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

[Mandalorian]

6 minutes ago, DurhamBorn said:

I bought £20k of BATs and sold that holding for £350k+ at £52.Lots of those profits went into Harmony at $1.90,Mosaic at $12 ,Sib around $3.8 ,then of course they were all sold and buying into new areas.The initial £20k in BAT has probably made me close to £600k (plus it bought my house by paying the mortgage off with those divis you hate,and helped fund my 5 years off work from 30 to 35 on top)

Iv bought £75k of BAT back at average of £24.687 and had £6 of divis since i started buying it back.Very happy so far,those divs finding their way into other investments,the last few into Sibanye.

VOD is my worst investment of the last 5 years it think,Tef Brazil on its own made me back the losses on VOD.Turkcell made me more than the VOD losses.Its annoying that the managers made mistakes but comes with investing.

BATs cash earnings are increasing every year.Thats a growth company.The market is choosing to value those cash earnings lower at the moment.Im very thankful as it meant i could buy back a big holding.

Your right index tracking the S&P is a good way for most to invest,or at least has been,but the market might be setting those people up for massive pain.Im not most people though.

 

 

 

And do you honestly think, hand on heart, that the future for tobacco and telecoms is rosy?

Tobacco - Western governments are making it slowly impossible for people to buy cigarettes.  You say growth will come from elsewhere in the world, but given EVERYBODY now knows smoking will kill them, do you really think non-western governments won't follow suit?

Telecoms - highly regulated, utility like companies with the dead hand of the state acting as a strangle hold over them.  Again, you see that growing?  Get too big for their boots and HMG will just windfall tax them.

[spygirl]

11 minutes ago, spygirl said:

Just perfect  -

The great bet on rate cuts is off

We are trapped in old ways of thinking about inflation

https://www.ft.com/content/d998d679-7d83-4e47-910e-b49370e0318b

Welcome to what Goldman Sachs is calling “reflation desperation”. For policymakers and investors, this will be a nauseating and probably lengthy ride.

The embarrassing reset has come about because it turns out the inflation dragon had not been slain after all, despite markets in effect calling victory over it late last year. 

.....

The great bet on rate cuts — and it was enormous — is dead. At the start of 2024, the expectation was for six, maybe seven, US rate cuts this year. That felt silly even then, but it is unravelling in humbling fashion. Today markets are pencilling in one, maybe two. 

Which begs the question - 

Is everyone confusign a rate pause as a peak?

Its possible that IR will be climbing a bit higher.

And that we learn that the UK - and EU - is even less 'independent' of h Fed then they claimed ~20y ago.

Me n mrs psy walk by a probate house on our way to her school.

Big but knackered.

It was bought ~2 maybe 3y ago.

Last 2 years have seen the odd tradey parked outside as they slowly refurb it.

I dont think anyone is inside - its still dark.

Lat month its stepped up - jungle garden cut down, new windows, drive put over garden, etc etc.

One, I guess thye can get tradeys now.

Two, its two late - they must be running out of money.

Theyve missed the spring bounce, that never was.

They wont be the only one.

HTB flats in London are brutal now.

[Alifelessbinary]

45 minutes ago, Mandalorian said:

Jam tomorrow.

Is VOD another one of DB's "growth* shares" like he said BATs was?

 

*Growth can be negative I suppose

You bring a nice counter balance to this thread, but there’s never been a trader who is right 100% of the time.

DB has made some incredible contrarian calls over the years, so he’s allowed the odd duff one! His 

The real judgement is how VOD performs over the next few years. While I’ve now sold most of my position I made about 65% on centrica which is amazing because it was absolutely hated at the time. I also need to wade through a long period of a heavy loss to get there. 

The one thing I’ve learnt on this thread is that if you want to be an active trader you need to hold your nose and buy stocks which are solid but hated.

[Mandalorian]

8 hours ago, DurhamBorn said:

The next Labour government will be a shit show.

The number of people who believe 'things can only get better' once rid of the Tories* is astounding.

*Nothing Tory about this shower - they have out New Laboured New Labour.

[Axeman123]

13 minutes ago, Mandalorian said:

Tobacco - Western governments are making it slowly impossible for people to buy cigarettes.  You say growth will come from elsewhere in the world, but given EVERYBODY now knows smoking will kill them, do you really think non-western governments won't follow suit?

India is still...trying to master the basics

Banning tobacco there (or Indians voluntarily foregoing it) is a long way off.

[AlfredTheLittle]

19 minutes ago, spygirl said:

Just perfect  -

The great bet on rate cuts is off

We are trapped in old ways of thinking about inflation

https://www.ft.com/content/d998d679-7d83-4e47-910e-b49370e0318b

Welcome to what Goldman Sachs is calling “reflation desperation”. For policymakers and investors, this will be a nauseating and probably lengthy ride.

The embarrassing reset has come about because it turns out the inflation dragon had not been slain after all, despite markets in effect calling victory over it late last year. 

.....

The great bet on rate cuts — and it was enormous — is dead. At the start of 2024, the expectation was for six, maybe seven, US rate cuts this year. That felt silly even then, but it is unravelling in humbling fashion. Today markets are pencilling in one, maybe two. 

It was the same when rates went to zero - we were the people saying surely they have to go up soon, and they didn't. Now everyone is saying surely they have to go down soon, and they won't.

[spygirl]

8 hours ago, DurhamBorn said:

Glad to others i respect come onto the roadmap 6 years later,the numbers were showing it back then,but of course a long way off in time,but it was underway.You would expect some policy changes by now,but nothing,they doubled down.So bennies and inflation linked none producing are driving the economy.Incredible,but true.I think when i look back at life i will remember i told Catherine Mann the above face to face.Someone who left school at 16 from the shittest of shit comps,in one of the poorest towns in the country right,the entire BOE rate setting board wrong.

The situation in the UK could not be worse.Reeves has just got herself a board of advisors,and they all think there should be NI on pension income,pensions should come under IHT,IHT is a very good thing etc.So there is a very good chance Labour simple keep allowances frozen and tax away all saved labour under we run out of savings.When John Major left office,the UK was in an incredible position.Labour destroyed it,the Tories decided to give up.The next Labour government will be a shit show.

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.

 

[Mandalorian]

Just now, Alifelessbinary said:

 

The one thing I’ve learnt on this thread is that if you want to be an active trader you need to hold your nose and buy stocks which are solid but hated.

But remember.  The overwhelming majority of active traders fail to beat a global tracker over the longer term.  Mostly because the vast majority of stock market returns come from a small number of companies* (typically 1.3% of companies.)  And as an active stockpicker, what are the odds of you having those specific companies consistently in your portfolio?

 

What's your objective?  To make money or to have a mental exercise aiming to beat the market?  This is why I have an 80/20 serious money/fun money allocation.

 

I just sometimes get the idea what you have on this thread is a bit cult like where:

- some people making gloomy predictions about the future (some of whom have arguably been successful as active investors  - but again, compared to a global tracker, how successful?) making out that certain individual companies are likely to be good investments (- who knows?)

- other people who, perhaps, aren't as well off / aren't as sophisticated an investor / don't have a large capital base "tuning in" and then actively trading with money that has a higher chance of doing well when placed in cheap tracker funds or a higher chance of "doing a VOD" than a tracker.

 

Having money in carefully selected pots is fine as long as you have plenty pots containing plenty money. 

This is why I favour trackers.  Your money is automatically diversified across thousands of companies.  Imagine having the bulk of your cash in BATS and VOD over the last 5 years because some bloke on the internet says they are growth shares. 

 

The fact that some on here genuinely think dividends are free extra money like bank interest was the first thing that made me pause for thought**.  They don't actually understand something as basic as that, so are they really in a good position to be making punts on which individual companies are likely to beat the market?  Though ultimately, grown adults can do what they like with their money.  I'm just trying to put across the alternative.

 

* Studies of 'asymmetry' by Hendrik Bessembinder – which looked at global stock market returns between 1990 and 2018 – established that just 1.3 per cent of stocks contributed all of the net gain when compared to the performance of US Treasury bills. https://magazinebailliegifford.com/lessons-from-bessembinder/

** I'm not strictly speaking against dividends as such. I just think they are an irrelevant distraction.  And I certainly don't see them as akin to interest.

[Mandalorian]

19 minutes ago, spygirl said:

Labours front bench is Stamer, Streeting and Reeves.

 

 

You forgot Rayner....

[Funn3r]

Just now, Mandalorian said:

You forgot Rayner....

Oh is she still a thing now?

[Mandalorian]

Just now, Funn3r said:

Oh is she still a thing now?

Probably not for long.  Though if she goes, you'll probably get some Momentum nutter installed as deputy leader because the membership get that vote.

[DurhamBorn]

29 minutes ago, Mandalorian said:

And do you honestly think, hand on heart, that the future for tobacco and telecoms is rosy?

Tobacco - Western governments are making it slowly impossible for people to buy cigarettes.  You say growth will come from elsewhere in the world, but given EVERYBODY now knows smoking will kill them, do you really think non-western governments won't follow suit?

Telecoms - highly regulated, utility like companies with the dead hand of the state acting as a strangle hold over them.  Again, you see that growing?  Get too big for their boots and HMG will just windfall tax them.

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.

 

[leonardratso]

bad news here;

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

[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.