Credit deflation and the reflation cycle to come.

[dgul]

6 minutes ago, eek said:

You won't need many. Manufacturing (as with everything else) isn't labour intensive anymore its machine / capital intensive. Once built its often 1 person loading raw materials, 1 person (possibly the same person) loading the finished products...

That's what Elon Musk thought.

[eek]

2 minutes ago, dgul said:

That's what Elon Musk thought.

True, but it's still a numbers game albeit not as blunt as my example. 

Plant Oxford employed 20,000+ in the early 1970's in 2011 Mini employed 3,700.... from https://en.wikipedia.org/wiki/Plant_Oxford

Elon Musk's problem is that cars are highly complex and Nissan, Toyota, Honda, VW, BMW.... have spent 20 years automating everything they can. He couldn't see why the remaining people are there and thought he could easily automate those away as well...

[DurhamBorn]

12 hours ago, Clueless Imbecile said:

Hi DurhamBorn.

Thanks for your comments on this fascinating thread.

My investment strategy still relies mostly on index-tracker funds spread across global markets.
However, having been inspired by this thread, I have invested a modest amount in some individual stocks, in the hope of hedging against the kind of scenario that you describe on this thread.

So far, I've invested in the following:

BT GROUP
VODAFONE GROUP
CENTRICA
YAMANA GOLD INC COM NPV
SIBANYE GOLD LTD SPON ADR EACH REP 4 ORD SHS
HARMONY GOLD MNG SPON ADR REP 1 ORD ZAR0.50
NEW GOLD INC COM NPV
ENDEAVOUR SILVER C COM NPV

I think I've got room to invest in a few more stocks. I was trying to think of what other sectors/companies might benefit from the scenario you describe. Maybe a travel company? I thought you mentioned Stagecoach somewhere earlier in the thread, but its share price seemed to have risen a lot since then. Also, I feel quite tempted by Lloyds, due to its current relatively low share price, although I doubt it really fits in with the infrastructure/depreciation scenario. Then again, generally speaking, banks seem to usually do OK, perhaps due to having such strong lobbying power/influence over governments/policy. What is your current view of the banks and how they might fare over the next 10 years?

Considering the above, what other stocks do you think I should consider?

Cheers,
Clueless Imbecile

Disclaimer: I am not an expert. Anything I post here is just my opinions, which may not be factually correct. My posts are intended purely for the purpose of debate and are not to be taken as advice. If you act on any of the above then you do so entirely at your own risk. I do not accept any liability.

 

 

Firstly i really like what you already own.The PM miners you have are all risky,but all have multi bag  potential.They key to them is to simply hold and wait and accept you might be in the red across them until your not.

I do like the transports and id look to add Go Ahead if it goes below £15 again.I sold some last week near £19 having bought in the £13.50-£14.50 range.Iv top sliced a few times this year.

On Vodafone id by more in a staircase if they go down more and probably set £1.57 as the next buy point,then £1.37.

For now id hold fire and see what comes forward,but hopefully you get some fun (in a good way) in those miners.

[DoINeedOne]

Well BullionVault orders processed so simple decided like others for London and Toronto, Gold and Silver split

But whilst on the site i saw a link to there other project posted about it here in a new thread interesting idea

 

[Barnsey]

Got a response from Raoul Pal of GMI, he reckons the £ is heading to below parity with the $ after it's little run up, pretty bearish indeed

[DurhamBorn]

11 hours ago, azzuri82 said:

Funny you should say that, I'm very particular when it comes to buying shoes and probably buy around 1/100 pairs I try on. I'd love to own / run a shoe manufacturing business, but any of the companies I like and I've looked at seem to be money pits when you check out their details on Companies House, perhaps it's an ego-driven industry run by people that have already made their money in banking, finance etc., like wine bars and restaurants? Hobbies rather than businesses that don't really have to derive a profit to survive -  it's very difficult to compete with such companies if you need to make money to survive.

I've thought about how something that's 'British Made' in the current political climate might do well, but presumably all the skills in manufacturing industries have been lost, I'm not sure where I'd even start.

If Sterling continues its current trend, and oil prices continue to rise, and we have trade wars with the EU and elsewhere, then stuff being made here will be more attractive. I agree with DB that the current trend of 'more stuff' that's gone on for 30-40 years+ is over. People don't have an appetite for more stuff any more, the young want steady jobs and 'authentic experiences', make of that what you will.

There's lots of agents' sites out there for business sales, but they are much of a muchness and more or less share their content on all the sites, businessesforsale.com , rightbiz.co.uk , are pretty good, and also gumtree.com , bizarrely, for those that wish to avoid agents/site fees , also classifieds in local newspapers can be a good source. The other way to do it would be to flyer local businesses, but you'd need to really have an idea of a specific business you're after, and I don't at the moment.

I know there's plenty of times I'd have chucked the towel in over the last 8 years if someone had knocked on my door and offered a fair valuation - I imagine many other business owners reaching retirement age would feel the same.

A friend of mine who makes the

Like you say the key to the next cycle is people will want less (or afford less) stuff.Thats why the government will step in and invest into the economy to take up the slack.

 

Manufacturing is coming back,thats pretty certain.China had low costs,but outside the factories with western technology they are terrible at QA etc.

18 minutes ago, DoINeedOne said:

Well BullionVault orders processed so simple decided like others for London and Toronto, Gold and Silver split

But whilst on the site i saw a link to there other project posted about it here in a new thread interesting idea

 

Could be an interesting inflation and currency hedge,but can you take delivery

[invalid]

UK growth helped by World Cup and warm weather

"Services grew particularly strongly, with retail sales performing well, boosted by warm weather and the World Cup," said Rob Kent-Smith from the ONS.

The construction sector expanded but industrial output contracted."

 

If we do get a big fall in the value of GBP then perhaps now ( within next 2 years?) is a good time to get into manufacturing and industry, either as investment or starting a business. All seems to be falling into place in line with DBs theory.

Disapointing that yet again it was the services that grew and industrial output dropped, they present this as good news?

[invalid]

14 hours ago, azzuri82 said:

Yep, we'll run, profitable small businesses rarely come on the market unless it's a genuine retirement sale with no dependents to take over. 90%+ on these sites are complete crap.

None of the businesses I've enquired about even have a set of accounts for 2017-18 yet (I've made 5 enquiries in total, 2 visits). Can't believe it. How do they expect to sell a business when they don't have a set of up-to-date accounts. One of the guys couldn't explain £90k of 'Administrative Expenses' in his 14-15 and 15-16 accounts. On £450k turnover. With no admin staff. 

The one thing I've learned from this process is that the vast majority of small business owners don't have a clue. Hardly anyone can read a set of accounts. Businesses with £1m+ turnover who shove a bunch of invoices / receipts into bin bags, hand it all over to their accountant and entrust them with everything. Absolute madness!

 

I've seen the same, plenty of sandwich shops, burger vans etc. Loads of small business that run from crappy little high streets. A friend who recently considered buying a business discovered that owner was being investgated for fraud. It's a real minefield and not something for the inexperienced, hence why I've never bought a business. There are good businesses out there for sale for good reasons, but rare as rocking horse poop.

I think you have sold at the right time, take the rewards of your work. You may have got more, you may have got less. You still have a stake so are hedged to some degree. Sounds to me like you need a new challenge.

[sancho panza]

5 hours ago, MrXxx said:

The problem will be where will we find the skilled work force?....`all well and good` making our Polys the `University of Suchensuch` but this meant they moved from being places of vocational training to academic study...funny how the Germans still have this segregation...but with the `B word` their skilled output won't be allowed such free movement into the UK.

Without being antagonistic, skilled workers will still be allowed in just as they are in Australia/NZ/Canada/USA.........quite why people conflate controlled immigration with no immigration,I have no idea.

5 hours ago, Sideysid said:

Exactly this. My parents thought I was mad, when I said the exact same thing the other week (post war generation). Their minds instantly reverted to dock workers and the coal industry. I explained that specific manufacturing will eventually return to the UK, as when the costs are added up, it will work out the most cost effective option.

Currency manipulation has played a huge part in the loss of UK manufacturing.High end stuff has stayed but looking at places like Leicester,the lower end has emptied out over the last forty years.

Manufacturing will really start to come back in earnest when the Chinese middle class starts to wield it's strength.The Chinese have been happy to subjugate the masses for the greater glory and for many years,the masses had no choice,but I think the timeline for the demise of the communists is drawing nearer.

2 hours ago, Barnsey said:

Got a response from Raoul Pal of GMI, he reckons the £ is heading to below parity with the $ after it's little run up, pretty bearish indeed

Sounds like the sort of person I'd enjoy talking to at a hosue party.

[Wheeler]

3 hours ago, DurhamBorn said:

Could be an interesting inflation and currency hedge,but can you take delivery

Taking delivery would make it a terrible investment for me. 

[DurhamBorn]

@sancho panza

https://www.ebac.com/washing-machines/listings

They are making washing machines down the road from me again.I worked for Electrolux in 1990 in the cooker/washing machine plant before going to Glaxo.It all shut down a few years later.

https://celloelectronics.com/

They are also making TVs again in my town.I had mates who worked at the big Philips factory in Durham in the 90s before it shut.

Transport and import duty from China and the weak pound make things very interesting.Id say we are now past the point where you can make it here,its just our supply chain got wiped out and will take a while to get going.

[invalid]

32 minutes ago, DurhamBorn said:

@sancho panza

https://www.ebac.com/washing-machines/listings

They are making washing machines down the road from me again.I worked for Electrolux in 1990 in the cooker/washing machine plant before going to Glaxo.It all shut down a few years later.

https://celloelectronics.com/

They are also making TVs again in my town.I had mates who worked at the big Philips factory in Durham in the 90s before it shut.

Transport and import duty from China and the weak pound make things very interesting.Id say we are now past the point where you can make it here,its just our supply chain got wiped out and will take a while to get going.

Yes, these things don't happen overnight, it takes time for the investment to happen and move to production. Also a sustained period of lower GBP required before investment starts, imo. When we voted to leave the EU and GBP dropped I felt like a lone voice saying its not all bad and there are positives. The remainers seemed to think that manufacturing and exports would ramp up overnight and that because they didn't I was wrong. They didn't seem to (or want to) appreciate that it takes time for these things to happen.

 

[Democorruptcy]

5 hours ago, Barnsey said:

Got a response from Raoul Pal of GMI, he reckons the £ is heading to below parity with the $ after it's little run up, pretty bearish indeed

That chart reminds me of a few emails I swapped with a US currency trader around 2013. He listed a few career moves he had made over the years and said Sterling was 1.60 USD each time. If you look at the last 40 years it does to revert around a mean of that 1.60. Therefore I predict at some point it will revert to that 1.60 mean. Rule Britannia!

[MrXxx]

6 hours ago, sancho panza said:

Without being antagonistic, skilled workers will still be allowed in just as they are in Australia/NZ/Canada/USA.........quite why people conflate controlled immigration with no immigration,I have no idea.

Currency manipulation has played a huge part in the loss of UK manufacturing.High end stuff has stayed but looking at places like Leicester,the lower end has emptied out over the last forty years.

Manufacturing will really start to come back in earnest when the Chinese middle class starts to wield it's strength.The Chinese have been happy to subjugate the masses for the greater glory and for many years,the masses had no choice,but I think the timeline for the demise of the communists is drawing nearer.

Sounds like the sort of person I'd enjoy talking to at a hosue party.

Don't worry about being antagonistic SP, if my argument is strong enough it will `stand on its own two feet` if not, you have enabled me to reformulate. Whilst I agree that overseas skilled labour will still be sourced, it will require more paperwork than it does at the moment...this may put both the employer and employee off. In addition, overseas labour may be more transient so stll leaving a skills void if native people are not trained. Finally, you have to overcome the short term thinking regarding investment (especially plant) that is apparent in UK manufacturing, where the attitude is "The current machine is still operational and we can't really afford a new one", rather than "although the machine is still operational it is no longer efficient, and so we cannot afford not to replace it"

[sancho panza]

2 minutes ago, MrXxx said:

Don't worry about being antagonistic SP, if my argument is strong enough it will `stand on its own two feet` if not, you have enabled me to reformulate. Whilst I agree that overseas skilled labour will still be sourced, it will require more paperwork than it does at the moment...this may put both the employer and employee off. In addition, overseas labour may be more transient so stll leaving a skills void if native people are not trained. Finally, you have to overcome the short term thinking regarding investment (especially plant) that is apparent in UK manufacturing, where the attitude is "The current machine is still operational and we can't really afford a new one", rather than "although the machine is still operational it is no longer efficient, and so we cannot afford not to replace it"

I think it cuts both ways.Whilst there is a benefit from having free movement,there are also fiscal costs eg schooling,NHS etc etc.So upside from free movement but fiscal drag on the downside.

From my experience around the Midlands,the bulk of immigration has been low skilled.I suspect the South East might be different.Lower wages have been good for corporations but higher population has pushed up rents.

Mrs P entered the UK on a skilled worker visa-Commonwealth and works for a large multinational.Lots of EU/no EU workers.Youth unemployment in Greece and Spain at 20%++,there are a lot of very talented kids from those countries making a life in the UK.Upside is for business,downside is for British graduates prospects.

I think the biggest concern I have with Brexit is the lack of certainty.It's that that business hates more than anything.We need to get the negotiations done and start getting some certainty into the investment cycle.

Decl:I voted out,but can see why people voted in.

[azzuri82]

18 hours ago, null; said:

UK growth helped by World Cup and warm weather

"Services grew particularly strongly, with retail sales performing well, boosted by warm weather and the World Cup," said Rob Kent-Smith from the ONS.

The construction sector expanded but industrial output contracted."

 

If we do get a big fall in the value of GBP then perhaps now ( within next 2 years?) is a good time to get into manufacturing and industry, either as investment or starting a business. All seems to be falling into place in line with DBs theory.

Disapointing that yet again it was the services that grew and industrial output dropped, they present this as good news?

To a certain extent, I agree with this. Presumably you need to try and make umpire your in a position to profit from a manufacturing book long before it starts? If you wait until the market conditions are perfect, you'll be very late to the game.

[invalid]

1 minute ago, azzuri82 said:

To a certain extent, I agree with this. Presumably you need to try and make umpire your in a position to profit from a manufacturing book long before it starts? If you wait until the market conditions are perfect, you'll be very late to the game.

Sure, if you can have everything in place and ready to go then great, that's the risk you take and those who have the correct foresight get rewarded for it.

Also, if you can make a success of of a business while times are hard you have a great foundation for when things pick up.

I've seen a couple of business over the last 5 years that got the timing wrong (too slow) at the both the expansion and contraction stages for that particular market.

[azzuri82]

"Sure you're", not "umpire your", damn autocorrect on my phone. 

In other news, we were notified by our energy provider that prices are being raised across the board by 18% in 2 months' time. All the other providers are doing same, or similar. For energy-hungry businesses, this could be the writing on the wall come October/November time. What sort of industries might be hit hardest?

[DurhamBorn]

4 minutes ago, null; said:

Sure, if you can have everything in place and ready to go then great, that's the risk you take and those who have the correct foresight get rewarded for it.

Also, if you can make a success of of a business while times are hard you have a great foundation for when things pick up.

I've seen a couple of business over the last 5 years that got the timing wrong (too slow) at the both the expansion and contraction stages for that particular market.

Its funny nul; but i started my little business in 2010.Importing from China and selling online.It was like shooting ducks it was that easy.It was pretty much a case of import container for £18k sell it for £36k in 6 months,repeat.Get 3 product lines on the go (pretty much anything) and a one man band could do £80k a year as a sole trader profit with only around £50k capital tied up.I had a friend who did the same but really pushed things and was making £18k a month profit as a sole trader.Forward to today and the margins are now so small and the competition so great you probably make £5k on a container that now costs £22k.Add on the extra work to get it up to decent wage area and extra costs involved (storage/risk etc) and its hardly worth it.Anyone starting now would get nowhere.I keep going because i only want to make £12k a year and work 1 day a week and so two containers a year (or 4 x 20 foot containers) makes me that and i only need to hire two containers self storage on month contracts for storage.I can walk away without any costs at any time after selling my stock.

I have been tempted to get into something else though.I semi retired at 39,but do like to keep something pulling a few quid in outside of my investments,but dont really want to pump much capital into anything.

[invalid]

2 minutes ago, azzuri82 said:

"Sure you're", not "umpire your", damn autocorrect on my phone. 

Guessed that was what you meant.

I've been involved in one business that started from scratch (not maufacturing). Even that took much longer than expected to build up, when you have something new buyers can be cautious at first until you build up experience and reputation.

I have no experience of manufacturing but its an area I wouldn't mind having a go at. For the UK at the moment I think the growth areas could be things like shoes as mentioned previously. Mass production that requires massive scale (1 penny plastic widgets) I dont think will work well at the moment, but anything where a quality (value add) mid volume product can be made I think has a future.

[invalid]

4 minutes ago, DurhamBorn said:

Its funny nul; but i started my little business in 2010.Importing from China and selling online.It was like shooting ducks it was that easy.It was pretty much a case of import container for £18k sell it for £36k in 6 months,repeat.Get 3 product lines on the go (pretty much anything) and a one man band could do £80k a year as a sole trader profit with only around £50k capital tied up.I had a friend who did the same but really pushed things and was making £18k a month profit as a sole trader.Forward to today and the margins are now so small and the competition so great you probably make £5k on a container that now costs £22k.Add on the extra work to get it up to decent wage area and extra costs involved (storage/risk etc) and its hardly worth it.Anyone starting now would get nowhere.I keep going because i only want to make £12k a year and work 1 day a week and so two containers a year (or 4 x 20 foot containers) makes me that and i only need to hire two containers self storage on month contracts for storage.I can walk away without any costs at any time after selling my stock.

I have been tempted to get into something else though.I semi retired at 39,but do like to keep something pulling a few quid in outside of my investments,but dont really want to pump much capital into anything.

In a previous job I used to work with some great guys, smart, hard working. I used to think it was a missed opportunity that with so much talent we didn't all leave and start a business. While they had the skills and intelligence they didn't have the confidence to go it alone (much as I was when younger) and were all tied down with family and big mortgages.

In a way, it feels like another opportunity presents itself - DOSBODS Ltd.

[invalid]

7 minutes ago, DurhamBorn said:

Its funny nul; but i started my little business in 2010.Importing from China and selling online.It was like shooting ducks it was that easy.It was pretty much a case of import container for £18k sell it for £36k in 6 months,repeat.Get 3 product lines on the go (pretty much anything) and a one man band could do £80k a year as a sole trader profit with only around £50k capital tied up.I had a friend who did the same but really pushed things and was making £18k a month profit as a sole trader.Forward to today and the margins are now so small and the competition so great you probably make £5k on a container that now costs £22k.Add on the extra work to get it up to decent wage area and extra costs involved (storage/risk etc) and its hardly worth it.Anyone starting now would get nowhere.I keep going because i only want to make £12k a year and work 1 day a week and so two containers a year (or 4 x 20 foot containers) makes me that and i only need to hire two containers self storage on month contracts for storage.I can walk away without any costs at any time after selling my stock.

I have been tempted to get into something else though.I semi retired at 39,but do like to keep something pulling a few quid in outside of my investments,but dont really want to pump much capital into anything.

Feels like the reselling of stuff from China is a race to the bottom.

What do you think has caused the decline in the margins? Is it lots of small time sellers or the big boys like amazon? Or a bit of both?

I've never liked follow the herd, so with manufacturing on the decline in the UK that's the way to go. Unfortunately, I don't have any great ideas so for me personally its nothing more than talk.

 

 

[DurhamBorn]

Just now, null; said:

In a previous job I used to work with some great guys, smart, hard working. I used to think it was a missed opportunity that with so much talent we didn't all leave and start a business. While they had the skills and intelligence they didn't have the confidence to go it alone (much as I was when younger) and were all tied down with family and big mortgages.

In a way, it feels like another opportunity presents itself - DOSBODS Ltd.

I was going to set up importing wood for log burners from Lithuania/Baltics.Very good margins and once you get the mid range customers on board very easy to just rotate containers and dont need too much storage.To be honest though i dont really want to be a one man band anymore.Having to be everything from CEO to import manager,to sourcing manager to lad who unloads the container gets to be too much with nobody to fall back on.

[DurhamBorn]

1 minute ago, null; said:

Feels like the reselling of stuff from China is a race to the bottom.

What do you think has caused the decline in the margins? Is it lots of small time sellers or the big boys like amazon? Or a bit of both?

I've never liked follow the herd, so with manufacturing on the decline in the UK that's the way to go. Unfortunately, I don't have any great ideas so for me personally its nothing more than talk.

 

 

Is is a race to the bottom,but luckily for me my costs are at the bottom,i do everything myself,pay nobody,have tiny storage costs etc and only want to make £12k a year now tax allowance level.Mostly the decline is sterling falling so much,Chinese sellers breaking the law through Amazon by not paying VAT and simply the fact every product line has multiple sellers.The only way now to make a profit really is to find a slight edge.If your selling tables and nobody sells pink ones,get pink ones.If your the only seller you can price £10 higher and people will pay because they want a pink one.Its actually easy to make a small amount (enough for me),but getting very hard for anyone employing people and being a decent size.

[invalid]

5 minutes ago, DurhamBorn said:

I was going to set up importing wood for log burners from Lithuania/Baltics.Very good margins and once you get the mid range customers on board very easy to just rotate containers and dont need too much storage.To be honest though i dont really want to be a one man band anymore.Having to be everything from CEO to import manager,to sourcing manager to lad who unloads the container gets to be too much with nobody to fall back on.

Hmm, I know that feeling. The upside is that when all the responsibility is on your shoulders it keeps you motivated. A downside is that it has to be the kind of business that can be put on hold if need be.

The way to make it big in business is to surround yourself with good people.