Credit deflation and the reflation cycle to come.

[JMD]

2 hours ago, S Brule said:

I've seen today that the VanEck Vectors Natural Resources ETF is now available on HL (not sure how long it's been there). This, or something similar, is something I've been considering for general commodity producer exposure and thought I'd share in case anyone here might be interested too. Having it all in one ETF might be good if you're either lazy (like me) or aren't investing enough in this area to justify the trading fees from buying into multiple companies or sector ETFs. Of course, do please DYOR as usual.

It doesn't pay a dividend, instead reinvesting them, but that doesn't really bother me personally. I've had a quick skim through the holdings here and got a rough estimate of the sectors it covers. Sectors I'm interested in include: precious metal mining (9%), general mining (11%), oil & gas producers/explorers (25%), energy distribution/utilities (6%), food producers (16%), fertilizer producers (9%), wood & paper producers (3%). It also has a few companies that produce agricultural equipment (13%), not sure how these might perform.

Appears a good general hard/soft commodities etf. Though its biggest 5 stocks represent over 20% of the fund (out of approx. 300 holdings). So I think I will wait and watch what the John Deere stock does, it represents 7% of the fund -  If this stock breaks out of its 2 year languidity, I guess it would give confidence that the fund's stock pickers know their stuff.    

[TheCountOfNowhere]

2 hours ago, Don Cam said:

I am a long time (10 year) lurker from the other site, over which time we haven't bought a place for various reasons, including spending 7 years in Oz. My god, that place has the most almighty of property bubbles...!

Long story short, I moved back to these shores last year for a job offer I just couldn't turn down, even if it is in the similarly 'bubble-tastic' SE. Nonetheless, we are here and settled for the long term, so in spite of the obvious issues with house price we are buying a place down here. Its expensive (yet still cheaper than renting similar) but has four bedrooms and a pretty huge garden whilst only being a few miles from where I work (easy cycling distance). My job is as solid as they come, I think. So, against our better judgement, we are going for it with a 30% deposit at 2.89% on a monster 15(!) year fix at a single salary multiple a little over 3.5. Doesn't feel to stretched to me. We are doing this mainly because we just can't reconcile with the prospect of moving to any more private rentals (8 in the last 10 years!) and I now have two kids who I'd like to have somewhere to call home (when we moved back from Aus and our container arrived, my eldest asked when the house was coming... heartbreaking!).

This will leave us with £35-40k of free capital to invest in the next cycle, whilst being pretty well shielded from the potential inflation being talked about here. In the event that major inflation doesn't come to pass we will obviously lose out on potentially lower interest rates in the short to medium term, but my appetite for risk is more than happy to carry that potential loss in order to sleep soundly at night in the event that rates ever do rise precipitously! Not the best financial decision given whats coming, I know, but the last ten years of moving at a landlords whim have ground us down. Will the house ever be worth what we pay for it? Probably not. But its come to the point where we just don't care. We just want a house to live in....!

Anyway, I am looking forward to continue reading the discussion here about how best to position for the next cycle, and hopefully contributing here and there. I recently opened a HL ISA account to get in on the action (CNA, VOD etc.), but top of the list is some silver via BullionVault or CoinInvest...

As you were!

That makes little sense to me. 

 

You buy into the deflation/reflation theory, fair enough. 

 

I'm convinced well see manic inflation at some point so buying a house and offsetting the mortgage with some (re) inflation socks is a sound idea. 

 

However. If you buy into the deflation side of it,  makes no sense to buy a house, you could see 10, 20, 30, 40, 50, 60% wiped off, esp in the SE. 

You could in theory end up with twice the size of house for the same investment. 

 

I'm still not 100% sure we'll see the massive deflation but house prices are teetering on the edge and look to be falling a roos the SE. 

 

 

 

 

 

 

 

[Don Cam]

1 hour ago, TheCountOfNowhere said:

That makes little sense to me. 

 

You buy into the deflation/reflation theory, fair enough. 

 

I'm convinced well see manic inflation at some point so buying a house and offsetting the mortgage with some (re) inflation socks is a sound idea. 

 

However. If you buy into the deflation side of it,  makes no sense to buy a house, you could see 10, 20, 30, 40, 50, 60% wiped off, esp in the SE. 

You could in theory end up with twice the size of house for the same investment. 

 

I'm still not 100% sure we'll see the massive deflation but house prices are teetering on the edge and look to be falling a roos the SE.

Yes, we are definitely going in to this accepting that there is a good chance we could have hung on for something better, or cheaper, or both! The problem is we have been waiting for something approaching sanity for 10 years, promising my wife we'd settle down somewhere for almost as long, and we just can't be arsed with renting any longer. 7 years of Aus style rental inspections (quarterly and ridiculously nit-picky) and being screwed over at the end of tenancy agreements (spurious cleaning charges, phantom damage - you name it, lettings agents will try and screw you for it!) have sapped any enthusiasm we have for lining Mr and Mrs BTL Landlord's pockets any longer, for better or worse! Granted those latter issues might be Aus specific, and I have a lot of respect for Sancho's position, if everyone involved is onboard with it as a plan...

[Bobthebuilder]

17 minutes ago, Don Cam said:

Yes, we are definitely going in to this accepting that there is a good chance we could have hung on for something better, or cheaper, or both! The problem is we have been waiting for something approaching sanity for 10 years, promising my wife we'd settle down somewhere for almost as long, and we just can't be arsed with renting any longer. 7 years of Aus style rental inspections (quarterly and ridiculously nit-picky) and being screwed over at the end of tenancy agreements (spurious cleaning charges, phantom damage - you name it, lettings agents will try and screw you for it!) have sapped any enthusiasm we have for lining Mr and Mrs BTL Landlord's pockets any longer, for better or worse! Granted those latter issues might be Aus specific, and I have a lot of respect for Sancho's position, if everyone involved is onboard with it as a plan...

If you can pay the mortgage off within that fix i think you will look back and thank yourself. Good luck with the family, i wish you well.

[Ash4781b]

From the other thread Intu Plc down in the £500mn market cap. Total car crash. Unsure who the lenders are but I expect them to take control 

[DurhamBorn]

13 minutes ago, Ash4781b said:

From the other thread Intu Plc down in the £500mn market cap. Total car crash. Unsure who the lenders are but I expect them to take control 

Those massive centres are simply too big to re-position.You want an Aldi or a Lidl,a BandM a Greggs,Card factory etc.The smaller retail estate near me with those on is rammed every single day.

In other news 

https://www.barrons.com/articles/apple-ceo-tim-cook-sells-apple-stock-51567009228

Nice of those passive investors to hand over their pension savings.Can Apple keep knocking out $60billion of free cash flow going forward?.I expect the mobile networks to outperform them by around 300%+ over the next cycle.

[Errol]

This is from Oct 2018, but it's a seriously good watch:

 

 

[Paulie]

Firstly, thanks to those on here (they know who they are!) who have shared their hunches in respect of the macroeconomic play-out. By digesting and implementing this knowledge and buying into TLT and miners SBGL, YRI etc I am looking at continued growth - rather than the plateau and recent decline in the wider market.

Mindful that this is unlikely to continue for an extended period once fiscal / monetary policy misguidedly tries to reflate the economy, my mind turns to the so-called Reflation Stocks.  Useful sectors under this heading could be value stocks, cyclicals and banks, and particularly those with low debts, given medium term interest rate direction.

I have a specific query, being "in command" of a discretionary trust of modest value. As this is "discretionary" then a "professional" calls the shots with a broad market spread according to risk profile. I can however override by suggesting specific funds to adjust the weighting. Such intervention may soon be timely. Hence, do the Dosbodders have any thoughts on widely available retail funds which may be considered "reflationary", and any experience of their recent performance?  

If the funds are ETF based or low cost index (if that is even possible?) then so much the better.

[spygirl]

4 hours ago, TheCountOfNowhere said:

That makes little sense to me. 

 

You buy into the deflation/reflation theory, fair enough. 

 

I'm convinced well see manic inflation at some point so buying a house and offsetting the mortgage with some (re) inflation socks is a sound idea. 

 

However. If you buy into the deflation side of it,  makes no sense to buy a house, you could see 10, 20, 30, 40, 50, 60% wiped off, esp in the SE. 

You could in theory end up with twice the size of house for the same investment. 

 

I'm still not 100% sure we'll see the massive deflation but house prices are teetering on the edge and look to be falling a roos the SE. 

 

 

 

 

 

 

 

My take on Southern housing is its fucked.

Places in North i follow are at same nominal price since 2004ish.

South is in trouble - property has gone up, jobs and earnings have fallen like a brick.

You go to towns and theres sod all earning above natiobal median wage.

It was all finsec, which has gone.

 

[MvR]

25 minutes ago, Paulie said:

I have a specific query, being "in command" of a discretionary trust of modest value. As this is "discretionary" then a "professional" calls the shots with a broad market spread according to risk profile. I can however override by suggesting specific funds to adjust the weighting. Such intervention may soon be timely. Hence, do the Dosbodders have any thoughts on widely available retail funds which may be considered "reflationary", and any experience of their recent performance?  

If the funds are ETF based or low cost index (if that is even possible?) then so much the better.

Since a professional advisor / manager is involved, does this may mean you're not limited to those ETFs that have issued KIID documents?  That should broaden the range of possibilities somewhat if so.

[Harley]

We talk about reflation stocks, even mention the odd one, but don't define the term.  What are the attributes, such as sector/industry?  Illustrative examples?

[Paulie]

8 minutes ago, MvR said:

Since a professional advisor / manager is involved, does this may mean you're not limited to those ETFs that have issued KIID documents?  That should broaden the range of possibilities somewhat if so.

You are correct. Looking through there are some institutional funds on the listing, Morgan Stanleys and AHFM etc etc. As well as retail such as Tritax, Jupiter, Fundsmith etc. 

Are you thinking of some specific non KIID funds that are reflation friendly? 

 

[Paulie]

20 minutes ago, Harley said:

We talk about reflation stocks, even mention the odd one, but don't define the term.  What are the attributes, such as sector/industry?  Illustrative examples?

Good point. Don't really know, but there are some sectors mentioned below, albeit in a macro sense.

https://www.ssga.com/investment-topics/general-investing/2018/04/making-the-most-of-reflation.pdf

Basically needs rather than wants, and those areas considered critical to the next cycle?

Indebtedness would seem to be a key measure for specific stocks.

[Harley]

14 minutes ago, Paulie said:

Good point. Don't really know, but there are some sectors mentioned below, albeit in a macro sense.

https://www.ssga.com/investment-topics/general-investing/2018/04/making-the-most-of-reflation.pdf

Basically needs rather than wants, and those areas considered critical to the next cycle?

Indebtedness would seem to be a key measure for specific stocks.

Thanks for the link.  Yes, sector and needs v wants.  "Those areas critical to the next cycle"?  DB also mentions fixed assets and debt levels and ageing profiles.  More clarity on those would be useful.

[Paulie]

2 minutes ago, Harley said:

Thanks for the link.  Yes, sector and needs v wants.  "Those areas critical to the next cycle"?  DB also mentions fixed assets and debt levels and ageing profiles.  More clarity on those would be useful.

Just my way of encapsulating the sectors and segments I saw on the list. I agree, more clarity would be helpful.

[Harley]

I added Microfocus to my income portfolio watch list this week.  Previously traded this stock but the yield looked good plus an uncovered sector.  No purchases thankfully as it just went down 32% today!  Maybe I'll buy for the bounce but today tells me a lot about my current approach to income investing and the states of the market.

https://uk.advfn.com/stock-market/london/micro-focus-MCRO/share-news/Micro-Focus-International-plc-Trading-update-and-S/80622944

Interesting times.

[MvR]

34 minutes ago, Paulie said:

You are correct. Looking through there are some institutional funds on the listing, Morgan Stanleys and AHFM etc etc. As well as retail such as Tritax, Jupiter, Fundsmith etc. 

Are you thinking of some specific non KIID funds that are reflation friendly? 

Not really any specific ones.. I'm only just learning the macro stuff myself from this thread, but various providers (iShares, Vanguard etc ) offer all kinds of sector specific ETFs covering things like Materials, Transports, Oil and Gas Exploration,  etc.

There are some nice ETF screening sites like https://www.etf.com/etfanalytics/etf-finder.

[Harley]

All, may I suggest you consider

https://www.justetf.com/uk/ 

as one of your possible ETFs search engines as it seems to restrict searches to UK resident investible ETFs (and provides their KIDs). 

There was one case where they did not list an ETF for some reason, a double short one or something.

[Barnsey]

1 hour ago, Cattle Prod said:

Where'd you get a 15 yr fix?! I have fix envy!

Welcome 

Both Virgin Money and Yorkshire Building Society now offer 15 year fixes, expect most others to follow soon.

In other news, the reflation will truly be global:

https://uk.reuters.com/article/uk-southkorea-economy-budget/south-korea-proposes-aggressive-spending-as-economy-faces-growing-risks

Quote

The ministry said in a statement budget spending would be increased sharply for welfare, job creation, small businesses, environment and research-and-development projects.

It said it would seek parliamentary approval to sell a net 60.2 trillion won worth of treasury bonds for the purpose of funding the fiscal deficit next year, which would be the biggest on record and nearly double this year’s 33.8 trillion won.

 

[TheCountOfNowhere]

9 hours ago, Harley said:

We talk about reflation stocks, even mention the odd one, but don't define the term.  What are the attributes, such as sector/industry?  Illustrative examples?

Ill have a go. 

 

Reflation stocks.... Companies who's products people really need even in a massive down turn + actual commodities, gold etc.  Id probably add defense stocks too. 

 

I. E.  Gold, gas, water, oil, BAE, electricity. 

Stuff that's going to do badly....pizza makers. 

Ps. My share position is... Based on several companies who look like they've already crashed and are hopefully fair value. 

 

Bt/vodafone

Gold x 2

Centrica 

Bailed out banks x2

Royal mail

Supermarkets x 2

Will add more as companies share prices tumble. 

[TheCountOfNowhere]

9 hours ago, spygirl said:

My take on Southern housing is its fucked.

Places in North i follow are at same nominal price since 2004ish.

South is in trouble - property has gone up, jobs and earnings have fallen like a brick.

You go to towns and theres sod all earning above natiobal median wage.

It was all finsec, which has gone.

 

As I said. Makes no sense in that context. 

 

I'm already seeing houses in Kent and Sussex and to a lesser extend Surrey with asking prices that make Milton keynes/Northants look embarrassing so top end prices defo have come down0. 

 

It's not a bad move tho if you don't see a collapse in prices and you are hedging your bets, might turn out to be the right option. 

 

At the end of the day.... Who knows. Not I.  I'd opt for 4/5 rental inspections over the next 2 years to find out tho. 

[Yellow_Reduced_Sticker]

"Forget Great Depression, the Greatest Ever is Coming Says: Gerald Celente...

Well worth a watch:

 

[VeryMeanReversion]

16 hours ago, CVG said:

Also consider playing via a SIPP. It's nice to know that the government will take the first 20% to 40% hit (tax relief on contributions) of any downturn! Or, freely leverage up your bets!

Only got 2 ladders into VOD and WMH before both turned. Sold ladder 2 in WMH today for a 20% profit.

All mine done via SIPP salary sacrifice. I get the income tax boost, national insurance boost and child benefit withdrawal boost.

Basically, giving up £33 of net income gets me £100 in SIPP. Understanding effective marginal tax rates is very important just above a £50K salary level.

I bought £70K of PMs  in 2017/18 that effectively cost me £23K of net income.  Up nearly £12K so far which I'll be able to get the lot back at ~90% net from aged 55. It helps offset my worst stock (Centrica, ouch, ouch, ouch) although the divis for that have been a big help.

Invesco Physical Markets  Invesco Platinum P-ETC 31/12/60 USD

55,411.01

49,898.29

+5,512.72

ETFS Metal Securities Ltd  Physical Silver

26,213.64

19,991.80

+6,221.84

 

I have nearly no £ savings. Everything is in assets of various sort, basically house equity (mortgage-free in <5 years) and SIPP.    I have around 20% in PMs, the rest is in divi stocks with Woodford  bought after the big-drop for a speculative punt.

Funnily enough, I have no bonds. They looks too risky (speaking as someone with PMs, Woodford and lots of individual stocks!).

Another view of mine is that debt-wise, anyone/anything with any capability to pay it back already has their fill of debt.  The students have to be forced into debt. The older workers like me are realising they need a pension and the last thing they need is more debt.  Those without hope of retirement will just grab as much debt as they can and throw themselves on the state.

 

 

[Hardhat]

32 minutes ago, VeryMeanReversion said:

Basically, giving up £33 of net income gets me £100 in SIPP. Understanding effective marginal tax rates is very important just above a £50K salary level.

I'm interested in setting up a SIPP, is there a thread on this already?

[Don Cam]

1 hour ago, Barnsey said:

Both Virgin Money and Yorkshire Building Society now offer 15 year fixes, expect most others to follow soon.

I'd have gone with the Virgin one at 2.75% in spite of the higher early repayment fees (we almost certainly won't be moving for a very long time), but they won't consider mortgages for people who haven't been resident in the UK for at least three years. Computer simply say's no...