Credit deflation and the reflation cycle to come.

[sancho panza]

Just checked Labour on BF and Yvette |Cooper managing to be 8th on 24 lets us know how weak that field is.

Emily  Thornberry  leads at 7.6.

Tories think they've got problems.

https://www.betfair.com/exchange/plus/politics/market/1.120629096

Short sterling is the only answer.

[sancho panza]

5 hours ago, reformed nice guy said:

https://uk.finance.yahoo.com/quote/DBK.DE/

Deutsche Bank currently sitting at all time lows of 7.52, down from 17.12 one year ago, 31 five years ago and pre-2008 peaks of 88!

Bad times for a bank with the biggest derivative exposure!

heart warming for the people who own the popcorn

[Harley]

On 05/12/2018 at 21:18, wherebee said:

I've had a very 'crash protection' small portfolio for a while now, where the investments are designed to perform once a meltdown starts.  Small gold miners, inverse ETFs, etc.  It's tracked sideways and slightly down for 2-3 years now, but is designed to counterbalance the risk that when GFC 2 hits my main income will probably dry up overnight, as happened last time.

I'm noticing some big spikes and drops in some of these 'crash insurance' investments.  Haven't seen that for a while.

Hi.  So I've been looking at inverse ETFs for the FTSE100 and found:

UKS - Xtrackers, x1, 0.5% expenses

SUK2 - L&G, x2, 0.6% expenses

UK3S - ETFS, x3, 0.77% expenses

Is that the full list?

Any comment on how you use them (e.g. what triggers a buy and a sell), which ones, etc?

They certainly look better than I had assumed so am definitely interested to hedge my equity income portfolio as and when.

Seem hard to trade with my normal system though so I would struggle on any technical buy and sell signals.

Anyways, many thanks for the heads up.

 

 

[leonardratso]

im always a bit dubious with x2, x3 stuff, nice when its going in the right direction, probably hell when its going the other way though, suppose its not margin though, so max loss would be 100% and no more.

[Bricks & Mortar]

7 hours ago, Democorruptcy said:

If I was forced to put a bet on the next Tory leader it would be Sajid Javid

They guy who earned £3m a year at Deutsche Bank, but took a 98% pay cut to pursue politics?   Wait... have I got him confused with Macron?

[Thorn]

Ok Viceroy- mulling here...do you think that over the last few months there has just been a head and shoulders bottom in the DOW and it could actually take off, despite all the noise?

[onlyme]

11 hours ago, macca said:

FED rate rise still coming 18th/19th dec? 

BOE 20th Dec?

There is much more going on in the Economy than Brexit, you can see that across the world.. 

I'm still of a mind that the FED are on a mission to scupper Trump, he and what he represents to others is the biggest threat to the plan. Conspiracy theory, absolutely, but what a coincidence that the FED take any notice factors to increase rates having spent a decade with their thumbs up their arses.

[Barnsey]

8 hours ago, Thorn said:

Ok Viceroy- mulling here...do you think that over the last few months there has just been a head and shoulders bottom in the DOW and it could actually take off, despite all the noise?

If you can get out within a few months then might be a good play, brave but rewarding. These things usually end in a crazy melt up.

[A_P]

iShares Physical Gold ETC (GBP) SGLN and iShares Gold Producers UCITS ETF USD (Acc) (GBP) SPGP doing their job for me. Up 7% and 12% respectively. Can't say the same for my other equities though

[Barnsey]

William Hill within 5p of it's all time low, very tempted, P/E of just 5.5 at this price and 8.9% divi.

[sancho panza]

1 hour ago, Barnsey said:

William Hill within 5p of it's all time low, very tempted, P/E of just 5.5 at this price and 8.9% divi.

Just had a cursory look at the income statement and balance sheet.Chunky £800mn loss up to Jun 26,presuming down to some sort of corporate activity.What's the story barnsey?

https://www.investing.com/equities/william-hill-balance-sheet

Nearly £1bn in goodwill as part of £2.3bn assets.Intagibles £616mn,

Total liabilities £1.3bn

https://www.investing.com/equities/william-hill-income-statement

 

 

 

 

 

[sancho panza]

3 hours ago, Barnsey said:

If you can get out within a few months then might be a good play, brave but rewarding. These things usually end in a crazy melt up.

UK market heavily oversold imho.I was filtering my short list yesterday -about 70 UK stocks(although 20 have yet to trigger my long term indicators ( I only fish with the tide)).Couldn't find anything to put money on.I'm conservative admittedly but I think if you go shorting taylor Wimpey et al from here you could well lose your shirt.

Lot of juicier US stocks have yet to trip long term downtrends.(Fangman trading is for the brave).Individually,much less of the Dow oversold than FTSE 100

I'm going to look to position my IG ac long for Christmas as I think a few things could be due a decent bounce eg Poodential, and dare I even suggest a trade in the UK housebuilders?

12 hours ago, leonardratso said:

im always a bit dubious with x2, x3 stuff, nice when its going in the right direction, probably hell when its going the other way though, suppose its not margin though, so max loss would be 100% and no more.

They never perform as mathematically as their title implies.Given they've normally options based there's a fair spread normally so liquidity/spread issues may prevent optimum performance.

[kibuc]

28 minutes ago, sancho panza said:

They never perform as mathematically as their title implies.Given they've normally options based there's a fair spread normally so liquidity/spread issues may prevent optimum performance.

It's also worth remembering that the leverage is re-adjusted daily, so their long-term performance may detach from the underlying asset.

A crude example:

1. Buy 1 unit of 5x gold, with unit price of $1000 and gold price at $1000/oz. Leverage for this transaction is $4000.

2. Gold drops 10% on the day, to $900/oz.  Our 1 unit is now worth $500.

3. Next morning, leverage on our 1 unit of 5x gold is re-adjusted to be $2000.

4. Gold recovers 11%, back to $1000/oz. Our 1 unit is, however, not back to where it was and is now worth only $775.

Daily re-adjusting is a killer with volatile underlying assets. On the other hand, it helps reduce losses in a consistent downtrend and raises gains exponentially in a consistent bull run.

[Harley]

29 minutes ago, kibuc said:

It's also worth remembering that the leverage is re-adjusted daily, so their long-term performance may detach from the underlying asset.

A crude example:

1. Buy 1 unit of 5x gold, with unit price of $1000 and gold price at $1000/oz. Leverage for this transaction is $4000.

2. Gold drops 10% on the day, to $900/oz.  Our 1 unit is now worth $500.

3. Next morning, leverage on our 1 unit of 5x gold is re-adjusted to be $2000.

4. Gold recovers 11%, back to $1000/oz. Our 1 unit is, however, not back to where it was and is now worth only $775.

Daily re-adjusting is a killer with volatile underlying assets. On the other hand, it helps reduce losses in a consistent downtrend and raises gains exponentially in a consistent bull run.

Extremely well said.

Most people repeat the mantra about the daily re-adjustment killing performance making this only a short term play.

True but only to a point, and anyways, what is "short term"?

What set's your post apart (in addition to the example) is your "consistent" provisio.

And then there's the degree of leverage (e.g. your example quotes 5x).

The matra folk never speak about these three things.  But money is made in such detail.

So, my afternoon homework is to model some real life scenarios.  Lets see!

[Harley]

57 minutes ago, sancho panza said:

Given they've normally options based there's a fair spread normally so liquidity/spread issues may prevent optimum performance.

I briefly looked at this and was surprised the spread was so small.  I need to investigate further.

[Harley]

28 minutes ago, Harley said:

Extremely well said.

Most people repeat the mantra about the daily re-adjustment killing performance making this only a short term play.

True but only to a point, and anyways, what is "short term"?

What set's your post apart (in addition to the example) is your "consistent" provisio.

And then there's the degree of leverage (e.g. your example quotes 5x).

The matra folk never speak about these three things.  But money is made in such detail.

So, my afternoon homework is to model some real life scenarios.  Lets see!

Here goes, a starter for 10:

Take two periods of FTSE100 falls on the weeklies and calculate changes for each type of inverse ETF:

08-Jan-18 to 19-Mar-18

   FTSE100: 7,778.6 to 6,921.9 or 11.0%

   XUKS (x1): 388.9 to 430.9 or 10.7%

   SUK2 (x2): 795.2 to 973.4 or 22.4%

   UK3S (x3): 258.6 to 347.8 or 34.5%

14-May-18 to 03-Dec-18

   FTSE100: 7778.8 to 6778.1 or 12.8%

   XUKS (x1): 379.7 to 423.0 or 11.4%

   SUK2 (x2): 753.4 to 922.6 or 22.5%

   UK3S (x3): 236.6 to 316.0 or 33.6%

So on the basis of the above, they do seem to meet the requirement (match the FTSE100 change for a long enough period of time (months)). 

Am I missing something or is this an effective occasional hedge for a buy and hold equity income portfolio?  

Next would be to run them through my trading system to see when I would have bought and sold them and compare performance.

Maybe also compare against my actual holdings rather than the FTSE100 proxy.

Chart for background:

[Harley]

58 minutes ago, Harley said:

I briefly looked at this and was surprised the spread was so small.  I need to investigate further.

Looking at the spreads right now per HL:

XUKS (x1): 419.40 versus 419.55

SUK2 (x2): 910.50 versus 911.40

UK3S (x3): 307.00 versus 307.40

Whereas, say, the FTSE100 ISF ETF is: 680.40 versus 680.60

None are massive spreads.

Or have I made an error?

[Democorruptcy]

16 hours ago, sancho panza said:

I've jsut had a whizz on BF and the top spots all look uninspriing and poor value.

 

We are in an age where the financial sector control puppet politicians, so maybe the sharp minds go to the financial sector. Most of the politicians don't even know the difference between deficit and total debt.

A name for the future is Rupert Harrison.

[Democorruptcy]

2 hours ago, sancho panza said:

Just had a cursory look at the income statement and balance sheet.Chunky £800mn loss up to Jun 26,presuming down to some sort of corporate activity.What's the story barnsey?

https://www.investing.com/equities/william-hill-balance-sheet

Nearly £1bn in goodwill as part of £2.3bn assets.Intagibles £616mn,

Total liabilities £1.3bn

https://www.investing.com/equities/william-hill-income-statement

 

 

 

 

 

Governbankment's FOBT ruling cutting stakes to £2

Quote

 

An £883m impairment at the half year shows how much of a game-changer the government's decision to cap maximum stakes on fixed-odds betting terminals at £2 a spin is. The idea is to tackle problem gambling, and received widespread parliamentary support. But with close to 30% of group revenue coming from gambling machines, William Hill will take a hit.

https://www.hl.co.uk/shares/shares-search-results/w/william-hill-plc-ordinary-10-pence/share-research

 

 

 

[Barnsey]

3 hours ago, sancho panza said:

Just had a cursory look at the income statement and balance sheet.Chunky £800mn loss up to Jun 26,presuming down to some sort of corporate activity.What's the story barnsey?

https://www.investing.com/equities/william-hill-balance-sheet

Nearly £1bn in goodwill as part of £2.3bn assets.Intagibles £616mn,

Total liabilities £1.3bn

https://www.investing.com/equities/william-hill-income-statement

I'm thinking the £2 FOBT limit is somewhat priced in, hence the share price plummeting by over 50% since the summer, they're expanding aggressively into the States, and along with their bid for Mr Green Group, things are looking very promising should they make it through the next year or two of turbulence and not take too much of a hit from the loss of business in their shops. Hopefully @DurhamBorn can chime in with more detail but this could be a very good reflation stock as he mentioned recently.

The key for WH is to get those who are stuck on FOBTs hooked on their online side of the business. Live casino seems to be the most addictive thing right now from what I see through work colleagues on their phones.

[Harley]

19 minutes ago, Harley said:

Next would be to run them through my trading system to see when I would have bought and sold them and compare performance.

So here goes:

Interestingly (possibly!), I had buy signals for all three inverse ETFs at the same times: 29-Jan-18 and 30-Jul-18.

So quite a lot later than the 08-Jan-18 and 14-May-18 I used in my initial example, such is a weekly trading system, although things did not go south immediately.

I had a buy signal for the FTSE100 on 02-Apr-18 but no further ones to date!

So if my strategy had been to buy an inverse ETF on a buy signal and sell on a FTSE100 buy signal:

29-Jan-18 to 02-Apr-18

   FTSE100: 7443.4 to 7183.6 or 3.5%

   XUKS(x1): 406.15 to 415.00 or 2.2%

   SUK2(x2): 866.05 to 900.80 or 4.0%

   UK3S(x3): 294.00 to 309.60 or 5.3%

02-Apr-18 to 30-Jul-18

   FTSE100: 7183.6 to 7659.1 or 6.6%

30-Jul-18 to 03-Dec-18

   FTSE100: 7659.1 to 6778.1 or 11.5%

   XUKS(x1): 382.05 to 423.00 or 10.7%

   SUK2(x2): 759.70 to 922.6 or 21.4%

   UK3S(x3): 238.60 to 316.00 or 32.4%

So, a game of two halves.

29-Jan-18 to 02-Apr-18 a x2 ETF was required or the trading system needed to improve.

30-Jul-18 to 03-Dec-18 a x1 ETF was sufficient.

"Sufficiency" seems to improve, the longer the period).

Maybe I need to improve the trading signal for the inverse ETF buys (e.g. down to daily within an overall weekly timeframe or just trade inverse ETFs independently on daylies).

Maybe a simple stratgey as to flip a sum between an inverse ETF and an FTSE ETF so as to gain on both sides, further improving hedging performance.

Caveat: Just a very limited (the most limited!) backtest so more work needed but has some utility.

[Harley]

Or being practical with say £100,000:

Trades:

   02-Apr-18: Buy £100,000 at 712.00 ISF FTSE100 ETF

   30-Jul-18: Sell £50,000 ISF at 759.20 giving (712.00 to 759.20) £3,500 profit

   30-Jul-18: Buy £50,000 at 382.05 XUKS FTSE100 x1 inverse ETF

As at 03-Dec-18 (with hedge):

   ISF 30-Jul-18 £50,000 sale: £3,500 profit

   ISF 03-Dec-18 £50,000 holding: 712.00 to 673.90 = 5.4% or £2,700 loss

   XUKS 03-Dec-18 £50,000 holding: 382.05 to 423.00 = 10.7% or £5,350 profit

   £6,150 net profit, plus dividends!

As at 03-Dec-18 (no hedge):

   ISF at 03-Dec-18 £100,000 holding: 712.0 to 673.9 =  5.4% or £5,400 loss, less dividends!

The 10.7% increase in XUKS against an ISF 5.4% fall is a bit of a worry though (should be more equal).

Based on actual buy signals.  Surely this cannot be correct!

[kibuc]

27 minutes ago, Harley said:

Based on actual buy signals.  Surely this cannot be correct!

Buying on technicals is all nice and well until a major event comes round and you end up catching a falling knife on your buy signals.

Is that true that no automated strategy managed to beat the index over any 30y period? I'm quite sure I read in more than one place criticising TA.

[macca]

7 hours ago, onlyme said:

I'm still of a mind that the FED are on a mission to scupper Trump, he and what he represents to others is the biggest threat to the plan. Conspiracy theory, absolutely, but what a coincidence that the FED take any notice factors to increase rates having spent a decade with their thumbs up their arses.

The word on the street is they are protecting the global reserve currency from become debunked by the yuan.. 

what im interested in is if this will drag the ECB and BOE into rate rises? Is there a link between FED rises and other central banks?

[Harley]

16 minutes ago, kibuc said:

Buying on technicals is all nice and well until a major event comes round and you end up catching a falling knife on your buy signals.

Is that true that no automated strategy managed to beat the index over any 30y period? I'm quite sure I read in more than one place criticising TA.

Sorry but a quick superficial put down does not do this analysis justice.

It doesn't even need to be on a technical basis.

Then there's money management.

Open minds, enquiring minds, search to find, and all that.