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


spunko

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22 hours ago, JMD said:

Iv'e been looking at the soft-commodities sector. Its part of my list for the BK event (i.e. if/when can buy these cheap). Might be useful for some here. If there are alternative suggestions, i'd be very interested to hear.  

Forestry sector - Weyerhaeuser (US, forestry and products, reit), Rayonier (US, reit), Potlatch Deltic (US, reit), Acadian Timber (Canada)

Timber Product sector - Domtar (US, paper, personal care), International Paper (US, paper, personal care, but high debt), Kimberly Clark (US, paper, personal care, but very-high debt), Canfor (Canada, paper), Louisiana Pacific (US, building products, so risky but not specifically domestic/home sector), Boise Cascade (US, building products, so risky but not specifically domestic/home sector)

Thanks.  A nice contribution.  "Timber & Wood Products" is one of the basic industries (as classified on Investing.com) I'm looking at to play an inflationary macro scenario.  There are two ETFs out there but not for us (the KID issue!).  The commodities themselves can be tricky to invest in.  There are derivative based ETNs listed on the LSE and options available but this a different, although possible, avenue.  Luckily I made two large lumber orders before things took off (more worried about Covid back then) so it's just the investing side that's TBD!

A long form post coming up here in case it's useful and/or people have better ideas....

I took a look at the industry using Investing.com.  I appreciate these provider industry assignments can be frustrating as each provider may assign companies to different industries (and industries to sectors!) but I've personally found Investing.com to be the best source to date (others?).  I limited myself ATM to the "Timber & Wood Products" industry for those exchanges to which I have on-line access and which are safer and liquid (i.e. not US OTC).  I also limited the stock type to "Ord" (ordinary share) so excluded things like ADRs and preference shares.  I then removed duplicate listings.  For example, Accsys is listed on the LSE and AMS markets but is a UK company (indeed Investing.com has no data for the AMS listing, as is their standard practice).  Note there is a "quirk"  in the Investing.com screener where companies with a "-" in a field you are screening on will not be listed in the results even if you set your screen range to the lowest reported value (e.g. "0")!  I therefore used no screens filters (something only possible given the small industry size).

The results, saved to a portfolio within Investing.com (registration is free), which is fine for this small industry but, given the portfolio size limit of 50, not for other industries:

Capture.PNG.e1feac44ed85a4d2b448511ec2db3b11.PNG

Now you'd think you could just sort by market cap and deep dive on say the 10 largest companies.  Alas not quite that simple as each company's figures are in their local currency!  Incidentally, the FT.com screener rebases everything into one currency (of a select list) but then has other issues.   Also, unlike the screens themselves, you can't list any chosen figure (e.g. the Current Ratio) in the portfolio view.  My workaround is (unlike here) to judiciously screen (given the "-" issue) for a country/industry combo with the figures I want to see and copy and paste to a spreadsheet (note you have to build the spreadsheet as each screen run is limited to one country at a time).  This screening is annoying and messy!

As an aside, the above list is quite different from the holdings of the two ETFs listed in the US.  And this highlights something about ETFs.  Investing.com's industry assignments aside, the ETFs are broader than just what they say on the tin in that they include upstream companies and not just producers.  This may suit some but not me as my investing focus is to be as close to the source (downstream) as possible.  I'll cover the other companies when looking at other sectors.  And note the two ETFs hold (at the top 15 level) very different companies between them.

Anyways, the above is the result.  I'll work on it some more from a fundamentals POV.  I hope this was of some use and any ideas to make things easier would be appreciated (less those who can't be arsed with such stuff, fine, each to their own!).

PS:  Witholding tax!  Important to consider these (for both dividends and capital gains) as this may further limit you choice of exchanges to screen.

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20 minutes ago, ThoughtCriminal said:

Can’t even imagine the world of shit he’s in right now. Probably has a shrine dedicated to DB to pray for his thesis to be correct. 
 

He’s got nearly a million quid invested IIRC. Poor bastard.

He's got $400k now?

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24 minutes ago, ThoughtCriminal said:

Can’t even imagine the world of shit he’s in right now. Probably has a shrine dedicated to DB to pray for his thesis to be correct. 
 

He’s got nearly a million quid invested IIRC. Poor bastard.

"The Selection and Maintenance of Aim".  A key principle of war, and life generally!  Capital values are not the number one priority if you bought for income, yield and its security is.  He could have bought an annuity and potentially instantly and irrecoverably lost as much capital!

Income is key in retirement.  Or to be more accurate, to have a floor fund of safe (from a dividend POV) investments to cover essential costs and maybe a more risky upside fund for the discretionary pleasures in life.  I say safe, but that's within reason, given only death is truly safe, but not a great, option!

A younger type would probably want to tilt away from income towards more risky capital gains, assuming they do not already have sufficient funds to retire(!), but it's never too early to start and work that segregation of funds.  I wish I had by reading his stuff much earlier in my life!. 

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12 minutes ago, Harley said:

Thanks.  A nice contribution.  "Timber & Wood Products" is one of the basic industries (as classified on Investing.com) I'm looking at to play an inflationary macro scenario.  There are two ETFs out there but not for us (the KID issue!).  The commodities themselves can be tricky to invest in.  There are derivative based ETNs listed on the LSE and options available but this a different, although possible, avenue.  Luckily I made two large lumber orders before things took off (more worried about Covid back then) so it's just the investing side that's TBD!

A long form post coming up here in case it's useful and/or people have better ideas....

I took a look at the industry using Investing.com.  I appreciate these provider industry assignments can be frustrating as each provider may assign companies to different industries (and industries to sectors!) but I've personally found Investing.com to be the best source to date (others?).  I limited myself ATM to the "Timber & Wood Products" industry for those exchanges to which I have on-line access and which are safer and liquid ((i.e. not US OTC).  I also limited the stock type to "Ord" (ordinary share) so excluded things like ADRs and preference shares.  I then removed duplicate listings.  For example, Accsys is listed on the LSE and AMS markets but is a UK company (indeed Investing.com has no data for the AMS listing, as is their standard practice).  Note there is a "quirk"  in the Investing.com screener where companies with a "-" in a field you are screening on will not be listed in the results even if you set your screen range to the lowest reported value (e.g. "0")!  I therefore used no screens filters (something only possible given the small industry size).

The results, saved to a portfolio within Investing.com (registration is free), which is fine for this small industry but, given the portfolio size limit of 50, not for other industries:

Capture.PNG.e1feac44ed85a4d2b448511ec2db3b11.PNG

Now you'd think you could just sort by market cap and deep dive on say the 10 largest companies.  Alas not quite that simple as each company's figures are in their local currency!  Incidentally, the FT.com screener rebases everything into one currency (of a select list) but then has other issues.   Also, unlike the screens themselves, you can't list any chosen figure (e.g. the Current Ratio) in the portfolio view.  My workaround is (unlike here) is to judiciously screen (given the "-" issue) for a country/industry combo with the figures I want to see and copy and paste to a spreadsheet (note you have to build the spreadsheet as each screen run is limited to one country at a time).  This screening is annoying and messy!

As an aside, the above list is quite different from the holdings of the two ETFs listed in the US.  And this highlights something about ETFs.  Investing.com's industry assignments aside, the ETFs are broader than just what they say on the tin in that they include upstream companies and not just producers.  This may suit some but not me as my investing focus is to be as close to the source (downstream) as possible.  I'll cover the other companies when looking at other sectors.  And note the two ETFs hold (at the top 15 level) very different companies between them.

Anyways, the above is the result.  I'll work on it some more from a fundamentals POV.  I hope this was of some use and any ideas to make things easier would be appreciated (less those who can't be arsed with such stuff, fine, each to their own!).

PS:  Witholding tax!  Important to consider these (for both dividends and capital gains) as this may further limit you choice of exchanges to screen.

Great stuff Harley. My favorite topic on here (along with the general and the financial macro cycle stuff - 'all hail DB' for creating this thread!) is the de-complex investment/trade. But not nearly enough discussed on here in my humble opinion. Ok PM's are, but timber, and the other commodities are also a major part of the de-complex 'complex'(?), so getting these right in our portfolios is crucial i think.  

Btw, stock screeners really are the bane of my (financial research) life! Its almost like 'they' make it difficult for 'us' on purpose (?!?). My searches for example didn't find any non-USA/Canadian timber co's. Well, there might have been just one now i come to think about it, but definitely no Japanese ones - so looking at your screen there Harley I will def. take a look at those other international ones.

I think in terms of investment platform service functionality our American cousins get - as per usual - all the bells and whistles, including things like 'automatic portfolio rebalancing'. I wouldn't trust it myself; but reading Lyn Alden's blog i understand even she avails herself of that particular feature, so maybe i'm just a troglodyte!

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2 hours ago, Panda said:

18th May 2018 £28 a share...

Anybody averaging under £15 and holding since then is doing pretty well...

Does anybody have an opinion on do you think RDS or BP could cut the divis in Dec. 

Both will deliver 250% to 300% minimum gains by the cycle end IMO.How we get there will be bumpy as it always is.Shell will make $6 billion per $10 on Brent.I see Brent at $150 minimum by cycle end.After mid cycle share buy backs we might be looking at a PE of 2 here.BP similar.Best thing to do is stop checking prices every day,do something else.

 

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How do people here rate the geopolitical analyst Peter Zeihan? I find him interesting, but is he just too sure of his thesis about the US no longer needing ME oil?

...Perhaps CattleProd could comment?

However, i think his view on the ME Kingdoms/Iran/Israel is broadly sound, though it is so un-pc he'd never be allowed on the BBC!

The sound quality not good, but its only 20 mins long, so worth a listen i think. Warning, the Canadian radio interviewer is annoying.

 

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My "Timber & Forestry Products" list scored on select fundamentals (that matter to me!) as follows:

. Only the top 10 by GBP market cap

. One point given if above the top 10 average for each of: Current Ratio, 5 year average yield (chosen given recent turbulence), number of past 4 years with positive operating cash flow, number of past 4 years with year-on-year growing operating cash flow, number of past 4 years where the dividend is covered by operating cash flow.

. One point given if below the top 10 average for each of: the Total Debt to Equity Ratio and latest recorded percentage of total assets comprising intangible assets (intangibles and goodwill).

Clearly other factors to look at in choosing the "best" but just some thoughts on process and outcome.

1542496559_Capture2.PNG.c1891e1b3a11e9bd069a0f079ff497f3.PNG

Some interesting insights:

. The sector is very solvent, as measured by the Current Ratio

. Pretty much a Canadian/US thing.  Was expecting more Scandinavians

. Weyerhaeuser is the elephant in the room (same cap as the other nine combined) but that div coverage

. Wide variation in debt levels but not crazy (like some) on average

. Overall good income earners (yield and coverage)

. Not a particularly high growth sector

. Some not so impressive asset bases (highish intangibles)

Now off to look at some charts!

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29 minutes ago, Cattle Prod said:

Fed better get on it, Uncle Sam can't afford 1.48%

I heard in a podcast yesterday that they are already printing some of the interest on their debt!

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Big moves up here today in the north east for Hydrogen.Iv always thought everyone was looking at EV when hydrogen might prove the winner,at least in many sectors.BP is leading the project,

https://www.gazettelive.co.uk/news/teesside-news/teesside-could-become-global-leader-19018326

"The UK’s plan is to embrace the use of hydrogen as an alternative, clean fuel."

https://www.netzeroteesside.co.uk/

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On 28/09/2020 at 19:23, DurhamBorn said:

TIPs will protect from inflation and are perfect for people simply wanting to protect buying power,though governments will likely under state inflation.However they wont leverage inflation.The assets we have been buying should outperform inflation by a high measure because they amplify.5% increases pa in inflation might increase a telcos profits by between 15% and 20% for instance.Oil at $55 instead of $40 means BP can double its divi from now (it wont it will buy back shares instead)

Inflation makes a massive difference to a lot of areas of the market,but they need to be the areas where price elasticity means people pull away from the products slower than the inflation.A good example is telcos.A 20% industry price increase would see a tiny fall in demand.However a 20% increase in a car might see a similar cut in demand.

Oil use might slowly fall as prices increase,but a 100% increase might only see a 10% demand pull.It how tobacco companies have always made massive money and had people scratching their heads,4% fall in use a year,but 6% price increase.

The evidence is out there,be it their version of retnal equivalence,failure to include shrinkflation of quality/quantity, hedonic adjsutments( eg car gets you from A to B,sticking electric windows on it leads to ifnaltion adjsutment down,but it still gets driver from A toB).Wolf has a great explanation below,but rest assured,it's tip of the iceberg stuff.

Shaun Richards is the

go to on this

https://notayesmanseconomics.wordpress.com/

https://wolfstreet.com/2019/12/05/what-worries-me-about-hedonic-quality-adjustments-cpi/

In my lifetime, there were only two such periods, from March through October 2009, and a teeny-weeny bit during the oil-bust of 2015, when energy prices collapsed. During my lifetime, the dollar has lost 90% of its purchasing power. That’s the Fed’s plan, as long as it happens within certain limits.

Now, all this is according to official inflation figures, the Consumer Price Index, or CPI, put together by the Bureau of Labor Statistics. The CPI is critical because it is used for inflation-adjustment purposes across the spectrum, such as inflation-indexed Treasury securities, measures of “real” wages, cost-of-living adjustments for Social Security benefits, or measures of “real yields” or “real returns” on investments or “real” GDP.

These quality improvements are figured into CPI via the so-called hedonic quality adjustments. They’re supported by academic research, and they make sense on a conceptual basis. But when the resulting CPI is used to officially portray increases in the actual costs of living, that’s where everything gets screwed up.

In 1990, the base Camry LE with a four-cylinder engine and automatic transmission came with a Manufacturer’s Suggested Retail Price, or MSRP, of around $14,700. The current 2020 base Camry LE with a four-cylinder engine and automatic transmission comes with an MSRP of $25,000. That’s a price increase of 70% from 1990.

But over the same period, the Consumer Price Index for new vehicles – so this is one of the many subcategories of CPI – has risen only 22%. In fact, it rose 22% from 1990 to 1997, and today is flat with where it had been in 1997

 


 

 

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4 hours ago, Harley said:

There are two ETFs out there but not for us (the KID issue!). 

KID issues only prevent you placing an opening order in the ETF directly.

You can still buy them by selling puts that end up in the money, and then being assigned the ETF stock when they are exercised.

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20 hours ago, Cattle Prod said:

They paid 10s of bn after it was fixed, still in their debt profile. While telling their large shareholders "we don't believe in the business model and cash flow to pay it off". 

I'm watching their asset sales carefully, if they start getting rid of cash cows like Clair, Skarv, Egypt, Rosneft or deepwater GOM I think I'll believe the new mgmt is truly misguided and redeploy. But for now, it's all talk. Watch what they do...

That's the key thing.Follow the moeny.People like Looney worry me in that sometimes,if you say something enough,you stat to truly believe it.

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4 hours ago, ThoughtCriminal said:

Can’t even imagine the world of shit he’s in right now. Probably has a shrine dedicated to DB to pray for his thesis to be correct. 
 

He’s got nearly a million quid invested IIRC. Poor bastard.

I was never onboard with WICAO or FIRE strategies in general for that matter. His simple approach was squirrel away most the salary in a mix of investments in a blind hope of ignoring all financial cycles and assuming every decade will be like the last.

I thought he shored up a good portion of his investments when reaching FIRE and buying a place in Cyprus or wherever it was. Would be interesting to hear an update where it all stands.

We may all be tight bastards on Dosbods, but I didn’t really feel the need to read his book either telling me how to darn socks to save money. My time is very precious and limited, while the deflation cycle is still with us and keeping prices low I’m going to take advantage and splash out on a £3 pack from Primark every year or so.

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8 minutes ago, Sideysid said:

I was never onboard with WICAO or FIRE strategies in general for that matter. His simple approach was squirrel away most the salary in a mix of investments in a blind hope of ignoring all financial cycles and assuming every decade will be like the last.

I thought he shored up a good portion of his investments when reaching FIRE and buying a place in Cyprus or wherever it was. Would be interesting to hear an update where it all stands.

We may all be tight bastards on Dosbods, but I didn’t really feel the need to read his book either telling me how to darn socks to save money. My time is very precious and limited, while the deflation cycle is still with us and keeping prices low I’m going to take advantage and splash out on a £3 pack from Primark every year or so.

spendthrift.Wheres YRS? i hope hes ok, i miss his anti-barometer buys.

AFAICR I did say to WICAO on TOS a few years back that i thought he had been extremely lucky to kick off and continue his strategy from the GFC thru the bull that followed. I did theorise that doing it much after that would lead to a slope the other way, he never really gave me a decent reply but did admit that his success wasnt just down to shrewd financial acumen, a lot of it was luck.

 

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8 hours ago, JMD said:

Yes, Oil is i think an example of a sector which has had its melt-up moment, and this is what DB spoke about many months back (cant remember exactly when). Maybe telecoms is another sector example. Of course none of this is exact and Oilies may fall further, but in terms of where those stocks might climb back to, i think it also fits with Dave Hunter's prediction of having first a big-fall, then a climb - over the inflation cycle - back to previous highs. I still think we'll get a BK event, but oil and telecoms, might not 'get involved'.

As I've saiad before,tehre are sectors that go up during some markets dropping 70%.

At the mo,I'm getting daily investing.com alerts about different telecoms stocks hitting long tiem lows.The value in that sector is incredible imho.

Decl:long the below and some others.

image.png.b070b262465cbdd3be14ab8f4f3a5039.png

image.png.6d0cf006da808d0c0846e42238580551.png

image.png.3eb479f511bfa89580a245eca5fa60f7.png

image.png.1835c30ab96020c493d5564e772aadc2.png

6 hours ago, Cattle Prod said:

Platts reporting from APEEC, on India growth:

https://blogs.platts.com/2020/09/29/oil-in-asia-coronavirus-clean-fuels-china-india-appec/

image.png.4b452672cfac06163a8a1bad6b65679f.png

 

For oil:

image.png.2ccc9038a7eccbf91cdb8db98c8f5647.png

And for Hydrogen

image.png.fba13a8beac6db91016d14a6c4c2599e.png

I was driving back from work and for the first time in years was pleased by the traffic.

Be interesting to see if we get that possbile dip to $30.I was checking the march 20 price action and it was noticeable that the big oilies all bottomed a month before the oil futures did in late april.

I think there are a lot of emerging market middle class people who will happily buy the oil if Western middle classes are too posh to.

8 hours ago, Panda said:

To be fair the old boy has a point....

I've bought in at 10.30, 10.17, 9.98, 9.65 and 9.59.

10.17 was the balls in deep buy...

Now I'm on my way down to the pawn shop with a barrow load of the missus old bits and bobs. See if I can get a few bob to get in at these new low's. I'm not confident...

Fair play there pansda.That's great trading imho.I jsut couldn't resist buying as it dropped.

I'm a poor market timer generally.My dear old Mum holds all our BP certificated and last time she checked a dividend or tow back,our ave price was circa 330.So we're currently down 50%.If you had offered me that two years back I'd have taken it.I jsut plain wouldn';t have believed we'd see a 2 handle on BP or a sub 10 on RDSB.

The great traders have that patience to wait for the bottom.

image.png

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6 hours ago, MrXxxx said:

Don't think this would happen until a BK moment, but would be pleasantly surprised if it did!

On another note, what's people's thoughts on the utilities such as water, electricity, gas etc...I can't help but think that although they might offer a steady stream of divi/returc, its going to be limited by government regulation...right or wrong?

I'd watch the debt position with the utilities.After the scottish play,I'm jwary of thsoe debt loads no matter tehy;'re at cheap rates.The underlying businesses aren't as robust as say the telcoms where theyve been exposed to real competition.

5 hours ago, Popuplights said:

I have held RDSB for years, better to have an average of sub £15 than £25 !! 

Still hodling !!

We're sub £15 after buying some mall holdings at £23 in 2019.Again,if you'df offered me that five years ago I'd have bitten your arm off .

EQNR is our best buy positon at about $12 iirc(I don't collate the exact average so I don't become obssessive about the wrong side of the decimal point.

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2 minutes ago, sancho panza said:

I'd watch the debt position with the utilities.After the scottish play,I'm jwary of thsoe debt loads no matter tehy;'re at cheap rates.The underlying businesses aren't as robust as say the telcoms where theyve been exposed to real competition.

We're sub £15 after buying some mall holdings at £23 in 2019.Again,if you'df offered me that five years ago I'd have bitten your arm off .

 

For once, my timing has been half decent. Bought half my RDSB holding at £13, the other half just under £10. Therefore averaged at £11.50. 

Like many others on here, I'm utterly convinced (nearly that is!) that oil has one more major run before we end up in a new green energy utopia or the world economy in total collapse. I fear it will be the latter.

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4 hours ago, Harley said:

Thanks.  A nice contribution.  "Timber & Wood Products" is one of the basic industries (as classified on Investing.com) I'm looking at to play an inflationary macro scenario.  There are two ETFs out there but not for us (the KID issue!).  The commodities themselves can be tricky to invest in.  There are derivative based ETNs listed on the LSE and options available but this a different, although possible, avenue.  Luckily I made two large lumber orders before things took off (more worried about Covid back then) so it's just the investing side that's TBD!

A long form post coming up here in case it's useful and/or people have better ideas....

I took a look at the industry using Investing.com.  I appreciate these provider industry assignments can be frustrating as each provider may assign companies to different industries (and industries to sectors!) but I've personally found Investing.com to be the best source to date (others?).  I limited myself ATM to the "Timber & Wood Products" industry for those exchanges to which I have on-line access and which are safer and liquid (i.e. not US OTC).  I also limited the stock type to "Ord" (ordinary share) so excluded things like ADRs and preference shares.  I then removed duplicate listings.  For example, Accsys is listed on the LSE and AMS markets but is a UK company (indeed Investing.com has no data for the AMS listing, as is their standard practice).  Note there is a "quirk"  in the Investing.com screener where companies with a "-" in a field you are screening on will not be listed in the results even if you set your screen range to the lowest reported value (e.g. "0")!  I therefore used no screens filters (something only possible given the small industry size).

The results, saved to a portfolio within Investing.com (registration is free), which is fine for this small industry but, given the portfolio size limit of 50, not for other industries:

Capture.PNG.e1feac44ed85a4d2b448511ec2db3b11.PNG

Now you'd think you could just sort by market cap and deep dive on say the 10 largest companies.  Alas not quite that simple as each company's figures are in their local currency!  Incidentally, the FT.com screener rebases everything into one currency (of a select list) but then has other issues.   Also, unlike the screens themselves, you can't list any chosen figure (e.g. the Current Ratio) in the portfolio view.  My workaround is (unlike here) to judiciously screen (given the "-" issue) for a country/industry combo with the figures I want to see and copy and paste to a spreadsheet (note you have to build the spreadsheet as each screen run is limited to one country at a time).  This screening is annoying and messy!

As an aside, the above list is quite different from the holdings of the two ETFs listed in the US.  And this highlights something about ETFs.  Investing.com's industry assignments aside, the ETFs are broader than just what they say on the tin in that they include upstream companies and not just producers.  This may suit some but not me as my investing focus is to be as close to the source (downstream) as possible.  I'll cover the other companies when looking at other sectors.  And note the two ETFs hold (at the top 15 level) very different companies between them.

Anyways, the above is the result.  I'll work on it some more from a fundamentals POV.  I hope this was of some use and any ideas to make things easier would be appreciated (less those who can't be arsed with such stuff, fine, each to their own!).

PS:  Witholding tax!  Important to consider these (for both dividends and capital gains) as this may further limit you choice of exchanges to screen.

Thanks for that H.Call me naieve,but I've never used their stock screener before.Fascianting.

5 hours ago, ThoughtCriminal said:

Can’t even imagine the world of shit he’s in right now. Probably has a shrine dedicated to DB to pray for his thesis to be correct. 
 

He’s got nearly a million quid invested IIRC. Poor bastard.

I remember him.iirc he was a someone who pushed passive investing and didn't really seem aware of the risks @Harley has explained well at length down thread.In my expereince,passive investing works until it doesn't,and when it doesn't,it really doesn't.

I checked his blog.Last update portfolio update. 2017.He may be retired though.

 

2 hours ago, Cattle Prod said:

Just noticed a bit of a move in Treasury yields

image.png.ec7a248984522f40f14264313880e9e9.png

What's that all about I wonder?! Makes the 10s/2s curve steepen of course...

image.png.fd2ac841c2f909b93340559c97ec42a8.png

Fed better get on it, Uncle Sam can't afford 1.48%

Interesting price action-any idea what caused it?

image.png

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35 minutes ago, Sideysid said:

I was never onboard with WICAO or FIRE strategies in general for that matter. His simple approach was squirrel away most the salary in a mix of investments in a blind hope of ignoring all financial cycles and assuming every decade will be like the last.

I thought he shored up a good portion of his investments when reaching FIRE and buying a place in Cyprus or wherever it was. Would be interesting to hear an update where it all stands.

We may all be tight bastards on Dosbods, but I didn’t really feel the need to read his book either telling me how to darn socks to save money. My time is very precious and limited, while the deflation cycle is still with us and keeping prices low I’m going to take advantage and splash out on a £3 pack from Primark every year or so.

His plan wasn't to ignore financial cycles it was to build a portfolio to withstand them and keep enough cash aside to not have to sell at lows. He didn't have all his money in cyclical equities, so might still be doing OK. One thing is for sure, I'd rather have £1m in under water equities that have no money!

He moved to Cyprus and rented a place with a view to buying but very quickly gave up on Cyprus, came back to the UK and got a job. I think he was considering moving abroad somewhere else but not sure where.

 

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4 minutes ago, Cattle Prod said:

Funny you say that. I was re-reading the Goehring & Rosencwajyz stuff again, and I overlooked the Emerging Markets point the first time. They may be on to something:

image.png.dae8d40cb7277d87f49a1d5f8144a64a.png

https://f.hubspotusercontent40.net/hubfs/4043042/Commentaries/2020.Q2 Commentary/2020.02 Goehring %26 Rozencwajg Market Commentary.pdf

Disc: I don't fully agree with this report, I think they are too bullish, too model driven, and have some things wrong, like lag times in shale. But they have the gist of it right, and are a good contrarian read.

I think the liquidity approach is better to gauge an oil pullback from here, rather than me backtesting. Oil usually does a .382 Fibb retest after a bounce from a ridiculous low, but I note that it didn't in 1999. So far, it's been holding at the .236 level for quite a while. 

On the physical side, floating storage is now gone, and onshore stockpiles are being hit, to the surprise of most. They're on target to be back to the 5 year average by year end. You still have ~8m bpd in the back pocket from OPEC cuts, but out of that will have to come US shale and global declines. Depends where demand gets to, and it did occur to me that I'm being a bit developed world centric if I'm looking around at traffic and jet travel from stupid lockdowns in the developed world. A years normal growth in India would probably account for all jet fuel barrels lost. And there are so many other emerging market powerhouses now as G&R say: Colombia, Brazil, Nigeria, Mexico, Indonesia, Thailand etc etc. getting on with life.

60% is a real turn around and that last stat in bold is one for me to remember.Incredible.

My long term thesis(one of many) is that Western middle classes are destined for the biggest shock in the next ten years.Lower socio demographics probably have lower expectations.

They've been lulled into a false sense of security by the fact that despite years of reckless fiscal deficit spending they've not been forced to suffer a reciprocal loss of purchasing power for their £/E/$

Gravity,always,always wins.

Western currencies have been held up by emerging markets storing savings in said currencies which has just served to reinforce Western citizens in their sense of entitlement and their willingness to spend it on funding vanity welfare projects at home and abroad.

At some point the piper will want paying, and offering them the promise of the sweat of future generations will no longer wash as the emerging market players will want to spend now.

 

The other night,I went to a guy who'd barely ever worked(gave me his life story),sat with a 20 plate Skoda on his drive paid for with his mobility allowance.The idea that emerging market societies will keep living in penury so that we can idle in luxury is utterly unrealistic.The day they wake up and realsie their power,we're in deep trouble.

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