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

[DurhamBorn]

Equinor have cut their first quarter dividend by 67% it will be interesting to see if Shell and BP follow.I think the fact the big oilies mostly pay every quarter means they can by quite flexible cutting one quarter,but quickly moving back as soon as price improves.I would be glad if they all cut and used the cash saved to buy up cheap assets while they can.Repsol have said they are holding theirs,but they might change their mind,though they are 60%+ gas upstream.

 

 

[Jesus Wept]

23 hours ago, Vendetta said:

Anyone have any thoughts on Evraz? 

6.70% rise today. One of the top FTSE 100 performers. 
 

One for the portfolio? 

[Castlevania]

34 minutes ago, DurhamBorn said:

Equinor have cut their first quarter dividend by 67% it will be interesting to see if Shell and BP follow.I think the fact the big oilies mostly pay every quarter means they can by quite flexible cutting one quarter,but quickly moving back as soon as price improves.I would be glad if they all cut and used the cash saved to buy up cheap assets while they can.Repsol have said they are holding theirs,but they might change their mind,though they are 60%+ gas upstream.

 

 

BP have a new chief executive. I reckon he’ll set his mark and cut the dividend. Shell are in my opinion likely to maintain.

[CVG]

25 minutes ago, Vendetta said:

6.70% rise today. One of the top FTSE 100 performers. 
 

One for the portfolio? 

It's in my portfolio (down 50%+). If you enjoy wild swings up 6.7% and down 12% then it'll delight. The dividend policy also seems prety random. Don't bet on getting 20% +.

 

[DurhamBorn]

34 minutes ago, Cattle Prod said:

Maybe so.

But I recall the screaming from the middle class retirees of the UK when they cut it after Macondo, a surprising % of pension or retirement income in this country relies on BP divis. They were practically on the streets! 

Its interesting how things play out.Iv noticed a slow drift over 20 years of shareholders coming last in more and more companies.Iv got a share who has cancelled the divi,yet the execs have taken a 20% salary cut and given it to food banks.Why are they giving it to food banks before shareholders?.The problem is less and less ordinary people own shares.A new chief exec at the present time will be looking hard at all that cash they could spend instead of giving to shareholders.Imperial Brands have a new chief exec and he might cut,BT are almost certain to,Vod already cut but may cut again.

Its very telling of where we are in the cycle though.I can remember when divis went up every year 8%+ and wages went up RPI+1%

[Errol]

[MrXxxx]

6 hours ago, JMD said:

yep, same here. I thought Craig was going to introduce a convoluted 'dough' and 'recipe' economic metaphor, not talk about making pizzas!

btw, nothing wrong with pizzas, but pretty much everything wrong with economic system.

One is based on `sound` scientific principles, the other isn't...I will let you all decide which is which. 

[MrXxxx]

2 hours ago, DurhamBorn said:

got a share who has cancelled the divi,yet the execs have taken a 20% salary cut and given it to food banks.Why are they giving it to food banks before shareholders?.

Yes, I saw this the other day when researching buy options; can't remember which one it was, and It was my thought as well...though "Sod that if they think I am buying shares as a one man charity!", and they didn't get my investment.

[sancho panza]

8 hours ago, JMD said:

.. And moreover being able to buy back into a future market - after it has crashed/big kahuna - would be the icing on the cake.... but do things like this really happen, surely that would be like winning the lottery?

chances of a big lottery win are small,chances of lots of decent medium size wins are better.

if you're anxious about trading then don't do it.Like i said this stuff's specualtive.

4 hours ago, Cattle Prod said:

Heads up @sancho panza @MvR or anyone else who is interested, Saxo Bank has (I think) reasonably cheap call options on the XOP ETF which has a good spread of US oil and gas production companies, with some Appalaicha only gas players in there too which I really like. I bought Jun 21 calls, otm, just to have optionality on a supply squeeze in early 2021.

 

Do your own due dilligence please folks, just sharing a trade I think could work well!

defintely,cheers for the heads up CP,I had a look ,I didn't realsie you get options on etfs

4 hours ago, DurhamBorn said:

Its interesting how things play out.Iv noticed a slow drift over 20 years of shareholders coming last in more and more companies.Iv got a share who has cancelled the divi,yet the execs have taken a 20% salary cut and given it to food banks.Why are they giving it to food banks before shareholders?.The problem is less and less ordinary people own shares.A new chief exec at the present time will be looking hard at all that cash they could spend instead of giving to shareholders.Imperial Brands have a new chief exec and he might cut,BT are almost certain to,Vod already cut but may cut again.

Its very telling of where we are in the cycle though.I can remember when divis went up every year 8%+ and wages went up RPI+1%

this ahrks back to the discussion we had about teh loss of crest accounts and assets being held by nominees.not that there's much retial left in the UK to be fair.but those that there are can't vote at agms in the main.

[sancho panza]

1 hour ago, Errol said:

why the excessive run up in goldies today?

any ideas welcomed.

[sancho panza]

 @Cattle Prod was looking at Occidental today and wondering if it's time to average down a little.How expsoed are they to shale? dyor natch.

The calls are pricey.

Also looks like I won't be getting my XOM Jan $50's............

[JMD]

8 hours ago, Craig said:

Sadly, advising folk to buy a Ferrari pizza oven has probably been my greatest contribution on here...

I wouldn't know about that and wasn't my point, and know (hope) you didn't take it that way. In fact I read and appreciate all posts here and appreciate that the 'P' theme is a recurring hot and crusty topic here. Unlike the c-word that must of course never be named!

[DurhamBorn]

With all the focus on the US OPEC members also dont have much storage,and of course most dont own down stream assets to at least send oil to.Big oilies can at least send their own oil to their own refineries,or run their wells at the minimum and take the cheapest oil they can get on the market.

 

In an interview with the Premium Times, Nigerian National Petroleum Corp. managing director, Mele Kyari, said the OPEC member state would be forced to cut output due to country's lack of storage capacity "whether with or without OPEC output cut deal".

Kyari reportedly put Nigeria's oil output at near 2.44m b/d.

That compared to 1.853m b/d as per OPEC's March Monthly Oil Market Report.

Nigeria only had storage worth 1.5 days of output, the Premium Times said, citing IHS Markit estimates.
 

[sancho panza]

[whocares]

On 23/04/2020 at 00:00, Loki said:

Reading now and this is brilliant 

But frightening? I am a bit of a pessimist but I look cheery compared to what he can see ahead for us all?! Gulp.

[JMD]

13 hours ago, sancho panza said:

He's very much along with the credit deflationists about the coming Big Kahuna.Page 34 he talks about debt deflationa and a velocity of money crisis.................wow.....calling all the students of behaviorual economics.

 

 

Well worth a read I've pulled a few points out

 

I think he nails it with his 3 phase theory-(saying we're in the panic).Very much echoes some of kaplan's work.Some great points on stock market history from 1929.

1) the panic

2) the hope

3) the insolvency.

A lot of the 120 pages i charts so you can skim read quite a bit.

Having said that,he calls for a possible move SPX to 2000 first two weeks in April-wrong.

Calls for a six month rally from the bottom-I think he's right on (decl-thats roughly what we're postioned for).

 

great quote-

'what's unfolding has elements of all the macro events of my life plus 1929,all rolled into one.'

 

'The everything crisis

Largest equity bubble of all time

Largest wave of retirees of all time

Largest student loan bubble

largest auto loan bubble

Indexation bubble

largest corporate credit bubble

ETF/market structure bubble

Foreign borrowings bubble

Monetary policy bubble

EU banking crisis'.

 

 

 

Edit to add:it's a proper bear fest.Should carry a warning to all baby boomers holding ETF's. @Harley he refers a lot to market structure I struggle to see how ETF's like GDX are a problem structurally.I can see why some high yield/junk bond ETF's with illiquid assets are a problem.Are ETF's like GDX a problem in your opinion?

Edit to add 2:Consumption crisis->corporate debt crisis->govt debt crisis->velocity of money crisis->dollar standard crisis pushes up dollar->foreign dollar debt crisis->dollar breaks after dollar spike->somewhere in thsi the EU loses it's banking system->'finally the entire sh1tshow  of global debt and pension losses-say $50trillion-goes onto govt balance sheets l;eading to a loss of faith in the financial system and money itself'

I feel like a Bull for once.

I note he has quarter of his liquid wealth in each of PM's/cash/bitcoin/equities. I like it when commentators 'show you' their portfolio. Kaplan is probably best for doing this type of thing. So long as people are being truthful, I think it shows their commitment to their own ideas. Personally I find portfolio allocations useful in helping evaluate/develop my own attitudes toward investment risk.                                                                                                                                             However there are many moving parts to investment risk, where for example Raul sees bitcoin as being not just another asset class but instead views it as becoming 'the network' of the digital encryption infrastructure (I believe that's how he stated it). It follows then that Raul would be very bullish about bitcoin. However I would temper that bullishness by highlighting the concern that banks may introduce their own digital currencies, and moreover ones that you can use to pay your taxes with. I suppose I am saying that decisions over risk can be/are so subjective, depending as much on judgement as on personal biases around outcomes that one would favour happening.

[CVG]

5 hours ago, JMD said:

Personally I find portfolio allocations useful in helping evaluate/develop my own attitudes toward investment risk.     

Posted before. Love this guys site:

https://portfoliocharts.com/

[Craig]

8 hours ago, JMD said:

I wouldn't know about that and wasn't my point, and know (hope) you didn't take it that way. In fact I read and appreciate all posts here and appreciate that the 'P' theme is a recurring hot and crusty topic here. Unlike the c-word that must of course never be named!

Not at all, just rueing the fact that I appear to be more adept at making pizzas than investing... 

[BadAlchemy]

On 22/04/2020 at 18:20, Vendetta said:

Anyone have any thoughts on Evraz? 

I believe they have, or had, quite high debt. (I've got a note on my 'stock picker' spreddy that describes them as 'doing a Chesapeake' I could be utterly wrong/too harsh about that of course!) I think they have been discussed previously here so maybe do a This topic search for more info ...

[sancho panza]

19 minutes ago, Cattle Prod said:

I dont know the %, but they bought Anadarko for their shale assets, and overpaid for them. Bad move, I didn't like it, and I don't see how they will get their money back.

Many thanks for that.It's the only realloser I have in the oilies but my smallest allocation.

I need to remember @Castlevania s excellent adivce from a few pages back about when a shares dwon 50% you need to tkae an honest look at why you want more.I'd be buying oxy for the wrong reasons.

I'm anchoring to a loser here.Got to be honest with myself.

[sancho panza]

what bubble?

[Shamone]

6 minutes ago, sancho panza said:

Many thanks for that.It's the only realloser I have in the oilies but my smallest allocation.

I need to remember @Castlevania s excellent adivce from a few pages back about when a shares dwon 50% you need to tkae an honest look at why you want more.I'd be buying oxy for the wrong reasons.

I'm anchoring to a loser here.Got to be honest with myself.

Sound info. Wish I’d known this before my small punt on premier foods!

[Fully Detached]

I appreciate you guys are more into profit making than wealth preservation but hope it's ok to post for some opinions here on my proposed strategy as you sure as hell know a lot more about it than I do.

My current split is approx 60% NS&I index linked savings certs, 15% land, 12% pms, 10% cash and dribs and drabs of crypto and investment funds. I'm happy with that split up until the point unless at some stage we're looking at currency collapse, in which case the index linking on my GBP is not going to be much good to me. So at that point I'll want to rotate all of that into shares.

My current plan is to go all large cap defensives, focussing on the products people will need regardless of how badly the shit hits the fan - food, utilities, pharma and defence. To that end I've identified a number of stocks in each sector (including the unmentionable one), and I'll be researching them over the coming months to identify which have lower debts because I assume that's going to be a major impediment going forwards.

Does that sounds like a reasonable strategy for preservation? I'm a little unsure whether debt would be such an issue in a highly inflationary environment, so maybe I'm barking up the wrong tree there, but I guess buying companies with less debt can't be a bad thing if you're looking at preservation rather than profit. The other thing that's bugging me now is that if I bought shares to ride out massive inflation then presumably there'd be a CGT liabiity on the "profits", so I guess there's an argument for maxxing out share ISA allowances asap and every April in the meantime. On the cash it makes sense to do that because I'm getting bugger all interest on it, but the index linked certs give a decent return because they still use RPI not CPI.

Apologies if this risks derailing the thread here - if so let me know where to post it instead and I'll delete this one.

[nirvana]

@Fully Detached I can't give you any advice on what do to with your wealth except make sure you have a good time before you die! 

BUT I will observe that the £ has already collapsed against the three biggest currencies in the world ie $ € and yen (can't see that symbol on my keyboard) ok swissy is important apparently but I have little time for the 'swiss gnomes' 

ie £ to $ was 2.2 now 1.2

£ to yen was 236 about 20 years ago, now 132 (and if you look at what Wilson did to the £ since 1968 you'll get an even bigger shock....)

£ to € was 1.4 just three years ago before Brexit, now 1.15............actually 1.4 to the £ gives you massive purchasing power on the continent.....

Also look at charts of Gold price in £s to see what has happened there...

Good luck!

 

[Fully Detached]

Thanks @confused - my intention has always been to remain in the UK, and my money will (probably) get spent on a house eventually, so whilst the £ has collapsed agaisnt other currencies already I guess it's less of a problem for me. I know even buying a house I'm competing against foreign money, but I hope that might change in future.

I'm not much of a risk taker, so while my intended purchases are denominated in GBP I've been happy to keep my investments in it.