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Credit deflation and the reflation cycle to come.


DurhamBorn

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7 minutes ago, Ma2 said:

Thanks DB, appreciate you have a strategy that you are working towards for your purposes.

I am still learning and so although my overall target is clear my strategy of how to get there often isn't. As I gain more knowledge or ideas from this discussion and other research I find that I hadn't quite grasped something or that there was an alternative I'd overlooked.

 

Im actually doing really basic stuff at the minute.Im simply pulling up every company in a certain industry and trying to shape it down to maybe 3 stocks.Im hoping to find maybe 15 companies in Europe,and some in the US.Mostly chemical related in areas i think will see inflation.

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1 hour ago, DurhamBorn said:

i tend to like being underwater as i build out the portfolio

100%.  Where I am now, mostly, overall.  But that means for me a time to look to buy given I'm still accumulating income equity payers.  But what?

So I've trawled through the financials for every stock on the FTSE currently yielding over 5%!  Apart from the big boys we all know and love, not as productive as I had expected.  I used Morningstar but struggled with their data (accuracy, completeness and meaningfulness).  For example, what exactly is in the "Financing" line in the cash flow statement (glossary unhelpful) and the same for "investing activities" (no glossary entry!)?  Very hard to reconcile numbers on a consistent basis.  The foreign statements (which I've now started to look at) are much easier to follow.

A few random things of note:

. A noticeable number of companies are carrying intangibles as a very high percentage of total assets.  Maybe OK for tech orientated companies (even gambling companies) but all the others (e.g. DTY at 50%?).

. Lots of companies taking on debt (nothing new to us) with big falls in interest cover, but unclear how effective it's being used (some using it to subsidise divs?)

. I wondered how some companies were going to pay off maturing debt - hope they get refinanced OK!

. Thinking best to avoid the plethora of ARS, GDRS, etc as these are via banks(?) - institutional risk?

. Very generally, 2017 seemed good (best) for most companies but 2018 markedly less so from a cash flow, revenue, and profitability POV.  

. A few smaller companies on the list seem to have high divs as a way maybe of some key players cashing out.

. I expected a better variety of business and sector but not that much there really.  Maybe the right trusts (who invest direct, ex FTSE) would be better.

. Can be quite topsy turvey (not what you'd expect) - e.g. SCS v DTY, although that may change over time.

My net would not have caught good div payers whose current elevated share price brings the yield down to below the 5%.  So I'll screen each week for new ones where their price has fallen/dividend risen sufficiently.

Just started on Germany, with the ROW to follow!

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18 minutes ago, DurhamBorn said:

Im actually doing really basic stuff at the minute.Im simply pulling up every company in a certain industry and trying to shape it down to maybe 3 stocks.Im hoping to find maybe 15 companies in Europe,and some in the US.Mostly chemical related in areas i think will see inflation.

I haven't looked at the financials for Heidelberg Cement AG yet, and they only currently offer a 3.43% yield, and they're not 100% chemical, but, having just used some 30+ bags of all sorts, IMO they do make the best postcrete!!!

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39 minutes ago, sancho panza said:

That's one of the companies who's Morningstar data I don't understand.  Total borrowings have pretty much been going up YOY for the last 5 years, as have net borrowings (whatever precisely these are, no glossary definition), as have dividends (with a flat net interest).  So why has the "Financing" cash flow figure fluctuated so much over that time period?  Financing is increasingly critical for those into this thread, so it's annoying to find one opaque line on the cash flow statement!

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1 hour ago, sancho panza said:

I'mlooking to build the RMV position.I think they could be in some trouble a year out.

I often get long buy signals for RMV.  Helps to remind me my system is a long way short of 100%!

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@Harley on Germany can you run the rule over Solvay SA , Evonik Industries , Bayer AG , Covestro and BASF  im setting up ladders in all of them if balance sheets look ok.Also in Finland i think Cargotec Corporation ,another im starting to buy once balance sheet looked over.

Some of these are big in animal feed chemicals,animal health,oil field drilling chemicals ,port and timber transport infrastructure etc,all getting hit and all might be big winners in a reflation as they feed into the high inflation areas and likely demand areas that outrun production.

Oh and Telefonica though im exposed to telcos already,their chart looks like capitulation.

 

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From Stockopedia

Capture.thumb.PNG.724af65928789f0652bc915f855678ba.PNG

9 hours ago, Harley said:

That's one of the companies who's Morningstar data I don't understand.  Total borrowings have pretty much been going up YOY for the last 5 years, as have net borrowings (whatever precisely these are, no glossary definition), as have dividends (with a flat net interest).  So why has the "Financing" cash flow figure fluctuated so much over that time period?  Financing is increasingly critical for those into this thread, so it's annoying to find one opaque line on the cash flow statement!

See above. Any help?

 

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Thanks for the heads up on the German companies, I am still feeling my way in via UK stocks but will start to look at others once I’m invested domestically to where I want to be. 

For those just starting out on this thread and looking to run their eyes over a particular company there are some excellent resources via ukvalueinvestor here

https://www.ukvalueinvestor.com/free-resources/

he doesn’t really look at macro considerations so I don’t always agree with his conclusions but if you keep in mind what is discussed on here and use his advice on what to look out for and the fairly simply spreadsheet then it’s a great start.

Well worth spending a couple of hours over a weekend looking at a company you might invest your money and your future in!

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@DurhamBorn I am pretty sure O2 are selling some phones at a loss. They have Refresh deals where they bundle discounted handset with inflated monthly contract,  but customers can get out of that contract within one month and keep the phone. And they are going quite heavy on cashback sites discounts, free gifts and sometimes even offer discounts via online chat.  

I got Huawei honor view 20 from them which ended up costing about £100 net which are going for at least £250 on eBay (and that's after O2 flooded the market with them).

Anyway, feels like BT from couple of years ago, when various discounts gave me free broadband for 8 months. Not quite heavily discounted now

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Democorruptcy
11 hours ago, DurhamBorn said:

Iv done shorts before but never feel comfortable with them.If im buying shares im buying for a cycle so looking perhaps 5 to 10 years out.Being underwater doesnt concern me at all,in fact i tend to like being underwater as i build out the portfolio.Shorting though you can end up right,but lose due to timing,fees etc.I just get the feeling however well you would do it would end in tears.

If you short you are going against the overall stock market trend, in theory it should go up due to inflation. Plus you are betting against CBs. However there are times when the market dips and some firms have mares, so it's doable.

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Democorruptcy
11 hours ago, sancho panza said:

This is nto advice and I'm short a few builders and RMV but BDEV and BKGH are the two that have dropped the least of late and seem high versus the rest of the sector with little reason for the outperformance imho.DYOR natch.

Currently on BDEV at 625 which is the highest average price I've ever got on at over the 3 occasions I've shorted it over the last year.

I'mlooking to build the RMV position.I think they could be in some trouble a year out.

I'm not short anything yet. I'd like to be able to wish you good luck with yours but selfishly I'd like the prices to higher in case I step in. I can only wish you a lot of green, eventually.

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Democorruptcy
4 hours ago, DurhamBorn said:

@Harley on Germany can you run the rule over Solvay SA , Evonik Industries , Bayer AG , Covestro and BASF  im setting up ladders in all of them if balance sheets look ok.Also in Finland i think Cargotec Corporation ,another im starting to buy once balance sheet looked over.

Some of these are big in animal feed chemicals,animal health,oil field drilling chemicals ,port and timber transport infrastructure etc,all getting hit and all might be big winners in a reflation as they feed into the high inflation areas and likely demand areas that outrun production.

Oh and Telefonica though im exposed to telcos already,their chart looks like capitulation.

 

Don't forget the dividend withholding tax.

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12 minutes ago, Cattle Prod said:

@Harley and others, a non-nutty discussion on survival is welcome and I think necessary for post 2027 or so. As I've mentioned here beford, I'll be going remote and checking out around that time. Forestry, fishing boat, farm, precious metals, cash, carpentry. I was poor growing up and am very comfortable with such a life. I'll want for nothing. In fact I can't wait, much of modern society disgusts me.

A key thing to do to prepare for such a future is fitness  health and strength. I recommend Mark Rippetoe Stronglifts programme for those who are interested, its significantly improved my quality of life.

In this country or abroad? +1 for SS, Jim Wendler 5/3/1 was also a favourite of mine 

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4 hours ago, DurhamBorn said:

@Harley on Germany can you run the rule over Solvay SA , Evonik Industries , Bayer AG , Covestro and BASF 

Love to and will do.  What's interesting is those were the sort of sectors I was looking for in the FTSE (with yield) but most/all were ADRs, GDRs, etc.

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2 hours ago, CVG said:

From Stockopedia

Capture.thumb.PNG.724af65928789f0652bc915f855678ba.PNG

See above. Any help?

 

Very much thanks.  And there I was just passing on a subscription deal thinking they had little to add!

I forgot debt and equity moves.  Maybe I can reconcile the Morningstar figures with their available data and save the sub. 

After all I was once told you should be able to produce a Statement of Source and Application of Funds from a good set of financial statements.

I'm not sure if a subscription to Morningstar would show this data as it maybe you just get 10 years of the existing data rather than 5 years.

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Chewing Grass
28 minutes ago, Cattle Prod said:

, a non-nutty discussion on survival is welcome and I think necessary for post 2027 or

I'm usually late to the party, what is special about 2027, why that date?

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leonardratso
7 minutes ago, Chewing Grass said:

I'm usually late to the party, what is special about 2027, why that date?

checking out also means something else doesnt it. Didnt epstein check out?

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42 minutes ago, Democorruptcy said:

Don't forget the dividend withholding tax.

Yep, very good catch and something that crossed my mind late last night.  Maybe why I slept poorly!  I researched this once, especially when looking at Singapore so will dust that work down. 

Maybe better to hold outside a tax wrapper to claim an offset on UK tax?  May that work particularly well where the ISA/SIPP annual sub is maxed out?  

Not all of us earn enough to max out the pension allowance plus I may go into drawdown ASAP nerved but comments on another thread about a possible change to the eligible age!

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Yellow_Reduced_Sticker
In the spirit of this thread, and the mention of car purchases/ownership going down hill over the next few years, and electric taking over...
 
As I'm a keen push-biker, where I'm moving to its a bit hilly, so today was thinking about buying an electric bike, actually I lied!o.O
 
Cos as ya all know, I'm a MEGA-TIGHT-WAD! xD... really I'm thinking about making/building an electric bike!
 
I even have an ebook on this, its called: The Ultimate Do It Yourself Ebike Guide
I'm sharing the PDF FREE, link below...
 
image.jpeg.88a6072923ec4b93b1c97fd191192353.jpeg
I could get a LOT of yellow reduced sticker bargains in those baskets!...and save me from sweating going up them hills!
 
All joking aside, I don't think the subject of electric bikes has been mentioned? OR has it?
 
@DurhamBorn @sancho panza @Harley...AND anyone else here, what do you guys think about investing in electric bike building companies?
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10 minutes ago, Yellow_Reduced_Sticker said:
In the spirit of this thread, and the mention of car purchases/ownership going down hill over the next few years, and electric taking over...
 
As I'm a keen push-biker, where I'm moving to its a bit hilly, so today was thinking about buying an electric bike, actually I lied!o.O
 
Cos as ya all know, I'm a MEGA-TIGHT-WAD! xD... really I'm thinking about making/building an electric bike!
 
I even have an ebook on this, its called: The Ultimate Do It Yourself Ebike Guide
I'm sharing the PDF FREE, link below...
 
image.jpeg.88a6072923ec4b93b1c97fd191192353.jpeg
I could get a LOT of yellow reduced sticker bargains in those baskets!...and save me from sweating going up them hills!
 
All joking aside, I don't think the subject of electric bikes has been mentioned? OR has it?
 
@DurhamBorn @sancho panza @Harley...AND anyone else here, what do you guys think about investing in electric bike building companies?

Id not invest in the bike builder.

The motor/gear and battery supplier are probably a better investment.

 

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13 minutes ago, Yellow_Reduced_Sticker said:
In the spirit of this thread, and the mention of car purchases/ownership going down hill over the next few years, and electric taking over...
 
As I'm a keen push-biker, where I'm moving to its a bit hilly, so today was thinking about buying an electric bike, actually I lied!o.O
 
Cos as ya all know, I'm a MEGA-TIGHT-WAD! xD... really I'm thinking about making/building an electric bike!
 
I even have an ebook on this, its called: The Ultimate Do It Yourself Ebike Guide
I'm sharing the PDF FREE, link below...
 
image.jpeg.88a6072923ec4b93b1c97fd191192353.jpeg
I could get a LOT of yellow reduced sticker bargains in those baskets!...and save me from sweating going up them hills!
 
All joking aside, I don't think the subject of electric bikes has been mentioned? OR has it?
 
@DurhamBorn @sancho panza @Harley...AND anyone else here, what do you guys think about investing in electric bike building companies?

Building an electric bike is easy -- just get one of the cheap wheel kits from Ebay and a battery.

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sancho panza

 

12 hours ago, Harley said:

That's one of the companies who's Morningstar data I don't understand.  Total borrowings have pretty much been going up YOY for the last 5 years, as have net borrowings (whatever precisely these are, no glossary definition), as have dividends (with a flat net interest).  So why has the "Financing" cash flow figure fluctuated so much over that time period?  Financing is increasingly critical for those into this thread, so it's annoying to find one opaque line on the cash flow statement!

Net borrowings is Total borrowings minus cash

As per @CVG answer there's been issuance/retirement of stock/debt

Investing.com data differetn to CVG's.

image.png.3071bde0c8fb5a7b86f7d44626c54e56.png

 

11 hours ago, Harley said:

I often get long buy signals for RMV.  Helps to remind me my system is a long way short of 100%!

Yeah,I can understand why.It's weeklies and monthly charts would kick off buy signals if you're using momo indicators-which I do.

I have two types of short

1) structural-is industry in delcine for structural reasons eg EA business

2) technical-use of MA's to signasl bear X then short the momo indicators when overbought.

 

RMV structural short.They have a charging model based on physical EA branches which is outdated and unsustaianble.Can't see how they're going to replace the fees of the likes of CW.Thye have two choices.1)shaft the rest of the EA physcial B&M network and allow sellers direct access to their platform 2) carry on as they are and watch CW,Foxtons,LSL,etc etc shed physical branches.

Either way,I think they're oversexed, overvalued and overhere

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24 minutes ago, Yellow_Reduced_Sticker said:

In the spirit of this thread, and the mention of car purchases/ownership going down hill over the next few years, and electric taking over...

I'm still waiting for an electric quad bike or (dune type) buggy.  Something a bit rugged to get me to the weekly shop and back and then plug into my home made solar charging station.

No particular need for all the trimmings like doors, etc.

Anything out there yet?

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