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

[sancho panza]

4 hours ago, JMD said:

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'? 

I like buying exposure to a sector,when you buy these mega miners miners you're buying exposure to a load of sectors.

For uranium we buy cameco,potash Nutrien,ICL,SDFetc for gold KGC,AU,AUY etcfor silver FRES,HOC etc.so we can decide when teh sector offers value and nudge in over time.with BHP and the like you have to monitor lots of different asset markets and the mix within rio/BHP .

If they were on the floor I would but they're not really on the floor for me.

On another matter ,an old family favourite HSBC came cheap today and looks like it's getting cheaper.Barclays below the price I first bought at on my first trade in 1990 or so.Bless my Grandad.Definitely keeping an eye on Standard/HSBC for when the capitualtion selling starts.

[SillyBilly]

5 hours ago, NogintheNog said:

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??

Quite, I've spoken to a few people in business and they are in denial in my opinion. That we shut up shop for a few weeks and then throw open the doors in May and unleash this ferocious pent-up demand. Deluded. You can't turn off the economy for a few weeks and then simply re-boot and expect business to continue as normal. 

[sancho panza]

5 hours ago, TheCountOfNowhere said:

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%)

 

 

looks like they've had a split.I remember selling my Mums at £10+ a few years back.

[Loki]

Does anyone have any countries that might be particularly well placed for the cycle ahead? Occurred to me today that while nothing is keeping me here i don't know how well the ideas here would translate to another country. They sound pretty universal but what do i know other than access to stocks is easier now than any other time

[Shamone]

14 minutes ago, Loki said:

Does anyone have any countries that might be particularly well placed for the cycle ahead? Occurred to me today that while nothing is keeping me here i don't know how well the ideas here would translate to another country. They sound pretty universal but what do i know other than access to stocks is easier now than any other time

I would guess Zimbabwe could be good for the local knowledge.

[Loki]

Just now, Simon said:

I would guess Zimbabwe could be good for the local knowledge.

I'm not that brave 

[sancho panza]

8 hours ago, Cattle Prod said:

Speaking of which, I've been catching up on my reading, and I saw MoneyWeek had a '"Drowning In Oil" cover a couple a weeks ago. I assumed that they were taking the piss out of the famous Economist "Drowning In Oil" cover from 1999, which marked the start of the great oil bull market from $12 to $147 a barrel, and being a little contrarian. Exact same words. I am gobsmacked to see that they didn't refer to the Economist 1999 cover, though they did recommend picking up BP and Shell though, so I'll forgive them. 

It's worth noting that the 1999 "Economist" call was $19.20 inflation adjusted, and the article famously talked about oil going to $5. Today, we have talk about oil going negative at $20.58. I was three months from graduating when that bloody cover came out, not a job to be had! History rhyming, repeating etc. I put together a little graphic for you lot, I think I'll send it to the editor at MoneyWeek too...

 

 

 

I'll raise you a few more

http://barrelperday.com/2015/01/21/oil-story-the-economist-covers-single-chart/

[sancho panza]

5 hours ago, MvR said:

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 

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.

MAzing story MvR.Impressive response from the company too.I've had some hard lessons in shorting/trading in my time so it's really lukcy they took such a mature view of it.

Must say,I'll rememebr that next time we opena new account.

I always enjoy your writing on the options world,it's out there.Strange how margin can create such a squeeze.Beggars belief what soem fo teh big boys carry.I'd be sweating.One of the sreasons I always carried a fat balance in my IG account was because I always feared a margin call when I was at work.

[sancho panza]

6 hours ago, NogintheNog said:

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??

The reality is that every talking head on the TV is missing the one salient point of each set of graphs and thats that the one country on there that hasn't locked down and has the msot control over the virus is South Korea(and SIngapore if they were of a mind to let the public know that people in SIngapore are still going out for meals etc)

Instead we get the talking heads pleading for more lock downs and not tkaing the bungling Boris to task for not testing despite the fact that South Korea had roadside testing by mid Feb for anyone who wanted it.

Absolutely incredible what the MSM are doing here.ALl talking about Italy and Spain whist ignoring the glaring omission of SK/SING

[sancho panza]

Look at it.Japan is only now broaching the issue of a lock down.Countries with the lowest corona figures??????????? South Korea/Singapore,no lock down.Japan thus far,no lock down.

Commonality-high testing rates.

Our govt-low testing rates

[DurhamBorn]

1 hour ago, sancho panza said:

Look at it.Japan is only now broaching the issue of a lock down.Countries with the lowest corona figures??????????? South Korea/Singapore,no lock down.Japan thus far,no lock down.

Commonality-high testing rates.

Our govt-low testing rates

The problem is they have made such a disaster of it that they will simply double down on lock down to try to cover it up.

Notice Sainsbury have Argos open,yet other companies cant open selling the same things.Tesco still selling cards,yet Card Factory cant open.Local factories all open with people falling over each other on a production line,yet the local pub has to shut.Tube packed yet Marstons and Wetherspoons locked up.

In affect government has decided that it can bankrupt half the companies in the UK because its made such a mess.Notice today the reality of the business loans hitting home.They are pretty much useless for ordinary small companies.

Testing was always the way to go then lock down local areas,even whole towns instead of the whole country.

People in my street getting a new bathroom in,vans outside,workmen coming and going all day long.What is the point of locking down half the country but not the other half?

 

[reformed nice guy]

I think we have seen a lot of irrational panicking, but the Americans can take irrational panicking to another level.

Still have some ladders Im hoping get hit.....

[TheCountOfNowhere]

10 hours ago, sancho panza said:

 

Commonality-high testing rates.

 

 

 

Commonality, well ordered society that does what the f**k they are told.

South Korea and Japan, low immigration.

 

[Castlevania]

The one that must not be named, have cancelled their dividend and expect to see a big rise in bad debts.

What an absolute dog

[Loki]

BP and RDSB nice little bump this morning

[sancho panza]

10 minutes ago, Castlevania said:

The one that must not be named, have cancelled their dividend and expect to see a big rise in bad debts.

What an absolute dog

rivalling my Northern Rock investment from the last crisis.

 

Reflections,reflections.

However,I'd suspect with Ian Conn gone,the new boss will be kitchen sinking.

I still believe there's a viable business(es) there if they can get through to the other side and survive the ongoing cull in the sector which will see a lot of the smaller  companies go under.

Shareholder equity running at 6.6% of assets.EOn runing at 10.5%,Engie 20.7%,,EDF 15%,.So it's at the bottomProblem is that with this flow of bad news,it's not ina great position to negotiate top price for assets on sale..I think the industry has suffered from poor regulation,cheap money flooding in which led to severe margin compression.

https://www.investing.com/equities/e.on-financial-summary

[Don Coglione]

26 minutes ago, Castlevania said:

The one that must not be named, have cancelled their dividend and expect to see a big rise in bad debts.

What an absolute dog

Scarcely believable that a company can be so badly run.

[PaulParanoia]

13 minutes ago, Loki said:

BP and RDSB nice little bump this morning

What's the collective thoughts on this one?  Takeoff or a fake rally?

I've only invested a 3rd of my pot so far, taking a cautious approach in case of multi month falls in share prices.

Is £14.50 still a good price for Shell.  Getting some serious FOMO this morning.

[sancho panza]

9 hours ago, DurhamBorn said:

The problem is they have made such a disaster of it that they will simply double down on lock down to try to cover it up.

Notice Sainsbury have Argos open,yet other companies cant open selling the same things.Tesco still selling cards,yet Card Factory cant open.Local factories all open with people falling over each other on a production line,yet the local pub has to shut.Tube packed yet Marstons and Wetherspoons locked up.

In affect government has decided that it can bankrupt half the companies in the UK because its made such a mess.Notice today the reality of the business loans hitting home.They are pretty much useless for ordinary small companies.

Testing was always the way to go then lock down local areas,even whole towns instead of the whole country.

People in my street getting a new bathroom in,vans outside,workmen coming and going all day long.What is the point of locking down half the country but not the other half?

 

Ref lock down.I agree they will double down because they won't admit they've messed up taking a lead from China rather than South Korea.It very much depends if your force is run by Cressida Dick/Neil Basu or the wannabe Stasi in other parts of the country as to whether the new laws are imposed reasonably.They really need to regionalise the Police imho.

As I've said variously,test,then quarantine works and the public will approve and support it because they see a valid reason for being quarantined.Quarantining then testing selected individuals only alienates people over the medium term.

Our govt has basically quarantined people who are likely 98% healthy.Insane.Ruined businesses,held back kids educations,caused domestic distress and stress etc etc.

I heard today and would welcome anyone confirming that the govt 80% plan revolves around businesses paying the 80% then claiming back off the govt.Is that for real?

Lot of growing dissent in Germany at Angela's policy as it virtually gurantees a deep recession.

[sancho panza]

48 minutes ago, TheCountOfNowhere said:

Commonality, well ordered society that does what the f**k they are told.

South Korea and Japan, low immigration.

 

I'm sorry Count but you're being disrespectful to the quality of their response.Test then quarantine clearly works better than quarantine then test.

Boris is getting some blood on his hands metaphorically speaking and he's finding out that real leadership isn't just about practicing his witticisms in a Churchillian manner in front of his bathroom mirror,it's about taking hard life and death decisions and doing it in an ordered rational manner.

I've noticed we had the Business Secretary(who?) doing the daily Covid briefing yesterday.Fair play to him for turning up.

[TheCountOfNowhere]

4 minutes ago, sancho panza said:

I'm sorry Count but you're being disrespectful to the quality of their response.Test then quarantine clearly works better than quarantine then test.

Boris is getting some blood on his hands metaphorically speaking and he's finding out that real leadership isn't just about practicing his witticisms in a Churchillian manner in front of his bathroom mirror,it's about taking hard life and death decisions and doing it in an ordered rational manner.

I've noticed we had the Business Secretary(who?) doing the daily Covid briefing yesterday.Fair play to him for turning up.

Oh, I agree with the testing but they also have very well ordered societies.

In the UK it's all about number 1 and money.

We are reaping what they sowed.

[AlfredTheLittle]

12 minutes ago, sancho panza said:

 

I heard today and woud welcome anyone confirming that the govt 80% plan revolves around businesses paying the 80% then claiming back off the govt.Is that for real?

 

That's right, businesses pay wages as usual (or whatever proportion of wages they've agreed to pay employees) then the government will eventually reimburse 80%, although it's not yet clear how or when. All the rescue schemes are somewhat opaque and lacking detail, and less generous than they sounded when announced - in a way you can't blame the government, as they don't want to be giving out free money to people who don't need it, but they'd have been far better off keeping things simple, rather than creating a huge new bureaucratic nightmare.

[AlfredTheLittle]

25 minutes ago, PaulParanoia said:

What's the collective thoughts on this one?  Takeoff or a fake rally?

I've only invested a 3rd of my pot so far, taking a cautious approach in case of multi month falls in share prices.

Is £14.50 still a good price for Shell.  Getting some serious FOMO this morning.

I'm in the same boat, as I'm sure many are. I think there must be a decent chance the price comes back down again at some point in the next few months. If not, the boat has already sailed, I won't be getting involved at £14.50 (but what do I know - nothing at all)

[sancho panza]

44 minutes ago, PaulParanoia said:

What's the collective thoughts on this one?  Takeoff or a fake rally?

I've only invested a 3rd of my pot so far, taking a cautious approach in case of multi month falls in share prices.

Is £14.50 still a good price for Shell.  Getting some serious FOMO this morning.

Picture paints a 1000 words.I'm using the Euro one as it's history goes back further.I'm trying not to get distracted by the recent low and to focus on accumulating under £15 but we're buying on a timing ladder now over the next 8-10 weeks abandoning the price ladder that took us down to £9.

I think BP under £4.50 is my next target.If we can average aroudn £4.00 on BP on all purchases psot Aug 2019,then I'd have taken that two years back.

[DurhamBorn]

Its always best to remove the emotion and set ladders.Anyone who has should of tagged the bottom on Shell and BP,at least so far.There is always a risk things go lower,markets are never linear,but removing the emotion is crucial.Iv learned through hard work and plenty of mistakes (mistakes stillcome and always will,just hopefully less over time) that you put the work in before things happen,work out the likely road map of the forward cycle and then act.

Its then best to let the cycle play out and keep investing the dividends that come your way in reflation sectors that might be lagging.An example now would be to use and oil dividends for potash and telcos.I wont be using ladders much going forward apart from ones already set.Im also slowly starting to buy a few none reflation companies who i think might hold their own in the cycle,and likely under-valued.

The aim is a well balanced portfolio that leans to the cycles headwinds.

Oh and Centrica is a shocker,but the management were too slow to sell nuclear.If they had sold that they would of been bought out i expect at a much higher price.Nuclear is why people are holding back buying them out,and the chance of them being able to sell to the Chinese is now pretty remote.In the scheme of a portfolio though their loss is 1/3 of the profit Harmony Gold provided.Still not nice,but part of investing.Its highly likely if they get through this though they will see most of the smaller players gone.I still think Shell and BP must be looking hard at them though.Access to that many electricity customers must be very tempting.Again nuclear will be the problem.