Credit deflation and the reflation cycle to come.

[Starsend]

32 minutes ago, Festival said:

Great thread going here that i am learning so much from and am so grateful for that is getting us mentally ready for what lies ahead given the amount of leverage in the financial system. When I have a bit more time I'll post the thoughts of Brian Reynolds. He believes the individual states and mayor public pension schemes in the US are driving the stock market boom there, with its funds chasing a 7% plus return to cover unfund pension liabilities, then flowing into private credit funds who then lend to BBB rated corporations who then buyback their own shares leading to the stock market rising even though the economy and credit quality is deteriorating at the same time. He sees this going on for 3-5 years yet and a further 2 years from the UST 2-10 year yield curve inverting which I dont believe it has yet. Not sure this is my view but the scale of the funds flowing in to the markets via this route (before leverage is applied) in quite something.

 

In the meantime poor old sterling continues its inexorable fall. Looks like a retest of the October 2016 decision (1.21 vs the USD) to define Brexit as leaving the single market and customs union is going on at the moment. Regardless of when the UK actually leaves the EU and what the ultimate benefits are this now feels like a decade long process of uncertainty that the currency will struggle to battle against. Given prolonged uncertainty I'm downgrading my sterling forecast to c 80 cents against both the Euro and Dollar by 2026.  I expect a sharp rally or two along the way as shorts are covered but its hard to see any rally being worth more than 10% or so from these levels. I know this isn't a popular view in the UK but, the period of North Sea oil wealth aside, the UK currency has been falling 1-2 percent or so a year against the major currencies since 1914 and much faster (3-5% a year) during crises.  We need to make and export much more to change this dynamic.

 

 

 

Be surprised if it takes that long. The three month has been inverted against the ten year for months. Other yields are inverted across the world.

80 cents on the dollar is quite a call - not impossible I guess given the removal of North Sea oil backing. Won't be many holidays abroad if it does happen.

[DoINeedOne]

Centrica boss Iain Conn to step down after slashing dividend currently down -15.54% 

The start of that chart is around 1997 

[Barnsey]

14 minutes ago, Starsend said:

Be surprised if it takes that long. The three month has been inverted against the ten year for months. Other yields are inverted across the world.

80 cents on the dollar is quite a call - not impossible I guess given the removal of North Sea oil backing. Won't be many holidays abroad if it does happen.

Great for UK tourism from both international and domestic demand.

[reformed nice guy]

2 hours ago, Loki said:

Anyone else considering just focusing on gold and silver?  Rising tides and all that!

Im swithering whether to buy more miners at this point. 

I bought some Fresnillo today because I think they could buy some of the tiddlers in the short term.

I am hoping for a dip in the miners after the next Fed rates drop while everyone rushes into FAANG stocks and the like. Fingers crossed it happens.

If it doesnt happen, im not entirely sure what to do. I was considering buying a small amount every 2nd month with the aim of holding for the long term.

 

[Dogtania]

Wow, centrica down 17%.  Had thought about buying this morning.  Seems to be falling knives territory at the moment.  Wish I could be drip feeding £100 in rather then having to consider 1k timing (for my damn HL sipp😛).

@spygirl I'm the opposite my friend was trying to get me and him both a metal card.  I think it sounds ridiculous so was saying please don't, much more into plastic minimal lightness (maybe if it was NASA grade light metal like titanium or something I could go for it)

[janch]

"EU banks down 3.5% today. The GMI Worst Chart in the World (EU Banks) is on the CLIFF OF DEATH. This is extremely serious and yet no one seems to be paying attention. The Treasury re-building of the TGA reserves post-debt ceiling is going to suck $350bn out of the funding markets"

from Raoul Pal twitter feed

[CVG]

Fresnillo

July 30 (Reuters) - Fresnillo's  FRES.L  profit plunged by
more than two-thirds in the first half, hit by a drop in
production and higher costs, the silver and gold miner said as
it cut its capital spending budget for the year, sending shares
more than 6% lower.
    The precious metals miner has repeatedly warned of a
troubled year ahead and earlier this month trimmed its output
forecast, blaming lower quality ore and construction delays in
Mexico.
    "Continued challenges at our Fresnillo, Saucito and
Herradura mines, combined with higher costs, have impacted
profitability for the period," Chief Executive Officer Octavio
Alvídrez said in a statement.
    Profit for the six months ended June 30 stood at $70.9
million, compared with $229.3 million a year earlier, while
first-half core earnings of $307.9 million missed consensus
estimates by 6%, according to Jefferies analysts. 
    The Mexico-based miner, which said it would put in place a
cost control programme in the second half of the year, said it
now expected annual capital expenditure of $655 million, down
from its previous plan of $710 million.
    Silver production of 27.6 millions of ounces fell 10.4%,
while gold production fell 7.1%.
    The FTSE 100 company had earlier this month cut its 2019
gold production forecast to 880,000-910,000 ounces from a prior
target of 910,000-930,000 ounces and silver production to 55-58
million ounces from 58-61 million ounces.
    Last year, the miner cut its outlook for silver production
twice.
 

[Starsend]

Holy shitdog! CNA 75

 

Buy! Buy! Buy! 

[spygirl]

10 minutes ago, janch said:

"EU banks down 3.5% today. The GMI Worst Chart in the World (EU Banks) is on the CLIFF OF DEATH. This is extremely serious and yet no one seems to be paying attention. The Treasury re-building of the TGA reserves post-debt ceiling is going to suck $350bn out of the funding markets"

from Raoul Pal twitter feed

ECB is fucking the banks, so they are fucking the European company, so are fucking the European economy.

Academic economists.

 

[Loki]

47 minutes ago, reformed nice guy said:

Im swithering whether to buy more miners at this point. 

I bought some Fresnillo today because I think they could buy some of the tiddlers in the short term.

I am hoping for a dip in the miners after the next Fed rates drop while everyone rushes into FAANG stocks and the like. Fingers crossed it happens.

If it doesnt happen, im not entirely sure what to do. I was considering buying a small amount every 2nd month with the aim of holding for the long term.

 

Worth bearing in mind we are nearing the $1500 Gold price that durhamborn has mentioned (with a fall from there and then up and away, if i remember correctly)

[Starsend]

12 minutes ago, spygirl said:

ECB is fucking the banks, so they are fucking the European company, so are fucking the European economy.

Academic economists.

 

Everyone's fucking everyone, fucking fuckers.

[Loki]

Just now, Starsend said:

Everyone's fucking everyone, fucking fuckers.

Fuck.

[Noallegiance]

12 minutes ago, Starsend said:

Everyone's fucking everyone, fucking fuckers.

Fuck fuckedy fuck fuck fuck

[Festival]

2 hours ago, Starsend said:

Be surprised if it takes that long. The three month has been inverted against the ten year for months. Other yields are inverted across the world.

80 cents on the dollar is quite a call - not impossible I guess given the removal of North Sea oil backing. Won't be many holidays abroad if it does happen.

I'd be surprised Starsend as well - this bull market feels very long in the tooth to me.

Yep its a contrarian call - not seen anyone calling below dollar parity for sterling but there's a long time frame yet and the recent currency fall hasnt helped exports because of the associated uncertainty. I expect the uncertainty to continue for a number of years yet. I remember my Dad giving me a list of countries not to visit in Europe in the early 80's as he felt they were too expensive. (Switerland, Scandinavia, Austria, Germany etc). Germany's not that expensive now as it has used the Euro and the reunification to keep its currency well below fair value for 30 years but i wouldnt spend my own money in the others. 10 euros for a half pint in Norway.

[Bricks & Mortar]

From Twitter:
 

Albert Edwards

 

@albertedwards99

 

Whatever you think of Brexit, I see sterling's plunge as a silver lining of it. Countries are now fighting to avoid outright deflation in the next recession. As per Bernanke's Nov 2002 Helicopter Money speech, devaluation is a key tool to drive domestic inflation/wages higher

[spygirl]

8 hours ago, Bricks & Mortar said:

From Twitter:
 

Albert Edwards

 

@albertedwards99

 

Whatever you think of Brexit, I see sterling's plunge as a silver lining of it. Countries are now fighting to avoid outright deflation in the next recession. As per Bernanke's Nov 2002 Helicopter Money speech, devaluation is a key tool to drive domestic inflation/wages higher

Doesnt work, when all other countries do the same.

The only fix is to get wages increasing.

 

 

Dollar will stay relatively strong ,begin the last tradign currency standing.

EUROS fucked if they dotn start spendign money o ifnrastructure where its needed i.e central and germany.

Germany is a fucking mess. Everythings falling to bits.

 

[Barnsey]

And there goes Intu, cancelled its dividend, down 18% this morning. What a bloodbath this week!

[CVG]

DYOR. Rio Tinto half-yearly earnings call tomorrow. Sitting on £13B in cash with debts paid off. How much will the special dividend be?

[Starsend]

CNA currently at 74 pence.

So they've cut the final to 5 pence and the interim is 1.5p.

I make that to be a still very tasty divi of nearly 9%. Mmm mm mm tasty.

Think I might buy some today.

[Ash4781b]

Wow so over the summer I dip out of following market news. I look today and reported the Fed are moving towards rate cutting.

[sancho panza]

On 30/07/2019 at 01:47, Sugarlips said:

Any experts have an opinion on this minnow silver miner? It’s suddenly come to life the last few days after years in the doldrums, worth a nibble? (dyor etc, I know!)

https://markets.theaustralian.com.au/shares/SVL/silver-mines-limited

A lot of Aussie miners have flown of late due to gold hitting high in AUD(GBP and CAD as well for those buying the stealth bull meme).they've risen much more than the wider PM miner market.

I had a sift for some exposure there but found better punts in more liquid markets

As ever Dyor etc 

On 30/07/2019 at 10:36, Starsend said:

Yes the fx side has obviously been very good up until now. Will the pound strengthen going forwards? Maybe, who knows. Will it offset further gains in bond prices? Hard to tell but yield inversions have been a very reliable indicator of recession a year or two out. Every single time the FED smashes down rates. I reckon the rise in bond prices will easily outweigh any fx fluctuations but just my guess.

Sterling undervalued vs dollar(they're all equally fubar imho) and the chart I posted eearlier showing commercials net long by some distance tells you that the people who hedge GBP on a daily basis aren't short tells it's own story.This isn't advice but generally when there's a parade of big name bank/broking house traders going on TV telling you cable is going to parity,it's most likely not.

Just my experience.

 

On 30/07/2019 at 10:51, Barnsey said:

I'm very much in the same boat with my angst about this, the dollar milkshake theory could be very real, Gov bonds and dollar rally to come? What other currency are folks going to rush to in coming months? Seems the U.S. as things stand will be last to fall so there could be a window of opportunity here, I also think they are going to smash down rates to 0, possibly later than sooner due to strong current data, tomorrow is certainly the most highly anticipated FOMC meeting in a LONG time. Do they do .25 or .50? Folks looking at the now say nothing needed, folks looking backwards say .50 and another .50 soon.

Only problem is Barnsey that we could get a weaker dollar phase before we get a stronger dollar phase.I'm personally on the watch out for a weaker dollar and then a firming before we go into the big wave.Recent peaks in S&P likely push the big wave furhter out to late 2020/early 2021.

 

Worth noting the rise and rise of gold in non USD currencies and the divergence of the Russell 2000 from the larger caps,and aslo the predominance of outperformance in the big name/no to low profit names. eg FB,AMZN

decl-short AMZN

 

On 30/07/2019 at 10:54, sleepwello'nights said:

Investor sentiment is still negative towards them. Do you think their stated strategy to become more customer focussed will work or could they be a takeover target for a major company?

Centrica which we hold-could get taken out here.I'd be gutted.This company will turn around.We started laddering in around the £2 level a couple of years back,have taken scrip divi,last ladder was about 90p iirc.

Strangely,two years back,they sold off because customer numbers were down,now they went down despite customer numbers being up.Thye're a turnaround play and always have been.Selling the Nuclear and E&P will strenghten the balance sheet and focus the business on where the money is.Especially if they offload over the next year with a weakening dollar and rising prices for oil assets.....

 

DYOR natch.

 

10 hours ago, Bricks & Mortar said:

From Twitter:
 

Albert Edwards

 

@albertedwards99

 

Whatever you think of Brexit, I see sterling's plunge as a silver lining of it. Countries are now fighting to avoid outright deflation in the next recession. As per Bernanke's Nov 2002 Helicopter Money speech, devaluation is a key tool to drive domestic inflation/wages higher

Yeah it's funny how CB policy via QE and Zirp was to devalue currencies to get out of the drop.Then when it drops in Sterlings case it's a disaster along the 'wrong leaves on the line' type excuse.

Everything the BoE has done over the last ten years was to weaken sterling,then it happens and they're bitching and whining about it.

Always important to rmemebr that the BoE pension fund is majority invested in linkers.Watch what they do,not what they say

22 minutes ago, Starsend said:

CNA currently at 74 pence.

So they've cut the final to 5 pence and the interim is 1.5p.

I make that to be a still very tasty divi of nearly 9%. Mmm mm mm tasty.

Think I might buy some today.

It looks and sounds like a kitchen sinking.Be interesting to see how many Directors buy over the next few months.

[Democorruptcy]

1 hour ago, sancho panza said:

Centrica which we hold-could get taken out here.I'd be gutted.This company will turn around.We started laddering in around the £2 level a couple of years back,have taken scrip divi,last ladder was about 90p iirc.

Strangely,two years back,they sold off because customer numbers were down,now they went down despite customer numbers being up.Thye're a turnaround play and always have been.Selling the Nuclear and E&P will strenghten the balance sheet and focus the business on where the money is.Especially if they offload over the next year with a weakening dollar and rising prices for oil assets.....

Just looking at the updated HL research:

Quote

 

Adjusted operating profits fell 44% to £240m in Consumer, by 89% to £11m in Centrica Business. Within E&P, adjusted operating profit was down 42% to £148m

Total energy supply customer numbers fell 2% to 23.6m. Business energy supply customers were also down 2% to 1.2m.

https://www.hl.co.uk/shares/shares-search-results/c/centrica-plc-ord-6,1481p/share-research

 

E&P wasn't down as much as Business, -89%! Maybe some write downs etc shifted into there? Only 2% less Business energy supply customers.

Disc: I don't own any but keep thinking I should buy again.

[Harley]

On 19/07/2019 at 17:07, Ponty Mython said:

.......My own feeling is that TA of individual PM miner stocks is bollocks......

FWIW (may all be a bit dubious)!

So that kicked off my idea to do a bit of research (per my subsequent post).  I've now had the time (given the weather) and whatever the result, it usefully gave me the chance to learn the Pine Editor in TradingView to automate and back-test trading strategies.

I used a slow stochastic trading strategy which goes long or short depending on the movement in the Slow Stochastic technical indicator.  Used weekly data going back as far as there was data.  Used the default currency (USD?).  No stops used, just flicked between short and long.  I'm unclear on some of the TradingView Strategy Tester parameters so used 100% of an initial $10,000 capital order size.  Newmont for example, would only show a 22% "Net Profit Long" if I used a $100,000 initial capital size and an order size of 5% of capital.  Doing the same for GDX (UK) results in an equivalent 1%.  The point being I hope the relative numbers (which is what we are after) rather than the absolute numbers are what we should look at.

The results:

Note, with the current bull in the sector, most stocks currently have open long trades which should close well so the results may be understated (e.g. NEM has an open long at $30.53 and is currently priced at $37.73)..

I gave up going down the GDX holdings list as I saw the possible themes:

- just buy and hold, or some derivative of it, but only on the constituents, unless UK listed GDX?

- forget shorting?

- better net profits going long on the larger constituents?

- WTH with the difference between the results for GDX UK versus US listings?

Plenty of caveats such as the chosen trading strategy, using weekly data, possible calculation errors, Pine Editor novice, data accuracy and completeness, chosen data period, no stops, etc, etc.

Still worthy for a good way into studying the underlying data.  Plenty more to look at.

[DurhamBorn]

On 29/07/2019 at 23:07, Loki said:

Tempted. (Re imperial)

I tagged the recent bottom on it for a nice sized stake.I have to keep a close eye on the fact i have BAT as well and might need to trim one to keep them under a certain size of portfolio.I might sell some BAT,they are up 23%+ divi in a few months.

Lots of movement in most stocks iv been buying.Some like Centrica down 38% before divis,others up 50% like Go Ahead,Many that are down are up 15% from bottom ladder buys,others drifting lower.Profit warnings are everywhere now.My portfolio is up about £60k this year,mostly gold miners,.I had hoped PM gains would cover -16% down in my porfolio if every ladder hit on reflation/value stocks,but they should cover -22% now.Very happy with that.Iv taken more profits in the PMs now.

Iv got many stocks that hit bottom ladder points,and many that hit four out of five.Others still only on second and third points.Gambling stocks have been hitting points and are mostly at ladder two now.

Happy with the way things are playing out.Key will be how many parts of portfolio keep falling heavily after all ladders bought.Given a lot have already re-based divis etc.

Car sales should start to drop next,and insurers might start to feel the heat.

[DurhamBorn]

1 hour ago, Democorruptcy said:

Just looking at the updated HL research:

E&P wasn't down as much as Business, -89%! Maybe some write downs etc shifted into there? Only 2% less Business energy supply customers.

Disc: I don't own any but keep thinking I should buy again.

Centrica have done the right things,just behind the curve so taken the heat due to lack of speed.Likely they have put themselves up for sale and once the balance sheet is clean after nuclear and E+P go they will be taken out.Rough guess is expect £1.40+ a share bid then a counter bid.Not ideal,but one of a few dozen investments and see how things play out.Depends if big oil want a quick way into the EV charging space.They should of sold nuclear ages ago.Customer numbers went up May and June though,likely they are close to being price settors now.Ends of cycles are tough and its crucial people ladder in slowly and across a broad spread of areas/companies.