Deflationary collapse and the Reflation Cycle to Come.

[Fence]

My amateur technical analysis says we are at a key point on the FTSE.

We have hit major support per the following:

Where: E is where are are today; A (2015!) and B are prior peaks and C and D are retests of those peaks (i.e. A and B resistance became support).  We have been testing 7.141 for the last few days.  Monday, being a Monday,  could be interesting if little happens today (probably depends on the US).  Could be a decisive day.  

Edited February 9, 2018 by Fence

[Fence]

Withdrawn.

Edited February 9, 2018 by Fence

[Fence]

13 hours ago, Lavalas said:

HL said the following to me about GDXJ and I was planning to buy some tomorrow...

‘I can confirm that GDXJ is a UCITS ETF and does not identify as a PRIIPS (packaged retail and insurance-related investment product), therefore, we do not require a Key Information Document (KID). Subsequently, you are still able to trade the stock online.’

I had read UCITS should be OK to trade (do not need a KID until 2019 if they already have a UCITS KIID) but that the UK FCA is taking a very conservative and less than clear or proactive view, as are the UK brokers (who would face any fines).  This appears not to have been implemented well (possibly poor FCA guidance as the focus has been on other legislation).  I may test some EU brokers to see if they are being any less conservative and more reasonable. 

Bottom line, in my opinion, Brexit supporter or not,  it's more EU legislation to stifle competition and support the current businesses who no doubt are part of the corporate EU lobby.  Has been happening in many industries for a while (look at the saga of the seed laws).

Up to date information on PRIIPs is sparse but this was a good update

https://www.ftadviser.com/investments/2018/01/24/fca-rules-could-create-a-mis-selling-scandal/

Key points:

. The legislation has created the real potential for a future mis-selling scandal (very real).

. The FCA is interpreting things differently than other EU countries (as usual!)

. The rules benefit funds at the expense of investment trusts (and ETFs, quelle surprise!).

. Will be reviewed at the end of the year!

A link to EU guidance on KIDs, if you are wearing an anorak (I literally am!):

http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52017XC0707(02)&from=EN)

 

Edited February 9, 2018 by Fence

[SOLZHENITSYN]

1 hour ago, Fence said:

My amateur technical analysis says we are at a key point on the FTSE.

We have hit major support per the following:

Where: E is where are are today; A (2015!) and B are prior peaks and C and D are retests of those peaks (i.e. A and B resistance became support).  We have been testing 7.141 for the last few days.  Monday, being a Monday,  could be interesting if little happens today (probably depends on the US).  Could be a decisive day.  

Currently at 7113 as I type. Squeaky bum time for the FTSE100

:-0

[Fence]

15 minutes ago, SOLZHENITSYN said:

Currently at 7113 as I type. Squeaky bum time for the FTSE100

:-0

Yup, watching the ticks.  A real fight/indecision.  Need the US to give direction.  Time to break for lunch!

Edited February 9, 2018 by Fence

[Sancho Panza]

15 minutes ago, Fence said:

Yup, watching the ticks.  A real fight/indecision.  Need the US to give direction.  Time to break for lunch!

Quick question Fence,are you of the opinion that the top is in?

I think we've seen the peak in the US.

 

Edited February 9, 2018 by Sancho Panza

[nayth]

1 hour ago, Fence said:

My amateur technical analysis says we are at a key point on the FTSE.

We have hit major support per the following:

Where: E is where are are today; A (2015!) and B are prior peaks and C and D are retests of those peaks (i.e. A and B resistance became support).  We have been testing 7.141 for the last few days.  Monday, being a Monday,  could be interesting if little happens today (probably depends on the US).  Could be a decisive day.  

Hi Fence,

This is interesting stuff - I have been wondering how dividends and differing yield across stocks / indices is taken in to account in this sort of analysis (or why it isn't)? Have you given any thought to this before?

[Fence]

1 minute ago, Sancho Panza said:

Quick question Fence,are you of the opinion that the top is in?

 

Sorry, have no idea!  And it's all relative and one index can hide a lot of plus and minuses.  Hindsight is so much easier!  I've been looking back on the charts and June 2013 looks the closest but that did not precede a rounded top like we've had.  Maybe more like August 2015 in which case a bit more mess to come (certainly due a temporary bounce).  I'm just watching and waiting.  I think we'll get a better sense of things by Monday.  I'm probably going to start nibbling at some income shares just in case we are near the end but keep plenty of cash back in case of further falls.  Also waiting for PM's and some bonds to continue to move into my cross-hairs.  Overall though I'm with the basis of this thread.

PS: My last chart did not do justice to the current situation.  Just look at the monthly going way back:

 

If we decisively break here, we're going a long way down.

[Fence]

22 minutes ago, Fence said:

Sorry, have no idea!  And it's all relative and one index can hide a lot of plus and minuses.  Hindsight is so much easier!  I've been looking back on the charts and June 2013 looks the closest but that did not precede a rounded top like we've had.  Maybe more like August 2015 in which case a bit more mess to come (certainly due a temporary bounce).  I'm just watching and waiting.  I think we'll get a better sense of things by Monday.  I'm probably going to start nibbling at some income shares just in case we are near the end but keep plenty of cash back in case of further falls.  Also waiting for PM's and some bonds to continue to move into my cross-hairs.  Overall though I'm with the basis of this thread.

PS: My last chart did not do justice to the current situation.  Just look at the monthly going way back:

 

If we decisively break here, we're going a long way down.

 

OK, thanks SP, you've forced me to make a decision (not that it changes how I approach things).  My last (monthly) chart and the (weekly) one below has done it.  Re the weekly chart below, why did I not see this earlier?  Maybe I forgot the reason I wasn't buying!  We have a major divergence between the price and MACD and RSI data going back to October 2016.

A top might well be in or we bumble along doing nothing much!  Personally, I'm certainly not going to be rushing in to my favourites.

PS.  Things were on course in February 2016 but weren't allowed to happen.

PPS: Wish I knew about Fibonacci!

 

Edited February 9, 2018 by Fence

[Fence]

Whatever, it certainly is different this time.  QE?

Monthly data.  FTSE.  The current uptrend sans the usually supporting MACD and RSI.

OK MACD mostly positive and the uptrend less steep than before with more pullbacks but still looks a bit odd.

Help me, I keep getting drawn to FTSE 6000 and thoughts of a head and shoulders!

I'm done, brain hurts!

Edited February 9, 2018 by Fence

[Sancho Panza]

9 hours ago, nayth said:

I have been wondering how dividends and differing yield across stocks / indices is taken in to account in this sort of analysis (or why it isn't)? 

In short it's because you're analysing the asset class not those flows which come off it.Same way house price charts are considered in isolation from rental income.

9 hours ago, Fence said:

Sorry, have no idea!  And it's all relative and one index can hide a lot of plus and minuses.  Hindsight is so much easier!  I've been looking back on the charts and June 2013 looks the closest but that did not precede a rounded top like we've had.  Maybe more like August 2015 in which case a bit more mess to come (certainly due a temporary bounce).  I'm just watching and waiting.  I think we'll get a better sense of things by Monday.  I'm probably going to start nibbling at some income shares just in case we are near the end but keep plenty of cash back in case of further falls.  Also waiting for PM's and some bonds to continue to move into my cross-hairs.  Overall though I'm with the basis of this thread.

PS: My last chart did not do justice to the current situation.  Just look at the monthly going way back:

 

If we decisively break here, we're going a long way down.

I cheekily clarified my earlier post to focus on the US.

My take that the top is in there is based on the price action over the last week.You normally get some big pull backs in a bull market but the bounce normally comes quickly.My read is that we may well get a move back up a la Bull trap,but the internals are flagging warning signs as per @durhamborn who points to the many shares already down 50% plus.I tend to use charts to confirm the trend and generally prefer the longer timeframe MA's which have been particularly good ref the S&P.

But and it's a rather large But, they only tend to be apparent well after the fact.

DS's margin Debt chart is the key to the unwind which fits in with the earlier analysis of Marina Stoops I posted which points to the role played by the shadow banking system and the leverage within it.

Doug Short produces some of the most thought provoking chart mixes out there.you can clearly see how useless the longer term indicators are in this environment

Market Remains Overvalued

 

Market Cap to GDP:

Moving Averages: January Month-End Update

A Look at NYSE Margin Debt and the Market

Edited February 9, 2018 by Sancho Panza

[Sancho Panza]

9 hours ago, Fence said:

A top might well be in or we bumble along doing nothing much!  Personally, I'm certainly not going to be rushing in to my favourites.

PS.  Things were on course in February 2016 but weren't allowed to happen.

PPS: Wish I knew about Fibonacci!

 

Ref the FTSE,I know what you mean about Feb 16.Here's a chart using Logarithmic scale and you can see overtime how useful that was until it apparently broke down post 2008 monetary policy response.

I'm drawing up my shopping list and refining it while I have some time off.How lucky I've been to have watched this over the past few days when I could.

 

Edited February 9, 2018 by Sancho Panza

[Sancho Panza]

48 minutes ago, Fence said:

Whatever, it certainly is different this time.  QE?

Monthly data.  FTSE.  The current uptrend sans the usually supporting MACD and RSI.

OK MACD mostly positive and the uptrend less steep than before with more pullbacks but still looks a bit odd.

Help me, I keep getting drawn to FTSE 6000 and thoughts of a head and shoulders!

I'm done, brain hurts!

That chart really paints a 1000 words

[Fence]

40 minutes ago, Sancho Panza said:

I'm drawing up my shopping list and refining it while I have some time off.How lucky I've been to have watched this over the past few days when I could.

Same here.  Been putting together a FTSE based income share list, although the FTSE has lagged other markets (or is it actually leading the S&P?) so will go global.  Given up on TV for charts and financials.  Picked a great time, thanks to this thread, to get on top of things.

PS.  Noticed the edit.  I'm a serial editor myself as I like a tidy post!

[jiltedjen]

anyone want to list their buying lists? stuff they fancy?

I quite like dividend shares, but hard to spot ones without massive debt. 

[Castlevania]

30 minutes ago, jiltedjen said:

I quite like dividend shares, but hard to spot ones without massive debt. 

The spread betters?

[Fence]

1 hour ago, jiltedjen said:

anyone want to list their buying lists? stuff they fancy?

I quite like dividend shares, but hard to spot ones without massive debt. 

I'm building a list as long term debt v free cash flow v dividends is pretty much my #1 criteria.  Will share if/when done.  

A good source is Hargreaves Lansdown (no account needed).

Here's a link for GSK:

http://www.hl.co.uk/shares/shares-search-results/g/glaxosmithkline-plc-ordinary-25p/financial-statements-and-reports

Just enter each company in the "Enter Name or EPIC" search box (top RHS of page).

I'm thinking the key statistic is "Borrowings" under "Non Current Liabilities".

Anyone know of a list I could download for the FTSE 100, even 250?

[Fence]

I believe technically GDX and other ETFs should be available because they are UCITS and have a KIID so are exempt from the KID requirement until at least 2019.  Non-availability would therefore be a broker's decision, not an EU one!

Per the FCA website:

"Although UCITS schemes and EEA UCITS schemes are PRIIPs, the requirements in the PRIIPs Regulation will not apply to such schemes until 31 December 2019, due to exemptions detailed in the PRIIPs Regulation Article 32 and recital 35. For these schemes, firms will need to apply the existing key investor information document (KIID) requirements in the Conduct of Business sourcebook (COBS) and the Collective investment schemes sourcebook (COLL). (Firms also need to take account of the UCITS KIID technical requirements in the EU KII Regulation 583/2010, specifying the form and contents of key investor information (see text in COLL Appendix 1EU))".

Edited February 9, 2018 by Fence

[StrugglingMillennial]

Interesting read https://www.spectator.co.uk/2018/02/this-is-the-stock-market-crash-we-needed/

[SOLZHENITSYN]

Hi Durhamborn,

Just doing a bit of research on Drax Group. I notice that between H1 2016 and H1 2017 EBITDA rose from £70mm to £121mm but underlying earnings fell from £17mm to £9mm while debt ballooned from £85mm to £372mm. A profit of £184mm per year turned into a loss of £83mm per year over that period.

I'm in the process of digging through their annual reports to figure out what happened, but I saw you are an investor so I thought I'd ask if you have looked into this already? I'm a bit concerned that their net debt to EBITDA is 3.1x

It may well be that they have just made a big debt financed investment in their infrastructure that will lead to increased revenue, but I also noticed they more than doubled their dividend payment going from 2016 to 2017 as they took on all of this debt.

TIA

[xiox]

13 hours ago, jiltedjen said:

anyone want to list their buying lists? stuff they fancy?

I quite like dividend shares, but hard to spot ones without massive debt. 

Have you looked at Murray International investment trust? It focuses on yield. Their manager is very bearish. This is from their last monthly report:

Fund managers’ report
Background
Despite positive financial market performance suggesting otherwise, the economic backdrop prevailing in the debt-laden developed world at year end 2017 can only be described as insipid and uninspiring. Fragile growth solely dependent on ever-expanding consumer credit combined with stagnant wages and inept economic policy leadership does  nothing to install belief nor inspire confidence of sustainable progress ahead. Needless to  say, such realties remained of no concern to relentlessly rising stock prices.

Performance
Momentum continued to drive stock market performance as December witnessed the fourteenth consecutive monthly gain for the closely monitored MSCI World Index. Seldom has such widespread complacency prevailed in financial markets as the current over-whelming mood of optimism resolutely refuses to entertain the possibility that this ever expanding bubble might at some point deflate. The risk associated with a sudden change in sentiment has arguably never been higher.

Outlook
Arrest this moment. With the world’s attention captivated and obsessed over the future path of interest rates, an inflection point appears to have been reached. Depressed bond yields suggest fixed income investors are not convinced in the sustainability of the current business cycle; rampant stock markets suggest equity investors believe a re-acceleration of corporate profits and dividends are imminent. Economic history strongly suggests the odds are stacked in favour of the former, therefore great caution will continue to be exercised.

Edited February 10, 2018 by xiox
Add outlook

[durhamborn]

10 hours ago, SOLZHENITSYN said:

Hi Durhamborn,

Just doing a bit of research on Drax Group. I notice that between H1 2016 and H1 2017 EBITDA rose from £70mm to £121mm but underlying earnings fell from £17mm to £9mm while debt ballooned from £85mm to £372mm. A profit of £184mm per year turned into a loss of £83mm per year over that period.

I'm in the process of digging through their annual reports to figure out what happened, but I saw you are an investor so I thought I'd ask if you have looked into this already? I'm a bit concerned that their net debt to EBITDA is 3.1x

It may well be that they have just made a big debt financed investment in their infrastructure that will lead to increased revenue, but I also noticed they more than doubled their dividend payment going from 2016 to 2017 as they took on all of this debt.

TIA

Iv just started to buy Drax,very small holding (0.23%)but il be adding going forward.The debt was to finance this buy,

http://www.telegraph.co.uk/business/2017/02/08/drax-locks-340m-takeover-corner-business-energy-market/

They are going to pay out £50 million in dividends (so around 5.5% at fridays close) and look to increase going forward.I reckon their net debt to EBITDA will be 1.3 in two years,very low for a company with such high fixed assets.

[Democorruptcy]

20 hours ago, Fence said:

I'm building a list as long term debt v free cash flow v dividends is pretty much my #1 criteria.  Will share if/when done.  

A good source is Hargreaves Lansdown (no account needed).

Here's a link for GSK:

http://www.hl.co.uk/shares/shares-search-results/g/glaxosmithkline-plc-ordinary-25p/financial-statements-and-reports

Just enter each company in the "Enter Name or EPIC" search box (top RHS of page).

I'm thinking the key statistic is "Borrowings" under "Non Current Liabilities".

Anyone know of a list I could download for the FTSE 100, even 250?

It's a long time since I've done anything to do with scraping web pages for info but if nobody comes up with a list for you, maybe you could use something like web queries in Excel? You could use tickers across worksheets and link it to a master sheet.

[Amateur Idiot]

I've seen a few mentions of the IBTL fund on this thread. As I understand it, that is referring to the following fund:

iShares $ Treasury Bond 20+yr UCITS ETF

USD (Dist) Share Class

ISIN: IE00BSKRJZ44

Exchange Traded Fund (ETF)

I'm trying to understand the apparent fascination with this fund (and US Treasury bonds in general) on this thread (i.e. why people seem to like the fund and US treasury bonds at the moment).

I had a look at the key investor information document for the fund. The fund (ETF) appears to invest in fixed income securities (presumably US government bonds?). I guess that a fund like this could be less risky than a fund that invests in the stock market (US government is less likely to go bust than publicly traded companies are, because US government can print money if it chooses to). I can also imagine that if interest rates fall, then existing fixed-interest bonds would become more attractive and therefore their price on the secondary market would rise. However, since they are fixed interest, is there not a limit to how much their price could rise? For example:

Suppose I paid 100 USD for 1 bond that pays a fixed coupon (aka interest) of 2 USD per year (i.e. a 2 percent annual return). If interest rates then fell, such that the US government began issuing new bonds that cost 100 USD each but only paid a fixed coupon of 1 USD per year, new investors would need to buy 2 new bonds (= 2 * 100 = 200 USD) to get 2 USD income (= 1 * 2). Therefore, the price of my existing bond should rise on the secondary market to 200 USD. However, it is not likely to rise higher than that because potential buyers could spend the same amount of USD to buy the newer,  lower-yield bonds to get the same overall return. I'm not sure what would happen if interest rates went negative (or if that's possible?), but other than that, is there not a limit to how high the price of current fixed-interest bonds could rise?

I suppose that if current bonds were paying, say, 2 percent interest (bond price when issued = 100 USD, coupon = 2 USD), and if interest rates subsequently fell to 0.2 percent and the US government then issued bonds that cost 100 USD and pay 0.2 USD coupon (= 20 cents), then the price on the secondary market for the original bonds could rise by a factor of 10? (because a new investor would need to buy 10 new bonds with 20 cent coupon in order to get 2 USD of annual income).

If interest rates were to rise, such that the US government issued new bonds that pay a bigger coupon (for example. say, 4 USD per 100 USD bond), then the price of the existing bonds on the secondary market would be likely to fall.

When I first started writing this post, I was thinking that it looked like there is quite limited upside to fixed interest securities. However, after thinking through the above scenarios I have begun to think that it might be possible (although perhaps not very likely) for bond prices to go up by as much as a factor of 10. However, if interest rates rise, then bond prices could fall significantly. Also, I'm not sure how much the fund trades bonds (is it regularly buying and selling, or just buying and holding for the long term?).

Have I understood this correctly, or am I talking complete horse manure?

I suppose what I'm wondering is: what are the likely scenarios, as regards the US and global economies over the next few years, and how would that be likely to affect the fund and US Treasury bonds?

Cheers,
Amateur Idiot

Disclaimer: I'm not an expert. The above comments are just my opinions only and they may not be factually correct. If you act on any of the above then you do so entirely at your own risk. I do not accept any liability.

[leonardratso]

hmm, this article suggests now is analogous to 1966 [yes ZH, but report is BOFA].

https://www.zerohedge.com/news/2018-02-09/bofa-predicted-market-plunge-heres-what-it-thinks-happens-next

"Structurally investors should study 2018 = 1966 analog…start of secular rise in inflation & interest rates caused S&P500 -16% in 1966, "Nifty 50-small cap value barbell" worked well  (Chart 6) until inflation surge in 1969 caused massive shift from equities & bonds into commodities & cash (Chart 7). "

Which implies it may be years before reflation takes effect.