Credit deflation and the reflation cycle to come (part 3)

[M S E Refugee]

3 minutes ago, Cheese Limit said:

Popular Rolex sport / tool watches are 10 to 15% down over the last few months apparently. I am considering buying a bog standard mint Submariner but don't want to catch the knife while it is falling.

What are peoples thoughts?

I sold all of my collection this year to buy Silver, in my opinion I wouldn't touch any Rolex Watch with a 10 foot barge pole.

I am on a few waiting lists for Rolex Sports Models and if I start receiving phone calls from authorized dealers then that would tell me that the bubble is bursting.

[Transistor Man]

13 minutes ago, ThoughtCriminal said:

What a shit show winter is going to be. 

Looks more like 50% gas currently to me .

3 GW, or 9% of total generation, flowing to France. 

Are they going to get their fleet up and running again? Stress corrosion cracking of pipe welds. nightmare.

[ThoughtCriminal]

15 minutes ago, RJT1979 said:

We won't but European mainland probably will.

I don't share your optimism, I think we'll be as fucked as anyone other than Germany.

[Lightscribe]

39 minutes ago, Sugarlips said:

Capitulation?

It’s a manipulated farce, but we knew that already.

At what other point of time has global economy been on a knife edge and PMs held down. Russia, China, India all pro PMs. The western nations so desperate to protect their fiat currencies. 

The costs to to find it, extract it, refine it, mint it and logistics to ship it combined with energy inflation should far outweigh the current paper price.

But that desperation will eventually give way, it seems we’re getting nearer.

[Chewing Grass]

July is a 5 weekend month for normies in the UK, its discretionary spending squeeky bum time.

[M S E Refugee]

8 minutes ago, Lightscribe said:

It’s a manipulated farce, but we knew that already.

At what other point of time has global economy been on a knife edge and PMs held down. Russia, China, India all pro PMs. The western nations so desperate to protect their fiat currencies. 

The costs to to find it, extract it, refine it, mint it and logistics to ship it combined with energy inflation should far outweigh the current paper price.

But that desperation will eventually give way, it seems we’re getting nearer.

I'm as bullish on Silver as Paul Karason RIP.

 

[reformed nice guy]

1 hour ago, DurhamBorn said:

Yes,and its how the system works,and why the Fed is 100% trying to move the reverse repo into the real economy.Price signals are there from inflation,job done, BUT the problem is government have destroyed the work ethic,or build a business etc.There is simply no point working or growing a business as tax and reward are too low.The state is simply way too big.We are even worse in the UK.Sunak was at a local factory yesterday,usual levelling up crap and smiles.No questions from the media on why hundreds of bennie claimants in the same town got more than the workers in the factory for doing nothing.No questions on why they werent tackling systemic inflation by lowering bennies and public sector pensions and jobs.

The liquidity is in the system,the price signals are telling entities to invest,government is stopping it.

A good historical comparison is Spain versus the UK + Holland.

Spanish elites thought manufacturing was below them and thought that "those artisans and manufacturers toil for us". The upper classes trained to be administrators of estates, commanders in the military or clergy (for the tithes).

So while we sent over men with their families to North America to build farms and factories, the Spanish sent single men to the south to work the indigenous to the bond to extract silver, gold and commodities. They would only do this for a number of years then return to Spain. The silver would flow through Spain and away because nothing was manufactured locally.

When the armada set sail for England it was made up of Spanish troops only. The cannons, gun powder, weapons, boats and anything complicated had to be imported.

When their credit dried up due to diminishing returns from south America then it was game over. They had never developed or kept up with the times. Their elites were rulers and had multiplied. Innovators were discouraged so either didnt expand or left. Their large armies expected regular pay for mainly standing around - many had a full career without seeing battle.

Sound familiar?

[working woman]

39 minutes ago, Democorruptcy said:

I just wondered if you realised how fluid that displayed figure is, 

abrdn key facts

Thank you @DurhamBorn for highlighting ABRDN. A few posters,  myself included spotted the possible 9% Dividend Yield. Sounding too good to be true, so I did a bit of digging and on Hargreaves Lansdowne site found:  

https://www.hl.co.uk/shares/shares-search-results/a/abrdn-plc-ordinary-13-616/share-research

"But, with a dividend that's still not covered by profits, the group's relying on its reserves to keep shareholder returns flowing".

"Prospective dividend yield (next 12 months): 7.1%

All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. 

The group has yet to resolve its fundamental problem with investors walking away. 

Potential takeover of Interactive Investor, which is one of the UK's biggest direct-to-consumer investment platforms.

My thoughts:

How long will it take to drain "the reserves" by paying out dividends they can't really afford? What is a more realistic dividend? 

Since 2015 they have been on a downward share price trend. 

What will be the catalyst in the future to change this?

DB's macro view - Money being withdrawn from BTL and invested in shares via companies like this. 

The actual takeover of Interactive Investor being achieved - hopefully will increase income. Can they afford / finance it and how will it impact dividends?

 

 

 

 

[Lightly Toasted]

7 hours ago, tank said:

80%+ of the working age adult welfare budget goes to fat, lazy women with kids who sit on their arses all day ordering take aways and what not. These bints don't need to go near a Job Centre.

Given any significant welfare reform, why shouldn't they? Working mothers have to spend their time at some work site or other, what's the difference? The poster's idea was be to decouple the societal cost of being on benefits, from the individual reward of having a life of leisure.

A bigger flaw IMO is that it doesn't (as it stands) do anything about in-work benefits.

And of course the whole idea was tongue in cheek and from > 10 years ago. The welfare system is even more bloated now -- if you're going to enrage everyone by taking away their lives-of-leisure, might as well do it through properly thought-out, root-and-branch reform.

[Democorruptcy]

1 hour ago, Majorpain said:

Fed prints money and gives it to the banks, banks then park that money at the Fed who is currently paying $240mn a day in interest in printed money.  As much as I'm not a leftie, the average person on the street gets nothing more than screwed over by this circle jerk as their money get devalued by $87.6bn a year (and rising).

On a similar theme but in the UK... one thing that is annoying me at the moment is the saving rates that NS&I are paying savers. They have ignored recent BoE rate rises to 1.25% on such as Income Bonds, Direct Saver both 0.5%, Cash Isa 0.35%. I've asked the DMO why they are wasting taxpayer's money paying institutional investors (inc banks) a higher yield on Gilts when they could raise more money at NS&I? The DMO told me they are connected to the Treasury like NS&I but they are separate from them. Well yeah but they could get their heads together!

The recent NS&I annual report shows how they are ripping off savers. Their funding target for last year was £6bn but they only raised £4.4bn. They have to raise +/- £3bn from their target, so technically they were on target. However they could have raised twice as much at £8.8bn and still have been on target. Clearly savers are deserting NS&I due to their ridiculously low rates. In the report is a Value Indicator, the difference between raising funding at NS&I or on Gilts, to show how well they are doing. Their target is -£900m i.e. it's expected they pay savers more, after all it is our money! This year the Value Indicator is actually positive! +£38m! i.e. they have completely ripped savers off. Surprise surprise, they have decided not to use the Value Indicator in future report!

I think there could be plans to abolish NS&I because savings are backed by the Treasury, banks don't want the competition? Maybe they want it all out in the banks subject to the £85k FSCS? Of course it's mere coincidence that the NS&I CEO is ex-Barclays man Ian Ackerley, I think of him as The Trojan Horse.

Page 47 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1086456/NS_I_Annual_Report_2021_22_print_ready_final.pdf

[Democorruptcy]

7 minutes ago, working woman said:

abrdn key facts

Thank you @DurhamBorn for highlighting ABRDN. A few posters,  myself included spotted the possible 9% Dividend Yield. Sounding too good to be true, so I did a bit of digging and on Hargreaves Lansdowne site found:  

https://www.hl.co.uk/shares/shares-search-results/a/abrdn-plc-ordinary-13-616/share-research

"But, with a dividend that's still not covered by profits, the group's relying on its reserves to keep shareholder returns flowing".

"Prospective dividend yield (next 12 months): 7.1%

All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. 

The group has yet to resolve its fundamental problem with investors walking away. 

Potential takeover of Interactive Investor, which is one of the UK's biggest direct-to-consumer investment platforms.

My thoughts:

How long will it take to drain "the reserves" by paying out dividends they can't really afford? What is a more realistic dividend? 

Since 2015 they have been on a downward share price trend. 

What will be the catalyst in the future to change this?

DB's macro view - Money being withdrawn from BTL and invested in shares via companies like this. 

The actual takeover of Interactive Investor being achieved - hopefully will increase income. Can they afford / finance it and how will it impact dividends?

I was not passing any comment about ABRDN, just making the point that displayed dividend figures for any firm are very fluid. When @Pip321said '9% no guarantees' I wasn't sure he knew just how fluid but he says he did know.

[JMD]

2 hours ago, Democorruptcy said:

I just wondered if you realised how fluid that displayed figure is, it's a moment in time. It only applies to the price it is today. There are no guarantees at all. Price goes up, dividend displayed goes down, price goes down dividend goes up. 9.3% at 160p (yesterday) was 5.8% if you had bought at the 250p earlier in the year.

I am always on the lookout for stable divi payers so this question does interest me.                                                                   Surely the main focus for any 'divi bug' should be, their 'personal yield' and that only goes up/down with the company divi/share payout rate, not the fluctuation in the share price. Yes the price at which you buy kind of crystallises future potential returns, so for example Aberdeen paid approx 22p/share for many years leading up to 2020, then dropped to 14p - therefore I'd say the chance of them reducing further is low (inflation etc) and so future (minimum) yield is pretty much locked in.                                                                                                         If I have overstated or have missed something important here - please do correct me - as this is the method I use to invest for future divi income for my pension portfolio. I am talking general principles here across divi paying companies, and Aberdeen as a specific company may of course, prove me wrong!

[Boon]

I tend to think the opposite, a high prospective dividend yield implies a good chance that it will be cut.

The company past is less relevant to me because the Standard Life part was sold off, so today is a different business.

Paying £1.5bn for a business that made PBT of £41.7m seems on the very expensive side to me. I do think investment products will continue a trend towards being free (at the point of entry) for customers. However, there may be some good synergies to be had.

So I do feel if they botch the acquisition they may have no choice but to cut the dividend.

[Democorruptcy]

13 minutes ago, JMD said:

I am always on the lookout for stable (next cycle) divi payers so this question does interest me.                                                                       Surely the main focus for any 'divi bug' should be, their 'personal yield' and that only goes up/down with the company divi/share payout rate, not the fluctuation in the share price. Yes the price at which you buy kind of crystallises future potential returns, so for example Aberdeen paid approx 22p/share for many years leading up to 2020, then dropped to 14p - therefore I'd say the chance of them reducing further is low (inflation etc) and so future yield is pretty much locked in.                                                                                                       If I am overstating or missing something important here - please do correct me - as this is the method I use to invest for future divi income within my pension portfolio.

I wasn't passing any comment about Aberdeen, I was only talking about how fluid displayed dividends are. Though you mentioned a firm (any firm) might have dropped (or stopped) their dividend. This was something I complained to HL about in 2020. They still displayed dividends, at very high rates because share prices had dropped which obviously inflated displayed dividends, even if a firm had suspended their dividend. HL's argument was that it wasn't their data but came from a 3rd party. My argument was that it should be filtered and say "n/a" if no dividend was currently being paid. They did change and now display "n/a", here's an old favourite doing that! Some firms e.g. BP dropped from 12% to 3.9% overnight, on the day their much larger four 2019 dividends dropped out of the calculation. It wasn't even staggered to reflect an average of say 2 larger 2019 dividends and 2 smaller 2020.

Re a firm (any firm I'm not talking ABRDN!) cutting it's dividend, so it can't drop lower and future income is guaranteed, seems to be suggesting a firm can't go bust. I'm not sure why "inflation etc." means any firm can't cut their dividend again? What if a firm's profit margins are crushed by inflation, why can't they cut again before their sad demise? Isn't this what the thread is all about, some sectors will do better than others re inflation etc?

Re dividends and inflation you have touched on another point. If a firm paid 50p last year and increases it by 1% to 50.5p this year it's a real terms cut. If inflation is 10% that 50.5p only has the buying power of just over 45p. Dividend investing also needs a bit of capital gain?

 

 

[JMD]

2 hours ago, Democorruptcy said:

Nothing to do with BP but it's all a bit Ponzi though isn't it? Firms buying their own shares when they have lots of debt. How can you trust a share price that has been manipulated by a firm pushing it up with borrowed money, particularly if the cost of borrowing was increasing? Part of the problem is that executives get multiples of their salary based on share price performance. They are incentivised to drive the price up in the short term, while they collect their bonuses and share option money. Their share price performance is also only measured against a comparator group of companies, their company selects, not the market as a whole. Pick some dogs in their comparator group and they get bonuses for being the best of the worst. It seems like an epic fail in regulation to me.

I agree, however can any of that cruddy corporate behaviour actually be 'regulated'? Don't we unfortunately have to wait for all these ponzie/zombie horrors to die off once cheap money begins to be expunged from the market? Genuine question as I thought the debt deflation cycle will initiate such a corporate cull and that company board energies will return to 'old fashioned' cash flows and profits?                                                                                                                Although is that perhaps naive and an increasingly forlorn hope? As everywhere I look incentives, for work, for investment, for all kinds of behaviour, etc, seem to have been perversely beaten down... Where all the models/myths we lived by have been seriously whacked, perhaps irretrievably so? (NB I'm finding everything is so crazy at the moment.)

[Democorruptcy]

9 minutes ago, JMD said:

I agree, however can any of that cruddy corporate behaviour actually be 'regulated'? Don't we unfortunately have to wait for all these ponzie/zombie horrors to die off once cheap money begins to be expunged from the market? Genuine question as I thought the debt deflation cycle will initiate such a corporate cull and that company board energies will return to 'old fashioned' cash flows and profits?

They could find a way to regulate cruddy corporate behaviour if they wanted to. However the regulators don't want to damage their portfolios, they are more interested in getting some inside info.

[DurhamBorn]

43 minutes ago, Boon said:

I tend to think the opposite, a high prospective dividend yield implies a good chance that it will be cut.

The company past is less relevant to me because the Standard Life part was sold off, so today is a different business.

Paying £1.5bn for a business that made PBT of £41.7m seems on the very expensive side to me. I do think investment products will continue a trend towards being free (at the point of entry) for customers. However, there may be some good synergies to be had.

So I do feel if they botch the acquisition they may have no choice but to cut the dividend.

I think the key to them is the India stake and how much they get for it.They will use it for share buybacks i expect.I think they over paid for II,but i can understand their logic.Platforms like them are only really them and HL.AJ Bell a distant third.The key to the sector are mergers.HL need more wealth managing/advice,Abrdn have both now.M+G or Legal and General might also decide to go for them.Lots of value in the sector IMO,but when it turns is hard to judge and why i simply use ladders to buy,remove the emotion and sit and wait for however long it takes.

Take the Local Government Pension scheme.That alone will see big increases in amounts going in just through wages increasing.Reflection point will be when that gets bigger than falls in AUM.

The sector is hated right now thats for sure.

[Calcutta]

I don't spend a massive amount of time on social media or the msm, but today I've already noticed 4 different stories about banks having issues of some kind. 

Are they lubing us for something? 

[JMD]

6 minutes ago, Democorruptcy said:

They could find a way to regulate cruddy corporate behaviour if they wanted to. However the regulators don't want to damage their portfolios, they are more interested in getting some inside info.

Yes, I've often wondered where middle ranking regulator types go after performing their job for say 10 years. Bet they can write their ticket into some cushy city job, armed as they are with all that highly sensitive/inside company info.

[M S E Refugee]

17 minutes ago, Calcutta said:

I don't spend a massive amount of time on social media or the msm, but today I've already noticed 4 different stories about banks having issues of some kind. 

Are they lubing us for something? 

The Undeclared War aired last night on Channel 4 about a Russian Cyber Attack so I would think something is in the works.

[Cheese Limit]

2 hours ago, M S E Refugee said:

I sold all of my collection this year to buy Silver, in my opinion I wouldn't touch any Rolex Watch with a 10 foot barge pole.

I am on a few waiting lists for Rolex Sports Models and if I start receiving phone calls from authorized dealers then that would tell me that the bubble is bursting.

Thanks - I have heard that the authorised dealers are known for taking bungs for selling several watches a year to flippers and average Joe gets none. So a call from any of them would be a sign for sure.

[M S E Refugee]

1 minute ago, Cheese Limit said:

Thanks - I have heard that the authorised dealers are known for taking bungs for selling several watches a year to flippers and average Joe gets none. So a call from any of them would be a sign for sure.

I fall into the Average Joe category so if I start getting calls then they are desperate.

I fully expect pre-owned Rolexes to sell below retail like they always used to (apart from the Daytona)

[ThoughtCriminal]

German guy on twitter just said his electric bill has gone from 250 to 700 euro a month. 😳

 

I thought demand destruction was supposed to take care of this by now?

 

 

[planit]

I haven't had any time recently but I just wanted to post the current chart of US oil stocks including their strategic reserve (which they have been drawing down in order to keep oil prices low LOL).

 

 

The declines have been accelerating and the total is at levels not seen since 2004.

More worryingly, by November they will be at 1986 levels (under 800mmbl) if the current 10 week trajectory continues.

 

The US would have blown through 1/3 of their entire reserves in just over 2 years (July 2020 - Nov 2022)

 

[Boon]

6 minutes ago, ThoughtCriminal said:

German guy on twitter just said his electric bill has gone from 250 to 700 euro a month. 😳

 

I thought demand destruction was supposed to take care of this by now?

 

 

Must be a massive property to be paying that.

Nevertheless I reckon the same might be happening to people here by the time of autumn price cap.