KDave

The only issue I have with Shells increased dividend;

16.65p per quarter x 4 = 66.60p annual 

Bill Gates is that you? 

https://uk.reuters.com/article/shell-results/update-1-shell-increases-dividend-after-beating-q3-forecasts-idUKL1N2HK0FN

Well would you look at that 

2 hours ago, Kman said:

I looked into this a bit last night, I read an article here -  https://www.investorschronicle.co.uk/tips-ideas/2020/06/19/what-bp-s-hybrid-bond-sale-means-for-shareholders/ 

Says things like "it is also a reflection that BP is facing very difficult times, as these securities are expensive compared to senior unsecured debt"

I also found this website with a little information about the bonds - https://cbonds.com/bonds/745015/ this one is 2.5 billion USD @ 4.875% which seems quite high 

• BP PLC, 3.625% perp., EUR - 2.25b
• BP PLC, 4.25% perp., GBP - 1.25b
• BP PLC, 4.375% perp., USD  - 2.5b
• BP PLC, 4.875% perp., USD - 2.5b
• BP PLC, 3.25% perp., EUR - 2.5b

All together it's  about $12 billion usd @ 4.075%

So it's about  $480 million a year for these, but I'm not sure if the 12 billion they got allowed to them to do anything else to lower other debt payments so maybe it's not just an additional 480 on top of whatever they paid before 

I have found another article going into detail as well, a good read;

https://climateriskreview.substack.com/p/buying-time-bps-sideways-approach

"One especially attractive feature of these instruments is their yield. Because the principal never has to be repaid, BP has to pay investors more than it would for “normal” senior bonds. One $2.5 billion slug of the dollar-denominated perpetual debt will pay 4.4% over the first five years before reverting to a lower rate linked to US Treasury securities. Another $2.5 billion will pay 4.9% for 10 years.

Compare that to the 2.8% rate paid on $1 billion of senior secured notes sold by BP last May. With rates the world over at rock bottom because of the coronavirus-induced economic crisis, the coupons on these perpetual notes can’t help but be tempting."

24 minutes ago, Kman said:

Ohhh yes I remember that was discussed on another page, just saw the -65% on tradingview and etoro and assumed correct, thanks

 

I recall now it was 10 shares for every 3, RR is having a good day in real terms despite joining the sea of red.

1 hour ago, Stacktastic said:

Ah got you. Yes I meant bad timing as I made a bad assumption it was about to go up. I cost averaged too often & don't really have enough funds too continue. Not somehting I have replicated since.  so i have leant my lesson. 

The lesson being not to time the market expecting a quick win. At least you did it with majors that are going nowhere and will pay you to wait, there are harder ways to learn, for example on AIM 

These oil companies are hated now, and oil price may stay subdued for months yet - good. It needs to stay low at least until this Friday. Give it until after the US election when stimulus turns back on, allow time for those infrastructure projects to start coming online, wait for China, India and the rest of the world to continue its industrialisation.

Green energy is a dream that needs massive amounts of oil, coal and gas to make a reality. Keep cost averaging into the reality behind the dream 

1 hour ago, Kman said:

-65% today, very volatile after a steep move back up

 

-65% headline is a bit misleading, as holders are getting 3 shares for 1. At 80p a share they still holding £2.40 worth of value, so is the share price down? Looks like they are up 20p equivalent on yesterdays value. 

On 27/10/2020 at 07:57, Stacktastic said:

I have however made some bad investments ( especially with regards to BP & Shell) as I got in too early or too late

I think I was going off this but see you mean timing wise, you are not wrong but its a rare case when someone maximises on timing. 

Yes FTSE is getting battered today, BP at £1.89 and Shell £8.55 last I looked. Lots of red in my portfolio too, this Friday I will add some more red  BP dividend is roughly 8.4% now

1 hour ago, Kman said:

Ahh I see, yes as far as I can tell nowhere else is showing the same

Yes that's true, they've all been cutting the fat so another result as bad as Q2 shouldn't be possible even with a fall in demand over Q4 with lockdowns and travel restrictions

This was quite interesting from BP

“Funding the dividend remains our first priority and we are confident in moving toward our $35 billion net-debt target,” Auchincloss said in a statement released earlier.

Once net debt reaches that threshold, BP will be able to begin share buybacks, which Auchincloss said could happen between the fourth quarter of 2021 and the first quarter of 2022. However, the CFO added that buybacks redirecting capital expenditure into its low-carbon business remains higher up in the priority list."

Another thing I need to look into is they have less debt now but they did "hybrid bonds" https://in.reuters.com/article/us-bp-fundraising-bonds-idUSKBN23P1OU to raise 12 billion

I'm not going to lie I'm not sure what hybrid bonds are, something I need to look into, but has that papered over any cracks? or was it a very healthy way to do it, it seems like it was healthy but again I don't know as of yet what a hybrid bond is 

 

https://www.investopedia.com/terms/h/hybridsecurity.asp

Good question, it looks like normally a hybrid is debt that can be converted into equity. For existing share holders its an ongoing threat of a placing, which is otherwise just more debt. For the bond buyer its a secure way of investing in a company (lenders are paid first in bankruptcy) that pays a guaranteed a decent yield, with option to convert to shares? I can't find the details anywhere for BP, it looks like 3.5% yield for the bond holder. Its only brief mention in Q2, I didn't pay it much attention at the time; 

https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/investors/bp-second-quarter-2020-results.pdf

"Updates to significant accounting policies, Hybrid bond issuance: On 17 June 2020, a group subsidiary issued perpetual subordinated hybrid bonds in EUR, GBP and USD for a USD equivalent amount of $11.9 billion. As the group has the unconditional right to avoid transferring cash or another financial asset in relation to these hybrid bonds, they are classified as equity instruments and reported within non-controlling interests in the condensed consolidated financial statements. The contractual terms of these instruments allow the group to defer coupon payments and the repayment of principal indefinitely, however their terms and conditions stipulate that any deferred payments must be made in the event of an announcement of an ordinary share or parity equity dividend distribution or certain share repurchases or redemptions." 

Looks like these are more bond than share, in that BP does not have to transfer cash (I read as repayment of principle) or financial assets (I read that as placing of shares) to the bond holders. These bonds are open ended in that BP can defer the principle repayment indefinitely, and can defer interest payments. BP can only defer interest payments until a dividend or share repurchase is announced. If I am reading into that right, this gives BP the option of breathing room on coupon payments linked to the dividend. A lever to pull, if its cancels the dividend then it can stop the coupon payment until they are both restored. In return the bond holders get 3.5% yield which will be paid as often and for as long as a dividend is paid. But they will not see a share nor will their principle be repaid. Seems quite a risky product for the buyer, perhaps there is more to it or I am reading into that incorrectly.

Perhaps BP are refinancing at lowish interest rates for the long haul while they can. That yield is pretty low given the flexibility offered to the company. I have not found much to go on, I would like to see the details from the bond holder perspective to see if its a good deal for them beyond the yield, because if inflation picks up even at that yield this is still a better deal for BP than the bond holder. If I have this right its a great move; 11.9 billion in perpetual long debt at only 3.5% which can be turned off with the dividend (in a disaster scenario)?

6 hours ago, Kman said:

Not bad all things considered

I think this might be the eye of the storm though with covid cases creeping back up - Italy and Spain leading the way with restrictions like they did in March

I read Libya are doubling production which will effect barrel prices, seems very poor timing

$100 million profit is like small change to these companies but its good to see them already reaching $40 break even.

https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/investors/bp-third-quarter-2020-results.pdf

BP quarterly results, a minuscule profit, some debt paid off, dividend being paid for now. They have stopped bleeding at realised average WTI $40.91 and Brent $42.94, if we see much lower than those markers then and they will struggle all being equal. Although not good for BP short term we could do with sub $40 oil prices for a few months ideally to make a big difference long term, the lower it goes now the higher it goes later. 

"In the quarter, net debt reduced to around $40 billion and our cash balance point was around $42 Brent, despite weak refining margins, low gas prices, reduced product demand and the payment to Reliance. Funding the dividend remains our first priority and we are confident in moving towards our $35 billion net debt target, supported by value accretive divestments." 

@Stacktastic Get your money back on BP and Shell as they are a bad investment? Please explain how that one works?  

4 hours ago, Stacktastic said:

Im starting to loose a bit of faith in many of these people especially when you watch them over a period of time and they then change course and forget thier previous predictions or statements. If it was not for monetisation, affiliates & some form of ego satisfaction, you wonder if they would be there in the first place?

I do think it will crash though, might not be as abrupt, but I do feel that cvid is just the start of somehting a lot larger. Maybe civil war in the USA?? Dont know, but I just wish I had 100k to drop into the markets, crypto & mining stocks when or if it tanks..

I was looking today at the odds of Kanye winning the election. its 1000 to 1! Even £10 will reap £10k. Imagine dropping 10k into it and he wins (no chance though). 😛

There is a joke that an investor is just a successful speculator. The joke can only be true if you confuse gambling with investing, in which case, jokes on you. Say you put £10,000 into opening a business in a product you are sure will do well, that business goes on to make £20,000 - was it a successful gamble? Or was it an investment? Which best describes it. The same process is happening when you buy into a company on the stock market for the same reasons, the share price is the price of entry. Do you want to pay more to set up the business/position due to a high share price? Or would you rather pay less to set up? Keep the ideas about gambling and investing separate, as they are not the same thing. If you are trading solely on a share price movement then you can say you are speculating/gambling, because as we have seen over 2020 the short term movement of share prices often have little to do with either the long or short term realities and prospects of the business or the economy.

You are right to lose faith in commentators, just use them for information and then you don't need to work out what angle they are working because its then irrelevant to you. Personally I share what I am doing here and elsewhere to hold myself to account and test my ideas out. I think perhaps some of the commentators I follow do that as well, but who cares, I am only listening not really following despite the social media terminology. Perhaps there isn't much difference.    

Parts of the market, especially the US market are overvalued by many metrics, other markets such as the FTSE are not. Look at the difference between what is in the NASDAQ and what is in the FTSE 100 as an example of where the money is going. FTSE 100 is heavy into materials, mining, oil, etc. US markets have trimmed oil and gas in some cases (was it the DOW that cut oil and gas? I forget). We may get a crash like March, we might instead get a rotation into value and materials, we may get the big one like 2007 or 2000. Who knows. There are a lot of people in on the reflation trade right now from what I am reading, it is quite possible we will see a good shake out of the weak hands before things turn around next year. In the case of the oil price, the lower it goes now, the higher it goes later. 

Yes I am reading a lot of "crash is imminent" stuff, it could be, but when a lot of people are saying it the opposite usually happens. The people I follow get it wrong from time to time.

When a cycle turns there is a lot of turmoil in the market, some people think March was it, but we are too far into a bubble in tech stocks now its getting harder to agree with the March thesis. Tech bubble 2.0 always leads to big crash. The question for me is still will it take the rest of the market with it, or will people flee to value like last time. I think the latter is more likely given the valuations we are seeing in the hated sectors, but cheap can always get cheaper.

https://seekingalpha.com/article/4378438-stock-bubble

Stocks have been only before the 1929 and 2000 crashes more expensive than today.

Hold tight chaps. I have a lot of time for Avi Gilburt, I have followed him for years because of his PM analysis. He is seeing 10-15% stock market falls coming in the short term.   

https://seekingalpha.com/instablog/876837-avi-gilburt/5512782-storm-clouds-are-forming

He also says by 2021 the market will continue its rally to new all time highs, regardless of who wins the election.

13 minutes ago, HerefordBullyun said:

Cisco could be one to watch going forward. They've invested in passwordless authentication with duo. I was looking at Thier white paper for this. If they own the patent for this it's going to be big in the tech market going forward. Very interested in this and going to put on my watchlist. The only concern I have is we are in tech bubble but Cisco are well established and can easily ride the storm. Definitely worth looking at.

Tech bubble 2.0

https://www.cnbc.com/2020/08/28/us-tech-stocks-are-now-worth-more-than-the-entire-european-stock-market.html

This time I don't think we get 90% off the big ones when it cracks though, as they are a key part of the economy now. Maybe half price. It will be like last time in that money will flow into value, such as, for example, the oil majors. 

46 minutes ago, Kman said:

I'm listened to the first part, she says the government spends money into existence but that's not what currently happens, at least not in the US with the fed

Direct fed to government lending would be a major shift and I'm not sure why it would be needed, the demand for bonds is still strong from auction data and they seem to be able to generate all the currency they need from those; the only reason there hasn't been more stimulus is politicians arguing over the bill

The bank of England might be able to do it but GBP isn't the world reserve currency, we are just f*ing ourselves if the pound is over spent but the world runs on dollars and messing that up with direct lending seems like a step too far

Maybe it will happen who knows but for now just have to play in the system that exists 

Yes we will have to see what happens 

22 minutes ago, Kman said:

I've listened to the first 10 minutes and I'm going to give up 

He just said "I think the bond bull market is about to end after 38 years" what with the Fed as guaranteed buyers? 

What better market to be in than having the Federal Reserve as guaranteed buyers, how can that fail

 

 

Did you listen to what Kelton had to say, she outlines how government and economists (central bankers) will justify the massive spending that is coming for infrastructure. Direct FED to government borrowing and spending (and the justification for that). The rest of the podcast take it or leave it honestly. The interview is 30 mins or so long, I forget where it is exactly sorry. The end of the bond bull yes that is where we are, at the cycle turn from consumer debt cycle to industrial cycle, already I hear the term 4th industrial revolution though I think its currently being used in a limited context and will be used more in hindsight.

32 minutes ago, Kman said:

Fed are constantly doing QE but they might ramp it up - https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/treasury-securities/treasury-securities-operational-details

I didn't realise loans were still being deferred "On Aug. 8, 2020, President Trump directed the Secretary to continue to suspend loan payments, stop collections, and waive interest on ED-held student loans until Dec. 31, 2020."

They're also still not doing evictions and a lot of people are living rent free - https://www.reuters.com/article/us-usa-housing-eviction-insight/times-up-after-a-reprieve-a-wave-of-evictions-expected-across-u-s-idUKKBN27415U

"It has been a nightmare year for many of America’s renters. The local, state and federal eviction bans that gave them temporary protection in the spring began to lapse in early summer - ensnaring renters like Bean in the gap. September’s reprieve by the CDC, which protected many, but not all, renters will expire in January.

At that point, an estimated $32 billion in back rent will come due" 

It's amazing that despite the record stimulus it's achieved nothing in terms of stimulating anything in real world only bubbling stock/pm/collectible prices etc; unless they further extend the deferrals billions of dollars are going to be sucked out of circulation for debt in January and the velocity of money is going to be in the gutter, super deflationary 

This goes against what you just posted above but I haven't listened to it yet 

Downside who knows, depends on oil demand & prices and how long until people start to see a recovery around the corner; the fact oil stocks are struggling would suggest there's not much optimism yet about either demand or price increasing (all though in the past 24 hours oil stocks seem to have a little uptick) 

What I'm hoping to see on the charts is a nice clear shift in trend, perhaps a bottoming pattern - the dollar in 2018 is a good example 

There's different bottoming patterns but basically it's just the price has stopped falling, generally trading in a tighter range ~15% up and down, a top resistance is established over a decent length of time, when it breaks out of that you know a corner has been turned and it's a positive signal to buy

Its not really amazing, record stimulus during the pandemic = has at best replaced what was lost - ie - not inflationary. The liquidity is now sat there in the system however, and more is coming. 

Have a listen to the podcast interview at least its worth your time. 

Dollar going higher/deflation kicking in is a risk, but the response will be to print every time. The alternative is as you say massive deflationary pressure which will lead to collapse. Very low chance of it and if it does happen none of this will matter. Otherwise short term who knows where it goes. Long term, much easier to see.

Worth listening to the interview, it will help understand what is coming once the FED has had enough of deflation. 

26 minutes ago, HerculeHolmes said:

I've put £1,200 into Royal Dutch Shell because it sounds like a safe enough investment  (I at least don't expect to lose money on it) but really I have no idea how much it's going to be worth 5 or 10 or 15 years from now. Will it go back up to it's old 2018/2019 value, or will it NEVER return to that level?

Shell will make returns over the next few years in accordance with rising oil and gas prices. The market thinks oil is dead about 30 years too early hence the market gift of £9 shell and £2 bp (insane yield on BP at this price).

Returns depend on how high oil goes, for shell $60 oil is $20 billion free cashflow, at $70 its $30 billion, so on and so forth. When inflation picks up oil will be 3 digits mid decade, I expect new all time highs. Depends on how low it goes and how long it stays there over the next few months. 

10 year US bond is creeping up, likely the FED will be along to smash some more QE in soon. 

https://tradingeconomics.com/united-states/government-bond-yield

3 hours ago, Kman said:

 

https://markets.businessinsider.com/earnings-calendar

• 27th - BP
• 29th - Shell
• 30th - Exxon
• 30th  - Chevron

@KDave I'm only negative on oil for the near future (unless something fundamentally changes), I just don't think we've found the bottom yet but time will tell 

Sure oil might drop further, or it might not. What is the downside now you reckon? Risk/reward downside vs upside must be in favour on the charts now surely?  

I can't help myself I just keep buying, Shell earlier this month for sub £9, never thought I would see it, today I have bought a few more BP for £2. Payday I was looking for some more Total, even with French dividend tax the yield is decent and its the best one of the majors imo. I think as with the sovereigns we were buying back in the day, in a few years we will look back at these prices and think it unbelievable. But who knows! 

1 hour ago, Kman said:

Bets have already been placed on presidential victories, green stocks (Biden) for example

Oil stocks have seen no love so I don't think anyone is expecting a recovery for oil prices either way 

Safest bet is more lockdowns and travel restrictions over winter, bad for oil

Q3 results for oil are in the next 10 days, if companies further cut dividends or things have been worse than expected.. will be interesting

Then people are betting the wrong way, as Biden is not going to win the election 

Oil stocks will continue to be hated, it is political, fashionable, moral even. Once cashflow is rolling in people will want to buy oil stocks regardless. I read that NEST the UK biggest pension fund is no longer investing in oil and gas, another massive contrarian indicator.

Demand growth in energy is the easiest thing to see, as is the lack of supply. If we want to go full windmill in the UK, it is going to take a lot of energy to get there. 

On 10/10/2020 at 14:35, Stu said:

Would the 5million share buy back have any bearing? (Albeit , announces 25 Sept, genuine question)

This should be positive for the share price naturally, and there is never a more sensible time for buy backs than at the lows. This is the kind of action you would expect from good management.

2 hours ago, Bumble said:

Does anyone know why Anglo Pacific Group (APF.L) is so cheap? I bought them two years ago at about 140, and then sold at about 190. They are now back down to 105. This is a stable, reliable company on a P/E of 7, paying a dividend of over 6%. It is a royalty company with assets in base metals and potash. I understand that it owns thermal coal royalties and these are of diminishing value, but even so, this seems ridiculously cheap for a royalty company. I'm looking to buy back in.

Thanks for highlighting this, I like the look of APF from the 2020 AGM slides and looking through the royalties page on the website. I will do a bit more digging. My first thought for its performance is sentiment, caught up in the same wave of irrationality as the rest of the energy stocks but it appears well diversified. They say in the slides they are not making any more investments into coal, which perhaps like BP saying it will move away from oil has had the same effect on investors who have sold to look elsewhere for someone who will invest in coal. Coking coal is used exclusively for steel production? If so I don't understand the move away from it, we are going to need more not less over the next decade. 

Maybe they have not bottomed, maybe they have, who knows mate. The idea was not to try catch the bottom it was to build exposure to sectors that will do well in the industrial cycle. All year I have been saying it, telecoms, energy, mining, while the market hated on them and bought tech, Tesla, Apple, etc. Now the sectors get some action, is it the market wising up or is it as the article says, new entrants seeing value in 25 year lows and taking a punt on a bounce back, I would expect the latter. Which means as you say there could be more downside in the short term, I was hoping for a few more months of buying in oil I really like Total and had missed it until recently. We will see. 

I am hearing calls for oil to be $50+ by year end, that would not be the best case in my view as the best returns will come from a true shake out in the oil industry, killing off shale with sub $40 oil for a period of months. BP can break even on $35 a barrel, shell is aiming for $30. Imagine break even at $30 a barrel when oil is at $80-$100 end of 2021, no new entrants coming into the market (because oil is dead right) CAPEX massively reduced, where are all those profits going? Hopefully not all into windmills  most of it will go to share holders via buy backs and dividends but we will see. 

I don't think the market is buying oil for the reasons we have been exploring here, it is bargain hunting and gambling on a bounce back but who knows, once the stock is bought for a punt it can easily turn into an investment if circumstances turn positive, lets hope not for my desired position in Total's sake.

May I ask what are the green stocks you are looking at please anything UK based?