Credit deflation and the reflation cycle to come.

[Castlevania]

@DurhamBorn when I was looking to buy into Telefonica (still haven’t) the CDI seemed the way to do so. 

[dgul]

15 minutes ago, kibuc said:

That would've lifted the stocks instead of sinking them even deeper. 

The actual reaction is one of a market that sees the most important central banker having no fucking clue about what's going on or how to react to it. 

When I wrote it originally the market was up on his speech, which I found astounding (as per your comment).  It then pared some of the gains, but only crashed on Trump's statements on trade wars and Powell (to come later, apparently).

[DurhamBorn]

3 minutes ago, kibuc said:

That would've lifted the stocks instead of sinking them even deeper. 

The actual reaction is one of a market that sees the most important central banker having no fucking clue about what's going on or how to react to it. 

Terrible Fed chair.Way behind the curve,if they slice now and QE might only get a bad recession,instead we will get a massive deflationary bust and a full on reflation.Suits us though.Id thought $1560ish might be a top in gold,but $1600+ looks more likely now the Fed is so far away from where they need to be.Dollar shortage next.China in a very dodgy place as well.They need to pull back credit growth.Growth companies and industrial commods should start to really roll over now.Oil hopefully gets down to my target of below $20 (actually below $15) .

[DurhamBorn]

10 minutes ago, Castlevania said:

@DurhamBorn when I was looking to buy into Telefonica (still haven’t) the CDI seemed the way to do so. 

Im tempted to start buying,but might hold off a bit.I think the whole sector will be in a decent place once the next cycle gets going,but might continue being sold off first.Laddering in of course thats not a worry.Not many sectors will see free cash moving higher fast,but telcos might be one of them as the investment cycle  starts to end as prices rise.

[Majorpain]

47 minutes ago, kibuc said:

That didn't age well. 

However, it's worth taking note of Harmony's 10% spike on yearly results announced eariler this week. Current gold price still hasn't filtered into quarterly earnings and the earliest it should show will be in Q3 results, reported usually early Nov. Harmony reports at a different cadence and its H2 results had a small but measurable overlap with the curent gold run. If - and that's a big if - those levels can be sustained until Q3 reports from other miners, we should see some juicy earnings. 

Im still long and strong PM Miners, still no clamour about them, i suspect you are right an it will be when Q3 results start to hit (like Harmony) and higher PM prices are shown on the bottom line that the herd will pile in.

Geopolitically things are starting to go downhill, a US president finally standing up to the things China is up to is not going to end well, although its totally the right thing to do. 

Also Trump looks like he is sick of waiting for the Fed to put a bullet in the Dollar and is going to do so himself!

[kibuc]

14 minutes ago, dgul said:

When I wrote it originally the market was up on his speech, which I found astounding (as per your comment).  It then pared some of the gains, but only crashed on Trump's statements on trade wars and Powell (to come later, apparently).

My bad then, I only tuned in about an hour after Powell speach and markets were already deep in the red and metals nicely up. 

Trump having a meltdown on twitter certainly plays a part. 

[kibuc]

This is a nuclear tweet in my eyes. 

 

[Don Coglione]

12 minutes ago, DurhamBorn said:

Im tempted to start buying,but might hold off a bit.I think the whole sector will be in a decent place once the next cycle gets going,but might continue being sold off first.Laddering in of course thats not a worry.Not many sectors will see free cash moving higher fast,but telcos might be one of them as the investment cycle  starts to end as prices rise.

Anyone with a view on Telstra? I looked into them last summer, but was put off by the fact that I could only buy them on HL via ADR; daft, really, as I was happy to hold SBGL as an ADR. I was also concerned about AUD getting whacked. At $2.80-ish, in hindsight they were a screaming buy.

They have a pretty monopolistic position and the Australian authorities historically have been less keen on smacking down dominant companies. 

[Castlevania]

28 minutes ago, DurhamBorn said:

Im tempted to start buying,but might hold off a bit.I think the whole sector will be in a decent place once the next cycle gets going,but might continue being sold off first.Laddering in of course thats not a worry.Not many sectors will see free cash moving higher fast,but telcos might be one of them as the investment cycle  starts to end as prices rise.

One thing to consider is their debt profile. Vodafone’s for example is generally longer dated than Telefonica’s. 

[Agent ZigZag]

23 minutes ago, kibuc said:

This is a nuclear tweet in my eyes. 

 

There is no messing around with the Trump.

 

[Talking Monkey]

27 minutes ago, Majorpain said:

Im still long and strong PM Miners, still no clamour about them, i suspect you are right an it will be when Q3 results start to hit (like Harmony) and higher PM prices are shown on the bottom line that the herd will pile in.

Geopolitically things are starting to go downhill, a US president finally standing up to the things China is up to is not going to end well, although its totally the right thing to do. 

Also Trump looks like he is sick of waiting for the Fed to put a bullet in the Dollar and is going to do so himself!

How would he do that Major

[DurhamBorn]

12 minutes ago, Castlevania said:

One thing to consider is their debt profile. Vodafone’s for example is generally longer dated than Telefonica’s. 

Yes and that could be key.I have a feeling debt coming due from around 2024 might start to be paid off rather than rolled over,that is if its in right sized chunks.I want more in the sector than i have in Vod and BT (still laddering into BT) so looking for two more really,not samed sized holdings as first two,probably about half.

[Agent ZigZag]

43 minutes ago, DurhamBorn said:

Terrible Fed chair.Way behind the curve,if they slice now and QE might only get a bad recession,instead we will get a massive deflationary bust and a full on reflation.Suits us though.Id thought $1560ish might be a top in gold,but $1600+ looks more likely now the Fed is so far away from where they need to be.Dollar shortage next.China in a very dodgy place as well.They need to pull back credit growth.Growth companies and industrial commods should start to really roll over now.Oil hopefully gets down to my target of below $20 (actually below $15) .

I have a nice platform in place with both my ISA and SIPP with a good cash war chest ready in my SIPP, and bank account ready for something like this. I am of the opinion that there will be a massive bust. If I can get through the next 18months still working and adding to my pension I will be happy.  The next cycle I am hoping  now has the potential to make those invested in the right sectors potentially generational life changing.

 

Keep up the good work DB with your road map. So invaluable  

[Napoleon Dynamite]

2 hours ago, DoINeedOne said:

Bad news for Woodford

Woodford is Eddie Stobart’s largest shareholder. His fund’s 22.9% shareholding was worth about £60m before today’s news, following a stock sale I estimate at £5.8m in early July. Stobart shares are likely to fall heavily when they return from suspension in September.

Woodford may find it difficult to find buyers for further large chunks of stock. I think these problems could add to his difficulties in reopening his Equity Income Fund in early December, as currently planned.

Posted this in the Woodford forum of what his suspended fund held

 

Article in times says he sold the lot

https://www.thetimes.co.uk/article/neil-woodford-ditches-his-70-million-stake-in-stobart-group-l5r9pslxq

 

 

[Talking Monkey]

17 minutes ago, Agent ZigZag said:

I have a nice platform in place with both my ISA and SIPP with a good cash war chest ready in my SIPP, and bank account ready for something like this. I am of the opinion that there will be a massive bust. If I can get through the next 18months still working and adding to my pension I will be happy.  The next cycle I am hoping  now has the potential to make those invested in the right sectors potentially generational life changing.

 

Keep up the good work DB with your road map. So invaluable  

I wonder whether we will get a final melt up

[Majorpain]

31 minutes ago, Talking Monkey said:

How would he do that Major

Dont know, watch his twitter!  I wouldn't rule out more tariffs to counter the devaluation, although there are no doubt other things in the toolbox.

[reformed nice guy]

6 minutes ago, Majorpain said:

Dont know, watch his twitter!  I wouldn't rule out more tariffs to counter the devaluation, although there are no doubt other things in the toolbox.

I think the sabre rattling with China goes beyond economics here.

If China regains a dominant world position then it really screws over the rest of use. Things like the belt & road project are not about economics, it is a projection of Chinese power. It would shift a significant part of the world into a Chinese led financial system, engineering standards, market standards (food hygiene etc), core language of business, internet standards etc

Some call it the Thucydides trap, but I think it is inevitable. The USA will not allow a loss of hegemony. We are often quick to think in 5-10 years, but this is a Chinese plan that started with Deng Xiaoping and was envisaged over 100 years.

[Talking Monkey]

1 minute ago, reformed nice guy said:

I think the sabre rattling with China goes beyond economics here.

If China regains a dominant world position then it really screws over the rest of use. Things like the belt & road project are not about economics, it is a projection of Chinese power. It would shift a significant part of the world into a Chinese led financial system, engineering standards, market standards (food hygiene etc), core language of business, internet standards etc

Some call it the Thucydides trap, but I think it is inevitable. The USA will not allow a loss of hegemony. We are often quick to think in 5-10 years, but this is a Chinese plan that started with Deng Xiaoping and was envisaged over 100 years.

Can the USA really do anything to stop China ultimately take the number 1 slot, other than delay the inevitable by say a few years

[Majorpain]

7 minutes ago, reformed nice guy said:

I think the sabre rattling with China goes beyond economics here.

If China regains a dominant world position then it really screws over the rest of use. Things like the belt & road project are not about economics, it is a projection of Chinese power. It would shift a significant part of the world into a Chinese led financial system, engineering standards, market standards (food hygiene etc), core language of business, internet standards etc

Some call it the Thucydides trap, but I think it is inevitable. The USA will not allow a loss of hegemony. We are often quick to think in 5-10 years, but this is a Chinese plan that started with Deng Xiaoping and was envisaged over 100 years.

Correct, but its a bit deeper than that.  The Chinese people let the CCP remain in power as long as they have continually rising living standards, this has been achieved mainly through a massive buildup of debt.  Obviously that will burst eventually, and the CCP is already rolling out the big brother style social credit system that a communist regime needs to keep a rebellious population under control.  The only goal of the CCP is to remain in power, if they have to start a war to do so then so be it.  

The Chinese 100 year plan is already falling to bits thanks to Trump, it simply a matter of how much damage the CCP does on its way to oblivion IMO.

[Talking Monkey]

1 minute ago, Majorpain said:

Correct, but its a bit deeper than that.  The Chinese people let the CCP remain in power as long as they have continually rising living standards, this has been achieved mainly through a massive buildup of debt.  Obviously that will burst eventually, and the CCP is already rolling out the big brother style social credit system that a communist regime needs to keep a rebellious population under control.  The only goal of the CCP is to remain in power, if they have to start a war to do so then so be it.  

The Chinese 100 year plan is already falling to bits thanks to Trump, it simply a matter of how much damage the CCP does on its way to oblivion IMO.

shitting hell Major you reckon they're going to implode

[Castlevania]

I was chatting to one of my work colleagues who’s Chinese and she mentioned that many goods and services are now cheaper in London than in China. She’s referring to the Southern bit of China,  where most of the work is. Combine this with the fact that manufacturing costs are now as high if not higher in China than in most of the Western world, it doesn’t look too good for China.

The issue is whether they can shift from a middle income economy to a high income one; and my general feeling is no.

[Gordie Lastchance]

2 hours ago, DurhamBorn said:

Notice today lots of the stocks i like doing well.Even Centrica is in the winners.Best FTSE stock SSE.Cyclicals starting to go up as well as expected.Never mind the MSM,sterling moving up really helps them.

Does anyone know the best way to buy Telefonica?.Is it through the crest depository interest ?.Im tempted to open first ladders,but sterling is a worry.

@sancho panza what telcos are you looking at/liking? I think the whole sector is near an inflection point and want to add a few more companies.

Is this article even more reason to love the likes of Vodafone? 

https://www.hl.co.uk/news/2019/8/21/amazons-cloud-computing-empire-faces-threat-from-edge-of-the-network

Here's a flavour of the article:

Bloomberg claims there's a threat to cloud computing from what it calls the edge of the network. With so many mobile devices and sensors now connected to the internet, people and companies need computing power close to them. Apparently, remote data centers are just too far away.

The upshot is that it's handing a huge opportunity to wireless carriers, which are building fast 5G networks to handle the task.

Telecom analyst Chetan Sharma says, "Over time, cloud will be primarily used for storage and running longer computational models, while most of the processing of data and AI inference will take place at the edge.” He claims the edge-computing market will be worth more than $4 trillion by 2030.

Wireless carriers and the owners of cell towers have a big advantage in this race: They control access to high-speed telecommunications networks and have valuable real estate, such as tens of thousands of cell sites all over the country.

Although cloud computing isn’t going away, there’s more pressure on the industry’s Big Three to team up with wireless carriers, so they’re not left out of the burgeoning edge market. "The big players realise that, at a minimum, they need to partner up with operators to get access to their real-estate property,” Sharma said.

Already, AT&T Inc. — the second-largest U.S. wireless carrier — has joined forces with Microsoft Corp. and IBM Corp.

IBM, meanwhile, is also working with carrier Vodafone Group Plc in Europe.

“The networks are essentially themselves becoming a cloud,” said Steve Canepa, IBM’s global managing director for the telecom industry. “The telcos today have a point of presence at the edge, and that becomes a great place to have an extension of the platform.”

[Bear Hug]

Sold anglogold Ashanti and harmony today, both more than doubled from when I bought them. )))

 

[DurhamBorn]

29 minutes ago, reformed nice guy said:

I think the sabre rattling with China goes beyond economics here.

If China regains a dominant world position then it really screws over the rest of use. Things like the belt & road project are not about economics, it is a projection of Chinese power. It would shift a significant part of the world into a Chinese led financial system, engineering standards, market standards (food hygiene etc), core language of business, internet standards etc

Some call it the Thucydides trap, but I think it is inevitable. The USA will not allow a loss of hegemony. We are often quick to think in 5-10 years, but this is a Chinese plan that started with Deng Xiaoping and was envisaged over 100 years.

Exactly,and its key to the reflation.Everyone will be in a race against each other.China will double down on One belt one road,the US will double down on navy assets in the Pacific.UK will invest in clean energy as much as possible etc.They will all print to buy resources and that will lead to higher and higher inflation.

[Castlevania]

16 minutes ago, Bear Hug said:

Sold anglogold Ashanti and harmony today, both more than doubled from when I bought them. )))

 

I sold Harmony to buy Cresud (they own farmland and run their own farms in Argentina; Brazil; Paraguay and Bolivia and got completely smashed last week after the unexpected pre-election vote result in Argentina) only to find that I couldn’t buy the stock in my ISA. I wish I’d held on. Might have to buy back in on Monday.