Credit deflation and the reflation cycle to come (part 6)

[wherebee]

BAT now paying a 9% dividend.  Insane.

Do we think maybe those in the know are discounting BAT, expecting increased tensions between west and China to result in sanctions against BAT from China (which are, after all, a british company?), hitting their legal and illegal sales into that market?

https://www.chinadaily.com.cn/a/201805/22/WS5b02f6bba3103f6866ee9b47.html

I'm looking for the downside in taking even more BAT at these levels.  9-10% return is insane for such a reliable payer.

 

 

[desertorchid]

13 minutes ago, wherebee said:

BAT now paying a 9% dividend.  Insane.

Do we think maybe those in the know are discounting BAT, expecting increased tensions between west and China to result in sanctions against BAT from China (which are, after all, a british company?), hitting their legal and illegal sales into that market?

https://www.chinadaily.com.cn/a/201805/22/WS5b02f6bba3103f6866ee9b47.html

I'm looking for the downside in taking even more BAT at these levels.  9-10% return is insane for such a reliable payer.

 

 

Not that insane . For income seekers they are absolutely spoilt for choice right now, and this  could be a once in a generation moment if the polos are right and inflation heads south again and we have another decade of deflationary forces. As this is possible due to demographics, one must decide if you want to take a punt now for sound 8-12% yields at the risk of some kind of systematic breakdown destroys most asset classes.

 

[Yadda yadda yadda]

I've topped up on BAT today even though they're up a bit on yesterday. Ex-div tomorrow for 57.72p per share. Maybe they will be under £25 by the end of the week but the long term risk looks good to me.

[Harley]

1 hour ago, Pip321 said:

Starting to see more and more immigrant crime where the victim is also an immigrant.

There was one particularly awful crime which I won’t detail because I just think karma would kick me in the nuts for using it as an example to make a point…..but the victims mother also had broken East European accent but no reference to origin.

I also recall a while ago highlighting a housing shortage issue on the BBC website where the complainant who was having to wait for a house was again East European. Like me going to Portugal and then complaining they won’t house me???🤷🏻‍♂️

I wonder if soon it will get so bad in the UK that the immigrants will start complaining about the immigration policy and it’s impact on their own free services. Or better still they will stop seeing the UK as a safe place to live and dinghy their way to somewhere else?

What's happened in Sweden?

[Harley]

2 hours ago, onlyme said:

It is somehwat staggering that given the green agenda the very first locations you would think would festooned with solar - the likes of supermarkets with 1,000 sq ft of very usable roof space, very predicatable and largely daytime energy usage and businesses that can carry a bit investment funding - all seem pretty much devoid  of it.

They don't own most of the buildings.  Orgs like SUPR do.

[DurhamBorn]

44 minutes ago, wherebee said:

BAT now paying a 9% dividend.  Insane.

Do we think maybe those in the know are discounting BAT, expecting increased tensions between west and China to result in sanctions against BAT from China (which are, after all, a british company?), hitting their legal and illegal sales into that market?

https://www.chinadaily.com.cn/a/201805/22/WS5b02f6bba3103f6866ee9b47.html

I'm looking for the downside in taking even more BAT at these levels.  9-10% return is insane for such a reliable payer.

 

 

BAT does not sell in China,nobody does,just Chinese.However BAT Bangladesh sells massive amounts of baccy leaf to China,a backdoor way into the market.BAT are a machine,they will make sure the right people get onside.The stock is down for three reasons,first short term sterling strength,regulation worries as always,but also their debt is too high and rates are going up.They have nice fixes,but will need to start paying some down as it comes off.That means no buy backs.Likely small divi increases for a few years while the decrease leverage.The have amazing EM coverage though,better than anyone.

[Castlevania]

49 minutes ago, wherebee said:

BAT now paying a 9% dividend.  Insane.

Do we think maybe those in the know are discounting BAT, expecting increased tensions between west and China to result in sanctions against BAT from China (which are, after all, a british company?), hitting their legal and illegal sales into that market?

https://www.chinadaily.com.cn/a/201805/22/WS5b02f6bba3103f6866ee9b47.html

I'm looking for the downside in taking even more BAT at these levels.  9-10% return is insane for such a reliable payer.

 

 

Loads of debt in a rising interest rate environment 

[Long time lurking]

7 hours ago, wherebee said:

is that crypto fucked then?  force breaking of security?

I have not got a clue ,but most think China can only copy things 

I read an article yesterday saying how RR were stealing a march on it`s competitors by developing  Module reactors ,when Chain have already lunched it`s first which is claimed to be a thorium molten salty reactor if correct we are probably close to a decade behind 

[DurhamBorn]

1 minute ago, Castlevania said:

Loads of debt in a rising interest rate environment 

Yes,next five years they can probably pay down just over half what comes due from cashflow,but roll over half.It means i doubt there will be buybacks.£20 bill coming off over next 5 years,i think they could pay off around £12 bill to £14 bill if they choose too.The maturity profile is very low after that though,so they might roll some over on much shorter periods rather than long fixes.

[BurntBread]

2 hours ago, onlyme said:

Economies of scale, builk purchasing power and that they would be putting up 100's KW at a time would mean it should be pretty competitive.   Refrigeraion and chilling would most likely take a bulk of the power.  Payback got to be less than 10 years.

I work in food manufacturing not retail, but there is no way we would get a project with a ten year pay-back approved.

Engineering investments are of course prioritised by RoI and time-scale, and the only ones which would get a look-in with even a 5 year pay-back time would have to have some other reason attached to them; which means ESG ... and the only reason ESG factors into financial decisions is because the company has somehow managed to make commitments around green things in order to get away some cheaper bonds (presumably ultimately paid for by us suckers in private pension schemes).

More typical pay-back times for capital investment would be three years or less. I guess that's one of the (many) reasons I find CP's anecdotes from the oil world so fascinating. Those guys are planning on generational time-scales, while we make decisions that have to work out over a few years. Obviously some things get tacked on or slipped through with the justification that it sets up the technology for ten years or more, but the whole project has to have short pay-back here.

[Transistor Man]

59 minutes ago, Long time lurking said:

I have not got a clue ,but most think China can only copy things 

I read an article yesterday saying how RR were stealing a march on it`s competitors by developing  Module reactors ,when Chain have already lunched it`s first which is claimed to be a thorium molten salty reactor if correct we are probably close to a decade behind 

I don't think this is really true. There's lots of stories and technologies all mixed up in the news. The US tried the molten salt reactor for plane applications in the 1950s.

 

 

Edited July 12, 2023 by Transistor Man

[Pip321]

48 minutes ago, Harley said:

What's happened in Sweden?

Abba, Bjorg, meatballs and IKEA. 

AIUI they are fighting immigration at the moment almost as hard as the Vikings fought when they came invading to Britain😆

Looks like they have increased criteria and got numbers down from a few years ago but 100k a year with a population of 10m total….the natives continue to get restless. And that’s soft Sweden.

Interesting times. 

[JoeDavola]

1 hour ago, wherebee said:

BAT now paying a 9% dividend.  Insane.

Do we think maybe those in the know are discounting BAT, expecting increased tensions between west and China to result in sanctions against BAT from China (which are, after all, a british company?), hitting their legal and illegal sales into that market?

https://www.chinadaily.com.cn/a/201805/22/WS5b02f6bba3103f6866ee9b47.html

I'm looking for the downside in taking even more BAT at these levels.  9-10% return is insane for such a reliable payer.

If I could get 9% on my savings I'd never need to even bother about buying a fucking house. Could just rent wherever I wanted to live, in whatever country.

[Long time lurking]

22 minutes ago, Transistor Man said:

I don't think this is really true. There's lots of stories and technologies all mixed up in the news. The US tried the molten salt reactor for plane applications in the 1950s.

 

 

So did Russia but theirs actually flew,only because they did not use some much lead around the cockpit subsequently frying the pilots 

All i can go by is whats reported in China ,yes it could be propaganda ,but it was a long detailed article ,i can also remember back in 2017 when they announce the plan to develop the technology into full scale use ,they gave the team until 2025 to to have a full scale molten salt rector up and running then moved the date forward to 2022 

In the last month they then said they have licensed the first of the type to run commercially  

If you were referring to them not inventing the prosses you are 100% correct  as Chain was more than happy to tell the world they downloaded the US research from the 1950s from MIT when they announced the project

But they have succeed where the US failed and that was to scale it up ,according to the Chinees it was always a material science problem as in making what was required in the size that was required and it still being safe

 

 

[jamtomorrow]

Finally, the medicine we've avoided taking for best part of 2 decades is about to be administered.

Be under no illusions: it's because the markets have a gun to their head, and not because the central planners at the BoE have suddenly woken up.

It's as if some creative destruction followed by reallocation of capital to productive activities is too much to ask for.

UK’s ‘zombie’ firms will be wiped out by interest rates, says insolvency specialist

Britain’s debt-laden “zombie” companies are expected to be wiped out by the surge in interest rates, an insolvency specialist has predicted.

Begbies Traynor, a business recovery and financial consultancy, has said all of the nation’s zombies – companies struggling to service debts that have avoided bankruptcy through cheap borrowing costs – will have failed by the end of next year.

“Over the next 18 months, we’ll see virtually all of them finally come to an end,” Ric Traynor, the executive chairman of the company, which is seen as a bellwether for the health of UK businesses, told Bloomberg.

...

https://theguardian.com/business/2023/jul/11/zombie-firms-uk-interest-rates-insolvency-begbies-traynor-profits

[King Penda]

3 hours ago, crashmonitor said:

Top 8 Banks clear stress testing by BOE. Won't be a cause for concern then with the Bank's predicted course of 6.5% Base Rates by the Spring.

 

https://www.marketscreener.com/quote/currency/US-DOLLAR-BRITISH-POUND-12684800/news/Stress-test-shows-top-8-UK-banks-have-enough-capital-says-Bank-of-England-44316302/

Fucking stop it …..ps I’ve bought extra wipes today

[King Penda]

29 minutes ago, JoeDavola said:

If I could get 9% on my savings I'd never need to even bother about buying a fucking house. Could just rent wherever I wanted to live, in whatever country.

Just stop talking filth I’m geting excited over 6% plus predictions never mind 9%.

[Loki]

4 minutes ago, jamtomorrow said:

Finally, the medicine we've avoided taking for best part of 2 decades is about to be administered.

Be under no illusions: it's because the markets have a gun to their head, and not because the central planners at the BoE have suddenly woken up.

It's as if some creative destruction followed by reallocation of capital to productive activities is too much to ask for.

UK’s ‘zombie’ firms will be wiped out by interest rates, says insolvency specialist

Britain’s debt-laden “zombie” companies are expected to be wiped out by the surge in interest rates, an insolvency specialist has predicted.

Begbies Traynor, a business recovery and financial consultancy, has said all of the nation’s zombies – companies struggling to service debts that have avoided bankruptcy through cheap borrowing costs – will have failed by the end of next year.

“Over the next 18 months, we’ll see virtually all of them finally come to an end,” Ric Traynor, the executive chairman of the company, which is seen as a bellwether for the health of UK businesses, told Bloomberg.

...

https://theguardian.com/business/2023/jul/11/zombie-firms-uk-interest-rates-insolvency-begbies-traynor-profits

 

[Transistor Man]

23 minutes ago, Long time lurking said:

So did Russia but theirs actually flew,only because they did not use some much lead around the cockpit subsequently frying the pilots 

All i can go by is whats reported in China ,yes it could be propaganda ,but it was a long detailed article ,i can also remember back in 2017 when they announce the plan to develop the technology into full scale use ,they gave the team until 2025 to to have a full scale molten salt rector up and running then moved the date forward to 2022 

In the last month they then said they have licensed the first of the type to run commercially  

If you were referring to them not inventing the prosses you are 100% correct  as Chain was more than happy to tell the world they downloaded the US research from the 1950s from MIT when they announced the project

But they have succeed where the US failed and that was to scale it up ,according to the Chinees it was always a material science problem as in making what was required in the size that was required and it still being safe

 

 

I've read something on the Chinese reactor now -- I should have done that before. Interesting. They are pushing hard. Nickel-based superalloy. Advanced stuff. This was something that was holding them back from being able to produce a high performance jet engine domestically. 

 

Edited July 12, 2023 by Transistor Man

[Chewing Grass]

14 hours ago, Plan-b said:

Just watching the Martin Lewis TV Live Shit Show.

Lewis to Hunt:' When do you think we will see mortgage rates come down ?'

Hunt to Lewis: 'I dont have a Crystal Ball (no shit Sherlock) the view is that inflation will come down to around 5% by the end of this year and around 3% next year'

What?

That wasn't answering the question and nobody batted an eyelid.

Notice that Martin Lewis has never covered the private pensions racket/scam - to hot and complex of a subject to air in public as they might realise they will end up with nowt.

[Castlevania]

21 minutes ago, jamtomorrow said:

Finally, the medicine we've avoided taking for best part of 2 decades is about to be administered.

Be under no illusions: it's because the markets have a gun to their head, and not because the central planners at the BoE have suddenly woken up.

It's as if some creative destruction followed by reallocation of capital to productive activities is too much to ask for.

UK’s ‘zombie’ firms will be wiped out by interest rates, says insolvency specialist

Britain’s debt-laden “zombie” companies are expected to be wiped out by the surge in interest rates, an insolvency specialist has predicted.

Begbies Traynor, a business recovery and financial consultancy, has said all of the nation’s zombies – companies struggling to service debts that have avoided bankruptcy through cheap borrowing costs – will have failed by the end of next year.

“Over the next 18 months, we’ll see virtually all of them finally come to an end,” Ric Traynor, the executive chairman of the company, which is seen as a bellwether for the health of UK businesses, told Bloomberg.

...

https://theguardian.com/business/2023/jul/11/zombie-firms-uk-interest-rates-insolvency-begbies-traynor-profits

This is good news

[sancho panza]

10 hours ago, DurhamBorn said:

Im not sure of course if i will.Its telling i was going to add to BT today,but didnt.Its one of the few UK nearly all earning that should keep in front of inflation over the cycle,but i noticed Hunt mention regulators "putting hard pressed families first" and didnt like the sound of that.I bought some more SK Telecom instead.Im full on BAT about 4% above these prices so wont buy more,but notice others buying on here.It has risks aroun debt and regulation,but its a fantastic currency hedge.Its why so many South Africans own the stock.

I think we're getting to pick your posion time and cash sjut isn't really an option over a timeframe beyond 6 months due to inflation.

We've moved our BATs up,EM's building nicely.We sold BT circa 150(and rolls too) and that was the last of our UK centric stocks earnings wise.

I was wodnering the otehr day,who's buiyng things like M&S at the mintue .......and why??????what coudl be the thesis there?

2 hours ago, Castlevania said:

Loads of debt in a rising interest rate environment 

BATs FCF circa £6bn+ over last 4 years

There's no doubt they need to chip away at it but they have the room to do so.

Despite their detbs I personally consdier them way more solvent than the UK govt andntherefore a better risk.I'd be pretty happy if they halved the divi for a few years tbh if it helps.

 

edit to add:also as EM currencies strengthen versus USD/EUR/GBP they'll be well palced to pay it dowm

https://www.bat.com/group/sites/uk__9tvmh3.nsf/vwPagesWebLive/DO9TVMUH

Edited July 12, 2023 by sancho panza

[Long time lurking]

28 minutes ago, jamtomorrow said:

Finally, the medicine we've avoided taking for best part of 2 decades is about to be administered.

Be under no illusions: it's because the markets have a gun to their head, and not because the central planners at the BoE have suddenly woken up.

It's as if some creative destruction followed by reallocation of capital to productive activities is too much to ask for.

UK’s ‘zombie’ firms will be wiped out by interest rates, says insolvency specialist

Britain’s debt-laden “zombie” companies are expected to be wiped out by the surge in interest rates, an insolvency specialist has predicted.

Begbies Traynor, a business recovery and financial consultancy, has said all of the nation’s zombies – companies struggling to service debts that have avoided bankruptcy through cheap borrowing costs – will have failed by the end of next year.

“Over the next 18 months, we’ll see virtually all of them finally come to an end,” Ric Traynor, the executive chairman of the company, which is seen as a bellwether for the health of UK businesses, told Bloomberg.

...

https://theguardian.com/business/2023/jul/11/zombie-firms-uk-interest-rates-insolvency-begbies-traynor-profits

Yep the gun to the head part is spot on IMO 

I`m betting on the rest regarding insolvencies ,my stake is simple i want a newish van for a camper conversion with a bit of luck ( form my point of view anyway) their will be a lot of distressed sales in the next twelve months 

[wherebee]

56 minutes ago, JoeDavola said:

If I could get 9% on my savings I'd never need to even bother about buying a fucking house. Could just rent wherever I wanted to live, in whatever country.

Then go set up an investment account and buy a shitload of BAT.  You'll get dividends, and if you need to buy a house you sell the shares...

Not investment advice, etc etc etc

[AlfredTheLittle]

10 minutes ago, Castlevania said:

This is good news

It did get me thinking whether any forum favourites might count as zombie companies. I think the whole point of the companies mainly looked at here is that they probably aren't, even those with big debt are generally producing decent cash flow which will cover interest and repayments unless things go very differently to expectations.