Credit deflation and the reflation cycle to come.

[Majorpain]

2 hours ago, DurhamBorn said:

In other news,

https://www.bbc.co.uk/news/uk-46494465

Debt,small margins.Says it all.

The entire construction sector is one to avoid at the mo, unfortunately it what work does so its batten down the hatches time.

2 hours ago, dgul said:

But it is more complex than that.

This is a 150 year old company that exists in a very reliable business -- low margin, yes, but extraordinarily reliable income against stable costs.

IMO what they've done is borrowed against future income (or, rather, used loans to fund development with the future income as collateral), and used the increased cash-flow (that comes with low interest rates / ease of credit) to fund ever higher senior management pay (and other stuff -- I'm sure there'll turn out to be other ways that cash has left the business).  Now, with credit drying up they've met the downside of that plan.  But the senior management still have their money, and the cash exist vehicles still exist, while people will lose jobs (just before Christmas) and the taxpayer foots the bill.  Great. 

Age of a business means very little these days, plenty of family business going for 100+ years have gone under in the last 20 years, mine was one of them!  Times change and if you dont change with them...  Construction as a whole is very oversupplied, some of the contractors need to die so that the others may prosper.  Interserve will eventually be one them IMO.

Got a job on with Interserve at the moment, on the first couple of phases, with Cash on delivery written into the contract, they were taking 30+ to actually pay money into the bank.  Next phase is money BEFORE delivery!

 

[leonardratso]

1 hour ago, Majorpain said:

The entire construction sector is one to avoid at the mo, unfortunately it what work does so its batten down the hatches time.

Age of a business means very little these days, plenty of family business going for 100+ years have gone under in the last 20 years, mine was one of them!  Times change and if you dont change with them...  Construction as a whole is very oversupplied, some of the contractors need to die so that the others may prosper.  Interserve will eventually be one them IMO.

Got a job on with Interserve at the moment, on the first couple of phases, with Cash on delivery written into the contract, they were taking 30+ to actually pay money into the bank.  Next phase is money BEFORE delivery!

 

and no or massive credit insurance.

I wonder how many suppliers and in the end people were fucked in the arse by carillion, if i had anything to do with any of these companies id have to really consider winding them down if they were a large client, cedrtainly woudlnt extend them any credit whatsoever, got to learn from other failures or die with them.

[DurhamBorn]

7 hours ago, leonardratso said:

and no or massive credit insurance.

I wonder how many suppliers and in the end people were fucked in the arse by carillion, if i had anything to do with any of these companies id have to really consider winding them down if they were a large client, cedrtainly woudlnt extend them any credit whatsoever, got to learn from other failures or die with them.

In the early 80s one of the people in my parents circle was a builder.Built up a half decent sized business.Went bankrupt.I thought that meant hed be skint,but he was actually loaded.Turned out years later when i understood finance that he had paid most money into his and his wifes pension,and her salary.He went under owing lots of little people lots of money,but once it was all done he simply kicked his pension in and never worked again.I guess the whole sector is like that,they make out like bandits.

[Barnsey]

One thing is for sure, if reflation plays out, the ones left standing after the debt deflation are going to do very very well indeed, keeping a close eye on the sector over the next year or two will be important.

[UnconventionalWisdom]

3 hours ago, DurhamBorn said:

In the early 80s one of the people in my parents circle was a builder.Built up a half decent sized business.Went bankrupt.I thought that meant hed be skint,but he was actually loaded.Turned out years later when i understood finance that he had paid most money into his and his wifes pension,and her salary.He went under owing lots of little people lots of money,but once it was all done he simply kicked his pension in and never worked again.I guess the whole sector is like that,they make out like bandits.

It's amazing how naive we all are. A couple of years ago it really dawned on me that working hard is just a way to screwed out of money by people who have realised how to play the system. Housing and BTL really showed that people in power don't care about economic sustainability and stability, just care about their own pockets. 

Learning about finance helps (I still have a lot to learn), but it's shocking how many people don't want to listen about what's going on with financial manipulation. 

[Castlevania]

4 hours ago, DurhamBorn said:

In the early 80s one of the people in my parents circle was a builder.Built up a half decent sized business.Went bankrupt.I thought that meant hed be skint,but he was actually loaded.Turned out years later when i understood finance that he had paid most money into his and his wifes pension,and her salary.He went under owing lots of little people lots of money,but once it was all done he simply kicked his pension in and never worked again.I guess the whole sector is like that,they make out like bandits.

This is pretty standard. The owner of one of the local car show rooms went bust in the 90’s and then he just bought it back out of administration. During the good years he’d been paying himself a fortune in salary and dividends. The joys of limited companies. 

By contrast a family friend used to be in the restaurant trade and went bust on a number of occasions. Every time when she was back on her feet, and had the money she paid all her creditors back in full - even though there was no need for her to actually do this. She regarded it as the right thing to do.

1 hour ago, Barnsey said:

One thing is for sure, if reflation plays out, the ones left standing after the debt deflation are going to do very very well indeed, keeping a close eye on the sector over the next year or two will be important.

Balfour Beatty?

[Eventually Right]

Bloomberg article on SA gold:

https://www.bloomberg.com/news/articles/2018-12-09/south-african-gold-industry-enters-final-phase-of-slow-death

[MrXxx]

5 hours ago, Castlevania said:

This is pretty standard. The owner of one of the local car show rooms went bust in the 90’s and then he just bought it back out of administration. During the good years he’d been paying himself a fortune in salary and dividends. The joys of limited companies. 

By contrast a family friend used to be in the restaurant trade and went bust on a number of occasions. Every time when she was back on her feet, and had the money she paid all her creditors back in full - even though there was no need for her to actually do this. She regarded it as the right thing to do.

Balfour Beatty?

Morally the right thing to do, yes, financially, no....unfortunately you need money to feed your family and nobody gives a toss anymore about morals

[Democorruptcy]

Simply put, yield curve inversions are what happens when too many investors try to crowd into the same arbitrage opportunity at the same time.

http://danielamerman.com/va/ccc/YieCurArb.html

[Talking Monkey]

23 hours ago, DurhamBorn said:

GDXJ contains the smaller gold miners,and now quite a few of the mid range ones.GDX contains all the big gold miners and most of the mid range ones,but no small ones.GDXJ tends to outperform in a gold bull,or underperform in a gold bear.When iv used the two i tended to go 40% GDX,60% GDXJ,or if buying SIL the silver miner fund 30% GDX,40% GDXJ 30% SIL.

What would be the main reason behind you  not using them for the next bit to come DB, is your preference to buy a range of the miners instead, if so why do you prefer that approach

[DurhamBorn]

19 minutes ago, Talking Monkey said:

What would be the main reason behind you  not using them for the next bit to come DB, is your preference to buy a range of the miners instead, if so why do you prefer that approach

I would happily use them and will be buying them at some point.At the moment im in individual miners because iv got a decent amount of capital in the sector so iv already got a good spread of companies.

[Talking Monkey]

Just now, DurhamBorn said:

I would happily use them and will be buying them at some point.At the moment im in individual miners because iv got a decent amount of capital in the sector so iv already got a good spread of companies.

thanks DB for explaining

[BearyBear]

1 hour ago, Democorruptcy said:

Simply put, yield curve inversions are what happens when too many investors try to crowd into the same arbitrage opportunity at the same time.

http://danielamerman.com/va/ccc/YieCurArb.html

Excellent read, thanks for posting!

[sancho panza]

On 07/12/2018 at 15:24, Ma2 said:

Interesting article on what GDX did earlier this year when equities fell

http://www.marketoracle.co.uk/Article61588.html

 

Thanks for posting .Very interesting.

On 07/12/2018 at 17:27, Ash4781b said:

I expect sales revenue is up but like for like sales revenue falling. Primark have no e-commerce business(at least what we know publicly). Risky? 

As an aside I went into a Mothercare store today and there was hardly any stock to sell. I think this is probably the supplier restrictions refered to publicly. I’m Not sure how they get out of that one tbh. 

 

Mothercare is one of those stores I go in,count the staff,look at the square footage,watch the tills and wonder how they're still in business.That whole baby shop thing has gone online.

[sancho panza]

On 08/12/2018 at 09:30, DurhamBorn said:

Eldorado will have to go up another 27% for me to break even on them,the old dog.The others are looking decent though.I actually sold a few Harmony at $2.09 and bought them back again at $1.50,reason at $2.09 they were far too big a holding.The Rand is weakening a bit again so they are getting a double benefit.If the Rand gold price goes over 600k a kg (570k now) they should double.They are risky due to being South African,but the amount of gold they have in the ground,around 80 million oz compared to a cap of around $800 million is incredible.I also think they might be sitting on a lot of gold in the greenstone belt areas they own in SA.Their Kalgold mine only does 30k oz a year,but looks like it might be able to go to 150k and open pit.Their Wafi Golpu asset is probably the best copper/gold asset in the world yet to be developed.However unless gold goes up they probably can fund building it.

 

 

I'll need a lot more than that to break even on ELD.

As weve discussed the SA miners trade at massive discounts  in terms of market cap to revenue.They poffer real leverage to a gold price rise.Intersteing tosee Anglogold/Golf fields firm up recently.

On 08/12/2018 at 15:37, kibuc said:

Just a few words about EDR (10 sec analysis, so take it with a bucket of salt): there was some noise some time ago about them exploiting their highest-grade veins at Guanacevi mine to keep production numbers up and, inevitably, paying for it a few quarters down the line when high-grade ore dried out.



I generaly try to steer away from companies that are more interested in massaging their numbers than focusing on their operations. And their acquistition of ElCubo and subsequent production numbers there hint at their unability to handle money or assets. Then again, big silver bull would allow to paper over any cracks.

Always appreciate being educated on the subtler nuances of the gold industry

On 08/12/2018 at 18:39, leonardratso said:

no surprises here at all. Next up - capita.

Yep.it'll happen,probably sooner than many expect

7 hours ago, Eventually Right said:

Bloomberg article on SA gold:

https://www.bloomberg.com/news/articles/2018-12-09/south-african-gold-industry-enters-final-phase-of-slow-death

The SA miners have lots of experience in that country and also have hedged with assets in other jurisdictions

[Sound Money]

45 minutes ago, sancho panza said:

I'll need a lot more than that to break even on ELD.

Me too, I’ll need a 43% increase to break even. Assuming you mean EGO

[sancho panza]

https://wolfstreet.com/2018/12/07/ugly-week-for-stocks-fangman-even-wsj-effort-to-manipulate-shares-up-fizzles/

FANGMAN down 10.4% for the week, down $1.12 trillion from peak. Apple plunges.

That was on Thursday. But on Friday, the whole thing came unglued again – and for the FANGMAN stocks – Facebook, Amazon, Netflix, Google’s parent Alphabet, Microsoft, Apple, and NVIDIA – in a particularly ugly way.

• The Dow fell 2.24% on Friday to 24,388, ending the week down 4.5%. It’s down 9.5% from its peak, but down only 1.3% so far this year, and flat year-over-year.
• The S&P 500 fell 2.3% on Friday to 2,633, ending the week down 4.6%. It’s down 10.5% from its peak, down 1.5% year-to-date, and down 0.7% from a year ago.
• The Nasdaq fell 3.05% on Friday to 6,969, ending the week down 4.9%. It’s down 14.3% from its peak, but remains up 1% year-to-date and is up 1.9% from a year ago.
• The Russell 2000 small caps index fell 1.98% on Friday, ending the week down 5.6%. It’s down 16.9% from the peak, down 5.7% year-to-date, and down 4.8% from a year ago.

The FANGMAN stocks are now in a peculiar position. Their combined market cap had once upon a time – namely August 31 – been $4.63 trillion. It has since plunged by 22.4%, or by $1.037 trillion, an astounding loss for just seven stocks. Friday was outright bloody for Apple, Nvidia, and Netflix:

• Facebook [FB]: $137.42 (-1.6%)
• Google [GOOG]: $1,036.58 (-3.0%)
• Amazon [AMZN]: $1,629.13 (-4.1%)
• Apple [AAPL]: $168.49 (-6.3%)
• Microsoft [MSFT]: $104.82 (-4.0%)
• Nvidia [NVDA]: $147.61 (-6.7%)
• Netflix [NFLX]: $265.14 (-6.27%)

[sancho panza]

28 minutes ago, Sound Money said:

Me too, I’ll need a 43% increase to break even. Assuming you mean EGO

Yes my bad.I bought a broad spectrum of decent size producers and EGO has been teh worst performer.New Gold awful too but all were buy and holds and I tend not to let my losers affect my risk appetite hence I don't know my exact per centage we;re down.

[Democorruptcy]

Robert Shiller : US Housing Boom Is Already Gigantic. How Long Can It Last?

[Barnsey]

7 hours ago, Democorruptcy said:

Robert Shiller : US Housing Boom Is Already Gigantic. How Long Can It Last?

Thanks for posting, "we're almost back to 2006 peak in real terms", wow! Combine that with an enormous corporate debt bubble, trade war, weaker emerging markets, social unrest in EU, Brexit etc...easy to see why the next one will be so much worse.

[Democorruptcy]

Thread favourites CNA, SSE & RMG having a bad day so far. Presumably due to fear of a general election and Corbyn getting in. EU judges rule we can unilaterally exit the Brexit exit, so Labour could win the election with staying in the EU as their manifesto and the Tories in disarray.

[leonardratso]

IRV was wondering if i should do a day trade on it, but the spreads all over the place, reckon liquidity would be a problem.

 

yeah, i cant get a guaranteed price. bid is showing higher than sell, only being offered a negogiated price, they can FO.

[Barnsey]

Interserve down 46% this morning 

[Don Coglione]

2 minutes ago, Barnsey said:

Interserve down 46% this morning 

Cheer up, it was down 75% an hour ago!

23 minutes ago, Democorruptcy said:

Thread favourites CNA, SSE & RMG having a bad day so far. Presumably due to fear of a general election and Corbyn getting in. EU judges rule we can unilaterally exit the Brexit exit, so Labour could win the election with staying in the EU as their manifesto and the Tories in disarray.

It does rather look that way.

They are going to steal it (Brexit), aren't they?

[leonardratso]

16 minutes ago, Barnsey said:

Interserve down 46% this morning 

right i need 14.35 to break even, its a complete punt and ill probably get shafted, but i was a bit bored anyway.