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Credit deflation and the reflation cycle to come.


DurhamBorn

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1 hour ago, dgul said:

Cloggies need more dams and whatnot.

Germany needs rebuilding. The place is falling to bits. As an example of how one industry - cars - has fucked over the country - motorways excellent, schools etc falling down.

Spain has more infrastructure than people.

EE needs more shops. Maybe he ECB could fund putting a Primark in every large Polish town.

 

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15 hours ago, Bricks & Mortar said:

Can you buy TLT from the UK? 
I can't find it on my HL platform right now, but thats just because their search feature is down.  Pretty sure I found it the other day, and was duly informed I couldn't, due to lack of a KID, (Key Investor Document - the EU requirement that stops us buying all sorts of interesting international ETFs)

I don't think you can actually buy TLT in the UK, because as you say kid not available. Could be wrong, but I think Barnsey uses TLT prices for market signalling. 

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19 hours ago, Harley said:

Very confused.  Took the German lead from DB, and shows it's listed there (FRA) but may be Euronext listed (Belgium)!  SOL v SOLB!

Blooming foreigners.  Maybe I should stick to the sensible FTSE after all!

thanks Harley, I found SOLB (Belgium). However, is FRA its German ticker as i cant find it if it is?

I'm experimenting with investing.com - all good except for the German stocks - where they don't appear to handle sorting the different German exchanges very well/or logically (I digress, but interesting how aspects of German economy are still not centralised; though I believe the UK still had at least two regional exchanges 'up north', one in Birmingham(?), until the inter-war period).

 

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17 hours ago, Errol said:

So a bet on Russia then?

TurkStream, Power of Siberia and Nordstream II coming on line soon.

Russia media reporting always soooo very bad from our media - politically - not without cause I admit.

However economically….bad demographics and corrupt/inefficient regime is downside ...BUT hardly ever mentioned is the surely massive upside of:

big commodity exporter (oil, gas, coal, wood / Siberia thawing=agriculture+++, already world largest wheat exporter) and huge adjacent 'like minded' Chinese customer.

Question is how best to get investment exposure for the coming cycle - How are others planning/doing this? Is it through individual (Russian?!?) stocks or generic emerging market ETF's?  ...or are there other better options?    

 

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5 hours ago, dgul said:

Funny old times at the moment (fed notes yesterday, bund sale, Powell's speech Friday, etc).  They know they've got to reduce rates, but they can't reduce them without the market telling them that it's needed, which it'll do with a reduction in share prices reflecting 'definitely recession coming' -- but no matter what they say the market responds with 'that means lower interest rates!', so they don't get the sell-off which would allow them to lower interest rates...

Dangerous game being played, looks like we're in for a market plunge this week if Powell doesn't surprise with an overly dovish stance, market still pricing in 0.75-1% of cuts by year end. I have no doubt that if the market does dive, he'll have his justification to act next month.

Not the biggest fan of Trump, especially concerned about his mental health after all this Greenland nonsense, but there's considerable logic behind his Twitter rants about the Fed being too tight and needing to act, he's panicking that it's going to be too late, and he's spot on.

If you REALLY look into the tightening we've seen including QT, taking into account the Wu-Xia Shadow Rate, the Fed have actually tightened by 5.75% since 2014, far more than any of the 4 previous tightening cycles, and almost the same as the last 2 combined! They are way behind the curve and should have started easing end of last year to stand any chance.

https://www.frbatlanta.org/cqer/research/shadow_rate.aspx

Don't fall for the more positive numbers out of France and Germany today either, look to Sweden which has seen it's unemployment rate really start to tick up, an economy which usually acts as the canary for the Eurozone.

IMG_20190822_145924.jpg.b6a911287df9345aab4940555db83e56.jpg

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reformed nice guy
7 hours ago, CVG said:

Watch your World Index Share ETF. It may be heavily weighted towards US and towards a few shares in the US, e.g. FAANG's, so may not be as diverse as you imagine.

This is one thing that I have been thinking about recently.

If you feel that the FAANG stocks Burberry etc, or any particular component of a major index is going to fall significantly then is it worth investing in an index tracker?

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Quote

While "It’s hard to know exactly where neutral is" Harker said that "we’re roughly where neutral is right now.

Such knowledge and expertise!  Its hard to understand what Gold/Silver are getting so worked up about....

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1 hour ago, Barnsey said:

If anyone is looking for broad exposure to commodities (including agriculture) for the next cycle, the WisdomTree Enchanced Commodity ETF (WCOB) looks pretty good

Looks good @Barnsey, been wanting a broad commodities exposure for my floor fund just not sure about the below bit though? Suspect many ETF have this in the small print, at least they have it up front ...

The Fund also aims to outperform the Bloomberg Commodity Index TR over the long term. The Fund invests in US Treasury Bills and uses total return swaps to deliver the Index performance. The swaps are collateralised on a daily basis and reset monthly. L

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6 hours ago, spygirl said:

Id add I still do not see a collapse of demand in the US.

Europe, china fucked.

US booming.

 

US market will likely ge thit hardest.

 

1 hour ago, Barnsey said:

Dangerous game being played, looks like we're in for a market plunge this week if Powell doesn't surprise with an overly dovish stance, market still pricing in 0.75-1% of cuts by year end. I have no doubt that if the market does dive, he'll have his justification to act next month.

Not the biggest fan of Trump, especially concerned about his mental health after all this Greenland nonsense, but there's considerable logic behind his Twitter rants about the Fed being too tight and needing to act, he's panicking that it's going to be too late, and he's spot on.

If you REALLY look into the tightening we've seen including QT, taking into account the Wu-Xia Shadow Rate, the Fed have actually tightened by 5.75% since 2014, far more than any of the 4 previous tightening cycles, and almost the same as the last 2 combined! They are way behind the curve and should have started easing end of last year to stand any chance.

https://www.frbatlanta.org/cqer/research/shadow_rate.aspx

Don't fall for the more positive numbers out of France and Germany today either, look to Sweden which has seen it's unemployment rate really start to tick up, an economy which usually acts as the canary for the Eurozone.

IMG_20190822_145924.jpg.b6a911287df9345aab4940555db83e56.jpg

Will you please not put it out there how much the Fed has tightened.Nobody else has noticed and we dont know who might be reading this.:ph34r:..Of course that is 100% right.The lag is now hitting home.Its why its too late now.Markets jump on the sugar rush of easing,but it takes 18 months to come through.Notice sterling up 2c since everyone said it was toast and we said it would likely turn there.

Page one macro strategy.If i earn £2000 a week im rich.If i pay out £2000 a week for goods and services great.If my income drops to £1980 im still rich,but somebody is taking a pay cut.99% of people dont understand that.It doesnt matter where you start from,its loose,or its tight.The Fed has stayed tight far too long.

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21 hours ago, Harley said:

Noticed this on Morningstar (once I went to SOLB!):

"Belgium-based Solvay has largely completed its transformation to a specialty chemicals company, although there are still some commodity chemicals where the company has a leading market position, notably soda ash and peroxides. However, we still don't see a moat, given that high capital intensity continues to weigh on ROIC, leaving us with limited confidence in the company's ability to generate sustained returns above the cost of capital. A EUR 150 million cost-cutting plan was announced in 2018 to adjust the company's cost base to its new, leaner business portfolio. Successful execution of said program, with some evidence that current high margins have staying power in an economic slowdown, would go far in building our confidence around a potential moat for Solvay". 

I could already see some cost cutting in the figures.  Totally agree about the intangibles.  They were 37% of total assets in 2018.  That was a very common feature when I looked at the FTSE.  I'm more of a going concern valuation type so am reluctant to give such things much value for the same reason as you state, especially with what may be coming. 

Harley, great discussion and analysis. The exercise was a little dispiriting for me as I couldn't really find a company that stood out after looking at their financials. For example, Solvay (as you say, has a suspiciously large 'goodwill asset' figure; although many co's do appear to carry this); Evonik (has large debt, where total liabilities are bigger than its market cap). 

I guess every company will have at least one worrying negative figure in its financials, but would you rule out Solvay and Evonik - or would you need to compare them to many other co's within same sector?

Of course i'm completely discounting other information that might be available for example regarding a company's recent history (large debt might be due to acquiring a competitor), or a company's future potential (it may have recently developed a market leading product) - but on financials alone would the above figures be too negative to encourage you to research further?             

 

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23 minutes ago, JMD said:

Harley, great discussion and analysis. The exercise was a little dispiriting for me as I couldn't really find a company that stood out after looking at their financials. For example, Solvay (as you say, has a suspiciously large 'goodwill asset' figure; although many co's do appear to carry this); Evonik (has large debt, where total liabilities are bigger than its market cap). 

I guess every company will have at least one worrying negative figure in its financials, but would you rule out Solvay and Evonik - or would you need to compare them to many other co's within same sector?

Of course i'm completely discounting other information that might be available for example regarding a company's recent history (large debt might be due to acquiring a competitor), or a company's future potential (it may have recently developed a market leading product) - but on financials alone would the above figures be too negative to encourage you to research further?            

Ta, and yes I agree with you.  A bit dispiriting.  There is always something not to like.  Take, Solvay.  Had an interesting time in 2015 but was undergoing a major restructuring and the performance metrics (DSO, etc) since then seem to be getting better so maybe a sign of a well managed company.  I think I'm still learning what is reasonable as I look at company financials more closely and regularly.  Interesting I'm even doing a lot more of this (as opposed to just tracking or focusing on pure technicals) but this shows how I think things have changed (pickers market).  For example, I initially was worried about movements in cash balances (per the cash flow statement) but then you could argue a company not using it's cash is just as bad, as long as debt, divs, etc are covered.  I think I'll develop a better yardstick as I practice more.  And yes, I would compare against the others in the sector.  I prefer a top down approach most of the time so get the sector right first and then look at which company (or two) to invest in, if possible.  After all, asset/sector allocation is arguably more important, on the average, than the specific company.  However there doesn't seem to be a lot out there ATM for div investors.  I can see a lot of damage to company financials in any serious storm like what we're talking about on this thread, given some of the trends, like the growth in intangibles as a percentage of total assets.  Maybe a lot of accumulated "padding" that a storm needs to clear out.  These things tend to go in cycles.    

PS: I started using ADVFN today as I found their screener and forum to be very good (hate most of the rest though).  Nice to be able to screen by div cover, etc.  But then that's only for the latest figure and again, we probably need to look at company averages and trends if we want to be able to buy anything! 

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10 hours ago, CVG said:

Watch your World Index Share ETF. It may be heavily weighted towards US and towards a few shares in the US, e.g. FAANG's, so may not be as diverse as you imagine.

FYI.  I hold a global ETF but also a range of regional ETFs (LA, Europe, AsiaPac, etc) so that I can ensure and tweak the allocations for this very reason.

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5 hours ago, JMD said:

thanks Harley, I found SOLB (Belgium). However, is FRA its German ticker as i cant find it if it is?

I'm experimenting with investing.com - all good except for the German stocks - where they don't appear to handle sorting the different German exchanges very well/or logically (I digress, but interesting how aspects of German economy are still not centralised; though I believe the UK still had at least two regional exchanges 'up north', one in Birmingham(?), until the inter-war period).

Solvay has several listings.  SOL on the Frankfurt exchange and SOLB on the Euronext (Belgium) exchange.  SOL is the main listing.  Not helped that Morningstar has data on both listings but more on SOLB.  So I went in and first found SOL, only later to twig I should have gone in with SOLB.  Happens with all these multi listings, let alone ADRs and GDRs, etc.

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3 hours ago, Barnsey said:

If anyone is looking for broad exposure to commodities (including agriculture) for the next cycle, the WisdomTree Enchanced Commodity ETF (WCOB) looks pretty good

indexcommo.png.3c0d78485124d919f1ff5176ef6f47b5.png

https://www.wisdomtree.eu/en-gb/etfs/commodities/wisdomtree-enhanced-commodity-ucits-etf-usd-acc

Ta.  Been a while since I looked but I think you're right to wave the commodities flag for another look.

Looks interesting but WisdomTree bough ETFS Securities (who specialised in these ETFs) and I lost bad on one of ETFS' commodity funds after AIG and all that so I'm a bit biased!

I maybe would go down a level so I could control my allocations to each commodity group, but only if there was liquidity and size in these more granular ETFs as some can get quite small. 

But then maybe a single one would be more manageable in a balanced portfolio covering many areas other than commodities.

One of the first things I would do is compare it to the CRB index to seek how well it has tracked it.

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1 hour ago, Ma2 said:

Looks good @Barnsey, been wanting a broad commodities exposure for my floor fund just not sure about the below bit though? Suspect many ETF have this in the small print, at least they have it up front ...

The Fund also aims to outperform the Bloomberg Commodity Index TR over the long term. The Fund invests in US Treasury Bills and uses total return swaps to deliver the Index performance. The swaps are collateralised on a daily basis and reset monthly. L

Apart from Gold and Silver and some Goldman (or whoever) tankers full of oil, no-one is going to take delivery so yes, these are synthetic based and need to be looked at carefully.  They only other option seems to be to invest in the producers as proxies, but again, that's a somewhat different game.

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Talking Monkey
8 hours ago, spygirl said:

Id add I still do not see a collapse of demand in the US.

Europe, china fucked.

US booming.

 

Which is more fucked Spy Europe or China

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Talking Monkey
1 hour ago, DurhamBorn said:

US market will likely ge thit hardest.

 

Will you please not put it out there how much the Fed has tightened.Nobody else has noticed and we dont know who might be reading this.:ph34r:..Of course that is 100% right.The lag is now hitting home.Its why its too late now.Markets jump on the sugar rush of easing,but it takes 18 months to come through.Notice sterling up 2c since everyone said it was toast and we said it would likely turn there.

Page one macro strategy.If i earn £2000 a week im rich.If i pay out £2000 a week for goods and services great.If my income drops to £1980 im still rich,but somebody is taking a pay cut.99% of people dont understand that.It doesnt matter where you start from,its loose,or its tight.The Fed has stayed tight far too long.

Does that mean DB that if they start easing now, the market jumps but because it takes 18 months for the easing to take effect the recession hits along with the associated market tank, and then during the depths of the market tank the easing that will start now begins to impact the real economy so early 2021

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4 hours ago, Barnsey said:

Dangerous game being played, looks like we're in for a market plunge this week if Powell doesn't surprise with an overly dovish stance, market still pricing in 0.75-1% of cuts by year end. I have no doubt that if the market does dive, he'll have his justification to act next month.

...

I have this feeling that that is what they know they have to do -- it isn't enough to just do what the market wants -- they've got to make it clear to everyone that it is what the market needs.

Dunno though -- we'll see tomorrow.

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17 minutes ago, Talking Monkey said:

Does that mean DB that if they start easing now, the market jumps but because it takes 18 months for the easing to take effect the recession hits along with the associated market tank, and then during the depths of the market tank the easing that will start now begins to impact the real economy so early 2021

yes in basic terms.There is cross market stuff going on like currency etc,but thats the sort of basic road map.The US is seeing dollars return from China so that is easing things for them,but not enough.How they ease and tighten counts.The next cycle we expect them to inject direct into the economy,and this can see velocity move much quicker.

If i dont buy a tin of beans at the corner shop the farmer and the big factory dont feel it yet.The shop does.Next the wholesaler,then the factory,then the farmer,then the chemical feed company.That might be 3 months.Other things in the economy take much longer.

Fed should of been easing over a year ago.They are way behind the curve.Markets know they will ease now,but they dont yet know just how late they are.A bust full of deflation will show them soon.

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32 minutes ago, Talking Monkey said:

Which is more fucked Spy Europe or China

China.

China is shrinking and faces a revolution.

Europes just a bit shit and stuck with stupid dirigiste Pols.

 

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