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

[Harley]

1 hour ago, MrXxxx said:

...ok we didn't know the specics of the event but we knew such an even was likely, the economy wasin the `shitter`, and defensive buys are a safer option...

I went through those thoughts too but decided I was being too harsh.  Anyone can vaguely say something terrible will happen and be right.  But you're either in the game with that overhead or not, and "not" has costs too.  Life is not perfect (am I allowed to say that these days?!).  This was a black swan, we can all have a pass.  I bought what I thought were defensive buys given my macro outlook but this was a black swan and took down everything.  I own stocks I wish I didn't but I bought them for fair reasons at the time and could suffer the risk of the more risky ones.  But this took everything down.  So I'll have another pass.  The only thing that matters is what to reasonably do next.  Again, a bit of a crap shoot, that's the game we choose/have to play.  The roulette table has been cleared and time to spread out our remaining chips!

And on that last point, there is a wonderful thing in Economics called "Cobweb theorem".  Our minds are potentially in that cobweb now, for right or wrong.  We know the success stocks and sectors and we now say we should have been in them, but given what we know now.  And do we follow that now, jolted into it by the shock and awe?  And defensives?  Who would have considered the FANGs and co defensives at the start of the year?  My strategy now is to hold the core, revalidating as necessary, but trade the noise to compensate for any such wild swings.  There are compensating profits in these wild swings, but these are not the core and they will pass.  I would be very happy now had I had the time and enlightenment to trade off the March lows, very clearly seeing these as trades, and cycling the profits into the core to compensate.  Sadly, the market does not often offer you a chance to use such lessons. 

I guess my realisation is that it is not so much a question of changing (core) holdings in response to such a swan, but temporarily changing the approach (investor to trader) in response to that swan.  Tactics versus strategy sort of thing.  The short versus the long terms.  It was an ambush and ambushes can be devious things.

 

[Harley]

8 minutes ago, janch said:

Being new to investing I also bought most of my current holdings last year.  I took the plunge to start in January 19 and the first share I bought was CNA.  (What a baptism of fire)

I was unprepared for the rout in March and have vowed to keep some cash sitting on the sidelines in my dealing a/c ready to pounce if we get the chance again.  Actually I would have been nervous to buy then but having seen many stocks recover I can see what an opportunity I missed.  This is all part of the learning curve for me.

I daresay many on here have been at it for far longer than I have so would have seen it as an amazing buying opportunity.  I should have started all this years ago rather than waiting until I retired! 

The divis I get just get put into the cash in the dealing account ready for any new purchases so I'm not taking the income out.  I'm treating it as a hobby but it would be nice to make some money to pass on to my kids.  This is not to say I have a good pension...I don't, but have become so accustomed to living frugally over the years it's now second nature.  Hopefully I won't need to draw on any income although if inflation takes off in a major way I may need to.

When @sancho panza showed us what has happened in BAT over the years I can see the old adage of time in the market being crucial and as you say Harley total return is the important part.  I tend to forget the divis as so far I can't say they add up to much (I haven't got much invested so far).

As for what to invest in I agree regarding having some of it overseas but I can also see maybe @DurhamBorn's approach of slicing profits and putting them into the underperformers could be a good idea.  In which case I should be putting more into the likes of RDSB.

Sounds very similar.  A quick and thorough learner!  I don't think you've missed a single thing there!

[Harley]

As Indices Rise To Records, More And More Individual Stocks Sink

A timely article as the S&P today rises to a new high, erasing the March drop, to remind us all is not well and the market is being driven up by just a reducing handful of stocks.  Not even sectors like IT, but a few very specific stocks.  Today, as the likes of Amazon push forward, even AT&T, Micron, and Intel have or are retracing closer to their March lows.  Or put another way, the S&P on an equal weighted basis, is 5.5% down this year while on a weighted cap basis it is up 5% this year.  That's still a good performance off the March lows, especially compared to the FTSE or the other Banana Republics (LTAM) with their meager 20% post March gains.  More interesting going forward though is the weakening momentum in the S&P with several of the early hard bouncing cohort falling back to Earth leaving even fewer stocks still leading the charge.  Intel for example bounced 45% into early June only to plunge 16% on 24 July, or 24% from it's post March high to today.  Further selling followed.  It's now only 10% above its March low.  The interesting thing about percentages is that 45% bounce was $20 while that 16% fall was $10!  The others have fared better, being only about 50% off their post March bounce peaks, but they are still falling.  They now share a similar performance to the likes of Exxon.  Early June looks like the point where the remaining few stellar stocks discarded their fellow booster rocket stocks in their lonely push for the stars.  Good luck and bon voyage you intrepid few and those aboard the Tracker Galatica!

PS:  Thanks to the article I've just discovered the index S5FI showing stocks above their 50 day moving average and the RSP showing the equally weighted S&P (versus the SPY weighted one).  Nice one!  And reveals an interesting factoid: did you know that the weighted cap SPY started to move/surge ahead of the equally weighted cap RSP just after the 2009 crash? 

 

[Jesus Wept]

24 minutes ago, Harley said:

As Indices Rise To Records, More And More Individual Stocks Sink

A timely article as the S&P today rises to a new high, erasing the March drop, to remind us all is not well and the market is being driven up by just a reducing handful of stocks.  Not even sectors like IT, but a few very specific stocks.  Today, as the likes of Amazon push forward, even AT&T, Micron, and Intel have or are retracing closer to their March lows.  Or put another way, the S&P on an equal weighted basis, is 5.5% down this year while on a weighted cap basis it is up 5% this year.  That's still a good performance off the March lows, especially compared to the FTSE or the other Banana Republics (LTAM) with their meager 20% post March gains.  More interesting going forward though is the weakening momentum in the S&P with several of the early hard bouncing cohort falling back to Earth leaving even fewer stocks still leading the charge.  Intel for example bounced 45% into early June only to plunge 16% on 24 July, or 24% from it's post March high to today.  Further selling followed.  It's now only 10% above its March low.  The interesting thing about percentages is that 45% bounce was $20 while that 16% fall was $10!  The others have fared better, being only about 50% off their post March bounce peaks, but they are still falling.  They now share a similar performance to the likes of Exxon.  Early June looks like the point where the remaining few stellar stocks discarded their fellow booster rocket stocks in their lonely push for the stars.  Good luck and bon voyage you intrepid few and those aboard the Tracker Galatica!

PS:  Thanks to the article I've just discovered the index S5FI showing stocks above their 50 day moving average and the RSP showing the equally weighted S&P (versus the weighted one).  Nice one!

 

[Shamone]

12 hours ago, DurhamBorn said:

You mean like there has been for the last 60 years?.All that has done is stop new entrants into the market over the decades and allowed the sector to increase prices and cut costs.

The best contrarian investments over the long term tend to be sectors that everyone thinks has no future and nobody invests fresh capital into new projects.Oil is a prime example at the moment.

 

Hope so. Bought more RDSB and Repsol today.

[Harley]

6 minutes ago, Vendetta said:

 

So:  "A PCR ratio below 1 (edit: and we are very much historically below 1!) suggests that traders are buying more Call options than Put options. It signals that most market participants are betting on a likely bullish trend going forward (edit: or the FED, etc is buying the hell out of the market!) . For contrarians, it is a signal to go against the wind"?

[DurhamBorn]

2 hours ago, ThoughtCriminal said:

DB

 

Do I recall correctly that you said BAT were the best positioned in the sector in terms of exposure to vapes etc? 
 

Just thinking in terms of a hedge in case vaping grew at expense of tobacco

BAT is well placed on vapes and heated heat not burn,they also have a big stake in the big Indian tobacco company in a growing market.

[DurhamBorn]

https://seekingalpha.com/article/4370008-coming-inflation-boom-is-going-to-catch-lot-of-people-off-guard?utm_medium=email&utm_source=seeking_alpha&mail_subject=the-coming-inflation-boom-is-going-to-catch-a-lot-of-people-off-guard&utm_campaign=nl-macro-view&utm_content=link-0

Interesting article on Seeking Alpha that ticks a lot of the boxes.Its good to see how other macro strategists are making the link between inflation and why it would mean a massive sector rotation.

[Jesus Wept]

10 minutes ago, Harley said:

So:  "A PCR ratio below 1 (edit: and we are very much historically below 1!) suggests that traders are buying more Call options than Put options. It signals that most market participants are betting on a likely bullish trend going forward (edit: or the FED, etc is buying the hell out of the market!) . For contrarians, it is a signal to go against the wind"?

Yes - just about to invert like it did in March. 

[Jesus Wept]

35 minutes ago, Shamone said:

Hope so. Bought more RDSB and Repsol today.

Looking cheap today. I liquidated a lot Of stocks and PMs today - but not these!
 

RDSB 1080p and BP 275p at one point. I was even tempted to buy more! 

[leonardratso]

17 minutes ago, Vendetta said:

Looking cheap today. I liquidated a lot Of stocks and PMs today - but not these!
 

RDSB 1080p and BP 275p at one point. I was even tempted to buy more! 

closed at 1075/273, might be more in it next week , might go cheaper yet

[Jesus Wept]

1 hour ago, leonardratso said:

closed at 1075/273, might be more in it next week , might go cheaper yet

It seems very low. 

Could be a phenomenal buy if it gets caught up in ‘margin calls’ if the rest of market (lead by NASDAQ FAAAT) pops’.

All my efforts are going into making a list of 10 or so stocks to buy if bubble pops.

RDSB, BP, MOS, BT, Drax, etc at all on it - as one could possibly say they are ‘cheap’ already... 

When the whole market turns it takes everything with it. It could be a ‘once in a lifetime buying opportunity’...... before a 10year reflation....

[Errol]

59 minutes ago, Vendetta said:

RDSB 1080p and BP 275p at one point. I was even tempted to buy more! 

I'm waiting to see if RDSB gets below 1000p again.

[Harley]

19 minutes ago, Vendetta said:

All my efforts are going into making a list of 10 or so stocks to buy if bubble pops.

Excellent to hear.  Totally with you there.  I have a proforma of industries I'm working through.  I ideally would like four companies in each (to share with a friend), across several international markets.   My list of highly ranked industries:

Biotechnology & Drugs

Chemical Manufacturing

Chemicals Plastic & Rubber

Coal

Construction Raw Materials

Crops

Electric Utilities

Fish & Livestock

Forestry & Wood Products

Gold & Silver

Iron & Steel

Major Drugs

Metal Mining

Natural Gas Utilities

Non-Metallic Mining

Oil & Gas Integrated

Oil & Gas Operations

Oil Well Services & Equipment

Tobacco

Water Utilities

Plus a non sector specific screen for any jewels.

[Harley]

2 minutes ago, Errol said:

I'm waiting to see if RDSB gets below 1000p again.

I'm expecting the production crunch to kick in soon so the door might be closing soon.

[Harley]

1 hour ago, Vendetta said:

I liquidated a lot Of stocks and PMs today

I'm hedging my FTSE income stuff Monday.

[Democorruptcy]

14 hours ago, DurhamBorn said:

You mean like there has been for the last 60 years?.All that has done is stop new entrants into the market over the decades and allowed the sector to increase prices and cut costs.

The best contrarian investments over the long term tend to be sectors that everyone thinks has no future and nobody invests fresh capital into new projects.Oil is a prime example at the moment.

 

Unfortunately there hasn't really been a major health drive against smoking until fairly recently. Our own smoking band came in as recently as 2007. I say unfortunately because I spent 10 years as a betting shop manager before it came in, so even as a person who has never smoked, it's probably killed me!

Is the increased debt tobacco firms have, partly related to trying to branch out and spending on vaping? That seems to be getting bad press, will it be money well spent?

[DurhamBorn]

14 minutes ago, Democorruptcy said:

Unfortunately there hasn't really been a major health drive against smoking until fairly recently. Our own smoking band came in as recently as 2007. I say unfortunately because I spent 10 years as a betting shop manager before it came in, so even as a person who has never smoked, it's probably killed me!

Is the increased debt tobacco firms have, partly related to trying to branch out and spending on vaping? That seems to be getting bad press, will it be money well spent?

None of the debt is from vaping,its all from consolidating the industry.Debts are too high,but BAT has around £1.6 billion spare a year to pay it down.People have put something in their mouths and smoked it for thousands of years,its likely they will continue to.The sector made me insane amounts over the years,at least 1000% if i count dividends and for every 100% i heard they were a terrible investment and nobody would smoke by x amount of time in the future.At some point some cash will have to go on moving or buying into other sectors.

[Democorruptcy]

2 minutes ago, DurhamBorn said:

None of the debt is from vaping,its all from consolidating the industry.Debts are too high,but BAT has around £1.6 billion spare a year to pay it down.People have put something in their mouths and smoked it for thousands of years,its likely they will continue to.The sector made me insane amounts over the years,at least 1000% if i count dividends and for every 100% i heard they were a terrible investment and nobody would smoke by x amount of time in the future.At some point some cash will have to go on moving or buying into other sectors.

I wasn't suggesting it was a bad investment, it's feeding on addiction, so like gambling it's done well. Must admit my finger was hovering over the 'buy' button in March but I just couldn't press after all those chest infections from it!

[DurhamBorn]

2 minutes ago, Democorruptcy said:

I wasn't suggesting it was a bad investment, it's feeding on addiction, so like gambling it's done well. Must admit my finger was hovering over the 'buy' button in March but I just couldn't press after all those chest infections from it!

I can understand people not buying for ethical reasons and risk has slowly increased in the model.They will probably use some cash to get into new areas in time.

[MrXxxx]

5 hours ago, Harley said:

There are compensating profits in these wild swings, but these are not the core and they will pass.

Agree, shares to make a quick buck on but not to hold long term...just make sure you don't get stuck with them, the risk of being a short--term trader.

[leonardratso]

hmm trading institute tip : ciena  (NYSE:CIEN) might be one for @DurhamBorn telecoms

[wherebee]

8 hours ago, Vendetta said:

Looking cheap today. I liquidated a lot Of stocks and PMs today - but not these!
 

RDSB 1080p and BP 275p at one point. I was even tempted to buy more! 

I bought some more BP.  down 400 quid off 9k in total, which is fine seeing as the rest of the market except a few biggies are red red red.

I'm feeling that the reversal into the oil/pot/tel stock could be quite quick, so rather than wait for the bottom I am going to drip feed in to bring the average price down.  

Can someone criticise that approach and tell me what I am not considering?

[MrXxxx]

4 hours ago, wherebee said:

I bought some more BP.  down 400 quid off 9k in total, which is fine seeing as the rest of the market except a few biggies are red red red.

I'm feeling that the reversal into the oil/pot/tel stock could be quite quick, so rather than wait for the bottom I am going to drip feed in to bring the average price down.  

Can someone criticise that approach and tell me what I am not considering?

Its what I am doing...doesn't make it right though, this time next year we could both be living in ensuite cardboard boxes! :-)

[Lightscribe]

5 hours ago, wherebee said:

I bought some more BP.  down 400 quid off 9k in total, which is fine seeing as the rest of the market except a few biggies are red red red.

I'm feeling that the reversal into the oil/pot/tel stock could be quite quick, so rather than wait for the bottom I am going to drip feed in to bring the average price down.  

Can someone criticise that approach and tell me what I am not considering?

It depends. I average in all our ISAs (monthly allocation saving on trading fees) into whichever reflation stocks have taken a hit recently, BP, RDSB, Vodafone, energy, BAE systems, Potash, Rolls Royce etc as masses of capital wasn’t built up in there in the beginning (although the initial amount has doubled thanks to FRES)

With my pension I take a different approach. I sold the US heavy equity fund this week after the SP500 made a ATH. I was pretty much all in a cash fund back when the first leg down hit in March. I then put 50% of that fund into the US equities and a FTSE 100 fund in the drop (when it nudged at 5000) with half aside if it continued. US fund is now ridiculously like nothing happened.

I’ve kept the FTSE one as well as a diversified fund with energy and gold miners exposure (with 100% monthly contributions) as the FTSE is still undervalued.  So now got a fair whack in the cash fund awaiting the topple of the FAANGs (later this year after the election maybe). I’ll then use that to buy back into US and global equity funds with a smaller proportion in a small caps fund.