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

[Democorruptcy]

9 hours ago, DurhamBorn said:

VOD i used free cash low rather than PE as there are a lot of things going on with the balance sheet with mergers,depreciation etc and i got in around 8x.Interesting today Imperial hit a PE of about 7.3 as well.I actually thought my numbers looked crazy when i was seeing them all come up three years ago,but they have ended up hitting.It does show why a road map and then some structure in ladders helps you avoid a lot of the pain.

The media and market have different excuses for each company as it struggles to grow or sustain profits,but the real reason is we are at the end of the great dis-inflation.Imperial should be using any spare cash flow now to buy back shares as im sure they will do.

 

I'm not sure about what VOD are doing with this masts business.

I haven't been able to bring myself to buy into tobacco companies. If you had to pick one would it be IMB or BAT?

[Harley]

On 26/09/2019 at 11:36, DurhamBorn said:

i topped up Imperial at £18.42

Oh you, so much for a rough laddering technique!  £18.42 marked a major technical reversal on the daily!  Indeed, you bought on the classic confirming pullback for such a signal!  Same for BATS , minus the pullback on the daily.  Your timing was impeccable!

[DurhamBorn]

2 hours ago, Democorruptcy said:

I'm not sure about what VOD are doing with this masts business.

I haven't been able to bring myself to buy into tobacco companies. If you had to pick one would it be IMB or BAT?

I think BATs is the far better company,but Imperial looks a bit cheaper.If Imperial scrapped the vape business they could buy back 4% of shares a year and increase prices 4% on fags,if smoking falls at 8% or less a year (average is about 4%) they can maintain a 11.5% divi.That should be worst case.

The risk is the chair and exec go as they will and a new chief exec cuts the divi and goes on some spending binge.

28 minutes ago, Harley said:

Oh you, so much for a rough laddering technique!  £18.42 marked a major technical reversal on the daily!  Indeed, you bought on the classic confirming pullback for such a signal!  Same for BATS , minus the pullback on the daily.  Your timing was impeccable!

Nothing to see here move along 

[DurhamBorn]

4 hours ago, Majorpain said:

Presumably if the big manufacturers (Germany, SK, China) are showing big drops in demand, we are currently in a Wiley Coyote pause moment before the main consumer countries of the world drop off the cliff.

Yep,my company have seen a 24% drop in sales to forecast.Usually we roll down about 12 months after lumber prices etc and we have again.Germany should get whacked hard soon.UK cyclical stocks should do ok as market expects loose policy.I wouldnt fancy holding poor quality bonds right now.

[Barnsey]

Want to know what corporate bonds the BoE are buying? (BAT and Imperial included)

https://t.co/PwbRwtu0hw?amp=1

[DoINeedOne]

 

[dgul]

16 minutes ago, DoINeedOne said:

 

Does anyone care about this, specifically?

Surely the problem is China reciprocating and limiting Chinese investors portfolio funds into the USA?

[DurhamBorn]

42 minutes ago, Barnsey said:

Want to know what corporate bonds the BoE are buying? (BAT and Imperial included)

https://t.co/PwbRwtu0hw?amp=1

Is that the BOE pension scheme Barnsey?

[Barnsey]

1 hour ago, DurhamBorn said:

Is that the BOE pension scheme Barnsey?

It's their £10 billion of corporate bond holdings for QE

Quote

Corporate bond purchases

We purchase corporate bonds to stimulate the economy by lowering the yields on corporate bonds. This has the following aims:

• reducing the cost of borrowing for companies
• encouraging asset sellers to rebalance their portfolios to include riskier assets
• encouraging companies to issue more bonds.

The Bank acts as an agent for the Bank of England Asset Purchase Facility Fund (BEAPFF), and only purchases sterling corporate bonds issued by firms that make a material contribution to the UK economy. It participates in the secondary market by holding reverse auctions. However, we reserve the right to carry out purchases via other methods – such as bilateral purchases – if necessary.

https://www.bankofengland.co.uk/markets/quantitative-easing-and-the-asset-purchase-facility

[Harley]

7 minutes ago, Barnsey said:

We purchase corporate bonds to stimulate the economy by lowering the yields on corporate bonds.

Idiocy.  And the list, with many foreign company bonds, seems odd.

[DurhamBorn]

1 hour ago, Harley said:

Idiocy.  And the list, with many foreign company bonds, seems odd.

Force bond yields down so companies have to put more and more into their pensions and have less to invest,insane.

[Democorruptcy]

3 hours ago, DurhamBorn said:

Force bond yields down so companies have to put more and more into their pensions and have less to invest,insane.

If it's forcing the firm's corporate bond yield down, doesn't it mean it costs the firm less to service that debt and so gives them more spare cash, to invest or perhaps to put into their pension fund?

[Harley]

4 hours ago, Harley said:

Idiocy.  And the list, with many foreign company bonds, seems odd.

What the.......BMW, Total, etc!

[Castlevania]

10 hours ago, DurhamBorn said:

Force bond yields down so companies have to put more and more into their pensions and have less to invest,insane.

Allows them to do share buybacks

[MrXxxx]

11 hours ago, DurhamBorn said:

Force bond yields down so companies have to put more and more into their pensions and have less to invest,insane.

And `The Common Man` has to `invest` in what he/she understands/feels most comfortable with...property!?

[DurhamBorn]

11 hours ago, Democorruptcy said:

If it's forcing the firm's corporate bond yield down, doesn't it mean it costs the firm less to service that debt and so gives them more spare cash, to invest or perhaps to put into their pension fund?

Most big firms pension schemes are huge.Over time of course they are slowly moving away from DB pensions.It is a huge point in whats ahead though.Companies who used the debt to build out assets and have a long debt profile should do very well as rates increase,mainly as it halts competition.One of the great causes of a debt deflation is the fact margins reduce down to zero when almost anybody can borrow for almost free.It then reverses.

Of course that debt push has created the assets on the other side of the economy,all the expensive lease cars on the road are a great example.The tricky bit for us all is to make sure we avoid the sectors and carnage as best we can,and position for the following cycle.

[dgul]

16 hours ago, Harley said:

Idiocy.  And the list, with many foreign company bonds, seems odd.

I really don't understand why the central banks get to choose which companies to subsidise with lower debt costs.  

And I really don't understand why our central bank would subsidise foreign companies with lower debt costs.

[Castlevania]

33 minutes ago, dgul said:

I really don't understand why the central banks get to choose which companies to subsidise with lower debt costs.  

And I really don't understand why our central bank would subsidise foreign companies with lower debt costs.

I think they just have to be GBP denominated

[Bobthebuilder]

4 minutes ago, Tdog said:

Tory party to ban gas boilers from 2020.
https://www.express.co.uk/news/politics/1183777/Gas-boiler-ban-boris-Johnson-green

As well as the most expensive housing, seems they want to match it with the most expensive fuel bills.

Have not read the link but that will be in new build only. Goverments have been saying this for years but maybe now is the right time. Electric hot water is not to bad but heating is very expensive.

[dgul]

7 hours ago, Tdog said:

Tory party to ban gas boilers from 2020.
https://www.express.co.uk/news/politics/1183777/Gas-boiler-ban-boris-Johnson-green

As well as the most expensive housing, seems they want to match it with the most expensive fuel bills.

It sort of makes sense to me.

The problem with other heating options is retro-fit.  So long as you design the whole thing right from the start the alternatives usually work well enough.

[I'd add that one of the main problems with this is that the building/heating industry is extraordinarily conservative -- the system just can't cope with rapid changes like this.  The result will be a couple of years of chaos while the heating industry retrains itself to move away from gas boilers.  I don't really understand the reasons behind this inability of the building industry to move quickly when change occurs]

[Well, I sort of understand one aspect -- people who want different usually have a reason and so you can sting them (£££s) for being different.   This then discourages 'different' and reinforces the status-quo. As 'different' becomes 'normal' the prices normalise.  Nevertheless, it'll take a little time to work its way through the system]

[Thorn]

Waiting for Gold to hit its 200 MA again... (drums fingers on table)... meanwhile as DB says It’s all about the Liquidity.

found this...

[Bobthebuilder]

5 hours ago, dgul said:

It sort of makes sense to me.

The problem with other heating options is retro-fit.  So long as you design the whole thing right from the start the alternatives usually work well enough.

[I'd add that one of the main problems with this is that the building/heating industry is extraordinarily conservative -- the system just can't cope with rapid changes like this.  The result will be a couple of years of chaos while the heating industry retrains itself to move away from gas boilers.  I don't really understand the reasons behind this inability of the building industry to move quickly when change occurs]

[Well, I sort of understand one aspect -- people who want different usually have a reason and so you can sting them (£££s) for being different.   This then discourages 'different' and reinforces the status-quo. As 'different' becomes 'normal' the prices normalise.  Nevertheless, it'll take a little time to work its way through the system]

Do the sums, a small gas combi boiler is 25kw, so divided by 230 volts gives 108 amps, try doing that on a 60 amp domestic main fuse. Hope everyones got a log pile.

[dgul]

20 minutes ago, Bobthebuilder said:

Do the sums, a small gas combi boiler is 25kw, so divided by 230 volts gives 108 amps, try doing that on a 60 amp domestic main fuse. Hope everyones got a log pile.

Gas boilers are almost always over-rated -- there's barely any cost penalty over sizing it compared with exactly matching the actual needs of the property, and it allows faster cylinder recharge or higher volumes of hot water (for a combi).   So a property with a 24kw gas boiler seldom actually needs that much heat (ie, gas boiler on permanently for 24 hours a day -- they're always cycling).

The replacement for gas for most would be a heat pump rather than resistive heating -- that would give the 25kw of hot water from a ~10kw feed, so readily doable from a 60 amp supply.  In a new build with decent insulation it would probably be more like a 15kw on a 7kw or so feed.

The problem with heat pumps is the performance on the coldest of nights, which is a problem as it matches their worst performance with the greatest need for heating.  This is probably okay for a heavily insulated newbuild house, but spells trouble for a retrofit on a poorly insulated house (partly responsible for the bad press that heat pumps get).

[Bobthebuilder]

5 minutes ago, dgul said:

Gas boilers are almost always over-rated -- there's barely any cost penalty over sizing it compared with exactly matching the actual needs of the property, and it allows faster cylinder recharge or higher volumes of hot water (for a combi).   So a property with a 24kw gas boiler seldom actually needs that much heat (ie, gas boiler on permanently for 24 hours a day -- they're always cycling).

The replacement for gas for most would be a heat pump rather than resistive heating -- that would give the 25kw of hot water from a ~10kw feed, so readily doable from a 60 amp supply.  In a new build with decent insulation it would probably be more like a 15kw on a 7kw or so feed.

The problem with heat pumps is the performance on the coldest of nights, which is a problem as it matches their worst performance with the greatest need for heating.  This is probably okay for a heavily insulated newbuild house, but spells trouble for a retrofit on a poorly insulated house (partly responsible for the bad press that heat pumps get).

Interesting.

All combi boilers have 2 gas rates, domestic hot water minimum 25kw @19 mbar and heating 12kw @ 9 mbar burner pressure.

as you say you can heat a average house with 12kw from gas on a 15mm pipe.

I am not disagreeing with you but ive been in the heating business for 20 years and have heard all these things a million times before, if it was me i would install a log burner with a back boiler. I have done a few all electric systems with ground source heat pumps etc and 9 out of 10 have gone back to a gas / oil fired boiler because of running costs.

[MrXxxx]

5 hours ago, dgul said:

problem with heat pumps is the performance on the coldest of nights, which is a problem as it matches their worst performance with the greatest need for heating.  This is probably okay for a heavily insulated newbuild house, but spells trouble for a retrofit on a poorly insulated house (partly responsible for the bad press that heat pumps get

As my old dad would say "What's wrong with putting another jumper on?!"...to say I looked like the Michelin man as a child wouldn't have been an understatement, and it wasn't due to childhood obesity :-) :-) :-)