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Credit deflation and the reflation cycle to come.


DurhamBorn

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13 minutes ago, Bear Hug said:

My gold miners are about 10% up, silver 25%.  Although by "silver miners" I mainly mean Fresnillo which I bought very close to the bottom on Black Friday, when AJ Bell had free trading offer.  

But I am less than 10% up overall mainly thanks to Vodafone and Centrica too now.

It's interesting how timing makes such a difference. My Fresnillo and Centrica are two of my worst performers.. down 16% and 20% respectively.  Overall I'm still mostly cash though so happy to go for riskier stocks. I think I may roll out of Fresnillo into a smaller livelier silver miner at some point.. but I'll stick with Centrica.

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39 minutes ago, MvR said:

 think I may roll out of Fresnillo into a smaller livelier silver miner at some point.. 

Could still be lively next week: full year results Tue 26 Feb

 

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14 hours ago, A_P said:

Income tax threshold is going up but aren't they taking straight back in NI? When I looked earlier in the year at a comparison I was only going to be a few quid better off, hardly any change at all to my take home.

Yeah. They give with one hand and take away with the other. So half the gain on the income tax band shift is eaten up by higher NIC’s. 

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14 hours ago, MvR said:

It's interesting how timing makes such a difference. My Fresnillo and Centrica are two of my worst performers.. down 16% and 20% respectively.  Overall I'm still mostly cash though so happy to go for riskier stocks. I think I may roll out of Fresnillo into a smaller livelier silver miner at some point.. but I'll stick with Centrica.

I agree.  I just wanted to get in having dithered for the last few months and I can see if I'd got going when DB was advising I would be well up on just about everything by now:(.  Centrica was doing well until the other day and I can see now that I need to wait for an "off" day to get in to one or two other good div stocks for my "buy and hold" stocks.  I have some GDX and 3 miners for my "fun" stocks and so far I'm about breaking even overall but considering buying costs and no divis as yet I reckon that's about OK.

I was initially put off by having a nominee account as when I was dabbling in the early 90s it was all buying on the phone and holding share certs at home.  But I have to say doing it all online is much simpler and it's quite addictive to keep logging in to see how things are going:).  Mindyou things can change from hour to hour.  I just hope if any of them tank I'll be able to get in quickly enough to sell.  Just kidding I'm not going to panic.  This is a ten year+ thing.  Thanks DB for giving me the confidence to start.

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4 hours ago, janch said:

I agree.  I just wanted to get in having dithered for the last few months and I can see if I'd got going when DB was advising I would be well up on just about everything by now:(.  Centrica was doing well until the other day and I can see now that I need to wait for an "off" day to get in to one or two other good div stocks for my "buy and hold" stocks.  I have some GDX and 3 miners for my "fun" stocks and so far I'm about breaking even overall but considering buying costs and no divis as yet I reckon that's about OK.

I was initially put off by having a nominee account as when I was dabbling in the early 90s it was all buying on the phone and holding share certs at home.  But I have to say doing it all online is much simpler and it's quite addictive to keep logging in to see how things are going:).  Mindyou things can change from hour to hour.  I just hope if any of them tank I'll be able to get in quickly enough to sell.  Just kidding I'm not going to panic.  This is a ten year+ thing.  Thanks DB for giving me the confidence to start.

The cycle is just turning and there is a decade ahead of it.Hardly anyone has spotted it,and they wont yet for years.Notice KraftHeinz getting smacked down.Lots of excuses,but the real reason is dis-inflation has ended and now those sort of stocks will be facing headwinds.The ones inflation stocks have faced for 30+ years,the market is looking the wrong way at a key inflection point.Our macro work showed us those types of stocks would get smashed and its proving right.Our roadmap is actually doing even better than we expected , as always there are a few timing issues,but im very pleased with how things are going.

 

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If you don’t mind DurhamBorn, or other knowledgable posters, could you give a brief explanation of inflation vs disinflation stocks? Is it all about sector, essential vs discretionary, debt/fixed rate debt, some combination of all those, or something else entirely? Thanks

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On 21/02/2019 at 03:22, Sugarlips said:

This will keep ‘banks are bad’ messages in the news for years, will crimp their profits further and likely encourage them to be even more conservative with their future lending requirements - the snowball effect

https://www.smh.com.au/business/banking-and-finance/westpac-faces-responsible-lending-class-action-20190221-p50z7z.html

 

Quote

According to legal documents, the Tates borrowed $570,000 for a Darwin property, and $619,000 to buy a property in Mudgee, and to finance the construction of a duplex on the land. Both loan applications allegedly said the family's living expenses were $3,000 a month, whereas their actual costs were more than $7,500.

It is alleged the bank did not take "any reasonable steps" to verify the living expenses on the loan applications, and it assessed the couple's capacity to pay the debt by assuming their expenses were equal to HEM. It is also claimed the bank used a method for calculating repayments that has been previously criticised by regulators.

The law firm claims that if Westpac had sought to verify expenses, or used a more appropriate method to calculate how the clients would service the loan, they would have found the loans to be unsuitable.

'Devastated'

Ms Tate told journalists they had sold all but one of their properties, and she blamed the bank for not verifying the information provided by a mortgage broker.

"Dealing with Westpac has devastated us. Everything we were trying to achieve is lost. Instead of striving for financial independence, we are back living pay cheque to pay cheque, tax return to tax return," she said in a statement.

"We lied our arses off in the hope of making mad gainz when the properdee price went up,  as it always naturally does in a normal universe. How were we to know they would go down instead??? The banks should have called us on our lies. IT'S THEIR FAULT WE'RE STUFFED AND WE WANT COMPO!"

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6 hours ago, janch said:

I agree.  I just wanted to get in having dithered for the last few months and I can see if I'd got going when DB was advising I would be well up on just about everything by now:(.  Centrica was doing well until the other day and I can see now that I need to wait for an "off" day to get in to one or two other good div stocks for my "buy and hold" stocks.  I have some GDX and 3 miners for my "fun" stocks and so far I'm about breaking even overall but considering buying costs and no divis as yet I reckon that's about OK.

I was initially put off by having a nominee account as when I was dabbling in the early 90s it was all buying on the phone and holding share certs at home.  But I have to say doing it all online is much simpler and it's quite addictive to keep logging in to see how things are going:).  Mindyou things can change from hour to hour.  I just hope if any of them tank I'll be able to get in quickly enough to sell.  Just kidding I'm not going to panic.  This is a ten year+ thing.  Thanks DB for giving me the confidence to start.

I dithered as well, `missed the bus`, and so am waiting for the next (hopefully) opportunity. I did this as I (no disrespect to DB et al) wanted to understand my own financial decisions rather than just accept someones `tip`.

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7 hours ago, janch said:

I agree.  I just wanted to get in having dithered for the last few months and I can see if I'd got going when DB was advising I would be well up on just about everything by now:(Centrica was doing well until the other day and I can see now that I need to wait for an "off" day to get in to one or two other good div stocks for my "buy and hold" stocks.  I have some GDX and 3 miners for my "fun" stocks and so far I'm about breaking even overall but considering buying costs and no divis as yet I reckon that's about OK.

I was initially put off by having a nominee account as when I was dabbling in the early 90s it was all buying on the phone and holding share certs at home.  But I have to say doing it all online is much simpler and it's quite addictive to keep logging in to see how things are going:).  Mindyou things can change from hour to hour.  I just hope if any of them tank I'll be able to get in quickly enough to sell.  Just kidding I'm not going to panic.  This is a ten year+ thing.  Thanks DB for giving me the confidence to start.

The key with buy n hold is not to look too much in my experience.I use a phone broker for the accounts where we (me and the family) hold our stocks just so I don't obsess about short term price movements.In the past,over the last twnety odd years, it's caused me to sell early.On reflection,that was the solution we decided on.We also hold FTSE 100 longs in certs where we want to reinvest the divi in scrip where it's avaialble.When you get a decent run up,that really pays off.

On the IG accounts,the online functionality is absolutely incerdible but I check them every day due to the volatility associated with using leverage long/short.

 

56 minutes ago, MrXxx said:

I dithered as well, `missed the bus`, and so am waiting for the next (hopefully) opportunity. I did this as I (no disrespect to DB et al) wanted to understand my own financial decisions rather than just accept someones `tip`.

It's always best to make your own mistakes,although it's cheaprer to learn from other people's......and I say that from bitter experience

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2 hours ago, DurhamBorn said:

The cycle is just turning and there is a decade ahead of it.Hardly anyone has spotted it,and they wont yet for years.Notice KraftHeinz getting smacked down.Lots of excuses,but the real reason is dis-inflation has ended and now those sort of stocks will be facing headwinds.The ones inflation stocks have faced for 30+ years,the market is looking the wrong way at a key inflection point.Our macro work showed us those types of stocks would get smashed and its proving right.Our roadmap is actually doing even better than we expected , as always there are a few timing issues,but im very pleased with how things are going.

 

I think the margin comporession we've been discussing is going hard.During my footfall trips around shops,the big brands are idscounting more than they used to to maintain market share.Particualrly in the food sector.

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16 minutes ago, sancho panza said:

The key with buy n hold is not to look too much in my experience.

 

Fidelity set out to examine the behaviors of their best performing accounts in a effort to isolate the behaviors of truly exceptional investors, when they contacted the owners of the best performing accounts the common thread tended to be that they had forgotten about the account altogether or had died. So much for isolating the complex behavioral traits of skilled investors

This was from a book i have almost finished which is a interesting read so far 

953411975_51hpwZIMZaL._SX322_BO1204203200_.jpg.6e12e7ba898312c7194d883d9e903c21.jpg

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13 minutes ago, sancho panza said:

I think the margin comporession we've been discussing is going hard.During my footfall trips around shops,the big brands are idscounting more than they used to to maintain market share.Particualrly in the food sector.

Yes its happening SP isnt it.Its just like we expected.Companies like Heinz etc will be around,its just their margins will go to the floor and they will be running to go slowly backwards.The people flogging the nitrates to go on the crops wont mind though.

The likes of Amazon etc are about to come up against it as well.They will also then have the problem of higher rates meaning discounting future earnings changes.

Go Ahead being up nearly 50% as Honda closed its car plant brought a smile to my face.Not in the fact people were losing their jobs,thats always sad,,but in the way cycles work,and the complete lack of understanding in the media and public.

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2 hours ago, Sound Money said:

If you don’t mind DurhamBorn, or other knowledgable posters, could you give a brief explanation of inflation vs disinflation stocks? Is it all about sector, essential vs discretionary, debt/fixed rate debt, some combination of all those, or something else entirely? Thanks

Il try to write an answer over the next few days as i think it deserves a good explanation.As always its not a science and its not always black and white,but it is very interesting.

There are lots of interactions and differences.

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31 minutes ago, DurhamBorn said:

Yes its happening SP isnt it.Its just like we expected.Companies like Heinz etc will be around,its just their margins will go to the floor and they will be running to go slowly backwards.The people flogging the nitrates to go on the crops wont mind though.

The likes of Amazon etc are about to come up against it as well.They will also then have the problem of higher rates meaning discounting future earnings changes.

Go Ahead being up nearly 50% as Honda closed its car plant brought a smile to my face.Not in the fact people were losing their jobs,thats always sad,,but in the way cycles work,and the complete lack of understanding in the media and public.

Wolf saying Ford sales are plummetting

https://wolfstreet.com/2019/02/22/carmageddon-for-ford-but-its-not-what-you-think/

Ford’s China sales have collapsed

Ford’s annual sales through its joint ventures in China – by far the largest auto market in the world where GM sells more vehicles than in the US – peaked in 2016 at 1.297 million vehicles, according to Ford’s 10-K. But in 2018, Ford sold only 731,000 vehicles. A two-year plunge of 44%.

image.png.48d2cf3ffd23ebbd5ea0d05c70af3972.png

image.png.c709f1a1954c3a76e05baa300a0b9359.png

image.png.53b88dd79406e03347c6f73117852d29.png

So just increase the prices.

How does Ford try to keep its dollar sales from taking the same steep route of its unit sales? Jacking up prices. And executives are bragging about it to prop up the swooning shares.

The metric they toss around is the average transaction price – the price at which the vehicle is sold to consumers after haggling. During the earnings call for the fourth quarter, Executive VP James Farley, Jr. bragged about the “double-digit increase in transaction prices last quarter” for the Escape and Focus models; and CEO Hackett bragged about pickup transaction prices being “about $2,000 above segment average.”

Raising prices on declining volume to cover up the decline in volume is not an elegant solution for the long term.

 

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9 minutes ago, sancho panza said:

Wolf saying Ford sales are plummetting

https://wolfstreet.com/2019/02/22/carmageddon-for-ford-but-its-not-what-you-think/

Ford’s China sales have collapsed

Ford’s annual sales through its joint ventures in China – by far the largest auto market in the world where GM sells more vehicles than in the US – peaked in 2016 at 1.297 million vehicles, according to Ford’s 10-K. But in 2018, Ford sold only 731,000 vehicles. A two-year plunge of 44%.

image.png.48d2cf3ffd23ebbd5ea0d05c70af3972.png

image.png.c709f1a1954c3a76e05baa300a0b9359.png

image.png.53b88dd79406e03347c6f73117852d29.png

So just increase the prices.

How does Ford try to keep its dollar sales from taking the same steep route of its unit sales? Jacking up prices. And executives are bragging about it to prop up the swooning shares.

The metric they toss around is the average transaction price – the price at which the vehicle is sold to consumers after haggling. During the earnings call for the fourth quarter, Executive VP James Farley, Jr. bragged about the “double-digit increase in transaction prices last quarter” for the Escape and Focus models; and CEO Hackett bragged about pickup transaction prices being “about $2,000 above segment average.”

Raising prices on declining volume to cover up the decline in volume is not an elegant solution for the long term.

 

Any chance of the sales vol being trade war related? Ford are very ‘USA’ so an easy target for propaganda.

how does it compare to sales of other western car brands

China has doubled down on capital flight restrictions. They don’t want Yuan leaving the country or their citizens investing abroad

the quality of their homegrown vehicles is on the up apparently I’m sure they would want the natives to buy local in the current tense political environment.

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51 minutes ago, Sugarlips said:

Any chance of the sales vol being trade war related? Ford are very ‘USA’ so an easy target for propaganda.

how does it compare to sales of other western car brands

China has doubled down on capital flight restrictions. They don’t want Yuan leaving the country or their citizens investing abroad

the quality of their homegrown vehicles is on the up apparently I’m sure they would want the natives to buy local in the current tense political environment.

Looks like it's Ford market share suffering ergo China going own brand Aldi style??

It says a lot to me that both China's car sales are dropping and that some big Western brands have taken a shower there.

Worldwide car demand has been around the 78mn mark since 2016

https://www.statista.com/statistics/200002/international-car-sales-since-1990/

 

China saw the bulk of growth for cars since 2013

https://www.best-selling-cars.com/international/2018-full-year-international-worldwide-car-sales/

Since 2013, the combined car sales of these large markets grew by 10.5 million cars, of which almost 7 million accrued to the Chinese new car market. The Indian new car market grew by a million units in this period while in Russia and Brazil sales are still around a million cars less than in 2013. Car sales in the USA and Europe remained at historic highs in recent years while the Chinese new car market contracted in 2018 for the first time in two decades.

Weaker Car Sales in China in 2018

In 2018, China remained by far the largest single-country new car market in the world. However, the Chinese car market was 4% smaller than in 2017 – the first contraction in car sales in two decades. In 2018, car sales in China were weaker than in both 2017 and 2016 but still a good 3.2 million higher than in 2015 and 7 million higher than in 2013.

In December 2018, new car sales in China were 16% lower than a year ago. This was the sixth consecutive month of lower sales in China and the fourth of double-digit contraction. The Chinese new car market was hit hard not only by a weaker economy but also uncertainty due to tariffs and trade tension with the USA.

1 hour ago, DoINeedOne said:

Fidelity set out to examine the behaviors of their best performing accounts in a effort to isolate the behaviors of truly exceptional investors, when they contacted the owners of the best performing accounts the common thread tended to be that they had forgotten about the account altogether or had died. So much for isolating the complex behavioral traits of skilled investors

This was from a book i have almost finished which is a interesting read so far 

953411975_51hpwZIMZaL._SX322_BO1204203200_.jpg.6e12e7ba898312c7194d883d9e903c21.jpg

That's one of those 'you couldn't make it up ' stories......I can quite believe it.

 

The book any good?

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13 minutes ago, sancho panza said:

The book any good?

 

Actually just finished it tonight, worth a read highlighted plenty of sections whcih normally tells me that i enjoyed the book

lots of examples and studies into how we make decsisions it would seem doing less is best in regards to like you say checking prices daily or rushing to buy or sell and actually taking some time in making decisions

Also alot talk about our emotions and how these effect our decisions in investing 

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7 minutes ago, DoINeedOne said:

Actually just finished it tonight, worth a read highlighted plenty of sections whcih normally tells me that i enjoyed the book

lots of examples and studies into how we make decsisions it would seem doing less is best in regards to like you say checking prices daily or rushing to buy or sell and actually taking some time in making decisions

Also alot talk about our emotions and how these effect our decisions in investing 

That's interesting because over the years,I've never struggled identifying value-sometimes got it worng but a lot more right than worng-I've struggled staying in long enough to get the full benefit of a good call.

As I've aged I've calmed down but mastering your emotions is a huge part of investing imho.Huge.

Particualrly when you're in the red.That's hard maintaining a sensible strategy and sticking to it when your screen is a sea of red-as my IG a/c is at the mo.

@Harley has discussed behavioural economics before and I'm fascinated by it as it makes usch good sense.Obviously,ignored by the MSM and the Establishment.

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Yellow_Reduced_Sticker
5 hours ago, sancho panza said:

That's one of those 'you couldn't make it up ' stories......I can quite believe it.

 

The book any good?

YEP...this is so TRUE, case in point a mate whose father bought stocks in the 60's all the way to his death NEVER sold...

his only son inherited the lot and became an instant MILLIONAIRE! 

I have Daniel Crosby's other book: The Laws of Wealth: Psychology and the secret to investing success

EXCELLENT reviews: https://www.amazon.com/Laws-Wealth-Psychology-investing-success/dp/0857195247#customerReviews

But hey you can make ya own mind up by having a read yourself - I'm sharing a FREE pdf copy here!:D

www.mediafire.com/file/2by1tmd8xa1kzxt/

the-laws-of-wealth-300.jpg?w=712

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UnconventionalWisdom
8 hours ago, sancho panza said:

Particualrly when you're in the red.That's hard maintaining a sensible strategy and sticking to it when your screen is a sea of red-as my IG a/c is at the mo.

@Harley has discussed behavioural economics before and I'm fascinated by it as it makes usch good sense.Obviously,ignored by the MSM and the Establishment.

I'm also fascinated by it, not only for trading but life in general. We make so many decisions based on what we think is best, but in reality, it may be in our nature that makes us choose the wrong path. 

Loss aversion, valuing losses more than gains, is why most people don't do stocks. But looking at this more broadly, I'm sure its why people don't change jobs, partners or other things where they have the potential to be much happier. 

Loss aversion is shown in monkeys and hence really does indicate it as some underlying part of our nature. 

From the following link

https://www.psychologicalscience.org/observer/monkey-business

 

To test for this bias in capuchins, the researchers positioned two types of traders in the monkey marketplace. One trader always offered two pieces of apple — for clarity’s sake, we’ll call him Larry Loss, though the researchers used no such name. Upon receiving a token, sometimes Larry Loss handed two pieces to the monkey, but sometimes he removed one and delivered only a single piece. A second trader — let’s say Bonus Bob — always offered one piece of apple. When given a token, Bonus Bob sometimes delivered the single piece and sometimes added a second, extra piece. Sure enough, the monkeys preferred to trade with Bonus Bob, approaching him 71 percent of the time.

On the heels of this finding, Santos and collaborators studied a related behavior called loss aversion. Generally speaking, this concept states that people will go to great lengths to avoid losses, which have a stronger psychological effect on them than gains. To test loss aversion, the researchers brought back Larry Loss and paired him with a new trader, Even Stephen. Once again, Larry Loss offered two apple pieces. When the monkeys paid him a token, however, he delivered only one piece every time. Even Stephen, on the other hand, consistently showed one piece and, once paid, delivered the piece as promised.

Although the payoffs were identical in the end — both traders always parted with one piece of apple — the monkeys disliked the disappointment associated with Larry Loss. As a result, they traded with Even Stephen 79 percent of the time. Put together, the findings suggest that hallmark biases like reference dependence and loss aversion extend “beyond humans and may be innate rather than learned,” the authors concluded in a 2006 issue of Journal of Political Economy.

 

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12 hours ago, sancho panza said:

It's always best to make your own mistakes,although it's cheaprer to learn from other people's......and I say that from bitter experience

As is true in most of life, people mostly only learn from their own mistakes.  The trick is to ensure they can stay in whatever game they're playing!  You have to burn your fingers on the hob every now and then else it's just a head exercise yet you're dealing with emotions.

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11 hours ago, Sugarlips said:

Any chance of the sales vol being trade war related? Ford are very ‘USA’ so an easy target for propaganda.

how does it compare to sales of other western car brands

China has doubled down on capital flight restrictions. They don’t want Yuan leaving the country or their citizens investing abroad

the quality of their homegrown vehicles is on the up apparently I’m sure they would want the natives to buy local in the current tense political environment.

the irony being chinese firms are buying half the world

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