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

[DurhamBorn]

8 hours ago, Democorruptcy said:

I know about re-invested dividends thanks, I was merely suggesting why other people might have turned away from financials to leverage up on housing. Obviously with hindsight you can swerve shares that have faltered, like dividends from "safe" areas such as banking pre-2007 and all the other firms that have gone bust, but it adds to their "nothing is as safe as houses" mindset. 

I also know tax relief on money going in thanks but again there's a lot of whining in the press about the "unfair tax" on pension income. 

The governbankment have made housing more attractive than pensions to a lot of people, so they haven't been mad, they have followed the money. I wasn't suggesting people should avoid pensions and invest in housing but I can see why they might have done it. A lot of people must have made a lot more money from property that what they would have done in a pension. The governbankment have now started pension auto-enrolment to try force more money back into pensions and let people access them earlier to try make them more attractive. Maybe in the future things might change and dinner party conversation might switch how big is my pension pot instead of how much is my house is worth?

 

I think a lot of things came together at once like you say.Firstly the great dis-inflation cycle favoured bonds and property over shares.As rates cranked lower and lower servicing higher and higher debt became normal.The financial crisis frightened people,and also the general public dont understand equity investment now,where its easy to see a house standing there and think il get £450 a month rent it costs my £80k.

Of course one of the first things any macro contrarian learns is that the market will always hurt the most people it can.An asset class that runs hot for so long will always see a snap back,and usually go too far the other way.Pensions iv always thought are great,but have to be used as one part,not all of funding retirement.The government can move the goal posts too easily.My assets are roughly 40% ISAs and outside an ISA,40% pensions (SIPP and that current transfer) and 20% property.Iv also got of course some PMs but i dont even count them in my assets at the moment.I see them as insurance.I can live on the income from the pension or ISA alone,but together from 55 will be much nicer.

I think they will tighten up pension tax going forward,though i think the most likely outcome is merging NI and income tax so pensioners pay it.The Tories are saying they want the NI threshold up to £12.5k.Sounds to me once tax and NI have the same threshold then they will merge the two,and that will mean tax on income over £12.5 shooting up for the none working.

Im well structured so i can remove quite a lot between 55 and 68 from the SIPP then drawdown just whatever takes my state pension up to £12.5k.I think balance is crucial so you can tilt.

 

[Bear Hug]

27 minutes ago, Cattle Prod said:

I bought some Tullow today, my first tranche. They were clearly overvalued relative to their peers, so didnt touch till now, but now I think they are good value (pe of ~4?!) and in line with the other uk midcaps. A small tranche, less than 1% of liquid net worth, because I dont know they wont go bust. But their fields should be good for 70kbpd/150m fcf.

What I don't understand is guys on message boards who had 20-50% of their net worth in a single stock! Guys lost 150k+ today - absolutely insane. Why??

There was also a lesson in liquidity today, it was a buyers market. I got an order filled below quoted prices, I'd say institutional investors had to dump at any price. I do NOT want to ever be on the illiquid sell side ...

Nice, I bought £100 worth today and already lost 20% on that.  Will throw another £100 if losses hit 50%.  Happy to gamble small amounts on one of the new low fees trading apps. 

[Majorpain]

1 hour ago, Cattle Prod said:

What I don't understand is guys on message boards who had 20-50% of their net worth in a single stock! Guys lost 150k+ today - absolutely insane. Why??

More common than you think, greed and inexperience (or both) are 99% of the causes IMO.  Hell, i learnt it the hard way early in my investing career!

[Harley]

8 hours ago, JMD said:

Harley, notice you now use Gin Lane as your profile pic. - hope your not immersing yourself too literally in that there data you mention!! (...interesting how moralities change over time, were you aware that there is also a 'Beer Street' that sought to depict the opposite moral stance?)

Well spotted!  It's a metaphor.  Gin then, debt and the rest today.  But yes, a (real) gin after work is a nice treat!  Aldi of course!  I will research "Beer Street" and await its time!

[Harley]

1 hour ago, Cattle Prod said:

I do NOT want to ever be on the illiquid sell side ...

Amen.  Why I avoid/limit collective investments such as trusts, ETFs, funds, etc.

[DurhamBorn]

2 hours ago, Cattle Prod said:

I bought some Tullow today, my first tranche. They were clearly overvalued relative to their peers, so didnt touch till now, but now I think they are good value (pe of ~4?!) and in line with the other uk midcaps. A small tranche, less than 1% of liquid net worth, because I dont know they wont go bust. But their fields should be good for 70kbpd/150m fcf.

What I don't understand is guys on message boards who had 20-50% of their net worth in a single stock! Guys lost 150k+ today - absolutely insane. Why??

There was also a lesson in liquidity today, it was a buyers market. I got an order filled below quoted prices, I'd say institutional investors had to dump at any price. I do NOT want to ever be on the illiquid sell side ...

Thats insane isnt it.The most i ever have is 4% and thats in only a few companies and very large caps.Mostly im 2% max.£150k in one stock sounds like they stuck an inheritance or something into a gamble.If they wanted that much in oil why not simply buy 5 of the super majors and collect the divis.

[sancho panza]

On 02/12/2019 at 09:03, Cattle Prod said:

I first graduated in 1999 with oil at $11 a barrel, it was pretty hated then. Of course we may just be doing a repeat of 1999/2000 in the markets just now! I haven't looked at the charts for this period closely, think I will now

No, but I dont really discuss investment in work. Overall the atmosphere is positive, my company and most of the industry is quite happy with $60 a barrel. We're making plenty of cash, which is the most important thing. If investors don't want it, fine! Edit: I've been buying my own company shares, so thats one!

I don't know how the Aramco float puts a dampner on things, Ive read that too but ts a red herring imo and considered a bit of a joke. Who in their right mind would invest in a company with declining fields with zero growth prospects in a risky jurisdiction with a tiny shareholding relative to a large quotad government shareholding? You might get a solid dividend, for a while, but there are plenty of other options. I don't think it affects industry sentiment negatively at all - the fact they are selling it is an admission the end (or decline anyway) is in sight, and so is bullish for the rest of us medium term. If it's putting a damper on investors, well... dyodd, investors!

Oil is beginning to look pretty hated at the minute but the reality is that there's nothing to replace it.Some of the oilies are near ten year lows and we're talking Exxon here,not jsut smaller players.

Ref Aramco,I was just wondering if intso's were holding back cash to pile in but it sounds like anyone with decent contacts will steer well clear.

Weve been mechanically buying every week but have dropped Total/Repsol as thayve run up.Had a couple of weeks off RDSB above £23 but now at £21 and half ,back in.Jsut steady accumulating here.Hoping for that $40 price to get hit.Stocks will get even cheaper still

On 03/12/2019 at 11:59, kibuc said:

For what it's worth, this Black Friday Weekend at a certain online fashion retailer absolutely smahed it, with revenue increasing a whooping 35% YoY. For the financial year so far they're 24% up YoY. Obv that's only revenue and there's a long way for it to trickle down to the bottom line, especially with all that aggresive promotional activity cutting into margins, but the numbers are surprisingly robust nevertheless.

Problem is that online is canabilising the High St if @Majorpain retail sales chart is anything to go by.Interesting times.Suspect some smaller local high st shop owners are going to get burned.

On 03/12/2019 at 23:16, DurhamBorn said:

Its exactly what we expect on this thread,and exactly what we are planning for the last 2 years.Deflation leads to this and we are in a debt deflation.All the seeds are being set for an inflationary recovery cycle.They keep printing expecting some inflation,but the liquidity is below the level needed to stand still.The Fed are way behind as well.They will panic soon and open the floodgates and it will likely pile into bonds.Its that key moment where we get an inflection point.As that slowly reverses all that money will leave bonds and enter commodity stocks and real asset owning ones.We might see bonds keep doing well for another year yet,then snap the first 20% down in a few weeks,then a bear market where rates end up around double figures.

Im convinced equity and bond markets will go down ,and those 60/40 sure thing pensions will be smashed by inflation.Everyone has forgot there is another asset class.Its real assets,real commods,real industrial products.Hopefully we can get most of the oilies when oil goes below $40.

Prepping for a pile into UST's a la June 08.Adn then a pile on in comodities.

Worth ntoing over the last few weeks that copper shares ahve recovered some.

[Errol]

https://investmentresearchdynamics.com/the-feds-repo-qe-the-underlying-problems-are-escalating/

[sancho panza]

 

 

On 06/12/2019 at 22:44, Democorruptcy said:

True Contrarian latest downdate:

https://truecontrarian-sjk.blogspot.com/

Suoerb as ever

'

Small- and mid-cap U.S. companies are continuing to resist all attempts to regain their 2018 zeniths.

 

Throughout 1929 small- and mid-cap shares mostly never reached their highs from 1928 even while large-cap shares mostly did so; U.S. stocks thereafter suffered their worst percentage losses in history. Throughout 1972 and into January 1973 U.S. small- and mid-cap shares couldn't recover their 1971 highs while the largest-cap "Nifty Fifty" names kept climbing; this was followed by the biggest stock-market plunge since the Great Depression. Very few investors know or care that the New York Composite Index which has existed for decades has still not regained its January 26, 2018 top, while the Russell 2000 has not set a new all-time high since August 31, 2018. The most severe bear markets in U.S. history all have in common an extended period of underperformance by smaller and medium-sized companies relative to their large-cap counterparts. The markets are telling you loudly and clearly what is going to happen next; all you have to do is respect history and listen.

[sancho panza]

6 hours ago, reformed nice guy said:

https://finance.yahoo.com/news/eskom-widens-south-africa-blackouts-155023561.html

South Africa is having worsening black outs. Sibanye Gold is mentioned (and surprises me that it is SAs biggest private employer) as bearing the brunt of the cuts.

Is this a bad signal for the longer term prospects of SA miners?

Jsut got back from SA and whilst I'm not inside these companies,noone in SA is under any illusions about Eskom.Lot of verage Joe's have contingenices in place so wouldn't surprise me if the big miners were ready for load shedding.

2 hours ago, DurhamBorn said:

Thats insane isnt it.The most i ever have is 4% and thats in only a few companies and very large caps.Mostly im 2% max.£150k in one stock sounds like they stuck an inheritance or something into a gamble.If they wanted that much in oil why not simply buy 5 of the super majors and collect the divis.

QUite.............seems unreal people having those sorts of allocations.

[sancho panza]

Volcker gone the way ofJessops,....

https://moneymaven.io/mishtalk/economics/paul-volcker-dies-in-my-mind-the-most-successful-u-s-central-banker-of-the-last-several-decades-CmzpleG7Y0iRZGF9WlAvqg/

 

[MrXxxx]

10 hours ago, Harley said:

12 hours ago, Cattle Prod said:

I do NOT want to ever be on the illiquid sell side ...

Amen.  Why I avoid/limit collective investments such as trusts, ETFs, funds, etc.

I think you need to be specific here , as those ETF etc that follow indices can in a dire situation be split up into their component parts by the provider and the bits sold off, so I cannot see how they differ from any other share holding?!

[invalid]

13 hours ago, Bear Hug said:

Nice, I bought £100 worth today and already lost 20% on that.  Will throw another £100 if losses hit 50%.  Happy to gamble small amounts on one of the new low fees trading apps. 

I was thinking of doing the same, can you suggest a decent low fee app?

[Democorruptcy]

14 hours ago, DurhamBorn said:

I think a lot of things came together at once like you say.Firstly the great dis-inflation cycle favoured bonds and property over shares.As rates cranked lower and lower servicing higher and higher debt became normal.The financial crisis frightened people,and also the general public dont understand equity investment now,where its easy to see a house standing there and think il get £450 a month rent it costs my £80k.

Of course one of the first things any macro contrarian learns is that the market will always hurt the most people it can.An asset class that runs hot for so long will always see a snap back,and usually go too far the other way.Pensions iv always thought are great,but have to be used as one part,not all of funding retirement.The government can move the goal posts too easily.My assets are roughly 40% ISAs and outside an ISA,40% pensions (SIPP and that current transfer) and 20% property.Iv also got of course some PMs but i dont even count them in my assets at the moment.I see them as insurance.I can live on the income from the pension or ISA alone,but together from 55 will be much nicer.

I think they will tighten up pension tax going forward,though i think the most likely outcome is merging NI and income tax so pensioners pay it.The Tories are saying they want the NI threshold up to £12.5k.Sounds to me once tax and NI have the same threshold then they will merge the two,and that will mean tax on income over £12.5 shooting up for the none working.

Im well structured so i can remove quite a lot between 55 and 68 from the SIPP then drawdown just whatever takes my state pension up to £12.5k.I think balance is crucial so you can tilt.

 

I think that will happen. They will have to target the none working who have accumulated capital from their bubble blowing.

They will target unearned income. If interest rates were to rise they would have to transfer money from those with it to those without. They could do a DIRT like in Ireland or bring back the Investment Income Surcharge that Lawson scrapped in 1984 and maybe use the taxes to fund something for the debtors like bringing back MIRAS that started in 1983 an ended in 2000.

[Harley]

2 hours ago, MrXxxx said:

I think you need to be specific here , as those ETF etc that follow indices can in a dire situation be split up into their component parts by the provider and the bits sold off, so I cannot see how they differ from any other share holding?!

Let's wait until TSHTF and see what comes crawling out. In the meantime, we could read one of the prospectus' and review their share lending practices and levels and counterparties.  I don't want to scare the horses (indeed I own some ETFs), just as always be careful and know what you're buying.

30 minutes ago, Democorruptcy said:

I think that will happen. They will have to target the none working who have accumulated capital from their bubble blowing.

They will target unearned income. If interest rates were to rise they would have to transfer money from those with it to those without. They could do a DIRT like in Ireland or bring back the Investment Income Surcharge that Lawson scrapped in 1984 and maybe use the taxes to fund something for the debtors like bringing back MIRAS that started in 1983 an ended in 2000.

Or a wealth tax, only for "them", the rich b*tards of course..........to start with!

[DurhamBorn]

The threat of extra tax is more reason to structure yourself in the best way.£12.5k from income or pensions,the rest in an ISA.They will likely introduce a cap on ISA,but probably the same as pensions about £1mill.The asset they are likely to go after is property.BTL property that is.

The UK wont be too bad though because we are very well placed for the next cycle in many ways.The massive wind power in Scotland will drive hydrogen production and that will drive industry.Electric will drive the economy,but not as most think.It will be used to power homes as now,but also to produce hydrogen.The bus and lorry fleet will be first big gainers.Im expecting public transport costs to go down as private driving costs go up for around 10 years.

One of the reasons i like Drax is because i think they will end up producing hydrogen in their stations units and SSE because their power links are really well placed to move the power for hydrogen production.

[Agent ZigZag]

42 minutes ago, DurhamBorn said:

The threat of extra tax is more reason to structure yourself in the best way.£12.5k from income or pensions,the rest in an ISA.They will likely introduce a cap on ISA,but probably the same as pensions about £1mill.The asset they are likely to go after is property.BTL property that is.

The UK wont be too bad though because we are very well placed for the next cycle in many ways.The massive wind power in Scotland will drive hydrogen production and that will drive industry.Electric will drive the economy,but not as most think.It will be used to power homes as now,but also to produce hydrogen.The bus and lorry fleet will be first big gainers.Im expecting public transport costs to go down as private driving costs go up for around 10 years.

One of the reasons i like Drax is because i think they will end up producing hydrogen in their stations units and SSE because their power links are really well placed to move the power for hydrogen production.

Interesting thought process and in sight Thankyou

[MrXxxx]

8 hours ago, Harley said:

, we could read one of the prospectus' and review their share lending practices and levels and counterparties

Good point, its all well a provider ringfencing your money, but how do they do it with your shares if they are lending them out..I assume that you are still covered up to £85k with fscs though.

8 hours ago, Harley said:

indeed I own some ETFs)

So why do you own them then (not being sarcastic, genuine question)?

[UnconventionalWisdom]

On 05/12/2019 at 22:43, Errol said:

Don't be surprised. People on this forum are in the massive, massive minority. We are all free thinkers. Virtually all of us have opinions and ideas outside the mainstream of accepted thought.

'Normal' people just don't think about this stuff.

They dont just not think about this stuff, but believe we are bonkers for questioning the media, politicians, bankers 

[UnconventionalWisdom]

On 06/12/2019 at 19:29, DurhamBorn said:

Learning both even should help people have a much more stable life.

I wish we learnt more about finance and investment at school. We'd be in a much better position and the country would also benefit. I've met people with economic degrees and people working in finance that don't understand the manipulation of the economy that taken place. 

Tin foil hat goes on: maybe they want to keep us from knowing so they can make out like bandits. 

[UnconventionalWisdom]

On 06/12/2019 at 23:07, Gin said:

Saving & scrimping for the future is very worthy but surely there comes  a point where we have to throw some caution to the wind & stop patting ourselves on the back....or what is the point of living .

Enjoying life is the most important thing. I think most people are saying learn to value important things in life and dont expect a quick hit to make you happy. 

It's not about scrimping, but making yourself think, "do I need the BMW estate or will a 5 year old corsa actually do the job"/ "or even, do I need a car if the bike will do- better for the wallet and the health", "meal out or should I learn to cook". 

[UnconventionalWisdom]

On 06/12/2019 at 23:33, DurhamBorn said:

.I have friends who married their 2nd girlfriend,have new cars,go abroad twice a year,have mortgages,good jobs but small savings.That life wouldnt be for me,in fact it would make me ill just the thought of it.

This is why I love this forum. You've just described what many films make out as the pinnacle of human existence, the thing we should be aiming for. I can see through it but many cant. 

I'm mid 30s and can see so many people with that lifestyle who dont appear to be that happy. They continue with it as society has told them they are doing everything right. 

[Shamone]

37 minutes ago, UnconventionalWisdom said:

They dont just not think about this stuff, but believe we are bonkers for questioning the media, politicians, bankers 

I agree with this. This forum is great because it brings together people from massively different circumstances and life experiences but similar in free-thinking. Probably a lot of us struggle in society sometimes as constant outliers.

[invalid]

1 hour ago, UnconventionalWisdom said:

I wish we learnt more about finance and investment at school. We'd be in a much better position and the country would also benefit. I've met people with economic degrees and people working in finance that don't understand the manipulation of the economy that taken place. 

Tin foil hat goes on: maybe they want to keep us from knowing so they can make out like bandits. 

A couple of things I have observed about many but not all rich people:

1 - They are tight buggers, will argue to the last penny and don't like giving money away

2 - They only share useful information or oppurtunities with a very small and trusted circle.

 

The amazing thing about this thread is the openess of everyone to share their views, ideas and insights.

[Bear Hug]

14 hours ago, null; said:

I was thinking of doing the same, can you suggest a decent low fee app?

3 x Apps:

Freetrade (£1 instant trade, free when in bulk at 4pm)

Trading 212 (charges on spread?, not sure how much exactly, has CFDs, ISA)

Degiro (lots of markets, UK: £1.75, US$0.50, more for others)

I am overcharged on US dividends in Degiro (with W8Ben but get 25% instead of 15%) but I am not sure if it's an app or US tax issue.