Credit deflation and the reflation cycle to come (part 8)

[JMD]

6 hours ago, DurhamBorn said:

Some companies make more.10% price increases if only 2% customer losses etc.Baccie companies have done it for decades.

Markets go up on liquidity,and worldwide there is now record liquidity.Massive demand destruction in some areas as boomers die off,including for government gilts as pension schemes wind down.

Yes, finding those companies/sectors that are 'price-makers', not price-takers, is key. Most are  decomplex, start of the supply chain, providers of necessities, commodity sector type companies, eg. oil+gas sector, including energy services/infrastructure. Or those companies that can sweat their assets this cycle such as telecoms.     

...There are other examples, and an important thread subject I think, which I think  has been discussed for a long while. Maybe others might like to contribute their own favorites? eg. on my BK buy list under 'government favoured monopolies' (ie part of the rentier economy) are the stock exchanges?   (and not just the ASX, for example otc markets group looks interesting)

Edited February 5 by JMD

[Harley]

1 hour ago, Hardhat said:

What's this got to do with 5g or psyops?

Looks like a pretty standard warehouse automation system, we've been using them over here for at least ten years.

 

Edit: e.g. Ocado

 

I did some work for a Japanese equipment manufacturer in the 90s.  Everything came in crates from Japan apart from "Harry", "Bob", and "Jim" who flew.  I was there to try and make it "fit" into the UK.  In the end, you stood on a balcony and watched automated machines make automated machines.  A one shop floor guy operation.  Presumably with an oil can.  Loads of backoffice though puzzled why orders did not 100% match deliveries which did not 100% match invoices.  Had to create some new job roles!

Edited February 5 by Harley

[Harley]

31 minutes ago, DoINeedOne said:

Interesting video, showing what most see everywhere the towns that used to be thriving now endless empty shops, that tower block in Harlow is ridiculous the amount of land the carpark was taking up

Pretty much at the point that everyone is giving up

Us older folk have been here before, some twice!

[Pip321]

3 hours ago, sancho panza said:

SOme are already there. @kibuc (hive mind junior goldie go to) pointed out sometime back,as did ptehrs, that costs have been rising particualrly oil and wanred on AISC rising.I think that needs bearing in mind.

We've stopped buying the junioer goldies jsut too much stress and losses tbh but weve done well with tier 1 and 2s.

Currently,we sold BVN and New Gold a month back giving us a nice war chest.I am tempted by Newmont here which is trading a substantial discount to GDX off the lows in 2020 due ot the newcrest take over.Once that settles,they'll be the first recipient of insto moeny flowing in if it ever does.

GDX low Mar 20(yellow line) vs Newmont

Decl:we have a red running 4.5% position in NEM at $46

Inflation inherehently leads to smart moeny hiding in assets which can raise prices with inflation.Stocks are a decent place to go in usch circumstances.This looming recession will be like no other imho.We will see a credit deflation but it may not hit stocks particualrly hard as oilies/goldies rise versus real estate and tech.

S&P Mervel is the big Argentine Index aiui

https://www.investing.com/indices/world-indices

 

Thanks....really detailed as ever, appreciated. I will reflect as ever.  

My plan is to move a large amount into BlackRock Gold & General D which will be hopefully getting dragged down with Newmont.  I want this fund purely because its what is available in my Pru pension (appreciate that is the tail wagging the dog) but like many my direct investments haven't served me well (poly, fres) and I am looking to be really passive on some more chunky positions. The key is holding my nerve for a bottom and I have set some prices already. 

Then mix that with JP Morgan Natural resources 

These funds (plus a Latin America one, Pru general Growth Fund and another EM one) will be a passive position which I review a few times a year depending where the macros (and perhaps the AISC impact etc) are taking us. 

Then my S&S ISA (plus a small AJ Bell & Hargreaves SIPP) can be a trading accounts for fun. I still believe in those trading accounts a punt in for example BT could end up being a really nice play particular when I am only trying to beat cash. My idea of trading is maybe switching each month or holding for 2 years depending on the flow....

[janch]

5 hours ago, No One said:

 

I agree this is a good explanation and I particularly liked the bit with Dominic Frisby.

However I'm still sceptical about eg nurses needing foodbanks.  Until I see none of the whole aisles of fizzy sugar water in supermarkets will I believe people are genuinely on their uppers.  There is a real crisis of people not knowing what to eat and drink to keep them healthy all driven by big food companies.  All processed foods are expensive and full of chemicals etc.  No wonder we have so much diabetes and other poor health and that's even before big pharma have got involved with their miracle vax.

Only yesterday were the MSM having a thing about children having all their teeth extracted as they were rotten.  Please stop giving them expensive sugar water. 

 

[Royston]

On 04/02/2024 at 11:44, Plan-b said:

Slowly at first then all of a sudden.

Every time.

Slowly is an understatement. 

I think this economic collapse could be measured on a geological timescale.

[Harley]

47 minutes ago, Pip321 said:

Thanks....really detailed as ever, appreciated. I will reflect as ever.  

My plan is to move a large amount into BlackRock Gold & General D which will be hopefully getting dragged down with Newmont.  I want this fund purely because its what is available in my Pru pension (appreciate that is the tail wagging the dog) but like many my direct investments haven't served me well (poly, fres) and I am looking to be really passive on some more chunky positions. The key is holding my nerve for a bottom and I have set some prices already. 

Then mix that with JP Morgan Natural resources 

These funds (plus a Latin America one, Pru general Growth Fund and another EM one) will be a passive position which I review a few times a year depending where the macros (and perhaps the AISC impact etc) are taking us. 

Then my S&S ISA (plus a small AJ Bell & Hargreaves SIPP) can be a trading accounts for fun. I still believe in those trading accounts a punt in for example BT could end up being a really nice play particular when I am only trying to beat cash. My idea of trading is maybe switching each month or holding for 2 years depending on the flow....

I did what I said I would and ran my filters against the precious metals industry without the financial filters (so just the technicals except for a min $500M cap). 

Eight on the screen of primarily daily data but none I would go for based on a closer look.  NEM has dropped out too.  One on the screen of primarily weekly data which I would defo not buy atm.  Three on the screen of primarily monthly data of which one would be a possibility but has already run 18% and looks to be weakening over the short term. GDGB sums it up well.  Look at the HA candles on its daily and monthly, a classic reversal.  So for me, not there yet.

On vehicles, I'm still OK bagging a few premiere yielding stocks but essentially I'm ETF based at the sector, theme, country level.  That said, unlike WENS and co, GDGB never behaves itself technically!

PS:  I ignored the latest signals on ELD.ASX and YAL.ASX and see where they are now!

Edited February 5 by Harley

[ThoughtCriminal]

[Heart's Ease]

30 minutes ago, Pip321 said:

Thanks....really detailed as ever, appreciated. I will reflect as ever.  

My plan is to move a large amount into BlackRock Gold & General D which will be hopefully getting dragged down with Newmont.  I want this fund purely because its what is available in my Pru pension (appreciate that is the tail wagging the dog) but like many my direct investments haven't served me well (poly, fres) and I am looking to be really passive on some more chunky positions. The key is holding my nerve for a bottom and I have set some prices already. 

Then mix that with JP Morgan Natural resources 

These funds (plus a Latin America one, Pru general Growth Fund and another EM one) will be a passive position which I review a few times a year depending where the macros (and perhaps the AISC impact etc) are taking us. 

Then my S&S ISA (plus a small AJ Bell & Hargreaves SIPP) can be a trading accounts for fun. I still believe in those trading accounts a punt in for example BT could end up being a really nice play particular when I am only trying to beat cash. My idea of trading is maybe switching each month or holding for 2 years depending on the flow....

@Pip321

These are all old old friends and just a couple more for me to have a full house.  Some of the miners are massively down but we hold on. We'll take a moment to remember the Mighty Panther which was possibly before your time. RIP, Panther.

It's a weird dosbods woo thing but with my bats/BT/BP divs I had set my hat over the weekend at Newmont. First ladder in today.

 

[Harley]

China is to the EMs what the Mag7 are to the S&P.  A bounce off the higher low and you get to see which EM ETFs are stuffed full of China!  Meanwhile the news and yappers do what the news and yappers do!

[Jesus Wept]

 

How Low can Vodaphone go?

(Alliance News) - Vodafone Group on Monday said that its third quarter had shown sustained revenue growth in Europe and Africa, as the company reiterated its guidance for the full year. 

The British telecommunications company said that total revenue for the quarter ended December 31 was EUR11.37 billion. This represents a 3% decrease from EUR11.64 billion in the third quarter of 2022, but a 4.2% jump on an organic basis. 

Germany, the group's largest market, saw revenue grow slightly to EUR2.89 billion in the quarter from EUR2.88 billion a year prior.

Commercial trends have begun to improve in Germany, Vodafone said, with 0.3% service revenue growth compared to a 0.1% decline in the second quarter. The company is preparing for a change in the country's TV laws, which take effect from July, that will end the practice of bulk TV contracting in multifamily apartment complexes. Vodafone has begun migrating users to individual customer contracts "at scale", having already done so for between 35% and 65% of these households. 

Vodafone Business revenue growth accelerated to 5.0% on an organic basis, thanks to "strong performance in digital services", the company said. Vodacom, the company's South Africa-based mobile communications company, increased revenue 8.8%, with growth across South Africa, Egypt and international markets. No revenue figures were provided alongside the percentage changes. 

Vodafone reiterated its guidance for the full year ending March 31, and expects adjusted earnings before interest tax depreciation and amortisation of around EUR13.3 billion alongside roughly EUR3.3 billion in adjusted free cash flow. Last year, Vodafone posted Ebitda of EUR14.7 billion, alongside EUR45.71 billion in revenue.

Chief Executive Officer Margherita Della Valle said: "We've made good strategic progress in the first nine months of the year, with improving customer satisfaction and three consecutive quarters of service revenue growth in Europe. Our announced transactions in the UK and Spain are progressing well, and we are in active discussions in Italy."

Shares were down 3.3% at 66.6pence each in London on Monday end of day…

This price is bringing the current yield to 12% ??!!  is there something very amiss with VOD ? @DurhamBorn always value your insight / opinion on stuff like this .

I have laddered down in to VOD buying at 69p a few weeks ago. Worth a final purchase of a tranche? 

 

Edited February 5 by Jesus Wept

[Jesus Wept]

7 hours ago, wherebee said:

….look at who made it big in Weimar, it was those that rode the shares and debt market but cashed out before the collapse to buy real assets like farms and houses with no debt attached.
Of course, ten years later the russians took everything anyway and raped their daughters, but you can't win em all.

This ^ Love that post @wherebee

It’s little nuggets like these posts why I return again and again to this site…. @wherebee cheers 
 

Edited February 5 by Jesus Wept

[JMD]

How the wealthy ($30M+) invest their wealth...   Over half their assets are in real estate...

Makes sense really as the most valuable global asset class is real estate, far bigger than the total value of the equity market for example. 

https://www.visualcapitalist.com/visualizing-the-investments-of-the-ultra-wealthy/

 

Edited February 5 by JMD

[sancho panza]

1 hour ago, janch said:

I agree this is a good explanation and I particularly liked the bit with Dominic Frisby.

However I'm still sceptical about eg nurses needing foodbanks.  Until I see none of the whole aisles of fizzy sugar water in supermarkets will I believe people are genuinely on their uppers.  There is a real crisis of people not knowing what to eat and drink to keep them healthy all driven by big food companies.  All processed foods are expensive and full of chemicals etc.  No wonder we have so much diabetes and other poor health and that's even before big pharma have got involved with their miracle vax.

Only yesterday were the MSM having a thing about children having all their teeth extracted as they were rotten.  Please stop giving them expensive sugar water. 

 

Im scpetical too but some people are deep in debt and people on wages are exposed to inflation.

A friend delivered for a few years to Coops.He said it was amazing how his delvieries to poor areas in Liecestershire were dominated by booze,fags,cat food.He asked the manager at one Coop why when he devleired there there was so few cages of food.

Manager replied that they use the food banks and then spend their moeny on the stuff they cant get there.

I ofyten see food bank usage touted by politicians looking to rpint mroe cash and spend it.Im not sure it's a relaible indicator of poverty.Same with claiman counts.Life on bennies if you can get disability is pretty decent (read inflation linkedn) compared to life in a low age job that gets 3% pay rises a year after the inflation has cocured.

Dont get me worng.I see homelss people and people really up against it at work.All it tkaes is a bad debt/divoce/loss of a job and you're on the street.

but the govt makes choices in terms of who it spends its money on,and hard up working people arent at the front of the queue.It breaks me when I see Brits homeless and migrants put up in 4 star hotels

7 hours ago, No One said:

 

that was superbly done.Thx for psoting

1 hour ago, Pip321 said:

Thanks....really detailed as ever, appreciated. I will reflect as ever.  

My plan is to move a large amount into BlackRock Gold & General D which will be hopefully getting dragged down with Newmont.  I want this fund purely because its what is available in my Pru pension (appreciate that is the tail wagging the dog) but like many my direct investments haven't served me well (poly, fres) and I am looking to be really passive on some more chunky positions. The key is holding my nerve for a bottom and I have set some prices already. 

Then mix that with JP Morgan Natural resources 

These funds (plus a Latin America one, Pru general Growth Fund and another EM one) will be a passive position which I review a few times a year depending where the macros (and perhaps the AISC impact etc) are taking us. 

Then my S&S ISA (plus a small AJ Bell & Hargreaves SIPP) can be a trading accounts for fun. I still believe in those trading accounts a punt in for example BT could end up being a really nice play particular when I am only trying to beat cash. My idea of trading is maybe switching each month or holding for 2 years depending on the flow....

the goldies in that basket are a mixed bag.some good value but a lot high in their range.But then Im a confiremd 'spray and pray'er.using a basket like that will insure you agaisnt the downside.

the resources basket looks an intersitng rprospect and a really nie balance of divi payers.

[DurhamBorn]

31 minutes ago, Jesus Wept said:

 

How Low can Vodaphone go?

(Alliance News) - Vodafone Group on Monday said that its third quarter had shown sustained revenue growth in Europe and Africa, as the company reiterated its guidance for the full year. 

The British telecommunications company said that total revenue for the quarter ended December 31 was EUR11.37 billion. This represents a 3% decrease from EUR11.64 billion in the third quarter of 2022, but a 4.2% jump on an organic basis. 

Germany, the group's largest market, saw revenue grow slightly to EUR2.89 billion in the quarter from EUR2.88 billion a year prior.

Commercial trends have begun to improve in Germany, Vodafone said, with 0.3% service revenue growth compared to a 0.1% decline in the second quarter. The company is preparing for a change in the country's TV laws, which take effect from July, that will end the practice of bulk TV contracting in multifamily apartment complexes. Vodafone has begun migrating users to individual customer contracts "at scale", having already done so for between 35% and 65% of these households. 

Vodafone Business revenue growth accelerated to 5.0% on an organic basis, thanks to "strong performance in digital services", the company said. Vodacom, the company's South Africa-based mobile communications company, increased revenue 8.8%, with growth across South Africa, Egypt and international markets. No revenue figures were provided alongside the percentage changes. 

Vodafone reiterated its guidance for the full year ending March 31, and expects adjusted earnings before interest tax depreciation and amortisation of around EUR13.3 billion alongside roughly EUR3.3 billion in adjusted free cash flow. Last year, Vodafone posted Ebitda of EUR14.7 billion, alongside EUR45.71 billion in revenue.

Chief Executive Officer Margherita Della Valle said: "We've made good strategic progress in the first nine months of the year, with improving customer satisfaction and three consecutive quarters of service revenue growth in Europe. Our announced transactions in the UK and Spain are progressing well, and we are in active discussions in Italy."

Shares were down 3.3% at 66.6pence each in London on Monday end of day…

This price is bringing the current yield to 12% ??!!  is there something very amiss with VOD ? @DurhamBorn always value your insight / opinion on stuff like this .

I have laddered down in to VOD buying at 69p a few weeks ago. Worth a final purchase of a tranche? 

 

I think its the debt and a lot of moving parts.I suspect in May we might get a 25% divi cut,but a £2billion share buy back.The balance sheet is perfect in the way the debt is structured,but they really need to redeem some of it over time as it comes off rather than renew at higher rates.The thing is the debt to EBITDa is fine,but to free cash flow it is way to high.Thats the things with telcos though.If CAPEX tops out and OPEX then flatlines free cash conversion grows fast.

The divi costs around £2billion,i suspect they would like that at £1.5bill for the next few years because it means they will be able to split the other £1.5bill between share buy backs and debt redeem depending on whats coming off.

The regulation will have to allow more profit for telcos in Europe though in the end,or they will fall way behind.I would not add any to mine,and they have been a poor investment,but they do have a chance to come good in the end.

[Loki]

1 hour ago, ThoughtCriminal said:

More pointless non-job overheads on the productive 

[Axeman123]

22 minutes ago, JMD said:

How the wealthy ($30M+) invest their wealth...   Over half their assets are in real estate...

Is that the target allocation though, or just a lack of rebalancing?

Once upon a time 10% in primary residence was a "rule" bandied about, since under normal circumstances few people would ever liquidate that voluntarily (and potentially lose social standing).

[Red Debt Redemption]

9 hours ago, DurhamBorn said:

Thats where we are.In the UK the productive will be losing up to 65% of their spending power on present policies.The country has an under production of around 35%,but by inflation protecting bennies and retired public sector etc the productive must lose their share as well.Its happening because of policy errors.

What you will see now is the huge pain on lower paid working that then slowly moves up the income scale.The higher paid who have high costs will also suffer.In simple terms the UK economic pie is slowly shrinking and that smaller pie is being given more and more to the none producing.Its speeding up.

Olive oil was £2.39 in Lidl when i stocked up in Feb 20.Yesterday it increased to £4.79.

The government bumped up NMW rather than cut bennies,but that will just feed more inflation,and see a wave of job losses.It looks like tipping point for lots of companies.

More and more sharing  will be next.Sharing cars,houses etc more and more.

1L Extra virgin olive oil £2.40 Jan 2022 now £7.60. Its not stopping.

Edited February 5 by Red Debt Redemption

[Plan-b]

50 minutes ago, Loki said:

More pointless non-job overheads on the productive 

[Jay]

2 hours ago, Harley said:

China is to the EMs what the Mag7 are to the S&P.  A bounce off the higher low and you get to see which EM ETFs are stuffed full of China!  Meanwhile the news and yappers do what the news and yappers do!

Really..over the last year the mag7 have been multi bagging..the results out last week show continued growth..China on the other hand has been falling depending on your index..hang seng which I hold is 20% down over the year…Chinese have made some effort to boost liquidity but muted response from the indices..

I would not buy the mag7 at these levels but imo China is not going to be roaring based on current evidence and there are better em opportunities imo..evergrande story ain’t finished yet..

[Mandalorian]

4 hours ago, Harley said:

I just heard even a normie (i.e. financially illiterate) friend of mine is now worried about that and may at least take the 25% now.  Me, I already did before the last budget, Goes into my ISA.  My only worry is your pension is better ring fenced than other assets (or should that be only the HMG wolf is allowed inside!).

Starmer and his goons will be taking that too.  Or the tax free status at any rate - so then they take the rest by CGT or dividend tax.

Edited February 5 by Mandalorian

[MrFanciful]

Alasdair Macleod just posted this on his Substack. He recommends giving it a watch, not simply because he contributed to it but to help others understand how banks create credit.
 

 

[honkydonkey]

1 hour ago, Red Debt Redemption said:

1L Extra virgin olive oil £2.40 Jan 2022 now £7.60. Its not stopping.

It's the same price in the supermarkets in Portugal and I'm surrounded by olive trees. I think it's more a bad harvest/year type thing than inflation. Sunflower oil is e1,65 a litre, remember what that went to early in 2022 when Russia invaded.  Double that.

[wherebee]

Just bought some more GDXJ.  It's been a solid capital gainer for me over the past 4 years - in and out on a regular basis.  This time I am buying back at 33 exactly the same amount I sold at 41.  After trading costs, that's 1500 bucks profit over a 11month period on an investment amount of 7.5k, or a simple return of 14%+.  Dividends are small (couple of hundred bucks only in 23).

If/when GDXJ hits the 40-45 range, I'll sell the same amount again, unless I really think it's the start of the gold run.

I've now got 40k in GDXJ and I am pretty sure back in 2020 I started with around 20kish.  No, I don't always hit the highpoints or the lowpoints (for example back in 22 I sold out in the low 40's and it went on to touch near 50 before coming back down) but as a steady way of accumulating capital it's been a solid.  It's a very sentiment driven retail stock, especially the sentiment of US retail investors, and I like that.

I post this not to say how smart I am (boy you should see the sea of red on my small aussie miners) but people have asked about experiences of trading in and out and how to take the emotion out of it - for GDXJ, this is my style.

[JoeDavola]

1 hour ago, wherebee said:

I post this not to say how smart I am