Credit deflation and the reflation cycle to come.

[leonardratso]

1 hour ago, Democorruptcy said:

I've always been a gambler but never had a betting bank (or a staking plan). It seems like it's planning to lose and you don't trust yourself. I know in theory you are only supposed to gamble what you can afford to lose but that means you cannot go All In on one. What if one month you have a cert but your y is too small to really pile on?

hehe then y must be multiplied with a nice little postoffice job (or maybe a petrol station).

I was basically on about fixing your debt interest long term, i know people who got really lucky with their massively inflated mortgages because mortgage rates fell away over the last decade to such low levels, a lot of people probably did. So what to do when threatened by the reverse situation? a lock in sounds good over a long period, gives some certainty to repayment levels required, esp. if you can lock in reasonably low.

 

 

[sancho panza]

2 hours ago, Democorruptcy said:

I wish I'd never started over-thinking this VOD thing!

To be fair,it's been a thought provoking discussion,so I'm glad you did.

With so much in the investing/trading world,every day is a learning day and the discussions I particularly benefit from are the ones that I'm not familiar with.I remember Free Traders posts on ToS opening my eyes to the weird and wonderful workings of the govt bond markets.Likewise various discussions on FRB.

[Ma2]

I know this has been on the cards for a few years now but just got this from HL. What exactly will it mean to the price of an existing share and the price of the new share? Will they roughly reduce to the percentages quoted at first?

“SSE has announced the proposed Demerger of its UK Household Energy and Services business (now named SSE Energy Services) and subsequent combination of that business with Npower (a subsidiary of Innogy SE). 

The resulting new independent business (temporarily named as MergeCo) is expected to be listed on the London Stock Exchange with SSE plc Shareholders at the close of business on the day before the Demerger Effective Date owing 65.58% of the resulting business and Innogy SE owning the remaining 34.42%. SSE plc has not currently announced an Effective Date for the Demerger. 

SSE Shareholders at the close of business on the day before the Demerger Effective Date will receive 1 MergeCo Share for each SSE plc Share held. The new MergeCo Shares will be held in addition to the SSE Plc Shares.”

 

[sancho panza]

11 hours ago, DurhamBorn said:

No,because the dot com tech bubble wasnt a macro event itself and it was around that time i was just learning about macro strategy,most of the shares i owned before that were bought on contrarian views.I bought tobacco for instance when everyone said Clinton would destroy the industry.I didnt do any selling during the tech boom,but i was lucky in a way as it was during that time that my share saves from work were all coming off and my free share options and they had trebled (i was in pharma and it did well in the tech run),so i got a lot of capital,much more than i already had invested at the time quality "old world" shares were beaten down.My friend of course told me to ignore the market and buy the dis-inflation shares and that proved 100% correct.

The dot com boom though was the best investing event iv seen in my lifetime so far,not in the tech stocks,but in the way the market priced down quality companies to insane levels.I can remember at the time buying many defensives etc who ended up giving me a dividend yield of 20% a decade later on original buy price.

I have a feeling we might be seeing a similar chance in the PM sector now (and a few other sectors).Its pretty much ignored by everyone.Last week only 8% of retail investors were bullish on gold and the sector.It can take time,and its a sector that is very hard to ping the bottom,but with sentiment like that and the macro picture a reversal could be close.

 

 

I've had good decades and bad decades.The decade either side of the dot com boom was one of my best.Qulity companies were on the floor while companies with no earnings went through the roof.

I was lucky in that I'd started investing in techies from the mid 90's.I sold well before the blow off phase.

3 hours ago, Democorruptcy said:

The financial crisis must also have been a sell/buy opportunity.

 

My worst decade for stock returns has been the post 2008 decade.I completely misjudged the authorities willingness to sell our young people's futures to bail out swing voters(across the Western world)/faith in trickle down.QE/Zirp etc.Unlike previous times,we also had gains to protect which affects your judgement.You had to really commit in 2009/10.

I've been on the sidelines comparatively speaking since although we've bought and sold a few.I ended up going into other areas of speculation where I felt I understood the risks more and was quite happy with sitting in cash and running that alongside.

I look back now and can see that I was very blinkered with regard to QE etc

[DurhamBorn]

17 minutes ago, Ma2 said:

I know this has been on the cards for a few years now but just got this from HL. What exactly will it mean to the price of an existing share and the price of the new share? Will they roughly reduce to the percentages quoted at first?

“SSE has announced the proposed Demerger of its UK Household Energy and Services business (now named SSE Energy Services) and subsequent combination of that business with Npower (a subsidiary of Innogy SE). 

The resulting new independent business (temporarily named as MergeCo) is expected to be listed on the London Stock Exchange with SSE plc Shareholders at the close of business on the day before the Demerger Effective Date owing 65.58% of the resulting business and Innogy SE owning the remaining 34.42%. SSE plc has not currently announced an Effective Date for the Demerger. 

SSE Shareholders at the close of business on the day before the Demerger Effective Date will receive 1 MergeCo Share for each SSE plc Share held. The new MergeCo Shares will be held in addition to the SSE Plc Shares.”

 

Probably not much difference.Id be buying more of the networks business though after the split probably.

[leonardratso]

53 minutes ago, Ma2 said:

I know this has been on the cards for a few years now but just got this from HL. What exactly will it mean to the price of an existing share and the price of the new share? Will they roughly reduce to the percentages quoted at first?

“SSE has announced the proposed Demerger of its UK Household Energy and Services business (now named SSE Energy Services) and subsequent combination of that business with Npower (a subsidiary of Innogy SE). 

The resulting new independent business (temporarily named as MergeCo) is expected to be listed on the London Stock Exchange with SSE plc Shareholders at the close of business on the day before the Demerger Effective Date owing 65.58% of the resulting business and Innogy SE owning the remaining 34.42%. SSE plc has not currently announced an Effective Date for the Demerger. 

SSE Shareholders at the close of business on the day before the Demerger Effective Date will receive 1 MergeCo Share for each SSE plc Share held. The new MergeCo Shares will be held in addition to the SSE Plc Shares.”

 

yar, ive been in when  share consolidations and splits/mergers happen, you end up more or less equal to what you started with (value wise). They will probably suspend trading while it happens to get a stable price and just divi up and then adjust prices.

 

[TheCountOfNowhere]

Are you here yet?

 

 

[sancho panza]

Shamelessly nicked of ToS hattip Will

Market internals are flagging red.

https://www.bloomberg.com/news/articles/2018-07-02/these-10-stocks-account-for-all-the-s-p-500-s-first-half-gains

'Big tech stocks are still doing the heavy lifting when it comes to S&P 500 Index returns.

 

David Kostin, chief U.S. equity strategist at Goldman Sachs, highlighted that more than 100 percent of the S&P 500’s total return of nearly 3 percent in the first half is attributable to just 10 equities. Amazon.com Inc. alone accounts for roughly two-fifths of the benchmark gauge’s advance.

 

[Ma2]

Thanks DB and leonardratso. 

[Talking Monkey]

10 minutes ago, sancho panza said:

Shamelessly nicked of ToS hattip Will

Market internals are flagging red.

https://www.bloomberg.com/news/articles/2018-07-02/these-10-stocks-account-for-all-the-s-p-500-s-first-half-gains

'Big tech stocks are still doing the heavy lifting when it comes to S&P 500 Index returns.

 

David Kostin, chief U.S. equity strategist at Goldman Sachs, highlighted that more than 100 percent of the S&P 500’s total return of nearly 3 percent in the first half is attributable to just 10 equities. Amazon.com Inc. alone accounts for roughly two-fifths of the benchmark gauge’s advance.

 

The prices of Amazon, Netflix are so high, how much higher could they possibly go now

[Democorruptcy]

1 hour ago, sancho panza said:

To be fair,it's been a thought provoking discussion,so I'm glad you did.

With so much in the investing/trading world,every day is a learning day and the discussions I particularly benefit from are the ones that I'm not familiar with.I remember Free Traders posts on ToS opening my eyes to the weird and wonderful workings of the govt bond markets.Likewise various discussions on FRB.

I agree learning is good but I've not formed a conclusion about it yet.

Re your:

Quote

 

My worst decade for stock returns has been the post 2008 decade.I completely misjudged the authorities willingness to sell our young people's futures to bail out swing voters(across the Western world)/faith in trickle down.QE/Zirp etc.Unlike previous times,we also had gains to protect which affects your judgement.You had to really commit in 2009/10.

I've been on the sidelines comparatively speaking since although we've bought and sold a few.I ended up going into other areas of speculation where I felt I understood the risks more and was quite happy with sitting in cash and running that alongside.

I look back now and can see that I was very blinkered with regard to QE etc

 

Ditto all that. When Northern Rock went bust and the governbankment guaranteed deposits I piled into 6% savings now expired, when I should have piled into shares.

The problem as I see it is the rating agencies again. Firms that should be junked are being allowed to buy back shares using borrowed money, to inflate their share prices. It all seems so fake.  I want to short loads but the people capable of pulling the rug must be making too much cash to upset it... so far. We need another Big Short chap.

[leonardratso]

9 minutes ago, Talking Monkey said:

The prices of Amazon, Netflix are so high, how much higher could they possibly go now

to the moon rodney, to the moon. But due to gravitational constant ......(fill in the blanks).

[sancho panza]

41 minutes ago, Talking Monkey said:

The prices of Amazon, Netflix are so high, how much higher could they possibly go now

The trend is your friend until it isn't.

Learnt in the first tech bubble that you have to suspend logic to stay back from fighting the tide.There'll be a lot of shirts lost shorting AMZN,probably already have been

[sancho panza]

47 minutes ago, Democorruptcy said:

The problem as I see it is the rating agencies again. Firms that should be junked are being allowed to buy back shares using borrowed money, to inflate their share prices. It all seems so fake.  I want to short loads but the people capable of pulling the rug must be making too much cash to upset it... so far. We need another Big Short chap.

I think the one deal that typifies the failings of QE and Zirp was the Sainsbury's bid for Argos when they had to outbid Steinhoff who have subsequently been exposed for financial irregularities.That's what has happened as a result of QE-bad businesses that should have failed have been allowed to stay afloat due to the total and utter distortion of risk pricing across the market.

As you allude,that risk pricing has been totally overlooked by the ratings agencies ....again....but the strength of the buy back market particualrly in the USA holds me back.As I've stated on the short thread-and I don't want to intermingle too much- I think there's a good few companies that have already rolled over but the biggies will be 2019 imho.

Obviously, I reserve the right to change that opinion but I'm viewing my longs/shorts over the next two years and am builidng positions slowly on both sides-longs(PM miners,Utilities,Telecoms,Oil)-shorts(UK builders,assorted randoms eg Reckitt B/ITV/Travis Perkins).

[Viceroy]

I'm just going to put this out there to see if this forecast on interest rates comes about.

US Fed Disc rate closed end of June 2018 at 2.5%, above the 2.25% reversal.  According to MA we should see it jump up to 5% within a matter of months.

https://www.armstrongeconomics.com/markets-by-sector/interest-rates/the-fed-is-raising-rates-because-of-the-pension-crisis/

We have a very RARE Double Monthly Bullish Reversal at 2.25%. A monthly closing above that level and 5% will be seen in a matter of months.

(https://www.thebalance.com/federal-reserve-discount-rate-3305922)

The last time it was above 2.25% was 2008 https://www.frbdiscountwindow.org/en/Pages/Discount-Rates/Historical-Discount-Rates.aspx

[Bear Hug]

8 hours ago, Democorruptcy said:

I wish I'd never started over-thinking this VOD thing!

 

5 hours ago, sancho panza said:

To be fair,it's been a thought provoking discussion,so I'm glad you did.

With so much in the investing/trading world,every day is a learning day and the discussions I particularly benefit from are the ones that I'm not familiar with.I remember Free Traders posts on ToS opening my eyes to the weird and wonderful workings of the govt bond markets.Likewise various discussions on FRB.

I am starting to think it is more to do with a currency swap and positive EURUSD forward rates.  But agree with the whole overthinking thing.  Much more interested in reduced shopfloor and stockmarket items myself!

[Yellow_Reduced_Sticker]

11 hours ago, TheCountOfNowhere said:

Are you here yet?

 

 

 

Pardon...?

[Gordie Lastchance]

I wonder if I saw the turn in inflation from my shopping trip yesterday.

Went to Home Bargains and B&M stores for the first time in about a year. Headed to my usual food shelves to stock up on the cupboard staples and was stunned at the prices. I used to get tins of soup, including meat varieties, at 40-50p for a brand name at B&M. At the same place the shelves were dominated by Heinz soups at 75p a tin. That's mainstream supermarket prices. There were 50p tins, but nothing like in the quantity of the past. Looking at the price of other edible stuff at both places, I couldn't help thinking they have been creeping up. I love crisps - I didn't buy any at either place because I know I can get a monster pack at Aldi pretty cheap. In the past, I'd often say "how can they sell that so low" when looking at the price of food-related items at B&M and Home Bargains. After yesterday's visit, I'm not so sure. Granted, I don't know every price for every item to compare them with Tesco, but it was just the general feeling I was left with. Neither place seemed to be busy, although it was a scorcher of a day and folk were likely taking advantage of every second of sun.

Other bits I bought included soap, which was about a quid off RRP, but when Tesco have a half-price deal on the soap I usually buy (I'm sensitive!) there's little difference between them price-wise. 

Is there an inflation-led levelling of the playing field between the long-established players such as Tesco and these "discounters"?

However, I did come away with a large pail of Ronseal fence treatment which I considered a bargain. Then again, looking at the price of painting brushes, I felt I'd got a much better deal when I bought a pack of 10 or 12 Harris brushes when either B&Q or my local hardware store had them at half-price. 

[Barnsey]

Concur with the previous re: B&M, really don't bother going in these days. 

Apologies for constantly posting other people's fantastic observations via twitter, but felt this one particularly prudent/urgent:

Think this Autumn/Winter could very well be 'it', finally.

[Democorruptcy]

40 minutes ago, Gordie Lastchance said:

Is there an inflation-led levelling of the playing field between the long-established players such as Tesco and these "discounters"?

I don't know whether Booker supply anything to Home Bargains or B&M but they supply lots of independents and definitely the Londis and Premier brands. If Tesco buying Booker has led to price increases for who Booker supply then it must give others like Home Bargains the option to increase their own prices.

Re B&M they spent £152m buying Heron

[DurhamBorn]

1 hour ago, Gordie Lastchance said:

I wonder if I saw the turn in inflation from my shopping trip yesterday.

Went to Home Bargains and B&M stores for the first time in about a year. Headed to my usual food shelves to stock up on the cupboard staples and was stunned at the prices. I used to get tins of soup, including meat varieties, at 40-50p for a brand name at B&M. At the same place the shelves were dominated by Heinz soups at 75p a tin. That's mainstream supermarket prices. There were 50p tins, but nothing like in the quantity of the past. Looking at the price of other edible stuff at both places, I couldn't help thinking they have been creeping up. I love crisps - I didn't buy any at either place because I know I can get a monster pack at Aldi pretty cheap. In the past, I'd often say "how can they sell that so low" when looking at the price of food-related items at B&M and Home Bargains. After yesterday's visit, I'm not so sure. Granted, I don't know every price for every item to compare them with Tesco, but it was just the general feeling I was left with. Neither place seemed to be busy, although it was a scorcher of a day and folk were likely taking advantage of every second of sun.

Other bits I bought included soap, which was about a quid off RRP, but when Tesco have a half-price deal on the soap I usually buy (I'm sensitive!) there's little difference between them price-wise. 

Is there an inflation-led levelling of the playing field between the long-established players such as Tesco and these "discounters"?

However, I did come away with a large pail of Ronseal fence treatment which I considered a bargain. Then again, looking at the price of painting brushes, I felt I'd got a much better deal when I bought a pack of 10 or 12 Harris brushes when either B&Q or my local hardware store had them at half-price. 

Exactly,and remember the store isnt making any extra money,the input costs have gone up.In a reflation you want the companies who can push up prices faster than input costs.Those tend to be ones who have already paid massive amounts of capital over the years for fixed assets.Of course as they come to have to replace those assets it costs a lot more,but there is a sweet spot of 5 to 10 years.Thats why inflation stocks struggle so much in a disinflation,and the point you just made is why consumer stocks struggle so much in a reflation.

[sancho panza]

1 hour ago, Barnsey said:

Concur with the previous re: B&M, really don't bother going in these days. 

Apologies for constantly posting other people's fantastic observations via twitter, but felt this one particularly prudent/urgent:

Think this Autumn/Winter could very well be 'it', finally.

Your contributions are always learned Barnsey.

I'll raise you peak pizza...I mean where could those bank loans go wrong.

[Gordie Lastchance]

2 hours ago, Barnsey said:

Concur with the previous re: B&M, really don't bother going in these days. 

Apologies for constantly posting other people's fantastic observations via twitter, but felt this one particularly prudent/urgent:

Think this Autumn/Winter could very well be 'it', finally.

I felt from my shopping trip that you could so be right about "it" coming. For so long, there always seemed to be a new entrant to the discount market in the UK, or the expansion of the cheap-end of food retail bringing an outlet closer to your home, which kept a lid on runaway prices among the big boys. That seems to have ended - no more "wow, how can they sell that so cheap!"

I'm sure I've read others, possibly DB, on here speaking about people being tapped out re credit. But people have to eat - however it's my impression they don't have any refuge in cheap essentials at the B&M etc discounters any more. As for having a treat (or comfort eating through the coming crisis) I didn't see branded chocolate appear to be any cheaper at B&M or Home Bargains than when Tesco cuts choccy bars to half-price, which it does regularly. In Scotland, there's alcohol inflation from minimum pricing per unit. A 10-can pack of foreign premium beer (Stella/Kronenbourg/Budweiser) used to be £7 when Asda had them on special, which they often did. Now, in Scotland, that 10-pack is getting on for £11. So folk north of the Border can't even drown their sorrows with a cheap drink!

Something's up - and I think a lot of folk are going to be caught out by it.

 

[Bricks & Mortar]

11 minutes ago, Gordie Lastchance said:

folk north of the Border can't even drown their sorrows with a cheap drink! 

Quite.  And that's just the level of minimum pricing they chose as an introductory rate.  Basically, the Scottish Government now calls the tune for alcohol inflation, and can just bang up the prices, innit.
Expect Westminster to follow suit once the dust has settled.
I wonder if I can turn my pile of scrap copper into a still?

[Barnsey]

It's been about 2 years I've felt most are tapped out and we've peaked, my goodness how things have dragged on since then with easy credit, but that finally seems to be coming to an end (for now anyway), here's looking to August for the last UK IR rise, we need a little room to manoeuvre downwards next year. 

So much happening at the moment in the wider sphere of things, first US tariffs against China come into force 4am GMT tomorrow, rhetoric really heating up today, I wonder if we'll see a psychological shock in the markets tomorrow. I think the US know exactly what they're doing, even if the contagion will inevitably spread there too.

Looking at the technicals and ignoring the rhetoric, the $ looks likely to turn noticeably lower now, in line with expectations highlighted on here.