Credit deflation and the reflation cycle to come (part 9)

[DurhamBorn]

19 minutes ago, Mandalorian said:

You forgot Rayner....

Rayner has done what they all did on council estates.She has fiddled the council tax and lied about where she lived.She will get away with it likely.Probably get some dodgy invoice to say she had work done on the house so no capital gains etc.When my dad was on the council during the 80s British Gas applied for some planning so councilors had to declare an interest.More than half the Labour lot put their hands up to declare an interest.They had all bought shares.Rayner is a vile creature.

13 minutes ago, leonardratso said:

bad news here;

https://www.etfstream.com/articles/hsbc-am-to-close-four-emerging-market-etfs

Great news,hugely bullish.

Edited April 18 by DurhamBorn

[leonardratso]

hahaha, just gonna miss my HTRY, it was a great fund for making 30-40% in literally weeks.

[Mandalorian]

1 minute ago, DurhamBorn said:

Do i think BAT will return much capital growth?.No i do not.However when i first bought them i read the same thing a thousand times,baccie was finished.Iv bought BAT back thinking almost all of the return will come from the divi ie 10%pa.They should also buy back 2% to 3% of their stock once debt is lower.I expect earnings will grow 2%ish a year so operating cashflow flatline to small growth.Their new products are also growing very very fast though.VELO oral nicotine for instance went to 30 million pouches a month in Pakistan from a standing start.BATs ITC holding in India is also worth almost half their debt.If they can get oral nicotine into the big EMs they could prove hugely profitable.Once debt is down they also might have £2bill spare a year they could invest into new areas.

Telcos are suffering for the reasons you state and i agree the bear case is the government picking them out for more tax.However what if thats all priced in and something changes?.What if government thinks we need these telcos,we will let them charge big tech more?/.Telco bills are tiny now in the monthly household spend.Lots of room to move higher.

They also dont need to do much to be hugely under valued.Pay down debt,then slowly increase the divi would do it.I expected PEs to contract in many areas to the 5s to 9s areas once the markets woke up to the fact inflation was going nowhere.Telcos have done that and im up on the sector,just up,but up.I love setups where rubber bands are pulled right back because it only takes "something" to change for big profits.

Im also at the stage where if BAT just returned me that divi the rest of my life id be very happy.Tracking the S&P is no good to me seeing as i have retired,if it tanks 35%+ and im drawing down 4% a year,then it flat lines for a few years half your retirement savings are gone.Gilt holders in the UK found that out over the last few years.So yes over the long term the S&P might outperform BAT etc,but the risk it much greater for the stage of my life.

I have never had any interest in tracking an index.Its just not for me.

 

If the US index collapses (the world's largest stock market) , what do you think BATS will do?

Hint:  look at the Covid graphs.  From a quick look it appears the S&P fell less than BATS.

 

Comparison with a stagnating US market is a bit of a moot point.

If BATS stagnated for years and chucked back your own capital at a 10% yield per annum, then BATS would decline in value by 10% per annum (plus or minus market movements) so they'd be forced to cut the dividend.  No, they didn't cut the dividend after covid because the market bounced back pretty quickly, but in a period of prolonged share price stagnation they would be forced to or the share price would just keep falling after every XD day.

[Mandalorian]

5 minutes ago, DurhamBorn said:

Rayner has done what they all did on council estates.She has fiddled the council tax and lied about where she lived.She will get away with it likely.Probably get some dodgy invoice to say she had work done on the house so no capital gains etc.When my dad was on the council during the 80s British Gas applied for some planning so councilors had to declare an interest.More than half the Labour lot put their hands up to declare an interest.They had all bought shares.Rayner is a while creature.

 

Also worth looking who the Manchester Police and Crime Commissioner is.  Step forward, Andy Burnham's deputy Kate Green.

[SpectrumFX]

49 minutes ago, spygirl said:

Labour in 94 had a fantastic economy to forward to with growing tax revenue and a huge number of Pols that have had the daft Marxism knocked out of them over ~15y in opposition.

Unfortunately Smith dropped dead and the Cunt brothers entered.

Labour in 2014 have an economy where 10% of workers pay 80%+ of revenue.

40% are sat around doing fuck all bar drawing revenue.

Labours front bench is Stamer, Streeting and Reeves.

Thats it. They have to cycle the same three on telly as theres noone else they can trust.

3/4 of Labour are basically cretinous Marxist selected by Momentum.

I cant see how Labour will last.

 

I was thinking this through the other day, and I think that we've reached the point where even if someone was in charge who had the vision and ability to fix this country, I don't think they'd be allowed to do it.

As a thought experiment imagine a scenario where the next prime minister was a political genius who had all the answers, who was prepared to make all of the hard and unpopular decisions, who cared more about the future of this country than his own position in history, and was prepared to take the blame for all of the hard policies and consequent sad face nonsense that would be needed to fix this mess. How could he actually do it?

In that scenario how far could he get in any reform programme before he was removed by the vested interested who would lose out in the necessary reforms?

As a frame of reference Liz Truss lasted 50 days before she was replaced by an establishment stooge who wouldn't rock the boat. What she was proposing wasn't even that radical.

 

 

 

[DurhamBorn]

7 minutes ago, Mandalorian said:

If the US index collapses (the world's largest stock market) , what do you think BATS will do?

Hint:  look at the Covid graphs.  From a quick look it appears the S&P fell less than BATS.

 

Comparison with a stagnating US market is a bit of a moot point.

If BATS stagnated for years and chucked back your own capital at a 10% yield per annum, then BATS would decline in value by 10% per annum (plus or minus market movements) so they'd be forced to cut the dividend.  No, they didn't cut the dividend after covid because the market bounced back pretty quickly, but in a period of prolonged share price stagnation they would be forced to or the share price would just keep falling after every XD day.

BAT have £3billion spare a year after the divi of £5billion.I suspect the divi will be safe for a long time.The risk with BAT is they need to pay down debt so cannot commit that £3billion to share buy backs.I think they will buy back 2% of their stock a year though for £1bill going forward,use £2 bill to de-leverage and then maybe invest in new areas over time.I sold most of IMPs though still own some.They can buy back 6% of their equity each year,but i dont think their new products,or their market reach is anywhere near BATs.I would not buy BAT above £29,but i think at these levels they should provide me with what i want from them.A high,steady very slowly growing income across cycles.The interesting thing about when i first bought BAT at i think around £3.60 a share was i had bought a bus company called Arriva,northern bus company,came out of a group called Cowies i think for £1,and sold them quite quickly for £5 and bought BAT,so i think the initial investment was £4k.The UK market was much bigger then,it seems to be withering away now due to our socialist leaders.

[Mandalorian]

3 minutes ago, SpectrumFX said:

I was thinking this through the other day, and I think that we've reached the point where even if someone was in charge who had the vision and ability to fix this country, I don't think they'd be allowed to do it.

As a thought experiment imagine a scenario where the next prime minister was a political genius who had all the answers, who was prepared to make all of the hard and unpopular decisions, who cared more about the future of this country than his own position in history, and was prepared to take the blame for all of the hard policies and consequent sad face nonsense that would be needed to fix this mess. How could he actually do it?

In that scenario how far could he get in any reform programme before he was removed by the vested interested who would lose out in the necessary reforms?

As a frame of reference Liz Truss lasted 50 days before she was replaced by an establishment stooge who wouldn't rock the boat. What she was proposing wasn't even that radical.

 

 

 

Liz Truss was an idiot for not saying "No.  I won't resign and if you lot try and force me out then my last act as PM will be asking the King to call a General Election.  if I'm going then you lot come with me."

[Mandalorian]

2 minutes ago, DurhamBorn said:

BAT have £3billion spare a year after the divi of £5billion.I suspect the divi will be safe for a long time.The risk with BAT is they need to pay down debt so cannot commit that £3billion to share buy backs.I think they will buy back 2% of their stock a year though for £1bill going forward,use £2 bill to de-leverage and then maybe invest in new areas over time.I sold most of IMPs though still own some.They can buy back 6% of their equity each year,but i dont think their new products,or their market reach is anywhere near BATs.I would not buy BAT above £29,but i think at these levels they should provide me with what i want from them.A high,steady very slowly growing income across cycles.The interesting thing about when i first bought BAT at i think around £3.60 a share was i had bought a bus company called Arriva,northern bus company,came out of a group called Cowies i think for £1,and sold them quite quickly for £5 and bought BAT,so i think the initial investment was £4k.The UK market was much bigger then,it seems to be withering away now due to our socialist leaders.

But again.  That £3bn and £5bn a year belongs to shareholders and are already in the share price.  Each time that £5bn is paid out, the market cap would fall by £5bn in the stagnating market.

 

We agree that the UK market is dying.  Lots of fund managers/business leaders are agitating about it but they are pissing in the wind.  Under Labour, the British stock market will only get worse.  People like you and I are the enemy....

[Axeman123]

5 minutes ago, SpectrumFX said:

As a frame of reference Liz Truss lasted 50 days before she was replaced by an establishment stooge who wouldn't rock the boat. What she was proposing wasn't even that radical.

I actually agree with 99.9% of your post, and the tiny unfunded tax-cut that allegedly spooked markets was indeed a nothing burger, however stopping paying interest on banks' reserves was a big deal.

It is a classic EM move and generally signals shit going down hill fast. The very fact that Truss/Kwarteng dropped the idea so rapidly once the pushback began implies (at least to me) that they had blundered into it without understanding the implications. Starting a major shitstorm with a plan is one thing, doing it by accident is not a good look.

[Axeman123]

6 minutes ago, Mandalorian said:

Liz Truss was an idiot for not saying "No.  I won't resign and if you lot try and force me out then my last act as PM will be asking the King to call a General Election.  if I'm going then you lot come with me."

It seems to be part of the standard story arc. Pishy has hinted along those lines, and BJ made exactly the same threat towards the end. Cameron obviously jumped rather than pushed, like Blair ironically, so you are back to Thatcher for the previous comparable PM to have been ousted mid-term.

[DurhamBorn]

https://www.telegraph.co.uk/business/2024/04/17/hunt-bring-down-benefit-bill-worklessness-crisis/

[Mandalorian]

1 minute ago, DurhamBorn said:

https://www.telegraph.co.uk/business/2024/04/17/hunt-bring-down-benefit-bill-worklessness-crisis/

Gets the idea but has no idea how to do it.

In fact, I suspect ALL OF THEM get the idea but don't know how to do it.

Sadly, the mugs who pick up the tab will carry on paying for it and I suspect this year's ISA allowance is the last one we will get.

[Errol]

1 hour ago, leonardratso said:

bad news here;

https://www.etfstream.com/articles/hsbc-am-to-close-four-emerging-market-etfs

Good contrarian indicator.

[leonardratso]

6 minutes ago, Errol said:

Good contrarian indicator.

How do they make money on these MSCI funds? is it just the management fee + any other fees they can muster?

[Axeman123]

A blubbering idiot writes:

The Bank of England might cut interest rates before the Fed — here's why

Don't even bother with the article. It seems like it is just boilerplate to justify a headline.

https://uk.finance.yahoo.com/news/bank-england-could-cut-interest-095024596.html

[Axeman123]

4 minutes ago, leonardratso said:

How do they make money on these MSCI funds? is it just the management fee + any other fees they can muster?

AIUI purely the fee, as you say. Any ETF with sub £100M AUM is hanging by a thread just because of the profitability tipping point.

[Harley]

35 minutes ago, Axeman123 said:

AIUI purely the fee, as you say. Any ETF with sub £100M AUM is hanging by a thread just because of the profitability tipping point.

They also make on securities lending, although not all do on some etfs.  You allegedly get a share via a lower TER but how many people look at the counterparty risk?  JustETF detail the status for each etf. 

Some loan to collateral ratios look very low (e.g. 105%, even at 115%).  Then there's the issue of who the securities are lent to.  You have to dig to find the data, if indeed it's provided on a timely basis.

We always only look at ETFs over £100m (a filter available in JustETF) and higher the better as another consideration is for is good liquidity (AUM is a proxy although we look at various trading volume averages).

Edited April 18 by Harley

[invalid]

1 hour ago, leonardratso said:

bad news here;

https://www.etfstream.com/articles/hsbc-am-to-close-four-emerging-market-etfs

 

That's a shame, I have some of those, luckily not a lot.

What happens when they close? Do they just sell all their holdings and then buyback all the shares of the ETF?

 

[leonardratso]

6 minutes ago, invalid said:

 

That's a shame, I have some of those, luckily not a lot.

What happens when they close? Do they just sell all their holdings and then buyback all the shares of the ETF?

 

Hmm dunno, theres a corporate event on aj bell, ill copy it here in a bit, explains a bit more.

[leonardratso]

Notes

HSBC ETFs plc has advised that the HSBC MSCI Turkey UCITS ETF will close with effect from 10 May 2024. Any units held at the closure date will be sold by the fund manager and the proceeds from the sale will be applied to your account. In accordance with the prospectus, the Directors have the discretion to redeem all of the shares and terminate the fund if the total net asset value of the fund falls below USD50 million. The fund has now fallen below this threshold and the Directors have made the decision to compulsorily redeem the shares and close the fund. For further information, please copy and paste the below link into your web browser: https://www.assetmanagement.hsbc.co.uk/-/media/files/attachments/common/etf/hsbc-etfs-plc-termination-notice-to-shareholders-en-latam.pdf If you wish to sell your holding prior to the fund closure, please ensure the request is completed via the normal procedure by 8 May 2024. The shares will be delisted from the London Stock Exchange on 15 May 2024. Any remaining shares at the closure date will be compulsorily redeemed, and your account will be credited with the proceeds on or around 24 May 2024. Please be advised in some circumstances there may be delays in the proceeds being credited to us from our custodian. Please allow 10 working days for your account to be updated. Please copy and paste the below FAQ link into your web browser for more information on corporate actions: https://www.ajbell.co.uk/sites/ajbell.co.uk/files/AJB_Corporate_action_FAQs.pdf IMPORTANT NOTE - If you have any questions or queries regarding this event, please send us a secure message and ensure you quote the following in the ??Subject?? field: CORPORATE ACTION - HSBC MSCI Turkey UCITS ETF - 9846520 Updated: 18/04/24

[BurntBread]

1 hour ago, Mandalorian said:

If BATS stagnated for years and chucked back your own capital at a 10% yield per annum, then BATS would decline in value by 10% per annum (plus or minus market movements) so they'd be forced to cut the dividend.

You seem to be ignoring the possibility that a company can make a profit from its ongoing operations (after depreciation of assets). If BATS makes 10% of its market cap each year in profits and hands this back to shareholders, then it can go on doing so indefinitely without the market cap falling, long-term.

If it never makes a profit -- say it was a cash ETF, rather than a company -- then sure, it's value will fall 10% each time it pays out 10% of its market capitalisation, and its value won't (on average) increase again before the next payout.

[honkydonkey]

2 hours ago, leonardratso said:

bad news here;

https://www.etfstream.com/articles/hsbc-am-to-close-four-emerging-market-etfs

Thanks. I literally bought HBRL today the clucking funts.

[Bobthebuilder]

19 minutes ago, BurntBread said:

If BATS makes 10% of its market cap each year in profits and hands this back to shareholders

I would like to see a graph of say the SP500 next to bats over a 5 year period with the divis reinvested, rather than get your capital back every quarter just add to the pot as a tracker does.

[Mandalorian]

49 minutes ago, BurntBread said:

You seem to be ignoring the possibility that a company can make a profit from its ongoing operations (after depreciation of assets). If BATS makes 10% of its market cap each year in profits and hands this back to shareholders, then it can go on doing so indefinitely without the market cap falling, long-term.

If it never makes a profit -- say it was a cash ETF, rather than a company -- then sure, it's value will fall 10% each time it pays out 10% of its market capitalisation, and its value won't (on average) increase again before the next payout.

We said, for the purposes of this discussion, the market was stagnant.  I.e  The assumption the market movement of the share price is sideways.  Though I do take your point.

27 minutes ago, Bobthebuilder said:

I would like to see a graph of say the SP500 next to bats over a 5 year period with the divis reinvested, rather than get your capital back every quarter just add to the pot as a tracker does.

The graphs I post are total return, so they include dividends.

Depends what kind of tracker you have.  Distributing (dividends paid) or accumulating (dividends retained).

Edited April 18 by Mandalorian

[Pip321]

52 minutes ago, Harley said:

They also make on securities lending, although not all do on some etfs.  You allegedly get a share via a lower TER but how many people look at the counterparty risk?  JustETF detail the status for each etf. 

Some loan to collateral ratios look very low (e.g. 105%, even at 115%).  Then there's the issue of who the securities are lent to.  You have to dig to find the data, if indeed it's provided on a timely basis.

We always only look at ETFs over £100m (a filter available in JustETF) and higher the better as another consideration is for is good liquidity (AUM is a proxy although we look at various trading volume averages).

That’s interesting that you look at fund size, something I hadn’t really considered.

I hold Blackrock Gold and that’s £800m…no problemo.

However I was looking to add Abdn Latin America when it ladders down a bit first. That fund is £85m. I will factor this in….maybe reduce my intended holding. 

https://www.fundslibrary.co.uk/FundsLibrary.BrandedTools/Pru/DataOnline/HtmlFactsheet/9bb44328-81e5-4f21-a4d6-0c510c0f9428?displayThirdPartyFactsheetLink=True&fundType=retirement_account.pru#portfolio-analysis

 

Edited April 18 by Pip321