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

[Loki]

22 minutes ago, Cattle Prod said:

I had a nibble at it today, there I said it. Is there a meeting I can go to?

I can give you my bank details if you want to send it straight to me

[Democorruptcy]

New tax year for ISA money starts on Monday.

[Democorruptcy]

50 minutes ago, Cattle Prod said:

I had a nibble at it today, there I said it. Is there a meeting I can go to?

Yes, I went to one on 31st March. I sat down and said "My name is Democorruptcy and I'm a centricaholic".

It helped a lot and I haven't bought any this month. That's 3 days clean already.

[Yellow_Reduced_Sticker]

1 hour ago, Cattle Prod said:

I had a nibble at it today, there I said it. Is there a meeting I can go to?

 

The CNA board knows full well theres going to be a HUGE amount of disgruntled share-holders

 

Here's my NUMBER 1 Tip for anyone here attending the AGM, take a MASSIVE shopping bag with ya...WHY?

 

Because they WILL lay on a MAGNIFICENT Spread!

 

 

When the board start with their spill about CV being the REASON shares are DOWN ect ...ect, just get up and ask where the GRUB hall is!

 

Arrive before anyone else STUFF ya guts AND fill ya shopping bag up!

 

In fact if there is anyone here that lives close to the meeting, just BUY 1 SHARE, get there and CLEAN UP! (I personally know someone who did this for years who lived in London)

 

[leonardratso]

Probably can it due to CV19, or will use that excuse to avoid having to talk to shareholders.

[TheCountOfNowhere]

I've had a look at a few share prices today and when I look on the 6 month view ( google ) you can clearly see a dead cat bounce on a lot of them.

Not the oilies tho unless it's a BIG bounce.

The house builders are clearly showing this, ITV is a good one, rightmove, Easyjet, Tesla, the FTSE to some extend, BT, Legal and general, Vodafone, Whitbread.

Some stuff like Centrica I think the cat was so fat it went through the paving slab it hit.

[Calcutta]

2 hours ago, DurhamBorn said:

No,there is zero risk of hyper-inflation this cycle,they are printing into the biggest deflation in history and havent even right sized that yet.High inflation is painful,but its not out of control,20% is possible from where we are,but my zone is showing 12% to 14% is the likely area where rates catch up.The end of the next cycle is the real danger zone.Today the CBs can print as much as they want,with inflation running hot at the end of the next one they wont be able to act.It might seem crazy,but i fear the end of the next cycle more than i fear this one.I dont spend much time looking at it as its too far away,and we have more than we need to focus on now,but at the moment it looks like there will be nowhere to hide,no asset,and that is very very scary.However the fog will clear as the cycle gets mid way through.

 

OK, a little out of the box but reading this my first thought is buy land ans guns before the World drops it's guts again. How long have I got? My real investment won't be liberated from a pension till around 2040. If I've got to buy a farm before then I'll to get creative.

[Talking Monkey]

50 minutes ago, Yellow_Reduced_Sticker said:

 

The CNA board knows full well theres going to be a HUGE amount of disgruntled share-holders

 

Here's my NUMBER 1 Tip for anyone here attending the AGM, take a MASSIVE shopping bag with ya...WHY?

 

Because they WILL lay on a MAGNIFICENT Spread!

 

 

When the board start with their spill about CV being the REASON shares are DOWN ect ...ect, just get up and ask where the GRUB hall is!

 

Arrive before anyone else STUFF ya guts AND fill ya shopping bag up!

 

In fact if there is anyone here that lives close to the meeting, just BUY 1 SHARE, get there and CLEAN UP! (I personally know someone who did this for years who lived in London)

 

Kin hell is this a thing, do the companies put on a decent spread. Dont you have to pre register or do they have the shareholders register at the door and you can rock up and get in

[Democorruptcy]

17 minutes ago, Talking Monkey said:

Kin hell is this a thing, do the companies put on a decent spread. Dont you have to pre register or do they have the shareholders register at the door and you can rock up and get in

This virus has put me right off food spreads like that, free or not! Coughing and sneezing, no thanks.

[MrXxxx]

1 hour ago, Yellow_Reduced_Sticker said:

 

The CNA board knows full well theres going to be a HUGE amount of disgruntled share-holders

 

Here's my NUMBER 1 Tip for anyone here attending the AGM, take a MASSIVE shopping bag with ya...WHY?

 

Because they WILL lay on a MAGNIFICENT Spread!

 

 

When the board start with their spill about CV being the REASON shares are DOWN ect ...ect, just get up and ask where the GRUB hall is!

 

Arrive before anyone else STUFF ya guts AND fill ya shopping bag up!

 

In fact if there is anyone here that lives close to the meeting, just BUY 1 SHARE, get there and CLEAN UP! (I personally know someone who did this for years who lived in London)

 

But as always, `there is no such thing as a free lunch`...in fact for some if it goes `tits up` it has been quite an expensive one!

BUT my divi comment wasn't just restricted to cna, what are others thoughts on the more stable stocks that have done this?

[DurhamBorn]

41 minutes ago, TheCountOfNowhere said:

I've had a look at a few share prices today and when I look on the 6 month view ( google ) you can clearly see a dead cat bounce on a lot of them.

Not the oilies tho unless it's a BIG bounce.

The house builders are clearly showing this, ITV is a good one, rightmove, Easyjet, Tesla, the FTSE to some extend, BT, Legal and general, Vodafone, Whitbread.

Some stuff like Centrica I think the cat was so fat it went through the paving slab it hit.

Telcos should all be bought and keep buying them for the next 2 years.Keep trickling in.Im looking to keep increasing them from divi's mostly.

Take a step back and look at whats going on.Right now,what sectors are the most vital to the country.Energy and telecoms.If they failed everything would collapse.

The telcos have done a superb job so far in keeping the networks going.As the cycle unfolds not only will they have a much better macro situation,they will also probably be re-rated upwards.

When this is over governments will see what sectors were vital,and they will allow those sectors to make a higher return to make sure they are in great shape for any fresh crisis.

Of course they will see a hit from a loss of some business,and they will probably slice their divis,and their debt is too high,but they are probably structurally under valued to an extreme level.Just this week Aldi signed Telefonica up to improve their corporate network.Companies will of seen just how vital it is for that to stand up during a crisis.

They might keep falling,but as a sector they should be much higher by 2028,perhaps 400% higher including dividends against a cycle inflation of between 80% and 120%.

[Talking Monkey]

24 minutes ago, DurhamBorn said:

Telcos should all be bought and keep buying them for the next 2 years.Keep trickling in.Im looking to keep increasing them from divi's mostly.

Take a step back and look at whats going on.Right now,what sectors are the most vital to the country.Energy and telecoms.If they failed everything would collapse.

The telcos have done a superb job so far in keeping the networks going.As the cycle unfolds not only will they have a much better macro situation,they will also probably be re-rated upwards.

When this is over governments will see what sectors were vital,and they will allow those sectors to make a higher return to make sure they are in great shape for any fresh crisis.

Of course they will see a hit from a loss of some business,and they will probably slice their divis,and their debt is too high,but they are probably structurally under valued to an extreme level.Just this week Aldi signed Telefonica up to improve their corporate network.Companies will of seen just how vital it is for that to stand up during a crisis.

They might keep falling,but as a sector they should be much higher by 2028,perhaps 400% higher including dividends against a cycle inflation of between 80% and 120%.

On telecoms the 3 I have been laddering into are VOD, BT and Telefonica, with an emphasis on VOD and BT. Going to take a look at Deutsche Telecom, are any other worth taking a look at.

[JMD]

14 hours ago, Harley said:

Have the corporates be handed the opportunity to do a bit of zero based budgeting employee (and indeed other cost) wise and could this be a key driver to much higher unemployment?  If I was a company now with a large part of my workforce working from home or not working at all, I would take the opportunity to evaluate employee contributions, my cost (e.g. office rent) base, and alternative delivery models.  I would have IT (analytics), HR and finance working overtime to analyse the situation (which is a kind of enforced lab test).  As with zero based budgeting, I may only bring back what I can see adds value according to a newly reconfigured and "spring cleaned" (pardon the pun) delivery model.  Add back a little at a time and see how it goes and leave the rest at home, some permenantly.  The lockdown presents a golden opportunity for a major corporate re-organisations both in terms of clarity (data) and means ("political" cover).  And any such outcome would presumably fall more on the private sector, further raising the private versus public schism (DB just mentioned public sector pensions).  People talk about the employment benefits through on-shoring (to improve the security of supply chains), but as often happens, such things may not be so clear cut.   

Harley, companies may want to take those 'golden opportunities' you mention but how about an alternative..?

The alternative requires government policy and a vision for the future, but I don't think i'm merely dreaming here, instead I think Western economies demand it in order to survive. So for example I believe most people will be working a 3-day week with UBI top-up by the end of the decade. The mechanism for rolling this out in the near-term is far from clear, but we are already living in the age of the 'new normal', so we just need to wait I suppose for the next government subsidy/handout. It will be a electoral vote winner of course, but the alternative would surely be mass unemployment, division and eventual social breakdown, so not really an alternative the authorities would want to contemplate.

But not a completely utopian future lies ahead, and the difficult domestic decisions will be for governments to balance their new shiny 'command economies' along with enacting 'real' austerity/spending cuts, not the 'faux' austerity of the past 10 years where spending has in fact risen from 700bn to 900bn. My main hope is that the NHS - in some form(?) - can survive and indeed thrive. I expect it will though because most tech advances (apart from environmental ones) in coming years will be medical and profits will only be made if millions of people can use and benefit from these advances.       

[Loki]

9 minutes ago, JMD said:

command economies

Isn't that term used ironically when people mean communist?

[DurhamBorn]

58 minutes ago, Talking Monkey said:

On telecoms the 3 I have been laddering into are VOD, BT and Telefonica, with an emphasis on VOD and BT. Going to take a look at Deutsche Telecom, are any other worth taking a look at.

Iv been buying Vod,Telefonica,BT and Telia in that order.I would like to add a couple more,but cant decide on any so just those four for now.

[JMD]

6 minutes ago, Loki said:

Isn't that term used ironically when people mean communist?

Your right, I think I got a bit carried away - or did I - as must admit the last few weeks have shown the corporatism (not capitalism, we no longer have that unfortunately) vs communism debate looks pretty defunct.

Anyway, I have now put it in quotes, though it doesn't make me feel any safer!

[JMD]

14 hours ago, Harley said:

Ranked by market cap, not scores.   The greens indicate metrics better than the group average while the green scores are the top 3 (or more if many have equal scores).  So CNOOC and EOG score the best (3) because they have one year of better OCF growth.  A relatively minor difference and a pretty similar group overall score wise, although some of the actual metrics are quite different between companies.  Exxon has a very low quick ratio - current liabilities twice current assets while Conocco has a ratio of 2.26 which is very good!  I was expecting a more diverse industry, score wise, as in other industries but no. So hard on that basis to pick the better ones to invest in.  Maybe I should look further down the cap list to Equinor and Repsol (which are not far down in the top 20).  I excluded the Russian companies as they require ADRs/GDRs/CDIs to invest (I don't have access to the Moscow exchange), something else I maybe should relax.

More interesting in the service industry.  Some potentially mild stinkers debt wise (needs closer review)!  Plus a few have paid at least one years dividends above their OCF (i.e. from cash reserves and/or debt/equity issues).  Plus a high debt to capital ratio may also be due to that, more legitimate capex, or (quite common market wide), stock buy backs, or a mix of all three.  Any future asset write downs (and some balance sheets market wide do look a bit high, especially on intangibles and investments) in companies with such high debt ratios may cause greater pain to fall on the relatively smaller equity (shareholder) pool, assuming the debt is well secured with a margin. 

I also generally focus on cash flow metrics because of the potential for creative accounting regarding EPS, etc (due to share buy backs, etc).  Harder to fake real operating cash, although total cash flow can be prettied up by increased debt financing or stock issues, hence the focus on operating cash flows.  I'd rather see growing operating cash flows than growing revenues!  Ideally, they should correlate but if games are being played.....!  Not many places to hide in a cash flow statement, probably one reason companies may seemingly hide it amongst the accounts!  Overall, a liquidators mindset but maybe a good one if debt financing costs (interest rates) are to increase.  Plus things like the Quick Ratio tend to highlight well/poorly managed companies.    

thanks Harley, great post and also the previous stock table one.

[JMD]

6 hours ago, DurhamBorn said:

No,there is zero risk of hyper-inflation this cycle,they are printing into the biggest deflation in history and havent even right sized that yet.High inflation is painful,but its not out of control,20% is possible from where we are,but my zone is showing 12% to 14% is the likely area where rates catch up.The end of the next cycle is the real danger zone.Today the CBs can print as much as they want,with inflation running hot at the end of the next one they wont be able to act. It might seem crazy, but i fear the end of the next cycle more than i fear this one. I dont spend much time looking at it as its too far away, and we have more than we need to focus on now, but at the moment it looks like there will be nowhere to hide, no asset, and that is very very scary. However the fog will clear as the cycle gets mid way through.

DB, I have been meaning to ask this question for a while, but how do you calculate that the end of next cycle will be around 2028? I know the date is approx., and this thread is really more about predicting the economic path of the next cycle, its effects and investment opportunities. But what are the main 'drivers' you are watching and think will ultimately 'tip-us-over (into the abyss!?)' prior/leading up to 2028?

I know I haven't used the right terms but hopefully I have posed a coherent question (sort-of). 

[StrugglingMillennial]

Well i made the jump back into holding some shares today, not the low that they were last friday but RDSB were down from their mid week high so i held out for the end of day and got them for £14.08. Starting to feel like i have more of a idea of whats happening than a few weeks ago so i will keep my gold/silver but i think now is the time to start diverting the ISA fund into stocks when the ladders are hit.

Thanks again to every for there input, i can see that its bringing some clarity to the situation for alot of people.

[reformed nice guy]

Two more additions to the debt deflation? I assume these both have a large loan book and the debt will never be repaid. Someone will be losing the corresponding asset:

New look: https://www.bbc.co.uk/news/business-52153183

Debenhams: https://www.bbc.co.uk/news/business-52156457

 

[Errol]

Regarding Telecoms - why can't I find this ETF on ii?

https://www.hl.co.uk/shares/shares-search-results/i/ishares-stoxx-europe-600-telecommunications

[MrXxxx]

3 hours ago, Talking Monkey said:

On telecoms the 3 I have been laddering into are VOD, BT and Telefonica, with an emphasis on VOD and BT. Going to take a look at Deutsche Telecom, are any other worth taking a look at.

What's people's views on the BT DB pension deficit/liabilities though?...second largest in UK I believe.

[Bricormortis]

My local Morrisons asking £1.18 a litre rip off or what ? It's  £ 1.06 a couple  of miles away.

[eek]

17 minutes ago, Bricormortis said:

My local Morrisons asking £1.18 a litre rip off or what ? It's  £ 1.06 a couple  of miles away.

A Morrison's supermarket with a petrol station attached or a Morrisons Daily inside a Esso garage.

Mind you Morrisons do charge different prices based on local competition but our local one is £1.06 and the other one across town is probably £1.07

[DurhamBorn]

3 hours ago, JMD said:

DB, I have been meaning to ask this question for a while, but how do you calculate that the end of next cycle will be around 2028? I know the date is approx., and this thread is really more about predicting the economic path of the next cycle, its effects and investment opportunities. But what are the main 'drivers' you are watching and think will ultimately 'tip-us-over (into the abyss!?)' prior/leading up to 2028?

I know I haven't used the right terms but hopefully I have posed a coherent question (sort-of). 

Its a guide based on how long industrial cycles tend to last.Its also based on the fact the first few years will simply be repairing some of the damage of the deflation.I dont want to go into too much on the numbers,but its based on models of how inflation works.For instance id expect 6% inflation by 2025,8% by 2026 then the shoot up to 12%/20%.If it was 4% by 2025 the cycle might last a bit longer,or the inflation figure undershoot,say 9% to 16%.

These figures are based on CBs printing 3x what they have so far though.If they kept printing where it is now,we will see systemic collapse.Too much debt out there that needs bringing onto CBs balance sheets and monetized.

Another thing as well is the basis of what popped the deflation,this virus.It might leave parts of the economy hollowed out,so inflation might be even higher in certain areas.Lots of moving part and lots of work to do once things settle down into the cycle.For now its best to sit back and let it begin.