 

 

[MvR]

Slightly off topic,  but I just had a fantastic "customer experience" with one of my options brokers.. TastyWorks.com.  I'll describe the details for those interested, and as a warning to others not to get into the same position.

Through my own ignorance, I'd got into a tricky options position.. a fixed-risk butterfly ( long 4 x S&P500 3500 puts, short 8 x 3600 puts and long 4 x 3700 puts.).  

edit: separately, these are very large positions.. net value around $800,000, though they almost completely cancel each other out in terms of market risk.  ( this is also why you shouldn't take the talk of multi-trillion derivatives bubbles too seriously.. they just work this way )

The max risk/max loss was only about $300, and it would have paid out around $20,000 had the S&P500 drifted around 3600 in June.. a real possibility before the C19 correction, and not impossible still. 

Anyway, due to my not taking into account the slightly complex way futures options margin is calculated, a few days ago the margin requirement of $300 ish suddenly increased to around $10,000.. more than I have in the account, triggering a warning that I was about to receive a margin call for more collateral, and to avoid this I needed to close out the position.

However, again, due the complexities of the way futures margins work out, and the fact combinations of options don't always cancel each other's margin requirement out, as they do with stock options,  when I tried to enter a closing order, the platform said I didn't have the margin available to do so, even though closing the whole position at the same time should have reduced the margin requirement.

On top of that, the fact they were puts, now well in the money, meant the spreads were wide, particularly during the pre-market trading at the time I tried to close the position, around 10am this morning.

So, I contacted the support team, and asked them if they could enter the closing order ( as they'd have done anyway later today if I didn't add capital ), and they said they could.

However, due to a communication mix up, I was expecting them to enter a limit order, potentially losing me most of the $300 the position was worth, but closing it out neatly, but they actually put in a market order, during the pre-market hours, to dump it at any price... that price being 0.94c debit per contact per S&P500 point, or $4700 debit.. i.e. something I expected to have to give away for nothing in the worst case, actually cost me $4700 to "give" to someone else.   Ouch.

I emailed them straight back and expressed my unhappiness at the outcome, but recognising that it was a mis-communication, and asked them if they could pass the issue up the chain for someone to have a look at.

Legally speaking, since I was partly responsible for not giving completely clear, unambiguous instructions, they could have just told me "tough luck", and I'd have had to accept that, but they didn't.

A few hours later, as their Chicago offices opened for the day, I received this email 

Quote

MvR, 

This is Alan, the trade desk manager here at TW. I apologize for the miscommunication with the trade desk today on the closing of the butterfly.  This should never have happened in that manner.  In order to rectify this, I have requested a credit of $4,700 to your account. You can expect it within the next few days. 

Again, my sincerest apologies for the hassle with this. Please let me know if you need anything else. Stay safe. 

Best, 
Alan

I always like them as a company.. their online options trading eduction is brilliant, and the presenters are also the support team. When you contact them about an issue, you end up chatting to the very people you see on screen everyday.  Their response here just confirms my thoughts about them. They didn't need to compensate me, the money was gone, but they did so out of their own pocket without hesitation.  I'm not sure many other brokers would have done the same.

[JMD]

4 hours ago, sancho panza said:

As per my post to Harley, need to start looking at these. I'm a bit frit of the big diversified miners because of their exposure to things like coal/iron ore

SP, i understand your aversion to coal, but why don't you like iron ore?            

But I agree it is pretty alarming the earnings bias the big players get from their coal/iron ore mining operations (Anglo receives 35% of its revenue from coal, at least 2 years ago it did).

Perhaps a mid cap, kinda diversified player, might be the Russian miner 'Norilsk Nickel'? 

[Don Coglione]

1 hour ago, Cattle Prod said:

There is quite a story behind that, look up TNK-BP. Basically a bunch of oligarchs got BP on board to run the beautiful assets they 'acquired', until it was time to run BP out of town. Quite literally, Bob Dudley had to run :-)

They worked it out in the end though, with BP ending up with a chunk of their crown jewel, Rosneft. As I've said about Russians, though unorthodox, they didn't screw BP out of their rightful share, which I have found to be typical of them. Straight up businessmen. I know BASF get a cash transfer ever quarter for their share of profit from the Russian gas fields, and it is never late or quibbled about. I wonder could one of you financially minded types be able to spot it on the balance sheet? I bet its there somewhere.

Off topic, apologies, but as I have posted before, you generally know where you are with the Russians. We used to extend potentially ruinous levels of credit to them (and I had a very conservative and paranoid FD) - never did they not pay on time. Lovely people, too.

Mind you, if you fucked up, they would hit you with a baseball bat, metaphorical or otherwise...

[TheCountOfNowhere]

2 hours ago, NogintheNog said:

This is of course great news, but what does it prove?

Proves nothing but in 4/8 weeks the yank spivs and their $6Trillion hand out will  be having a party, best get to the party early so you get a nice seat

[sancho panza]

7 hours ago, Cattle Prod said:

I used to work on some of their fields, and know them quite well. A lot of them are old with declining production, so I will watch to see if they abandon them in the current price environment. But they have a few jewels, including equity stakes in a few giant Russian gas fields run by Gazprom. I can't remember how they got into them, as it is unusual, but I think ultimately it is part of the Russia-Germany energy cosyness. So with BASF, you are actually getting exposure to Russian gas too. Which IMO is a good thing.

Keep us posted .Funny you should mention Gazprom.Theyre looking good valuea t $4.50.I'm genuinely tempted to break my cable boycott.

Amazing how they've sold off.Have the Germans stopped heating their homes?

On another matter,I think you mentioned EQNR bouncing hard.A point me and @Harley were discussing recently was how the monthlies hide all manner of price action.We pciked up a few ladders below $12 and I think we won't be selling them for a very long time.I do wonder if the marekt has one more leg down in it.But EQNR's chart here says up on the monthlies to my untrained eye.

dailies show $8.84 on teh 18/3

monthlies not even showing a dip below $12.QUite excited about where these could go.