Credit deflation and the reflation cycle to come.

[DurhamBorn]

52 minutes ago, Democorruptcy said:

I came across with of these pickmeup services on holiday in Dovedale recently. Derbyshire council do one, book between 7 and 1 day in advance. Of course I didn't know about it until going to the bus "stop" when it was pissing it down. I had to carry on walking, there's no such thing as inclement weather, only incorrect clothing!

https://www.derbyshire.gov.uk/transport-roads/public-transport/news-notices/derbyshire-connect/derbyshire-connect.aspx

I see it as a growth area and very interesting.The question is can the transports like Go Ahead win in the space or will new tech companies take the cream.?.Their Pickmeup service looks like a real winner in busy urban areas.Iv been following the roll out and it looks like they are now starting to add in villages etc on the outskirts.The tricky part is each bus can only have a certain area (a couple of miles) so its of no use to anyone wanting to go much more than that.However is might be possible to roll out the service even to medium sized market towns etc and get big employers to sign up their staff as a perk.Parking is a huge problem for companies in many areas.The macro situation in a reflation will really help the push as owning expensive assets like cars becomes harder and harder.A similar thing will happen in energy.There will be lots more sharing in local areas and local grids.Distributed energy will be a huge growth area.The cycle ahead favours such companies as inflation runs ahead of depreciation so free cash flow improves.

[DurhamBorn]

4 minutes ago, Barnsey said:

Intu plunge quite something, had a price alert to buy some at 150p and it's sitting at 124p right now, staying on the sidelines even if the dividend yield is now close to 12% 

Few other warning signs to watch today, WTI continues down despite Santa rally, Deutsche bank offices being searched this morning in money laundering probe (Lehman moment?), Swedish economy contracts for first time since 2014 (good leading indicator for eurozone), and UK consumer borrowing growth slowest since 2015.

Yield is about 3% i reckon as they will cut the dividend by 75%.Problem they have is debt.Its too high and the huge centres are hard to re-position.In the space you want community centres with low rents stuffed with discounters etc you can put other services in.A lot of these companies have seen debt at 50% as the way to go when they should of been at 30%/35% at this stage of a cycle.Intu has rents of roughly £30 sqf compared to  busy community centres at £12.50 sqf but only have 30% higher footfall at best.

[Barnsey]

37 minutes ago, DurhamBorn said:

Yield is about 3% i reckon as they will cut the dividend by 75%.Problem they have is debt.Its too high and the huge centres are hard to re-position.In the space you want community centres with low rents stuffed with discounters etc you can put other services in.A lot of these companies have seen debt at 50% as the way to go when they should of been at 30%/35% at this stage of a cycle.Intu has rents of roughly £30 sqf compared to  busy community centres at £12.50 sqf but only have 30% higher footfall at best.

This is why I think NewRiver are far better positioned for the immediate aftermath of the 2019 crash (and possibly another in 2020/21 if we get a QE stimulated bounce), still don't hold any but they're close to target. Value retailers are where it's at for a couple years at least when SHTF, then perhaps like you say with some cash sloshing around in the reflation people might start spending again.

[DurhamBorn]

19 minutes ago, Barnsey said:

This is why I think NewRiver are far better positioned for the immediate aftermath of the 2019 crash (and possibly another in 2020/21 if we get a QE stimulated bounce), still don't hold any but they're close to target. Value retailers are where it's at for a couple years at least when SHTF, then perhaps like you say with some cash sloshing around in the reflation people might start spending again.

Iv been buying Newriver Barnsey slowly.They got most of their assets dirt cheap ,and they financed them mostly with equity at between £3.00 and £3.30 a share.Their balance sheet is un-encumbered so they can move fast (in a slow sector).They also issued a 10 year bond at 3.5% for half their debt a very very shrewd move.They have it tough as well at the minute,but they have superb management and debt is about 35% on much lower valued assets (about £12.50 sqf rent) that are much easier to re-position/extra use.The share price means they cant raise equity for buys as they have big shareholders who wouldnt want being diluted at these levels so likely they will spend another £80 million for debt of around 39% when centres come up cheap they would want.They are a very contrarian play,but i think their centres are mostly in the right places at the right price.Im not sure they should be increasing the dividend though,id much rather that was froze for now,or even cut 20% and they have a few centres they need to sort out.The Ridings in Wakefield and the Capitol Centre in Cardiff need effort.They need to keep slowly introducing the right tenants as units become available so they dont get caught out by too many CVAs at once and they have done a good job of that so far.

[spygirl]

1 hour ago, DurhamBorn said:

I see it as a growth area and very interesting.The question is can the transports like Go Ahead win in the space or will new tech companies take the cream.?.Their Pickmeup service looks like a real winner in busy urban areas.Iv been following the roll out and it looks like they are now starting to add in villages etc on the outskirts.The tricky part is each bus can only have a certain area (a couple of miles) so its of no use to anyone wanting to go much more than that.However is might be possible to roll out the service even to medium sized market towns etc and get big employers to sign up their staff as a perk.Parking is a huge problem for companies in many areas.The macro situation in a reflation will really help the push as owning expensive assets like cars becomes harder and harder.A similar thing will happen in energy.There will be lots more sharing in local areas and local grids.Distributed energy will be a huge growth area.The cycle ahead favours such companies as inflation runs ahead of depreciation so free cash flow improves.

Its not just limited to parking.

You can get between most urban centres resoanbly easy - say whiz between Wakefield and Darlo or Reading and Oxford.

The problem comes with the last few miles. Once you are off the motorway/A road you hit all the congestion points. You average commute speed then drops from 50-ish for main/rural road travel to sub 30 when you get into urban areas.. Then, when you finally get thru the congestion, its the find-the-parking fun.

Ive long given up planning for easy car commute for work.  You really have to be looking at bus and rail between transport hubs.

 

[DurhamBorn]

Just now, spygirl said:

Its not just limited to parking.

You can get between most urban centres resoanbly easy - say whiz between Wakefield and Darlo or Reading and Oxford.

The problem comes with the last few miles. Once you are off the motorway/A road you hit all the congestion points. You average commute speed then drops from 50-ish for main/rural road travel to sub 30 when you get into urban areas.. Then, when you finally get thru the congestion, its the find-the-parking fun.

Ive long given up planning for easy car commute for work.  You really have to be looking at bus and rail between transport hubs.

 

I think thats very true Spy and transport hubs are going to be crucial like you say.Likely we will see transport loops and then on demand for the last mile.The main problem is the unions of course in rail.

[Majorpain]

If anyone is interested, the Nov18 fed report on US financial stability is below.

https://www.federalreserve.gov/publications/files/financial-stability-report-201811.pdf

Quote

1. Valuation pressures are generally elevated, with investors appearing to exhibit a high tolerance for risk-taking, particularly with respect to assets linked to business debt.
2. Borrowing by households has risen roughly in line with household incomes. However, debt owed by businesses relative to gross domestic product (GDP) is historically high, and there are signs of deteriorating credit standards.
3. The nation’s largest banks are strongly capitalized, and leverage of broker-dealers is substantially below pre-crisis levels.Insurance companies have also strengthened their financial position since the crisis.
4. Funding risks in the financial system are low relative to the period leading up to the crisis. Banks hold more liquid assets, and money market mutual funds are less vulnerable to destabilizing runs by investors.

 

[Ash4781b]

I’m not convinced atleast some of the discounters aren’t vulnerable to a weaking pound due to thin margins. I’m talking Poundland with their high street locations. Though as I think it was a Steinhoff business who knows how they are doing or who still owns them.

[invalid]

On 25/11/2018 at 12:33, DurhamBorn said:

That is how it has always been and likely always will be.People hate being down and so avoid the cheapest assets.Cycles flow from liquidity mostly.Downturns come from a business cycle inventory top and much more rare a credit deflation.It looks like we are about to get both together.Political cycles also point to the need in western countries to reflate and invest.Inflation and a distribution cycle is coming.Assets that will do ok/well/very well in those type of cycles are the ones who struggle in dis-inflation times.It is at key inflection points that they look in terminal decline,finished,terrible investments.Of course this is the very time people should be slowly buying them in a ladder.Iv tightened the ladders down now in some to 5% from 8% as i think the bottoms could be close.Im also very pleased i sold my dis-inflation stocks when i did.The likes of BAT returned close to 1000% since i bought them,but that would have fallen to 600% now after they gave up 40%.In contrast the stocks im slowly buying are down 7% after dividends,and 3.2% if i take off profits iv locked in from Drax and BT.(the goldies/silvers are down 9% after profits from Sibanye were taken).I hope to ladder in roughly 50% of my portolio before i sell treasuries and goldies and ladder that in as well.Id be very happy is my portolio saw a maximum -15%/20% loss before dividends.(excluding the goldies/silvers)

DB, apologies for a dumb question, would you mind explaining exactly what you mean by 'laddering in'.

I think I know what you mean, but would rather ask a dumb question and be sure.

[DurhamBorn]

14 minutes ago, null; said:

DB, apologies for a dumb question, would you mind explaining exactly what you mean by 'laddering in'.

I think I know what you mean, but would rather ask a dumb question and be sure.

When i consider a share cheap,and its one i want for the longer term i start buying,but split my amount up.If i wanted £10k in Vodafone i might have 5 ladders £1.90,£1.75,£1.60,£1.45,£1.30 and invest £2k a time.I sometimes ladder in growing amounts.I tend to use that more for goldies and silvers.So if i wanted £5k in a goldie i might have 3 ladders,first £1k,2nd £2k,3rd £2k.

Go Ahead i started to ladder at £16.00 but only got 3 ladders in,but the 3rd ladder caught near the recent bottom at £13.36,£13.50 was the price,but fell through it more before i bought.I sold the bottom ladder buy at £18.80.I often sell out the bottom ladder on a 20% bounce.(i did the same with BT a few weeks ago).

I dont mind not getting my full allocation into a stock as there are plenty of other companies im interested in and iv found by buying with a ladder it keeps things less emotional.Iv also found that buying contrarian against the market tends to produce pain in the short term,so averaging slowly is very helpful.

[invalid]

2 hours ago, DurhamBorn said:

When i consider a share cheap,and its one i want for the longer term i start buying,but split my amount up.If i wanted £10k in Vodafone i might have 5 ladders £1.90,£1.75,£1.60,£1.45,£1.30 and invest £2k a time.I sometimes ladder in growing amounts.I tend to use that more for goldies and silvers.So if i wanted £5k in a goldie i might have 3 ladders,first £1k,2nd £2k,3rd £2k.

Go Ahead i started to ladder at £16.00 but only got 3 ladders in,but the 3rd ladder caught near the recent bottom at £13.36,£13.50 was the price,but fell through it more before i bought.I sold the bottom ladder buy at £18.80.I often sell out the bottom ladder on a 20% bounce.(i did the same with BT a few weeks ago).

I dont mind not getting my full allocation into a stock as there are plenty of other companies im interested in and iv found by buying with a ladder it keeps things less emotional.Iv also found that buying contrarian against the market tends to produce pain in the short term,so averaging slowly is very helpful.

Thanks DB for taking the time to reply with a detailed answer.

[Democorruptcy]

7 hours ago, DurhamBorn said:

Yield is about 3% i reckon as they will cut the dividend by 75%.Problem they have is debt.Its too high and the huge centres are hard to re-position.In the space you want community centres with low rents stuffed with discounters etc you can put other services in.A lot of these companies have seen debt at 50% as the way to go when they should of been at 30%/35% at this stage of a cycle.Intu has rents of roughly £30 sqf compared to  busy community centres at £12.50 sqf but only have 30% higher footfall at best.

The budget saw Hammond lift the cap on council borrowing, supposedly for housing. I can see that turning into a commercial real estate bailout. Council's borrowing money to buy shopping centres turning a bit into flats, with the Governbankment stood behind them as the lender of last resort. 

[Democorruptcy]

3 hours ago, DurhamBorn said:

When i consider a share cheap,and its one i want for the longer term i start buying,but split my amount up.If i wanted £10k in Vodafone i might have 5 ladders £1.90,£1.75,£1.60,£1.45,£1.30 and invest £2k a time.I sometimes ladder in growing amounts.I tend to use that more for goldies and silvers.So if i wanted £5k in a goldie i might have 3 ladders,first £1k,2nd £2k,3rd £2k.

Go Ahead i started to ladder at £16.00 but only got 3 ladders in,but the 3rd ladder caught near the recent bottom at £13.36,£13.50 was the price,but fell through it more before i bought.I sold the bottom ladder buy at £18.80.I often sell out the bottom ladder on a 20% bounce.(i did the same with BT a few weeks ago).

I dont mind not getting my full allocation into a stock as there are plenty of other companies im interested in and iv found by buying with a ladder it keeps things less emotional.Iv also found that buying contrarian against the market tends to produce pain in the short term,so averaging slowly is very helpful.

At HL I'm paying £12 as I'm not a frequent trader, I'm assuming you must be and paying £6? Looking at your 5 step ladder it would cost me £60 instead of doing the lot at the mid price of 1.60 for £12, which is what you average if you fill all 5 steps. If I did the 5 step ladder over 20 shares that an extra £960 in HL fees. Though the 100 trades would help towards being frequent. I'm not sure about your emotional bit because you need to be underwater to fill 5 steps. I don't get emotional, money is just a tool.  

[Band]

37 minutes ago, Democorruptcy said:

The budget saw Hammond lift the cap on council borrowing, supposedly for housing. I can see that turning into a commercial real estate bailout. Council's borrowing money to buy shopping centres turning a bit into flats, with the Governbankment stood behind them as the lender of last resort. 

Or a property developers baillout should they struggle to shift stock at the price they demand.

[DurhamBorn]

33 minutes ago, Democorruptcy said:

At HL I'm paying £12 as I'm not a frequent trader, I'm assuming you must be and paying £6? Looking at your 5 step ladder it would cost me £60 instead of doing the lot at the mid price of 1.60 for £12, which is what you average if you fill all 5 steps. If I did the 5 step ladder over 20 shares that an extra £960 in HL fees. Though the 100 trades would help towards being frequent. I'm not sure about your emotional bit because you need to be underwater to fill 5 steps. I don't get emotional, money is just a tool.  

The amounts i invest tend to make the fee a tiny percentage,and i mostly hold the holding for a decade,or in the case of many i sold last year and the year before two or three decades.Id fully agree the fees would matter if the ladders were for smallish amounts.I only tend to re-focus my portfolios every ten years or so.Outside of that i average a turnover of around 6% a year and that tends to be top slicing some areas that have done well and are too large,or the odd duff investment that looks like the capital would be better elsewhere.

[Democorruptcy]

49 minutes ago, DurhamBorn said:

The amounts i invest tend to make the fee a tiny percentage,and i mostly hold the holding for a decade,or in the case of many i sold last year and the year before two or three decades.Id fully agree the fees would matter if the ladders were for smallish amounts.I only tend to re-focus my portfolios every ten years or so.Outside of that i average a turnover of around 6% a year and that tends to be top slicing some areas that have done well and are too large,or the odd duff investment that looks like the capital would be better elsewhere.

I agree the fees are only a tiny percentage but they help pay for a lot of yellow sticker items! It would be interesting but most likely impossible, to back test your 5 step dealings compared to one at mid point. There would be some shares you would never have bought, others the profit would be different. Anyway just stick to your tried and tested methods but it's made me think about adding extra detail to my records. 

[harp]

I understand the concept of laddering in. But does anyone do it in reverse? Buying shares as they rise? Or is it only me

[MrXxx]

1 hour ago, Band said:

Or a property developers baillout should they struggle to shift stock at the price they demand.

Yes that is my concern, and they won't be bought at a knock down price (as they should/could be) due to backhanders!

[Bobthebuilder]

10 minutes ago, harp said:

I understand the concept of laddering in. But does anyone do it in reverse? Buying shares as they rise? Or is it only me

I did exactly that with Lloyds, started buying in about 2008 at 28p ish but just left the monthly drip going all the way to 70p. Oh i live and learn.

[leonardratso]

18 minutes ago, Bobthebuilder said:

I did exactly that with Lloyds, started buying in about 2008 at 28p ish but just left the monthly drip going all the way to 70p. Oh i live and learn.

fund dripping makes good sense since they cost very little to buy, ocf can be extrmeley low as well. No good starting at the top of the market obviously.

[leonardratso]

or on the way down obviously. Thats the crux of the matter though.

[sancho panza]

On 28/11/2018 at 15:20, Barnsey said:

Warning indicator #5976

Fed warns that a 'particularly large' plunge in market prices is possible if risks materialize

https://www.cnbc.com/2018/11/28/fed-warns-that-particularly-large-plunge-in-asset-prices-is-possible-if-risks-materialize.html

Is it even possible that I've been more hawkish than the Fed? 

Dec just got very interesting...

Why let delusion get between bad economics and bad maths?

 

'Consumer debt also has kept pace with GDP increases, indicating little threat there.'

[onlyme]

3 minutes ago, sancho panza said:

Why let delusion get between bad economics and bad maths?

 

'Consumer debt also has kept pace with GDP increases, indicating little threat there.'

Like saying a clinically obese person has kept pace with the food they were eating.

[sancho panza]

23 hours ago, Errol said:

Powell Just Signaled That The Next Crisis Is Here

http://investmentresearchdynamics.com/powell-just-signaled-that-the-next-crisis-is-here/

Great piece Errol.

'In fact, the median middle class household has gone backwards economically since 2008. 

The steep drop in housing and auto sales are signaling that the average household is up to its eyeballs in debt.

Also, most of the alleged jobs created in October were the product of the highly questionable “birth/death model” used to estimate the number of businesses opened and closed during the month. The point here is that true unemployment, notwithstanding the Labor Force Participation Rate, is much higher than the Government would like us to believe.'

[sancho panza]

14 hours ago, DurhamBorn said:

Intu smashed today,car sales falling,Fed tightening the world into a debt deflation.Go Ahead decent however.Nice comment free cash flow is increasing due to falling investment and that the Pickmeup service now has 15k users in Oxford.It is likely still loss making,but its doing very very well.Macro conditions will ensure car ownership falls going forward and public transport rise again.Sharing is going to be a massive growth area in the next cycle over owning.Transport,and energy will see many more local solutions.

Down 40% .....interersting.I follow the ftse 100 at work when I have time.Saw Land Sec and the builders being the bg losers today.Sadly cut my shorts on the builders two weeks back and never went back in.Still short Land Sec.The whole property ponzi looks ripe to get smashed....

 

9 hours ago, Ash4781b said:

I’m not convinced atleast some of the discounters aren’t vulnerable to a weaking pound due to thin margins. I’m talking Poundland with their high street locations. Though as I think it was a Steinhoff business who knows how they are doing or who still owns them.

I think a lot of High St shops are vulnerable,particualrly the £1 variety..period.Rates,rents,wages.I suspect most are barely covering 2 out of 3