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Credit deflation and the reflation cycle to come.


DurhamBorn

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9 hours ago, macca said:

I’m going to say something stupid.. 

If an economy is an invention, A made up game.. Why can’t they invent their way out of trouble by changing the rules of the game.. 

That's what they did in 2008, effectively. Or at least they tried to. They are running out of road now though, short of massive, massive money printing.

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9 hours ago, macca said:

I’m going to say something stupid.. 

If an economy is an invention, A made up game.. Why can’t they invent their way out of trouble by changing the rules of the game.. 

surely with a fictional unicorn such as an Economy there should never be a boom or bust unless they want there to be one.. 

Ever done that thing where you do a sum on a calculator, and then keep pressing = until it shits itself and just displays an insane number and E?

That's where we are xD

 

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Bobthebuilder
45 minutes ago, Errol said:

That's what they did in 2008, effectively. Or at least they tried to. They are running out of road now though, short of massive, massive money printing.

Indeedy and massive money printing is what they will do. but dont quote me on that.

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7 hours ago, reformed nice guy said:

To add further anecdotal evidence, I have family in America.

One is early 30s, divorced with a kid. He took 2 months off work to travel (Europe) and walked into a new job upon returning with a pay rise and working from home on a Friday. California, not particularly highly educated.

Another is early 60s. Tried to retire a few years ago but they threw money at him. Supposed to be retiring this year but hasnt done so yet. Works in oil, travels all over US.

Mid 20's female, married, no decent qualifications. Husband is an accountant, they moved to Texas and she doesnt have to work.

Early 30's female, recently married + kid, moved Arizona to Texas. Husbands job is so good that she doesnt think she will have to work again.

The reason that I add the above is that I havent heard equivalent here in the UK.

https://www.ft.com/content/55430aac-bf51-11e9-89e2-41e555e96722

Gist

Good numbers from Walmart, which covers ~70% of uk economy.

 

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3 hours ago, A_P said:

I thought you were running HB's perma portfolio, eg 25% of bonds and 25% gold. You should be laughing your way to the bank right now. Or were you reluctant to use bond etf's?  

I'm working towards it but their price ran away from me before I was done. Plus, with the views here and my own sentiment, I found it hard to go all in.  Plus, I included some NS&I inflation linked bonds in my allocation which obviously haven't run up (yet!).  Yes, I was also researching alternatives to bond ETFs.  I'm probably currently at about 15%.  Gold and silver, no problem!

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9 hours ago, Starsend said:

Any particular stocks that you think are particularly good value at the moment?

In the UK a lot,by the end of the next cycle i expect a lot of the blue chips getting smashed to treble or more before dividends.However they could keep falling a while yet as the market is shaken out.Everything is proceeding as expected,the only thing now is for the governments to start to inject liquidity.The market hasnt any sniff that the next cycle will be a full on reflation,and they wont until we are well in to it.So the stocks that will gain might continue down in the short term.

One sector i think is very very cheap is telcos.The next cycle will suit them as their investment cycle slows just as inflation runs higher.Key will be if they can pay off debt as it comes due.Their bond holders will take a bath though.

Pretty much all the UK consumer cyclical sector is now very cheap.The transports etc should be big winners going forward.The next cycle will be the first one in a very long time where car ownership levels fall.Second hand car sales will even start to fall at the same time as new cars do.The cyclical sector will also start to gain when everyone wakes up to the fact sterling is going to go up from here,not down.

Once the shake out happens i will be buying some insurers who have taken on final salary pension schemes etc because gilt yields will rise a lot through the cycle,so they should be able to release lots of cash for shareholders as the liabilities get cheaper to fund.Companies are offloading them at the worst point in the cycle.Legal and General will clean up,but they need to get through a credit deflation first.

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Inoperational Bumblebee
On 14/08/2019 at 09:16, Yellow_Reduced_Sticker said:

Can someone here who knows about this ETFS below explain, as looking at the 1 year chart its gone ONLY one way!

 
ETFS Foreign Exchange Ltd Long GBP Short USD (GBP)
 
image.jpeg.cde9345e79157121a9a91421294895ef.jpeg

Just looks like a straight-up unleveraged GBPUSD long i.e. equivalent of holding cash.

On 14/08/2019 at 10:07, DurhamBorn said:

Yeah you just got richer :),my PM allocation went too high (Errol will say there is no such thing),but because they shot up so hard (and of course some other parts of my portfolio fell)

I did! Similar reasons. My excessive exposure to miners and crypto is actually what's keeping my portfolio relatively stable at the moment, despite the wild volatility of both. I've seen overall weekly fluctuations of 4% at most even with the brutal drops in stuff like VOD and CNA.
Took profits on some BTC thankfully; for those who follow prices I had various sells around $11-12k, and managed to pick some back up at $9.5k. A quick 20% profit if denominated in BTC.

On 14/08/2019 at 10:54, Hardhat said:

I'm holding and adding. I haven't got enough invested to make it feel "worth it" to sell now. I'm also fairly young and willing to hold for the long term.

And I get a kick out of the drama. ;)

I now consider myself in between. Enough invested that it's worth holding on (as it could actually be life-changing in a relatively short timespan), but not enough to sell out now as a) I don't know what I feel comfortable getting rid of, and b) I'm hoping there's a lot more upside to come.

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sancho panza
On 13/08/2019 at 13:31, DurhamBorn said:

No,nothing matters compared to $ liquidity,nothing.The road maps are designed to ignore noise.Remember i dont short,i try to look at where something should end up,not if it goes past.My gold call was around $1530/1560 top and we made it.I would re-buy the miners if all the other indicators say to do .i follow those,not events.Im more interested in the cycle turn now and how it plays out as the miners made me more capital than i had hoped for.The below shows the debt deflation in progress as liquidity dries up.What caused the below?.Fed tightening nearly 2 years ago.Always the Fed,always the long bond rate,the rest is just leads and lags and cross market flows.

"The Society of Indian Automobile Manufacturers (SIAM) said sales of cars to dealerships fell by 30.9% to 200,790 in July - the worst drop since December 2000.

The pace of the decline has accelerated in recent months as a liquidity crunch in India's shadow banking sector has dried up lines of credit to dealers and potential car buyers."

 

Have to say that I'm increasingly coming around to this poiint of view whwne I look at the trades I'm lining up outside the short term trading ranges.

I hadn't made the connection that the drawdown in aggregate demand was a function of dollar liquidity,but the timing makes your line of thought compelling in the extreme.

IS it along the lines of Fed raises,$ 's head home, leads to drops in EM currencies,leads to rising costs/inflation,leads to drawdown in demand?

On 13/08/2019 at 17:25, JMD said:

Thank you SP, very generous of you to take the time to share this.  

 

I do have a follow up question... To filter out the 'bad companies' and reveal the good, do you use any sites like the one below? Or do you manually collate your data?

I just did a quick search so this is not a good example as its narrowly focused on the Nasdaq and not configurable.

https://www.nasdaq.com/symbol/ipi/guru-analysis/fool

I guess its well worth paying for a subscription based service to get all the bells and whistles - but probably only worth the fees if you are a regular trader.

So I was wondering - are there any inexpensive (free) online tools/calculators that can be used to help discover the type of reflation stocks discussed here on this thread? I'm thinking one that had some configurable metrics for say analysing debt/cash flow/balance sheet/etc... or is this asking too much; I assume harvesting all the info. from the company reports would mean there would have to be a charge made for all the work involved?   

I use the data on investing.com.There are loads of free sites with good relaiable data.I do pay for some research as I'm time poor-kids/work etc and it savesa lot of time but so much is free .Sites like the one you link are a waste of cash imho.Just charging people for an opinion-pass/fail.What I'll pay for is analysis but as DB has said,this thread has thrown up some better analysis than a lot of people are paying for.

If your a chartist then I beleive stockcharts.com might be worth a sub but best ask someone like @Harley.I use the charts on investing.comI pay the sub on investing.com but only because I feel guilty with the amount I use it.£40 or so p.a.Marketwatch has some great free data.

On 13/08/2019 at 17:55, A_P said:

quite an interesting response, not what i would have expected given your trading and analysis you do. So do you not track your dividends at all?

Without getting too deeply into my family/personal situation,no I don't track divi's much.I work the creative side if you will,looking for value and viable trades.I'm terrible at reconciling statements etc. Like I said,if I obsess about our annual %age returns,it'd stop me taking risks.

What I often do is buy in Mama P's name if it's a long term hold.She's old and she loves sitting there tallying up her certificates (we take scrip where we can).I put the short term trades in my/Mrs P name.As an example I got up today after my night shift,opened up my spread betting a/c and decided after 3 or 4 mins to shut my Savills short.If that was in my Mum's name it'd take three weeks before she was ready to close.

Me and Mama P have a little business that involves a couple of other family members,she looks after that, has someone who does the tax returns and decides who is owed what.

Sounds weird but it's family life.DB has a similar set up with his Dad n Mrs etc from what it sounds like.

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sancho panza
On 14/08/2019 at 08:39, kibuc said:

Zero remorse. Miners are still lagging way behind metals, and metals recovered nicely yesterday. I believe there's still headroom for PMs and a lot of catching up to do for miners.

However, I'm a believer, not a voice of reason.

You're one of the most informed PM/miner punters on her.I vote for voice of reason .Miners are indeed well behind the metals but historically peak as institutional money moves in,which it hasnt so far.

Imho this bull has jsut started,will be accelreated by $weaknes going forward,arrested by dollar firmness, then reignited by dollar weakness

 

On 14/08/2019 at 09:43, Majorpain said:

Ditto, although if there was any hype around PM's then I would be selling now for sure.  As it is the bulletin boards for shares which are up even 50% are currently pretty dead which goes to show how hated PM's still are IMO.  Volume isn't anything to write home about either.  I agree there is money to be made in the casino till year end, although its significantly riskier at $1500 AU!

Its fascinating that its always a simple reason why things happen, it doesn't get simpler than there are not enough $ in the world for everyone.  Trump for all he gets slagged off appears to understand that.

Absolutely MP.The time to sell is when we get some serious insto/retail participation. @A_P had a nice link about buying and holding beating trading in and out-weightings allowing.

On 14/08/2019 at 10:07, DurhamBorn said:

We had a fantastic talk about this way back in the thread @sancho panza etc.The conclusion was that the Fed etc knew the affect and werent stupid,its just it was a weapon to hit China and make sure the dollar was king,at least for another cycle.I think from what we are seeing now we were 100% correct on that,and i havent seen that said anywhere else,by anyone.The first thing my friend told my nearly 30 years ago now was the most important thing in a market economy was the cost of money.Everything else is leads and lags to that and cross market work.Like you say its the simple that causes things,not the complex.The complex is actually the affect of the simple.Gold isnt going up because of the China/US trade war,its going up because dollar tightening like you say means not enough dollars for everyone.One of the best tools i have is the liquidity one,because it doesnt look at "oh rates are still very low we are fine",it looks at are things tightening or loosening.Thats the key.Take UK houses.If liquidity is falling then you cross market that with other things like demographics in buying age,inflation,real wages etc and you then get the end result.

Strange I was remembering that the other day when I was driving and pondering things as I went.I was basically trying to work out if we're heading for a rerun of 2008 policy repsonse ie weaker dollar/stronger dollar/weaker dollar and jsut when I was talking myself out of it,I remembered that discussion and how it drew a simple line of reasoning beneath the Fed's logic that when you understand it,put it into context viz history, makes it highly likely we're going to get a weaker dollar phase.

The more I look at things,the more dollar obsessed Im becoming

obviously history never repeates exactly.

image.png.1760abc0ae9aca56df37009acd191a77.png

image.png.83977fbd1f458df123643e74aab33109.png

As I've said

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sancho panza
On 14/08/2019 at 21:27, spygirl said:

Im still counter to everyones opinion about FED n tightening.

I reckon US growth n wage growth will carry on.

Inflation is 1.8%

Big demographic fall back in US. Very few spare workers.

Companies are playing it safe and avoiding China.

No asian country have much in way of spare skilled Labour.

I think Europe will continue to fall apart due to gormless ECB n QE.

Wsllstreet are trying to play FED.

FED  can cut but watch for them dumping assets from bakance sheet.

 

wage inflation will be the key to teh next US recession

12 hours ago, DurhamBorn said:

Yep,gold and those bonds in sterling have been fantastic.Iv been selling though the last few weeks everything thats done so well and im slowly buying stocks that are getting smashed,but only in certain areas.Someone should send this thread to the MSM xD.Lots of people throwing the towel in on a lot of sectors (telcos for instance),they are seeing recession now (late as usual) but dont see the reflation coming soon,leads and lags,always leads and lags B|

Was looking at BT today...........bottom doesn't look in yet.

Do you have a view on their attempt to get into the TV market.Seems a pricey attempt to outbid those perennial outbidders Sky?

image.png.a652bac03ac7c63a00efea8e7e25f7d0.png

11 hours ago, janch said:

Someone else who thinks the same way as DB and an interesting article:

https://creditwritedowns.com/2019/08/the-fed-overtightened-now-its-behind-the-curve-recession-awaits.html

 

There's a notion underpinning a lot of thse articles that the Fed could have avoided a recession with a change in tack.Recessions are like the tides.You can maybe delay them coming in and the damage they can do,but you cant stop them coing in.

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@sancho panza yes similar set up.My dads finances are his but i know every penny he has and where and he does me.He comes to my house every couple of days and i always run thoughts past him.

The $ is simple really.The less $ in the system (and remember you can have less,but still more dollars if they have to service more debt) the less left after servicing all the debts in dollars to spend/invest.Billions of individual choices,but there are less choices with less dollars.The Fed started to tighten and nobody noticed.People dont understand the massive affects of a small cut.Once QE was stopped then dollars going back into the Fed balance sheet from debt evaporate.Liquidity and velocity are the two key ingredients to a macro cycle.The last cycle saw massive liquidity,but poor velocity.Thats why houses and momentum stocks went up so much and bread and butter company shares have been hammered.

Pretty much everything on the road map we had set out has come right so far.The stocks that hate deflation are being hammered down as the cycle ends.The key now is what happens next.The profits on the miners etc are for nothing if the stocks im buying now dont turn within the next 20%.That will see many down 75%+ from highs.My $/£ is showing around 16% upside in sterling minimum.Timescale 24 months.If that is right then the market is looking the wrong way at this inflection point.UK cyclical and reflation shares should turn higher soon.I had ladders set,but my cross market work on this has made me tighten those ladders (BT and RM were bought today and both now only have one more ladder,not two).Sentiment is terrible at the moment,but my road maps are there to remove sentiment from my moves.

As the CBs roll back on tightening and go loose i expect this time that it doesnt flow through the bond markets,but instead through government fiscal accounts.The markets wont notice the difference,but it should mean velocity wakes up,slowly at first,but then to a level that sees inflation increases ratchet up.

Just out of interest i road map inflation at 5% (mid point of what i expect across the cycle) and then roll that along a balance sheet with depreciation holding steady.In doing so it is showing VOD at £4.45,BT,£5.25,SSE £19.38,RM £6.44,Stagecoach £3.36 etc etc by 2027.

Those are minimum targets.Some will fail,one or two out of a portfolio might go bust,but that is what i see ahead.The resource areas i see much bigger gains,but those are areas im still starting to add small positions and set up ladders.

 

 

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sancho panza

Hodges says oil going down.Some cheap oil stocks out there

https://www.icis.com/chemicals-and-the-economy/2019/08/oil-market-weakness-suggests-recession-now-more-likely-than-middle-east-war/

Brent.png

Oil markets remain poised between fear of recession and fear of a US attack on Iran. But gradually it seems that fears about a war are reducing, whilst President Trump’s decision to ramp up the trade war with China makes recession far more likely.

The chart of Brent prices captures the current uncertainties:

  • It shows monthly prices for Brent since 1983 and highlights the conflicting risks
  • The bulls have been battling to push prices higher, but their confidence is weakening
  • The bears were hurt by the stimulus from US tax cuts and OPEC output cuts
  • But June’s abandonment of the Iran attack lifted their confidence

As a member of the President’s national security advisory team has noted:

“This is a president who was elected to get us out of war. He doesn’t want war with Iran.”

Big-3.png

With fears about a potential war reducing, at least for the moment, attention has instead turned to issues of supply and demand.  And here, again, the balance of different factors has turned negative:

  • As the second chart shows, supply from the 3 major countries remains at a high level
  • The US is the largest producer, and August’s output is now recovering after the slowdown in the Gulf of Mexico due to Hurricane Barry, and the EIA is forecasting new record highs this year and 2020
  • 3 new pipelines are also coming online during H2, which will boost US oil export potential
  • Meanwhile Russia, as usual, has failed to follow through on its commitment to the OPEC cuts. Its output rose by 2% in January-July versus 2018, despite May/June’s contamination problems
  • As always with OPEC output cuts, Saudi Arabia has been forced to fill the gap. Its volume dipped to 9.8mbd in July, well below the 11mbd peak last November

Overall, global supply has remained strong with EIA estimating Q2 output at 100.6mbd versus 99.8mbd in Q2 last year. Contrary to last year’s optimism over global economic recovery, EIA suggests Q2 consumption only rose to 100.3mbd, versus 99.6mbd in Q2 last year.

And the normally bullish International Energy Agency last week cut its demand forecast for this year and 2020 warning:

“The outlook is fragile with a greater likelihood of a downward revision than an upward one…Under our current assumptions, in 2020, the oil market will be well supplied.”

Orbital.png

The third chart, from Orbital Insight, highlights the changes that have been taking place in inventory levels in the major regions.

Generated from satellite images of floating roof tank farms, it is based on estimates of the volume of oil in each tank, which are then aggregated to regional or country level.

Oil markets are by nature opaque. But Orbital’s data does show a very high correlation with EIA’s estimates for  Cushing – where the official data is very reliable.

ACC.png

As discussed here many times before, the chemical industry is the best leading indicator for the global economy, due to its wide range of applications and geographic coverage.  The fourth chart shows the steady downward trend since December 2017 in the data on Capacity Utilisation from the American Chemistry Council.

Q2 has shown the usual seasonal ‘bounce’,  but key end-user markets such as electronics, autos and housing are also clearly weakening, as discussed last week for smartphones.  And Bloomberg has reported that US inventory levels at major warehouses are close to being full.

I suggested back in May that prudent companies would develop a scenario approach that planned for both war and recession, given that the outcome was then essentially unknowable.

Today, both scenarios are clearly still possible. But it would seem sensible to now step up planning for recession, given the downbeat signals from oil and chemical markets.

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11 minutes ago, sancho panza said:

wage inflation will be the key to teh next US recession

Was looking at BT today...........bottom doesn't look in yet.

Do you have a view on their attempt to get into the TV market.Seems a pricey attempt to outbid those perennial outbidders Sky?

image.png.a652bac03ac7c63a00efea8e7e25f7d0.png

There's a notion underpinning a lot of thse articles that the Fed could have avoided a recession with a change in tack.Recessions are like the tides.You can maybe delay them coming in and the damage they can do,but you cant stop them coing in.

Im buying BT  simply because i think the whole sector is undervalued,and that the investment cycle should end for the sector (and so depreciation level out) just as they manage to get price increases to bed in.I also think they will get a good deal on the fiber roll out early next year and they might flog off the Spain and South America business to pay for it and get much higher returns on capital.Ladders set of course in it and starting the buying two thirds down from where institutions took shares to fund the EE buyout.I expect it to probably treble from todays price by around 2027 before dividends.Of course its just another stock added to the portfolio,some will fail.

Oh and as for TV,there is an outside chance they might buy ITV,or at the least do a joint venture on their Britbox thing.

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sancho panza
6 minutes ago, DurhamBorn said:

@sancho panza yes similar set up.My dads finances are his but i know every penny he has and where and he does me.He comes to my house every couple of days and i always run thoughts past him.

The $ is simple really.The less $ in the system (and remember you can have less,but still more dollars if they have to service more debt) the less left after servicing all the debts in dollars to spend/invest.Billions of individual choices,but there are less choices with less dollars.The Fed started to tighten and nobody noticed.People dont understand the massive affects of a small cut.Once QE was stopped then dollars going back into the Fed balance sheet from debt evaporate.Liquidity and velocity are the two key ingredients to a macro cycle.The last cycle saw massive liquidity,but poor velocity.Thats why houses and momentum stocks went up so much and bread and butter company shares have been hammered.

P

 

 

Thanks for the explanation.I think you're right re the fed trying to reflate via fiscal rather than QE

 

Are you running your slide rule over big oil at the mo?Beginning to look really compelling to me.

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image.png.827ba58705a1573ec4db482cd7fadc75.png

image.png.63edfbfb71a2a91cce7395dbdd4e1b85.png

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Im expecting oil to get smashed lower this year or next.I have a ladder set in BP at £3.85 so that shows how bearish i am.I think we go under $40 minimum.I could be way out of course and a weakening dollar might send oil up,but not for me at this point.

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Talking Monkey
7 hours ago, DurhamBorn said:

In the UK a lot,by the end of the next cycle i expect a lot of the blue chips getting smashed to treble or more before dividends.However they could keep falling a while yet as the market is shaken out.Everything is proceeding as expected,the only thing now is for the governments to start to inject liquidity.The market hasnt any sniff that the next cycle will be a full on reflation,and they wont until we are well in to it.So the stocks that will gain might continue down in the short term.

One sector i think is very very cheap is telcos.The next cycle will suit them as their investment cycle slows just as inflation runs higher.Key will be if they can pay off debt as it comes due.Their bond holders will take a bath though.

Pretty much all the UK consumer cyclical sector is now very cheap.The transports etc should be big winners going forward.The next cycle will be the first one in a very long time where car ownership levels fall.Second hand car sales will even start to fall at the same time as new cars do.The cyclical sector will also start to gain when everyone wakes up to the fact sterling is going to go up from here,not down.

Once the shake out happens i will be buying some insurers who have taken on final salary pension schemes etc because gilt yields will rise a lot through the cycle,so they should be able to release lots of cash for shareholders as the liabilities get cheaper to fund.Companies are offloading them at the worst point in the cycle.Legal and General will clean up,but they need to get through a credit deflation first.

Do you think one final melt up DB before the bust hits, or was that it what we saw when the S&P was at 3000

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5 hours ago, DurhamBorn said:

....As the CBs roll back on tightening and go loose i expect this time that it doesnt flow through the bond markets,but instead through government fiscal accounts.The markets wont notice the difference,but it should mean velocity wakes up,slowly at first,but then to a level that sees inflation increases ratchet up.......

Lots of good stuff there guys but this is the bit for me, combined with the comment about velocity.

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16 minutes ago, CVG said:

Just in case anyone is confused by the apparent calm in today's markets …….. the London stock market system is broken!

I put my tinfoil hat somewhere round here....

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2 hours ago, Talking Monkey said:

Do you think one final melt up DB before the bust hits, or was that it what we saw when the S&P was at 3000

Im really not sure.Sentiment is so bad for the FTSE that if there is a sign of CBs going loose we could get a decent sized relief rally.This is the hardest part of a cycle to be an investor.Long term real grizzled investors should be preparing a plan.Getting sectors sorted out,looking at were we should be in say 5 years and then angling their portfolio to that while staying diverse.Avoiding any pain while doing this isnt possible.The aim at inflection points like this is to try to keep the losses as low as possible.It sounds simplistic,but if i ended up with a portfolio that  is down 10% after dividends (so say -20% nominal) over 2 years then it turns id consider a success.

I think most people forget,the stock market has seen a huge crash if you take away the mega caps.Many domestic facing,decent companies are down 65%+ from their highs,PEs are approaching the 5 to 7 range.Its highly likely that most of the damage is done in them,but the bond markets could see huge wealth destruction into the reflation.The market thinks inflation has gone forever,governments will prove them wrong on that.

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Democorruptcy
7 hours ago, DurhamBorn said:

@sancho panza yes similar set up.My dads finances are his but i know every penny he has and where and he does me.He comes to my house every couple of days and i always run thoughts past him.

The $ is simple really.The less $ in the system (and remember you can have less,but still more dollars if they have to service more debt) the less left after servicing all the debts in dollars to spend/invest.Billions of individual choices,but there are less choices with less dollars.The Fed started to tighten and nobody noticed.People dont understand the massive affects of a small cut.Once QE was stopped then dollars going back into the Fed balance sheet from debt evaporate.Liquidity and velocity are the two key ingredients to a macro cycle.The last cycle saw massive liquidity,but poor velocity.Thats why houses and momentum stocks went up so much and bread and butter company shares have been hammered.

Pretty much everything on the road map we had set out has come right so far.The stocks that hate deflation are being hammered down as the cycle ends.The key now is what happens next.The profits on the miners etc are for nothing if the stocks im buying now dont turn within the next 20%.That will see many down 75%+ from highs.My $/£ is showing around 16% upside in sterling minimum.Timescale 24 months.If that is right then the market is looking the wrong way at this inflection point.UK cyclical and reflation shares should turn higher soon.I had ladders set,but my cross market work on this has made me tighten those ladders (BT and RM were bought today and both now only have one more ladder,not two).Sentiment is terrible at the moment,but my road maps are there to remove sentiment from my moves.

As the CBs roll back on tightening and go loose i expect this time that it doesnt flow through the bond markets,but instead through government fiscal accounts.The markets wont notice the difference,but it should mean velocity wakes up,slowly at first,but then to a level that sees inflation increases ratchet up.

Just out of interest i road map inflation at 5% (mid point of what i expect across the cycle) and then roll that along a balance sheet with depreciation holding steady.In doing so it is showing VOD at £4.45,BT,£5.25,SSE £19.38,RM £6.44,Stagecoach £3.36 etc etc by 2027.

Those are minimum targets.Some will fail,one or two out of a portfolio might go bust,but that is what i see ahead.The resource areas i see much bigger gains,but those are areas im still starting to add small positions and set up ladders.

 

 

I can understand the sentiment being terrible in our 'usual suspect' stocks at the moment. It's not just the fear of them going bust in the cycle, it's fear of them being nationalised and a fair price not being paid to shareholders. If there were to be an election and Labour went all out Remain I think they might win, given the Tories and Brexit Party votes could split the Brexiteers. Part of the current drop in price is already due to governbankment interference, energy price caps, roaming charges cut etc. It seems the governbankment think it's a vote winner to kick utility companies to save people a few pence a week but funnel money into housebuilders to make people pay ££'s more for a shelter.

Disclosure: despite the above gnawing at me and making me thankfully exit the 'usual suspects' a while back, I've had to go back in this week at these prices and bought some CNA, BT VOD RMG what's a chap to do when stuff like CNA is 50% down from when I sold at 139 and a pension transfer landed in my account this week?

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Bricks & Mortar

 

12 minutes ago, Democorruptcy said:

it's fear of them being nationalised and a fair price not being paid to shareholders. If there were to be an election and Labour went all out Remain I think they might win

Don't think they could Remain AND Nationalise.  One or the other.

EDIT: Although, I wouldn't rule out the EU relaxing the rules for their new hero, JC.
 

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6 minutes ago, Democorruptcy said:

I can understand the sentiment being terrible in our 'usual suspect' stocks at the moment. It's not just the fear of them going bust in the cycle, it's fear of them being nationalised and a fair price not being paid to shareholders. If there were to be an election and Labour went all out Remain I think they might win, given the Tories and Brexit Party votes could split the Brexiteers. Part of the current drop in price is already due to governbankment interference, energy price caps, roaming charges cut etc. It seems the governbankment think it's a vote winner to kick utility companies to save people a few pence a week but funnel money into housebuilders to make people pay ££'s more for a shelter.

Disclosure: despite the above gnawing at me and making me thankfully exit the 'usual suspects' a while back, I've had to go back in this week at these prices and bought some CNA, BT VOD RMG what's a chap to do when stuff like CNA is 50% down from when I sold at 139 and a pension transfer landed in my account this week?

Yes its everything hitting sentiment isnt it.Im an old grizzled contrarian and its worked very well for me over the years.Lots of these companies are the backbone of the UK economy.Government got a reminder last week when the lights went out what happens.I think the next government needs to think again and will.BT will be the first test of this i think.If they get a good deal to roll out fiber we will know.As you say its insane to kick the likes of Centrica and BT while pushing zillions into house builders building piles of crap.

The politicians will reap what they sow though.Forcing deflation down companies necks simply leads to higher inflation down the road.I doubt Labour will get anywhere near power.I work in a factory with 100% union membership and hardly any of them are voting Labour next time.Going remain will destroy Labour.Every Labour voter i know voted leave.

In simple terms institutions were happy to buy shares in BT at £4.50 to fund the EE buyout.We can start to buy them with two thirds off.If we are wrong then we are a lot less wrong than they were.

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