Credit deflation and the reflation cycle to come.

[sancho panza]

On 21/08/2019 at 18:10, Democorruptcy said:

Do you mean you are under a different council to the city centre? What you pay goes on the band of the property not metres from the centre?

Scotland whacked their council tax up in 2016 for Band's E to H, no doubt England will do something similar.

Different council tax.but to be fair DM,I got the bandingsd worng.We're about £100 cheaper.So not as bad as thought

[sancho panza]

On 22/08/2019 at 17:53, 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...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.

Absolutely.Lets get that trader back off C4 news who was saying she didn't know a trader long sterling when the COMEX has commercials at year long record net long sterling.

I feel cheated.

9 hours 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. 

Looking to buy some more Fres and HOCM Monday I reckon.Silver ois looking value here.

 

8 hours 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) .

He's buggered if he tightens,buggered if he doesn't.Hobsons choice.At some point the addict has to renounce the crack cocaine and start drinking more milk

8 hours ago, Ponty Mython said:

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. 

Liked Telstra a long time.Don't own any yet though.

6 hours 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.

They had riots when some flats dropped in price.Wouldn't wanna be the CCP when the deflation hits and the people find out that the wealth they thought was their's has left the country and is living in Vancouver.

 

Agreed CCP will be trying to keep the ponzi alive however they can.Can't think of a suitable proxy war.Taiwan?

6 hours ago, Castlevania said:

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.

I've been hearing this from a few people who used to import from china-not jsut @DurhamBorn.Things are going to get tough there.

[MrXxxx]

8 hours ago, DoINeedOne said:

Was reading money week today and saw this about Germany's shitty infrastructure 

Why worry about roads when you have got your own decent railway...and starting to get everybody elses I.e UK

[MrXxxx]

7 hours ago, Tdog said:

The bridge is brand new but doesn't work,  they spent an absolute fortune on a bridge that looked pretty as opposed to one that got cars across the water.

Thats what happens when you get a designers to `build` a bridge rather than an engineer!

[Bricks & Mortar]

7 hours ago, Tdog said:

I do lose track with Carney but i believe last month he was talking about raising interest rates in the event of a no deal Brexit due to inflation and to prop up the pound.

Now he is going to slash interest rates if we leave with no deal due to inflation cause by the pound crashing.

https://www.dailymail.co.uk/news/article-7389053/Another-Doomsday-No-Deal-Brexit-warning-Mark-Carney.html

I believe the 2nd option is the real answer, being as its Mark Carney.

Carney yesterday.

"The dollar’s dominance of the global financial system increased the risks of a liquidity trap of ultra-low interest rates and weak growth, Carney told central bankers from around the world gathered in Jackson Hole in the United States. "


https://www.reuters.com/article/uk-usa-fed-jacksonhole-carney/world-needs-to-end-risky-reliance-on-u-s-dollar-boes-carney-idUSKCN1VD28H

 

[Democorruptcy]

12 hours ago, DurhamBorn said:

Great find.Like iv said on the telcos,imagine the above when they start to depreciate the assets they already have with prices going up.Their assets are paid for by bond holders mostly borrowing at 2%.The market forgets and is miss-pricing the people who own the network.Hopefully they keep doing it a while yet.Sometime in the next cycle i expect big mergers in telcos,or even by big tech.

How does that fit with Vodaphone's new TowerCo? Isn't that selling assets to pay long dated debt at a cheap rate?

Disclosure: I own some Vodaphone.

Quote

 

Vodafone is to spin off its pan-European mobile mast business with an eye on a stock market flotation worth as much as €20bn (£17.9bn) in the next 18 months.

Shares in the world’s second largest mobile operator climbed almost 10% as investors relished the prospect of a windfall from a sale or initial public offering of Europe’s largest towers company.

The new standalone business, called TowerCo, will comprise 61,700 Vodafone masts across 10 countries, with 75% of the sites in principal European markets Germany, the UK, Italy and Spain.

The business will generate about €1.7bn in revenues and €900m profits, leading analysts to value the business at between €15bn and €20bn, based on valuations of other mast businesses.

The masts provide mobile coverage across each country allowing phone owners to make and receive calls and use data to access apps and websites. Income comes from leasing space on each mast to rivals offering their own mobile phone networks.

“We are now creating Europe’s largest tower company,” said Nick Read, Vodafone’s chief executive. “Given the scale and quality of our infrastructure we believe there is a substantial opportunity to unlock value for shareholders.”

The new company, which will have its own management team, will be operational by next May.

Vodafone began evaluating a spin-off of the towers business last year after receiving several offers for various parts of its portfolio. The company said it intends to monetise a substantial proportion of TowerCo within the next 18 months. This will include a potential flotation on the stock market, the sale of a minority stake in the whole business or in its mast operations in individual countries, depending on market conditions.

The proceeds will be used to pay down Vodafone’s mounting debt pile, which will reach €48bn when the company completes its €18.4bn deal to buy Liberty Global’s German and eastern European cable assets.

Vodafone has also spent €4bn on 5G spectrum as prices ballooned in auctions in Germany and Italy during the past year.

“Yes, Vodafone will lose the profits associated with running the towers, but it will also remove the €200m of annual spending tied up maintaining and expanding the network,” said George Salmon, equity analyst at Hargreaves Lansdown. “So it’s easy to see the logic for the deal, especially since the group’s debts are fairly pressing.”

The share price rise will be a boost to Read who has seen the company’s value fall by more than a fifth since he took over the role of chief executive last October. In May, Read was forced to cut Vodafone’s dividend for the first time since it became a standalone business in 1990, despite having initially said he would not do so.

https://www.theguardian.com/business/2019/jul/26/vodafone-standalone-mobile-mast-business-towerco-europe

 

 

 

 

[DurhamBorn]

Its an interesting point on the tower sale.However its likely the edge cloud can be deployed anywhere on the network,not just the towers,and the money is in connecting them and Vod would simply rent space anyway.I havent looked into the area before,so needs more research.The point is though for me the market isnt giving the right value to the network owners.I think telcos will give very nice returns in the next cycle.They might go lower yet,but il be buying more.

In the UK BT own EE and the old telephone exchanges.That could prove a great combination for them.Im wanting to add Telefonica as well.

[Errol]

When gold goes to $2000, then $3000 etc etc, what will the Eldorado Gold share price be?  Presumably well over $30 a share.

[Yellow_Reduced_Sticker]

17 hours 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) .

Quote

Equinor/Statoil and Repsol got my attention there thankyou SP,have to look at best way to buy them?.Repsol looks very very cheap,i guess they produce in Libya and suffered for that.Not sure on that scrip dividend thing from Repsol though,says you can get cash but might prove tricky in a nominee account.

 

@DurhamBorn ...your target of oil hitting around $20, then why i you looking to buy oil companies now with the LOWER coming oil price in mind? Surely those stocks will become CHEAPER...no?

Sorry for another thicko question... I should get to the back of the class with my dunce hat on!

[Errol]

11 hours ago, DoINeedOne said:

Was reading money week today and saw this about Germany's shitty infrastructure 

US infrastructure is even worse. The US is essentially falling apart.

[UnconventionalWisdom]

3 hours ago, MrXxxx said:

Why worry about roads when you have got your own decent railway...and starting to get everybody elses I.e UK

Not sure about that. German trains are often late. I love that they have regional tickets and the price isn't too high, but I am shocked at how often they are late. 

Theres a joke that if you want to see German efficiency, go to Switzerland 

[DurhamBorn]

50 minutes ago, Yellow_Reduced_Sticker said:

 

@DurhamBorn ...your target of oil hitting around $20, then why i you looking to buy oil companies now with the LOWER coming oil price in mind? Surely those stocks will become CHEAPER...no?

Sorry for another thicko question... I should get to the back of the class with my dunce hat on!

Im not buying them yet,i expect oil to go below $20,but il start buying once it goes below $40 probably,maybe $35 in ladders as usual.I might actually ladder the buys in the companies based on the oil price,not their price.Im just starting to look at the sector at the moment and get the target companies and then set buy points.Its not one im too bothered about,but want some exposure for the cycle as i see oil going to around $200.Natural gas is more in my focus,so companies that are both oil and gas are better for me.Im not interested in the service companies,but i am interested in the companies in the chemical supply area for drilling etc.

Im pretty much set up now in UK stocks,focus now is more telcos,potash sector,chemical sector,oil and gas,industrial (supply of contruction equipment etc).Many are a long way through their downturns i think,some a lot more to go.Firms like Cargotec im going to buy wont be bought unless they get smashed down a lot more.

[DurhamBorn]

59 minutes ago, Errol said:

US infrastructure is even worse. The US is essentially falling apart.

Yep,people dont know that but your right.Bridges ,sewers,etc,terrible.Massive investment coming in those.Energy consumption will go through the roof in the next cycle.Massive reflation ahead,probably the biggest in history.After that an epoch defining crash.We worry about that later though 

[NogintheNog]

3 hours ago, Bricks & Mortar said:

Carney yesterday.

"The dollar’s dominance of the global financial system increased the risks of a liquidity trap of ultra-low interest rates and weak growth, Carney told central bankers from around the world gathered in Jackson Hole in the United States. "


https://www.reuters.com/article/uk-usa-fed-jacksonhole-carney/world-needs-to-end-risky-reliance-on-u-s-dollar-boes-carney-idUSKCN1VD28H

 

I really like Canadians. Except for this idiot! I bet the Canadians were glad to see the back of him

To quote him;

Quote

Bank of England Governor Mark Carney took aim at the U.S. dollar’s “destabilizing” role in the world economy on Friday and said central banks might need to join together to create their own replacement reserve currency.

“As a consequence, it is an open question whether such a new Synthetic Hegemonic Currency (SHC) would be best provided by the public sector, perhaps through a network of central bank digital currencies,” Carney said.

WTF! Does he think the Chinese Central Bank will wear that!?

I've never known any CBanker to flip flop on rates so much, one minute he's gonna raise them, next he's gonna slash them. I don't take any credence in anything he utters now.

I think this is a currency and trade war which the FED can't win, having backed themselves into a corner no matter what there will be some pain fighting their way out. And they know it.

As for a replacement reserve currency, why not just use Gold? The U.S. has plenty of it.....

[NogintheNog]

1 hour ago, Yellow_Reduced_Sticker said:

 

@DurhamBorn ...your target of oil hitting around $20, then why i you looking to buy oil companies now with the LOWER coming oil price in mind? Surely those stocks will become CHEAPER...no?

Sorry for another thicko question... I should get to the back of the class with my dunce hat on!

I do think if we get a SHF moment, then the price of oil could well collapse, but only briefly. At $20 the shale industry is totally screwed. Goodbye to US shale, which takes huge supply out of the system. If interest rates go up the shale industry will need $150+ oil to make it worthwhile fracking. Go figure....

Disclaimer; I am long BP, RDSB, TOT.

[Bear Hug]

17 hours ago, DurhamBorn said:

Lovely),set up a few ladders in some telcos maybe with the profits?.

Meanwhile another sector i want is starting to get close

https://www.hl.co.uk/shares/shares-search-results/m/mosaic-co-the-usd0.01

@sancho panza has been looking at the sector,maybe give us an update on what looks decent?

Thanks, already in telcos but definitely started too early and with too much in one go.  Now that I am more familiar with trading platforms, their fees etc, I have started to apply your laddering approach.  Many thanks for all the information shared here.

[Bricks & Mortar]

2 hours ago, NogintheNog said:

WTF! Does he think the Chinese Central Bank will wear that!?

I've never known any CBanker to flip flop on rates so much, one minute he's gonna raise them, next he's gonna slash them. I don't take any credence in anything he utters now.

I think this is a currency and trade war which the FED can't win, having backed themselves into a corner no matter what there will be some pain fighting their way out. And they know it.

As for a replacement reserve currency, why not just use Gold? The U.S. has plenty of it.....

I'm not sure if the PBOC would want to be the reserve currency.  That would increase the demand for Yuan, raising the value of Yuan, making exports less competitive and imports cheaper.  They'd be condemning themselves to the same fate thats befallen the USA.
I don't believe there will be any winners to the trade and currency war.  Maybe just those lucky souls who found the right internet forum and got themselves into gold & silver.
As for a replacement reserve currency - I don't think Carney just had a few sherberts too many and went off on a wee rant.  I think that was carefully planned.  Sowing a seed.  They're central bankers.  Of course they want something they can magic up at the touch of a button.  Devalue at their whim.  We might have to be our own central banks from now on.  Hold our own gold reserves.

Why not just use gold?  Maybe some other central bank will suggest that - but Carneys bank doesn't seem to have much...

[Craig]

Totally agree B&M. Wouldn't surprise me if the IMF are considering extending the SDR to become a de-facto reserve currency.

And listening to Trump last night, I wouldn't be at all surprised if he's in on it either...

[Talking Monkey]

4 hours ago, DurhamBorn said:

Im not buying them yet,i expect oil to go below $20,but il start buying once it goes below $40 probably,maybe $35 in ladders as usual.I might actually ladder the buys in the companies based on the oil price,not their price.Im just starting to look at the sector at the moment and get the target companies and then set buy points.Its not one im too bothered about,but want some exposure for the cycle as i see oil going to around $200.Natural gas is more in my focus,so companies that are both oil and gas are better for me.Im not interested in the service companies,but i am interested in the companies in the chemical supply area for drilling etc.

Im pretty much set up now in UK stocks,focus now is more telcos,potash sector,chemical sector,oil and gas,industrial (supply of contruction equipment etc).Many are a long way through their downturns i think,some a lot more to go.Firms like Cargotec im going to buy wont be bought unless they get smashed down a lot more.

Interesting concept DB setting the buy points to the oil price rather than the share price. I'm guessing the oil price will do a V shaped recovery with depressed prices for a few months at most perhaps 6, or would you expect longer

[DurhamBorn]

2 hours ago, Talking Monkey said:

Interesting concept DB setting the buy points to the oil price rather than the share price. I'm guessing the oil price will do a V shaped recovery with depressed prices for a few months at most perhaps 6, or would you expect longer

Very very quick bottoming i think on oil and silver.The final drop wont be on any fundamentals simply panic selling.Oil could go as low as $10 if only for a few minutes though the $15 area is likely where we would get a sharp turn back to around $25,then quickly back to $50+ as the printing kicks in.In silver we could see below $10 then above $25 within a year of each other.

The next cycle will be energy driven,so massive upside in the sector,but something the market wont expect is all currencies weakening against commods.Everyone will be printing,everyone spending.Its the kind of cycle where nobody wants to hold their fiat currency long.Its one of the reasons velocity will go through the roof.

 

[DurhamBorn]

5 hours ago, Bear Hug said:

Thanks, already in telcos but definitely started too early and with too much in one go.  Now that I am more familiar with trading platforms, their fees etc, I have started to apply your laddering approach.  Many thanks for all the information shared here.

Laddering also serves the purpose that your happy to be down on some investments because your buying more.Iv always found it stops me chasing after nailing bottoms because you cant very often.

[DurhamBorn]

@Cattle Prod i agree to avoid shale.Im really interested in the decent sized companies.I want the ones who might double the divi or treble it in the next cycle.Been looking at the ones SP put up.Like Equinor and Repsol for starters.

[leonardratso]

where are they trading? equinor ADR on nyse (depsitory receipts) and repsol on spanish xtr?

just shove them on the kalamazoo witchita kansas watchemroo list of many great things.

[DurhamBorn]

1 hour ago, Cattle Prod said:

Both solid. Soft spot for Equinor as I used to work for Statoil. Funny enough both Repsol and Statoil have a similarity in that they tolerate too many people doing very little, but they have enough good people to find, develop and run excellent assets. Johan Sverdrup is a dream oil field for Equinor, and the recent gas discovery in Indonesia is a dream gas field in for Repsol. In fact it's wells will be so productive (like 100/200x a shale gas well each) and throw off so much cash, it may well impact Repsols overall balance sheet. I must check out what their Indonesion business contributes overall. They're also into another high cashflow/netback potential goldmine in Alaska.

Equinor is probably best in class at sweating production/increased recovery factors in the world which are the cheapest most profitable barrels. And I like the windfarms! 

Really appreciate your input and knowledge on the sector as im sure everyone else does.Dogger bank wind could produce 5% of the UKs electric,thats a beast.

Thats two added to my buying list then.Like the sound of that gas find for Repsol.They are yielding 7% already,a nice knockdown from there would be very nice.I need to find out how you get cash rather than scrip from the divis though when in a nominee account.

[leonardratso]

15 minutes ago, DurhamBorn said:

Really appreciate your input and knowledge on the sector as im sure everyone else does.Dogger bank wind could produce 5% of the UKs electric,thats a beast.

Thats two added to my buying list then.Like the sound of that gas find for Repsol.They are yielding 7% already,a nice knockdown from there would be very nice.I need to find out how you get cash rather than scrip from the divis though when in a nominee account.

theres a bit on their website about dividends; https://www.repsol.com/en/shareholders-and-investors/faqs/flexible-dividend/index.cshtml

havent gone thru it yet, assume you may have seen already, dunno.

 

"Shareholders must contact the financial institution where they have deposited their shares to provide instructions on how to sell their free-of-charge allocation rights to REPSOL or on the stock exchange, according to the option they have selected and always taking into account the deadlines established for each option.

Shareholders must take into account the option that will be applied if they do not send any instruction to the financial institution where their shares are held (See question 10. What happens if shareholders do not select an option?)"