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

[Metalheadz]

While I'm whinging about HL another thing that kills me is you can't place limit orders for international stocks.

You can leave a fill or kill at X price but it will be dealt or rejected pretty much instantly... you will get an email back with the outcome.

On II you can leave bids up for 25 days for Canada or 1 day for Australia.

I like to leave stink bids over night on the ASX and check in the morning to see what I've won. 

When Donald trump got Covid a last week the ASX shat the bed and I got all my orders filled 

 

[sancho panza]

The wisdom pours forth.AS ever thanks to @Democorruptcy for bringing Dr Tim to my attention

 

#182. The castaway’s dilemma, part two

Posted on October 1, 2020

WE CAN’T RESCUE FINANCE UNLESS WE RESCUE THE ECONOMY

As we enter an Autumn which many of us have all along expected to be ‘fraught with interest’, one question, above all others, dominates the economic and financial debate.

Are the authorities going to try to monetize their (meaning our) way out of the extreme difficulties exacerbated and catalyzed by the Wuhan coronavirus pandemic?

Or are they going to adhere to a form of monetary rectitude that was so conspicuously abandoned during the 2008 global financial crisis (GFC)?

The central conclusion reached here is that we have exhausted the scope for short-term, ‘band-aid’ fixes for a fundamental imbalance between (1) a growth-predicated financial system and (2) an underlying economy that is tipping over into “de-growth”. We simply cannot reconcile a ‘financial’ economy of money and credit that keeps getting bigger with a ‘real’ economy of goods and services that has reached the end of growth.

This has both near-term and longer-term implications. Longer-term, we need to find ways of rebalancing the economy towards quality rather than quantity, and shrinking the financial system back to a sustainable scale.

Why ‘2008 revisited’ won’t work

More immediately, we need to recognize that the stop-gap ‘fixes’ used during the GFC won’t work this time. 

Back in 2008, it was just about possible for the authorities to bail out the financial system whilst leaving the economy to its fate, an approach lambasted by critics at the time as ‘rescuing Wall Street at the expense of Main Street’.

This time around, no such possibility exists. On the one hand, the process of financialization has advanced to the point where credit has been inserted into virtually all economic transactions. On the other, forward income streams have been incorporated into financial instruments to such an extent that the financial system could not withstand any significant and prolonged interruption to underlying economic activity. Large swathes of the financial system have become hostages to the continuity of interest, rent and earnings streams from households and from private non-financial corporations (PNFCs).

What this means is that, if it were ever really perceived that economic deterioration is going to undermine the ability of households and businesses to maintain such payment streams, the financial system would fall apart.

We cannot know, of course, whether the authorities actually understand that they can’t repeat the tactic of rescuing the financial system whilst leaving the ‘real’ economy to its fate. Some policymakers, at least, might labour under the delusion that the prices of securities, and the validity of collateral, can be shored up even if the underlying entities (businesses, borrowers, tenants) go to the wall. Delusions undoubtedly still exist at the policy level, as evidenced by the wholly fallacious faith that some still seem to place in the ability of negative interest rates to ‘stimulate’ the economy, and to ‘support’ financial valuations.

The view taken here, though, is that most policy-makers, if they don’t already understand this point, will very soon have its reality imposed upon them. This means that, even where propping up the financial system remains their first priority, they will come to recognize that the only way to do this is to support the underlying economy.

This in turn means that even those governments currently proclaiming fiscal rectitude are likely to be pushed into larger (and longer) support programmes, running ultra-large deficits whose additions to public debt will, in due course and to a very large extent, be monetized by central banks. This points to a scenario in which initial deflation (imposed by sagging economies) is likely to be followed by soaring inflation (as the authorities try to force a quart of monetary stimulus into a pint-pot of economic capability).  

Under starter’s orders   

On the question of “monetize or not?”, participants in capital markets have already placed their bets – if they thought for one moment that governments and central banks were not going to intervene, the prices of equities (and, very probably, the prices of property and of a very high proportion of bonds, too) would already have crashed.

The clear message from the markets is that, faced with a worsening economic and financial crisis, governments are going to turn to full-bore fiscal support, with the highly probable corollary that central banks will create (in an earlier idiom, ‘print’) enough new money to monetize the gargantuan debts thus created. If it’s objected that huge monetization might trigger high inflation, markets would doubtless retort that, if this were indeed to happen, investors would be better off holding almost any form of asset in preference to cash.

If the markets are right, a large proportion of everything – from wages, debt service costs and rents to the purchasing of goods and services – will be propped up by government largesse. Taking equities as an example, high prices indicate, not only that capital isn’t expected to flow out of markets, but also that most of the businesses in which capital is invested will be kept viable – after all, no amount of market liquidity can attach much value to the stock of a company which has gone bust. So market thinking is certainly consistent – governments and central banks will prop up both the financial system and the economy itself.

The contrary argument begins with the observation that some governments seem already to have committed themselves to fiscal rectitude. More fundamentally, it’s argued that monetization could not, this time around, be ‘neutralized’ within the boundaries of capital markets, but would have to happen at such a scale, and in such a way, that faith in fiat currencies would be placed at grave risk.

There’s a strong body of opinion, then, to the effect that the authorities won’t take what could be existential risks with the monetary system. There’s a seldom-made argument, too, that no amount of monetary tinkering can save businesses, or indeed whole sectors, whose viability is gone, and which could continue to exist only, if at all, on the basis of perpetual financial life-support.   

The view taken here – which is that the authorities are likely to succumb to calls for expanded fiscal support, much of which will then be monetized by central banks – is based on a reading of the fundamentals which is informed by the understanding that the economy is an energy system, and is not wholly (or even largely) a financial one.

From this perspective, how did we get ourselves into a situation in which a single crisis (admittedly a severe one, compounded by inept responses) could put the whole system at risk?

The Great Divergence

The background to the current crisis is that the ‘financial’ economy of money and credit has far out-grown the ‘real’ economy of goods and services.

The ‘claim for the defence’ in this situation is that the real economy, whilst it may lag the process of financial expansion, remains capable of pretty decent rates of “growth”.

This statement, though, is only true if you ignore the way in which we’ve been using the financial system to ‘buy’ growth, using $3 of new net debt (plus a lot of other deferred commitments) to create $1 of “growth”. Also, of course, conventional presentation ignores an escalating energy cost of energy (ECoE), and makes no effort to internalise the costs of environmental degradation.

For the purposes of this discussion, it’s going to be assumed that readers are familiar with the principles of Surplus Energy Economics (SEE), and know how this interpretation is put into practice using the SEEDS economic model.

Simply put, there are two ways in which the economy can be understood. One of these, favoured here but very much a minority view, is that the economy is an energy system, and that prosperity is a product of the economic value that we obtain from the use of energy.

The other – the established or ‘conventional’ orthodoxy – is that the economy is a financial system, a persuasion that has sometimes portrayed natural resources in general (and energy in particular) as little more than incidental contributors to economic activity.

The energy view of economics accepts – as conventional interpretation does not – that resources (which for this purpose include the environment) set limits to the scope for expansion in prosperity.

Though all of this sounds theoretical, it is in fact central to an appreciation of our current circumstances. Over time, the physical or ‘real’ economy of goods and services, and the immaterial or ‘financial’ economy of money and credit, have diverged relentlessly.

Between 1999 and 2019, the official (financial) calibration of World economic output (GDP) grew at an annual average rate of 3.6%, whereas SEEDS measurement indicates that underlying or ‘clean’ output (in SEEDS terminology, C-GDP) has grown at an annual average rate of only 1.8%. Because, of course, these are compounding rates, a huge gulf now divides GDP from C-GDP.

For practical purposes, what this means is that conventional statements, both of output (a measure of flow) and of wealth (a related measure of stock, but in reality linked to flow), are dramatically exaggerated in relation to the underlying reality of economic value.

One illustration of this is provided by the ‘values’ conventionally imputed to assets. Asset prices have come to represent not, as logic says they should, discounted forward streams of underlying income, but current and anticipated monetary conditions.

If, for instance, we multiply the average price of a house by a country’s total number of houses, we can arrive at a pretty impressive ‘valuation’ of the national housing stock. A moment’s reflection, however, tells us that this valuation could never be realised (monetized), because the only people to whom all of these houses could be sold are the same people to whom they already belong.

This process – which uses marginal transaction prices to value the aggregate of an asset category – applies just as much to stocks and bonds as to property. When we read, for instance, that billions have been “wiped off” (or added to) the value of the stock market, it’s easy to forget that all of this is purely notional, because the market as a whole couldn’t have been turned into cash at any point in this process.

What this in turn means is that we’ve become accustomed to believing in aggregate valuations which are, in fact, purely notional. Just as we couldn’t turn the whole of the national housing stock, or the entirety of the equity market, into cash, the same applies individually to large corporations, and to the housing stock of, say, a town or a city.

The distorting effects of ‘notional value’

This concept of notional valuation extends in very important ways into everyday economic activity. Here’s an example.

If interest rates are 5%, a person who can afford $10,000 a year in mortgage payments can buy a house for $200,000 but, if rates now fall to 2%, his or her affordability rises to $500,000. Because the same applies to every other potential buyer, properties in general are re-priced accordingly. Because they can be pushed out almost indefinitely into the future, capital repayment considerations play an almost negligible role in such calculations.

A real estate agent, charging an unchanged rate of commission of 2%, earns $4,000 on the first transaction, but $10,000 on the second, even though the work done, or the real value added by that work, haven’t changed.

Meanwhile, the homeowner who bought at the earlier price-point has seen a big (though a paper) increase in his or her equity, making him relaxed about borrowing to finance a holiday, or the purchase of a new car. Unless he or she intends to cash out (monetize) the supporting equity – which is possible for some by trading down, but isn’t possible for everyone – then these debts, ultimately, remain tied to the future incomes of the borrowers.

This monetary inflation of asset prices – a process excluded, by the way, from conventional statements of inflation – needs to be considered in tandem with the broader financialization of the economy, a topic on which Charles Hugh Smith is particularly perceptive.

Historically, a car would have been made by a vehicle manufacturer and its employees, and bought by a motorist using his or her savings, which are in turn the product of his or her labour. Now, though, financial institutions have routinely been inserted into this transaction in a way which, from a purist point of view, might be regarded as unnecessary. The car is bought on the basis, not on saved income from the past, but of assumed income in the future. 

The packaging and sale of forward payment streams (as exemplified by mortgage-backed securities, but in reality a very widespread, almost universal practice) dominates the financialized system. This has had the adverse effect of driving a wedge between risk (offloaded onto the purchaser of the security) and return (of which a significant part is retained by the initiator of the transaction). This is an example of quite how distorted the relationship between the financial and the real economies has been allowed to become.

Critically, this entire financialized process is wholly dependent on continuity, which in this sense is coterminous with growth. If the earnings of a mortgage-payer or a car-purchaser fall, he or she may not be able to keep up with committed payments, just as a business whose income deteriorates may no longer be able to afford scheduled debt payments. The same applies to rent (whether household or commercial), because the assumed forward stream of these payments is likely to have been packaged and sold on, often to somebody who, in turn, relies upon this income to service the debt that he used to finance the purchase.

Before turning to practicalities, let’s state what this means in the starkest possible terms. The real economy, and the people who comprise it, can tolerate stagnation, or a modest decline in output – but the financial economy relies absolutely on continuity and growth.

Most ordinary people, if they were unencumbered by debt, could certainly cope if their real (inflation-adjusted) incomes stopped growing, and could probably manage reasonably well if that income dropped by a relatively modest amount. By extension, if we imagined a debt-free economy, it, too, could probably adjust to, say, a 5% or a 10% fall in income, which in this context means a decrease in the quantity of goods and services that are produced. Its citizens wouldn’t like this, of course – but they could survive it.    

All of this changes when you introduce the futurity of leverage into the equation. Whether it’s a household, a business or an economy, a significant part of future income is now earmarked for debt service. In this way, financialization of the economy takes away resilience.  A person or a business with debt to service loses the ability to cope with static or declining income, primarily because the financial system discounts a future wholly predicated on the assumption of perpetual expansion.

A dangerous asymmetry

What this interpretation also tells us is that, whilst the ‘real’ and the ‘financial’ economies are interdependent, this dependency is asymmetric. The economy of goods and services, though it would be greatly disrupted, might well survive a slump in the financial economy, but the reverse proposition is not the case. For the financial system to survive at all, the real economy must carry on growing, and the absolute, irreducible minimum is that it must not contract, other than by a very small extent, and for a very limited period.

The more financialized an economy (or a household, or a business) becomes, the more its resilience is undermined.

From where we are now, the critical point is that the financial economy, though it might just about weather another modest recession, would be destroyed by “de-growth”. Moreover, the advance of financialization suggests that even something well short of de-growth – for instance, a severe and prolonged recession, well short of what was experienced in the 1930s – would bring down the financial system.

For policymakers, this means, as mentioned earlier, that a “Wall Street versus Main Street?” choice no longer exists. If they were to intervene to rescue the financial system, whilst leaving the ‘real’ economy to its own devices, the financial system would collapse anyway.

We need to be absolutely clear that the Wuhan coronavirus pandemic, though it has appeared to many to be a ‘bolt from the blue’, has in reality catalysed and accelerated trends that were going to happen anyway. Since 2008 – and, arguably, for a lot longer than that – a reversal of growth has been inevitable. It has already started in the advanced economies of the West, and was always going to pose an existential threat to a financialized money and credit system wholly predicated on perpetual growth.

Let’s look at what this means at the present juncture. Long before the pandemic, people in the West were already getting poorer, and a similar climacteric was imminent for the EM (emerging market) countries. Worldwide, growth in aggregate prosperity has now fallen to levels which are lower than rates of increase in population numbers. Thus far, we’ve blinded ourselves to this by using credit to sustain consumption in excess of real value output. As well as encouraging consumers to do this, the corporate sector has added top-spin to this process by using debt to buy back stock, essentially replacing shock-absorbing equity with inflexible debt (which is another example of how financialization takes away resilience). Critically, buy-backs add debt without adding to productive capacity.

Whether we borrow as individuals to increase our consumption, or as corporations to boost stock prices through repurchases, the common result is that we mortgage the future in order to inflate apparent prosperity and value in the present. Because we’ve used debt to try to mask the trend towards deteriorating prosperity (a trend that we can neither stop nor reverse), the imbalances between the real and the financial economies have grown steadily more extreme.

Our situation has become one in which monetary manipulation has created value which only really ‘exists’ if we can carry on sustaining illusory levels of output. The only comfort that can be offered to those who’ve mishandled the coronavirus crisis is that this crunch point, if it hadn’t been precipitated now, would in due course have happened anyway – indeed, SEEDS has long identified 2020-22 as the period in which equilibrium would bite back.

At the end of gimmickry and denial

The immediate conclusion has to be that the authorities can no longer sustain a semblance of sustainability through monetary manipulation (though they are highly likely to try).

If they decide to prop up the financial system whilst leaving the economy itself to its own devices, the financial system could not escape the consequences of slumps in ‘real-world’ income streams (which would show up in bankruptcies and defaults).

If, recognizing this, they decided to prop up the real economy as well, using fiscal and monetary intervention, this, too would fail, both because the ability to ‘stimulate’ the real economy is circumscribed, and because action on the required scale would undermine monetary credibility.

This leaves us with the question of whether fundamental reform is possible. In purely practical terms, it probably is, but the likelihood of it actually happening – let alone of it happening in time – seems remote.

In the economy itself, we could adapt to the implications of worsening imbalances between energy ECoEs, labour availability and the environment, opting for what might best be termed “craft” solutions for our profligacy with energy and broader resources.

Financially, shrinking the system back into a sustainable relationship with the real economy is by no means an impossibility.

But the processes of decision-making, the myriad self-interests in play, and sheer ignorance about financial, economic and environmental realities, makes the voluntary adoption of such courses of action look depressingly unlikely.   

 

 

[sancho panza]

Shaun Richards to cheer us all up

https://notayesmanseconomics.wordpress.com/2020/10/09/uk-gdp-shows-that-we-are-experiencing-a-depression-rather-than-a-recession/

UK GDP shows that we are experiencing a depression rather than a recession

 

Back to Normal?

Er no.

August 2020 GDP is now 21.7% higher than its April 2020 low. However, it remains 9.2% below the levels seen in February 2020, before the full impact of the coronavirus (COVID-19) pandemic.

In terms of structure we have this.

The production sector remains 6.0% lower than the level in February 2020, before the main impacts of the coronavirus were seen…….The services sector remains 9.6% lower than the level in February 2020……The construction sector remains 10.8% lower than the level in February 2020.

[JMD]

10 hours ago, Loki said:

I'm not trying to turn this into a climate change thread, so treat this as a weather report and energy sector prediction by proxy

https://electroverse.net/why-is-north-america-immune-to-global-warming/

Interesting. But I think this 'global warming' temperature 'anomoly' was first noticed in the UK temp stats as our records go back very far and are also so geographically extensive. I remember the story from about 10 years ago I think.                                                                                                                                                                                    ...apparently a young and upcoming statistician proved the erstwhile worrying figures to be spurious, nothing alarming, and that people should just move along - his name was I believe Neil Ferguson!! (this last bit totally fake news btw)

[Harley]

7 hours ago, sancho panza said:

The wisdom pours forth.AS ever thanks to @Democorruptcy for bringing Dr Tim to my attention

Cheers.  The very best explanation yet.  Maybe the only one.  Excellent.  Very comprehensive and coherent.  I couldn't have said it better!  I've been struggling to this clarity (and practically more) over the last year, starting with "feelings" and posts about value.  There's stuff there probably most will miss in their simplistic summations and/or will fail to internalise.

On a social level, it puts into true light such popularist talk as mortgaging the future and blaming boomers.  The political economy.  They seem to want to hang the wrong people.  Will they likewise accept a lynching from future generations for the current furlough money, business support, and so on?  They are doing nothing about all this now either.  But they are being played here too.  But they will find some convenient and self serving excuse.  People always do.  Blame the wrong people, feel better, change nothing, indeed suffer more. It has been seen a million times over.

The growth of mainstream financialisation since the 1980s is there for all to see but is complicated and seductive to all in its various consequences.  Very few people today are innocents, taking the financiers shilling but never asking from where it came and what that meant.  The excuse they did not realise or were tricked, if valid, applies to all.

And now they are embarking on financialisation mark 2 with the great reset.  A bad name though as it rhymes in trickery but does not repeat in form.  They have always been one step ahead.  More snake oil and its sellers will be along soon.  And people will shout for order from the very same that brought the chaos upon them and they will get it, just like they got Hitler, caesars, and so on.

The boomers brought the seeds of their prosperity with them by their timing and numbers.  But also the seeds of their own destruction.  But all very minor had that not been taken into orbit by financialisation.  People seemingly got a bit rich while the rich got proper richer.

Why apparently take things down the boomer angle?  Because it both highlights the actual mechanics (to those free enough to look) and the type of base perversion and mob rule ultimately inside most humans and with which we will have to deal.  There you go, the macro macro!

But like Nazi Germany, Rome, and many many others, it requires continual expansion to sustain itself.  And that never worked out in the end.  It ends in destruction whether through war or societal collapse.  That is the balancing of the nature of finance in the long term.  Being brought to account, here and as in heaven (ethics used to be an area of study!).  There is no sustainable trick, just good times and bad times.  Didn't they use to say you don't get something for nothing.  There is growth, real growth but I have less faith in that argument these days as that argument gets perverted and misused too.  And piddling against what they want and now need.

These are the glasses through which to see the current situation and plan.  The reality, the mob rule, the consequences.  With that post we have had the reality......

Have a nice day.

[UnconventionalWisdom]

2 hours ago, Harley said:

Cheers.  The very best explanation yet.  Maybe the only one.  Excellent.  Very comprehensive and coherent.  I couldn't have said it better!  I've been struggling to this clarity (and practically more) over the last year, starting with "feelings" and posts about value.  There's stuff there probably most will miss in their simplistic summations and/or will fail to internalise.

On a social level, it puts into true light such popularist talk as mortgaging the future and blaming boomers.  The political economy.  They seem to want to hang the wrong people.  Will they likewise accept a lynching from future generations for the current furlough money, business support, and so on?  They are doing nothing about all this now either.  But they are being played here too.  But they will find some convenient and self serving excuse.  People always do.  Blame the wrong people, feel better, change nothing, indeed suffer more. It has been seen a million times over.

The growth of mainstream financialisation since the 1980s is there for all to see but is complicated and seductive to all in its various consequences.  Very few people today are innocents, taking the financiers shilling but never asking from where it came and what that meant.  The excuse they did not realise or were tricked, if valid, applies to all.

And now they are embarking on financialisation mark 2 with the great reset.  A bad name though as it rhymes in trickery but does not repeat in form.  They have always been one step ahead.  More snake oil and its sellers will be along soon.  And people will shout for order from the very same that brought the chaos upon them and they will get it, just like they got Hitler, caesars, and so on.

The boomers brought the seeds of their prosperity with them by their timing and numbers.  But also the seeds of their own destruction.  But all very minor had that not been taken into orbit by financialisation.  People seemingly got a bit rich while the rich got proper richer.

Why apparently take things down the boomer angle?  Because it both highlights the actual mechanics (to those free enough to look) and the type of base perversion and mob rule ultimately inside most humans and with which we will have to deal.  There you go, the macro macro!

But like Nazi Germany, Rome, and many many others, it requires continual expansion to sustain itself.  And that never worked out in the end.  It ends in destruction whether through war or societal collapse.  That is the balancing of the nature of finance in the long term.  Being brought to account, here and as in heaven (ethics used to be an area of study!).  There is no sustainable trick, just good times and bad times.  Didn't they use to say you don't get something for nothing.  There is growth, real growth but I have less faith in that argument these days as that argument gets perverted and misused too.  And piddling against what they want and now need.

These are the glasses through which to see the current situation and plan.  The reality, the mob rule, the consequences.  With that post we have had the reality......

Have a nice day.

Fantastic post. The psychology of the situation also facinates me. 

I am not sure what happens when the BK hits and people's pensions get destroyed. Like you say, most people go along with things and are happy to whack a proportion of their salary into a pension for it to grow. Most the pension providers are doing the same thing- lifestyle type funds which track the market and have a stocks and shares/bond split based on age. These are great as monetary policies have supported market expansion. But are likely to be much worse when things go wrong as all the providers will be removing funds from the same place at the same time- leading to further issues.

It's prob at that point that people realised they were conned.

[Castlevania]

12 hours ago, Harley said:

A probably useless bit of info about buying overseas shares.  I spent part of the day on it so want to get my money's worth!  Some brokers will route your order to the relevant country exchange (e.g. Madrid) and you will presumably own the stock via your brokerage nominee account.  Other brokers will sell you a CDI instead which is actually an entry in the Crest system.  Crest will buy corresponding stock on the foreign exchange in their name and I understand hold it in some form of trust for you.

For example:

This what HL does: https://www.hl.co.uk/__data/assets/pdf_file/0005/9674978/important-info-overseas-shares.pdf.  That bit about withholding tax for SIPPs and ISAs is as clear as a brick!  I think AJ Bell also uses CDIs.

This is what II does: https://help.ii.co.uk/system/templates/selfservice/ii/help/customer/locale/en-GB/portal/402800000001013/content/Auth-5407/Investments-blocked-from-trading-online extract:

"International trades- If you are attempting to purchase an international line please ensure you have selected the international tab in the trading screen, otherwise you may be attempting to purchase a secondary listing which we do not trade in. You can recognise this as the tickers of a secondary listing on the LSE usually follow the format of – 0QZD for example".

and

"2. International Crest (CDI) Stocks - Other UK brokers tend to trade international stocks through the London market and hold these as CDIs. At Interactive Investor we trade and settle directly on local international markets and hold the local version of the stock for you. Where international stocks have been transferred in to us, rather than purchased directly through us, it may be that the stock is still held in CDI form. We will be unable to purchase any further holding of the CDI version, but you may buy the stock on its primary market by selecting the correct country on the 'trade now' page. Please call us if you wish to sell a CDI holding.

Investing.com shows you where a stock is traded and which is the primary market and which are secondary markets (the financial data appears to only be recorded against the security on the primary market).  Try looking at financial data for a CDI.

 

Another bit of useless information is that HL won’t allow you to trade Italian stocks online. You have to call them up as I found out earlier this week.

[DurhamBorn]

10 hours ago, Talking Monkey said:

DB post 2030 would you expect there to still be a huge demand for oil, between then and now I'm sure a lot of renewable energy infrastructure will be stood up, however my understanding is it will take several decades for a majority of global energy needs to be met by renewables. 

Yes big demand still,and by 2050 i expect natural gas sales to treble.They will likely be around 370tcf from todays 137tcf .Oil i expect will be down to around 80mbpd by 2050,maybe 75mbpd,then slowly fall away up to 2100.

I think as the world sees they cant transition and still function as they want carbon offsetting will become much bigger.Im talking tree planting etc.Re-forest the Sarah fringes etc.

Im looking a lot more at the macro numbers for the industry at the moment.Im starting to see a situation where it might be worth keeping some of these stocks for 30 years.I want big companies though with big gas exposure.

[Harley]

12 hours ago, Metalheadz said:

I only have experience with the trading account which is good as I convert all my GBP in to AUD and CAD to eliminate conversion fees - but I have a feeling you can't do that in an ISA. YMMV.

Yes, I'm pretty certain you cannot hold foreign currencies in cash in an ISA.  You can buy overseas stock on an approved exchange but it has to include the required FX transaction at the time of trade.

[Harley]

2 hours ago, UnconventionalWisdom said:

Fantastic post. The psychology of the situation also facinates me. 

I am not sure what happens when the BK hits and people's pensions get destroyed. Like you say, most people go along with things and are happy to whack a proportion of their salary into a pension for it to grow. Most the pension providers are doing the same thing- lifestyle type funds which track the market and have a stocks and shares/bond split based on age. These are great as monetary policies have supported market expansion. But are likely to be much worse when things go wrong as all the providers will be removing funds from the same place at the same time- leading to further issues.

It's prob at that point that people realised they were conned.

The young forget they have one massive advantage to handle the BK - time.  It's 100% in their lap how they use it and whether they repeat the sins (real or imagined) some of them shout about.  No-one else to blame of this one.  I hope they do well.

My worry about all this is the role of Brexit.  Are they building some unwelcome (to the average Jo) offshore state to replace the EU?  I always thought the real battle would be after Brexit.  Has it started?

[Errol]

12 hours ago, Talking Monkey said:

DB post 2030 would you expect there to still be a huge demand for oil, 

Of course! Why wouldn't there be? Oil is in virtually everything made on the planet.

There's a reason why Russia is expanding oil discovery work in the Arctic and building more gas facilities at Yamal - http://yamallng.ru/en/ - and other places.

[Harley]

1 hour ago, Castlevania said:

Another bit of useless information is that HL won’t allow you to trade Italian stocks online. You have to call them up as I found out earlier this week.

And I read AJ Bell will let you trade US stocks on-line, but only between 19:00 and 21:00!!!!  Not ideal in a crunch!

[Castlevania]

20 minutes ago, Harley said:

And I read AJ Bell will let you trade US stocks on-line, but only between 19:00 and 21:00!!!!  Not ideal in a crunch!

I think that’s a period where you can only deal online because their brokers will have gone home.

[Harley]

57 minutes ago, Castlevania said:

I think that’s a period where you can only deal online because their brokers will have gone home.

So you can phone and on-line deal during normal US open hours but only trade on-line from 19:00 to 21:00?  That'll be fine if so.

Regardless, I hunted(!) through their new website and found these which were well written in themselves if (IMO) are not ideal because CDIs "represent an underlying interest" (like an ETF?) and because the share pool is limited to those companies having CDIs:

"We offer online dealing in the main US and Canadian markets for shares that are available as CDIs - CDIs are UK securities representing an underlying interest in an overseas security and can be bought and sold easily in the UK".  So traded on the LSE, not directly on the US markets.

And this: "Online dealing is available in all the main western European markets as CDIs".

And this: "We offer dealing in Australian, New Zealand, Hong Kong, Japan and Singapore markets by phone only and there is a minimum investment size of £10,000".

But I liked this "A W-8BEN form is not required for US investments held within a SIPP as the IRS recognises our SIPP as a qualifying pension scheme and all qualifying US dividends and interest are automatically paid to you free of any withholding tax".

And expected this: "Tax treaty arrangements are available for any share dealings in the US and Canadian markets. However any dividend income you receive in other markets would be subject to that country’s relevant withholding tax. We do not offer any tax reclaim service. Your Dealing account annual tax summary lists any income received from international shares".

PS:  I also read this about their Platinum SIPP and SSAS services which may be of interest to some here:  https://www.ajbellplatinum.co.uk/

 

 

[Harley]

3 hours ago, Castlevania said:

Another bit of useless information is that HL won’t allow you to trade Italian stocks online. You have to call them up as I found out earlier this week.

I didn't even know you could do that!!!  Presumably you can by CDIs on-line on the LSE, where available.

[DurhamBorn]

11 minutes ago, Harley said:

I didn't even know you could do that!!!  Presumably you can by CDIs on-line on the LSE, where available.

Yep,

i own these in CDI

https://www.hl.co.uk/shares/shares-search-results/e/eni-npv

 

[Castlevania]

18 minutes ago, Harley said:

I didn't even know you could do that!!!  Presumably you can by CDIs on-line on the LSE, where available.

They told me it’s due to a financial transaction tax (think stamp duty) levied on all Italian shares. It’s 0.1% of the transaction when buying. I assume their systems aren’t set up for it. They charged me the usual online dealing commission which was good.

They also mentioned there’s a similar tax on French shares so would assume that again you’d have to call them up to buy any French companies - although 30% withholding tax on dividends has put me off buying the likes of Total and Orange. Plus they’re French.

[Castlevania]

4 minutes ago, DurhamBorn said:

Yep,

i own these in CDI

https://www.hl.co.uk/shares/shares-search-results/e/eni-npv

 

It was ENI I was buying and had to call them up for.

[Harley]

14 minutes ago, DurhamBorn said:

Yep,

i own these in CDI

https://www.hl.co.uk/shares/shares-search-results/e/eni-npv

 

Good to see they now(?) flag it as a CDI.  I'm not against CDIs, ETFs or anything.  It's just about pumping out information so people can make informed decisions to suit their own circumstances, etc.  I'm also pleased to see one of my screening candidates is well liked!

[Castlevania]

4 minutes ago, Harley said:

Good to see they now(?) flag it as a CDI.  I'm not against CDIs, ETFs or anything.  It's just about pumping out information so people can make informed decisions to suit their own circumstances, etc.  I'm also pleased to see one of my screening candidates is well liked!

Note that the dividend data on the HL website and on Google Finance is all wrong. ENI have cut the dividend and come up with a completely incomprehensible formula for future payouts linked to the price of Brent.

[Harley]

1 minute ago, Castlevania said:

Note that the dividend data on the HL website and on Google Finance is all wrong. ENI have cut the dividend and come up with a completely incomprehensible formula for future payouts linked to the price of Brent.

Many thanks.  Nice to know!  BTW, how did you find out?  Do you have a source that works for other such companies?

[Castlevania]

5 minutes ago, Harley said:

Many thanks.  Nice to know!  BTW, how did you find out?  Do you have a source that works for other such companies?

I was reading up on them a couple of weeks ago (I wanted to diversify away from the large oil and gas companies that I already held so was doing some due diligence on potential candidates) and came across their new dividend policy.

Here’s an explanation. Best of luck in trying to make sense of it all.

https://www.eni.com/en-IT/investors/shareholders-remuneration.html

[Ellandback]

15 hours ago, Metalheadz said:

You should be able to get these with an Interactive Investors Stocks & Shares ISA

https://www.ii.co.uk/ii-accounts/isa

You have to pay a tenner a month but the trading fees / exchange rates are a lot better than HL (IMHO).

I have a trading account at Interactive Investors (good) and an ISA at HL (crap, selection kills me) so am planning to go all in on Interactive Investors.

I only have experience with the trading account which is good as I convert all my GBP in to AUD and CAD to eliminate conversion fees - but I have a feeling you can't do that in an ISA. YMMV.

Thanks for that, cushty, I'll keep my SIPP with HL and start an ISA at ii. Their website states £20 a pop for Canadian trades through ISA - I'll get confirmation of that when I call on Monday and report back.

[DurhamBorn]

54 minutes ago, Castlevania said:

I was reading up on them a couple of weeks ago (I wanted to diversify away from the large oil and gas companies that I already held so was doing some due diligence on potential candidates) and came across their new dividend policy.

Here’s an explanation. Best of luck in trying to make sense of it all.

https://www.eni.com/en-IT/investors/shareholders-remuneration.html

Within two years the yield should be around 11% +buybacks of around 3%pa.

[NogintheNog]

3 hours ago, Errol said:

Of course! Why wouldn't there be? Oil is in virtually everything made on the planet.

There's a reason why Russia is expanding oil discovery work in the Arctic and building more gas facilities at Yamal - http://yamallng.ru/en/ - and other places.

Has Russia signed up to any global restrictions on its future carbon footprint. I can't remember seeing any...

Still with the climate they ('suffer') have, why would they