Credit deflation and the reflation cycle to come (part 2)

[Errol]

Raoul Pal on Twitter:

 

Gold in inflation adjusted terms is 15% away from the biggest cup and handle break out you can imagine...

https://twitter.com/RaoulGMI/status/1277247782613639168

[Loki]

47 minutes ago, Sasquatch said:

Fracking hell. That's £750 I'll never get back.

You win some, lose some. I should have sold when I was 20% up 

 

I nearly took a punt on them...only luck  I didn't

[DurhamBorn]

2 hours ago, TheCountOfNowhere said:

Some comedy for a Sunday night

http://www.economicsuk.com/blog/002372.html

AFTER THE BAILOUT, BAILEY PLOTS THE BANK'S EXIT STRATEGY

Now, however, Bailey is looking for a way to reverse it. He, and presumably other members of the Bank’s monetary policy committee (MPC) are starting to feel uncomfortable with the size of the Bank’s balance sheet.

I agree with them,im uncomfortable with the size of the balance sheet,,,,,,its needs  to be another £400 billion higher. 

 

[DurhamBorn]

On 27/06/2020 at 21:40, Castlevania said:

Does it matter? It’s the same share just listed on different exchanges. Or is there a bigger bid offer spread or something?

Not really,i just wondered why HL only offers one.I guess they would buy the other on the phone.

[TheCountOfNowhere]

4 minutes ago, DurhamBorn said:

I agree with them,im uncomfortable with the size of the balance sheet,,,,,,its needs  to be another £400 billion higher. 

 

It will be. They're lying bastards 

[Harley]

47 minutes ago, Errol said:

Raoul Pal on Twitter:

 

Gold in inflation adjusted terms is 15% away from the biggest cup and handle break out you can imagine...

https://twitter.com/RaoulGMI/status/1277247782613639168

Keep up at the back!  Posted here by me months and months ago.  And he wants me to subscribe!

PS:  Presumably means in USD as well past that in GBP!

PPS:  Ah in inflation terms, quelle surprise!

[Bear Hug]

2 hours ago, Sasquatch said:

Fracking hell. That's £750 I'll never get back.

You win some, lose some. I should have sold when I was 20% up 

 

Lost one or two hundred. Honestly, no idea exactly as I was buying few pounds at a time. Trading 212 managed to mess up their consolidation few months ago too: I should have ended up with a couple of shares but I just had zero in the end. Was going to try to work it out and complain but there is no point now I guess

[Harley]

2 hours ago, DoINeedOne said:

 

Their cash flow statements said it all.  Wanna see a few others?

[JMD]

4 hours ago, jamtomorrow said:

That's a good summary of why I'm interested in energy economics. I do think DB's macro roadmapping captures the lion's share of factors that will shape the next decade, and so in terms of crystal-ball gazing one of the most interesting questions (to me) is: what might be different this time?

My working assumption is any such "secondary" factors are going to have a marginal effect on outcomes, but in the back of my mind is the degree to which the economic system might be especially sensitive to critical parameters, and which can be hard to spot a priori . Funnily enough (topical!) even simple epidemiological models are known to exhibit "bifurcations" where the system suddenly flips into a completely different equilibrium state for a small parameter change.

To your specific point: nuclear looks nailed-on for a comeback. In EROI terms, we've been sliding towards that net energy cliff for the best part of 50 years, partly as a result of mix effects (rise of renewables, decline of nuclear), partly as a result of high-EORI resource depletion (per @Cattle Prod's "shale too early" lament). Nuclear is a *really* obvious way we could move back from the cliff, if not globally then at least at a national level to begin with. The rest just doesn't seem obviously cut & dried to me at all though (hence why I'm reading up).

I do hope the energy analyst boffins get their EROI house in order. There's just no getting away from the laws of physics, and seems like we're in dire need of a "ground truth" for understanding energy policy choices.

Thanks JT. An energy policy might be part of the grand infrastructure plan from government that's expected this week. We might then get mention of that 'ground truth' you mention, or maybe just political murmurings about being guided by the (energy) science. I suspect something similar to the latter, so in the meantime I will hold my oil companies and commodities such as yellow cake - But it's the 'technology/engineering bit' lying between these two that I find difficult to settle on. Eg AFC energy has dropped in price so might be a potential conviction  buy but I think I need to also find a good fund to spread risk for this specialist investment sector. Any suggestions/alternate suggestions would be welcome to hear.

[DurhamBorn]

33 minutes ago, Harley said:

Their cash flow statements said it all.  Wanna see a few others?

Its incredible really how we said debts become huge once you have no profits.They couldnt even pay a few million coupon.The Fed has being buying corporate debt,but i guess once you cant get an issue away its curtains.

[JMD]

4 hours ago, Transistor Man said:

Talking of leads and lags, unless we reconstitute the CEGB, UK nuclear new build will not happen at sufficient scale, and anywhere near fast enough.

11 years ago, I came to the same conclusion as @jamtomorrow

I left my job, joined the then UKs largest energy consultancy, responsible for building Sizewell B and many AGRs. After loads of training (reactor physics, reactor materials, fuel cycle, control,), New-build ground to a halt, and I was sent to France to work on fusion. Complete waste of time. 

In the 70s, after the first oil shock, France built 50+(!) PWR reactors, based on a Westinghouse design. 

It can be done, but not the way the UK has gone about it. 

TransistorMan, I agree and think the CEGB will return in a new, even more expanded, quango guise. Strategically it will be needed, and the last few months of government economic intervention shows I think the direction of travell. I wonder though which companies will be the biggest beneficiaries of a potential national and/or global nuclear big-build? I'm thinking in terms of the West, and where China will now be shut out, so will a raft of proven French firms be ready to take advantage (if they still exist?). I guess each nation will do their own different thing, but are there some good engineering company prospects to look out for... or will it be mainly Siemens as per usual!

[jamtomorrow]

6 hours ago, JMD said:

TransistorMan, I agree and think the CEGB will return in a new, even more expanded, quango guise. Strategically it will be needed, and the last few months of government economic intervention shows I think the direction of travell. I wonder though which companies will be the biggest beneficiaries of a potential national and/or global nuclear big-build? I'm thinking in terms of the West, and where China will now be shut out, so will a raft of proven French firms be ready to take advantage (if they still exist?). I guess each nation will do their own different thing, but are there some good engineering company prospects to look out for... or will it be mainly Siemens as per usual!

I'd also be interested to know from @Transistor Man whether an indiginous nuclear industry could be stood back up in this country in relatively short order.

It *seems* like we still have the engineering skills and expertise in wider industry, we "just" need something like the old CEGB to pull it all back together - I'm thinking civilian nukes we still run, Sellafield and general decommissioning expertise, marine nukes at Rolls, world class civeng consulting, and then the wider nuclear engineering diaspora like your good self.

Or am I taking 2 and 2 and getting 5?

[Castlevania]

11 hours ago, DoINeedOne said:

 

For some reason I thought they’d already gone bust

[MrXxxx]

13 hours ago, TheCountOfNowhere said:

Was this posted

https://www.ft.com/content/4fd04fd9-7209-4b7c-97a1-97466f226159

 

The pound is now an emerging-market currency in all but name, according to analysts at Bank of America, who say that Brexit has turned it into a mirror of the “small and shrinking” UK economy.

Yes while the US maintains people's confidence, but if sentiment goes we will see things change quickly (or a war instigated to deflect attention)...take a look at Debt/GDP ratios, that gives the real perspective.

[Transistor Man]

42 minutes ago, jamtomorrow said:

I'd also be interested to know from @Transistor Man whether an indiginous nuclear industry could be stood back up in this country in relatively short order.

The way the UK nuclear plants were built was by these various consortia.

For each station you had a (I) civil contractor, (2) someone responsible for the design and purchasing of the nuclear island, and a (3) supplier of the turbine island, GEC, Alston etc. 

All the nuclear parts of the various consortia was eventually combined to form  NNC - the National Nuclear Corporation. 

For Sizewell B, which is still very similar to what you would build today, CEGB commissioned NNC to build the power plant.

it was a very successful project. On time, on budget, with excellent performance over the last 25 years.

As you’d expect, parts came form all over.

Westinghouse did the reactor system, but with some UK design. Pressure vessel forgings were from France and Japan, steam boilers - Babcock, turbines gec alstom turbines, civil engineering - John Laing. 

NNC was bought by AMEC, then Wood Group, and is now owned by Jacobs. 

Sheffield forgemasters can do large forgings, but I don’t know how big. 

 

[leonardratso]

i dont know anything about all this nuclear malarky, what i do know is that in the cutlery draw, the best and most hardwaring cutlery is over 30* years old and has made in sheffield on it, but then again i suppose that was probably made in a time when it meant something and it was built to last.

* god knows how old it is, its from my mums cutlery draw and shes been dead for many years.

[jamtomorrow]

17 minutes ago, leonardratso said:

i dont know anything about all this nuclear malarky, what i do know is that in the cutlery draw, the best and most hardwaring cutlery is over 30* years old and has made in sheffield on it, but then again i suppose that was probably made in a time when it meant something and it was built to last.

* god knows how old it is, its from my mums cutlery draw and shes been dead for many years.

Wonder if things would have been much different if that Forgemasters loan hadn't been pulled in 2010

[DurhamBorn]

1 hour ago, Cattle Prod said:

More on infrastructure, I suspect @DurhamBorn might get his arc furnace ;-) 

(And of course they have the money. It's just going to come with a massive dose of inflation)

This is where good macro strategy is crucial.Most people have no understanding of macro cycles,inflection points and the interaction between CBs and government.People have this idea that the CBs can do as they please,and that governments have no control.They couldnt be more wrong.Governments drive cycles,the CBs simply adjust to it with leads and lags.That is their job.As this (and the last) thread said from page one,the economic backbone of the country cannot sustain the demands on it.For all we read in the MSM and fringe websites the UK and the west in general are not some banana republic.The Tories see belief in capitalism at risk,as do the republicans in the US.In such times they need to show the population better times.

Its laughable when everyone thinks the government have no money,when the CB will print whatever they need 100% certain.Complete lack of understanding of our system.

[DoINeedOne]

bp today announced that it has agreed to sell its global petrochemicals business to INEOS for a total consideration of $5 billion, subject to customary adjustments. The agreed sale, the next strategic step in reinventing bp, will further strengthen bp’s balance sheet and delivers its target for agreed divestments a year earlier than originally scheduled. 

#Thoughts seems to be getting mixed opinions

 

[Castlevania]

7 minutes ago, DoINeedOne said:

bp today announced that it has agreed to sell its global petrochemicals business to INEOS for a total consideration of $5 billion, subject to customary adjustments. The agreed sale, the next strategic step in reinventing bp, will further strengthen bp’s balance sheet and delivers its target for agreed divestments a year earlier than originally scheduled. 

#Thoughts seems to be getting mixed opinions

 

BP sold Grangemouth to Ineos back in the day. Ineos paid around a third of the replacement cost of building such a plant from scratch. My guess is Ineos are getting the better deal here.

[JMD]

3 hours ago, Transistor Man said:

The way the UK nuclear plants were built was by these various consortia.

For each station you had a (I) civil contractor, (2) someone responsible for the design and purchasing of the nuclear island, and a (3) supplier of the turbine island, GEC, Alston etc. 

All the nuclear parts of the various consortia was eventually combined to form  NNC - the National Nuclear Corporation. 

For Sizewell B, which is still very similar to what you would build today, CEGB commissioned NNC to build the power plant.

it was a very successful project. On time, on budget, with excellent performance over the last 25 years.

As you’d expect, parts came form all over.

Westinghouse did the reactor system, but with some UK design. Pressure vessel forgings were from France and Japan, steam boilers - Babcock, turbines gec alstom turbines, civil engineering - John Laing. 

NNC was bought by AMEC, then Wood Group, and is now owned by Jacobs. 

Sheffield forgemasters can do large forgings, but I don’t know how big. 

thanks TransistorMan, excellent info. on the companies. I've been looking into the sector and did have my eye on Wood Goup. But i think John Laing is now Laing O'Rourk, and the company has been taken private so not for the likes of us!! (a real pity as i think it would have made a great buy)

Is Jacobs you mention the US one - Jacobs Engineering Group (nyse:J)?  Excuse my follow up question, only i am looking to buy into some of these if/when we get another market correction. 

 

[Harley]

1 hour ago, DoINeedOne said:

bp today announced that it has agreed to sell its global petrochemicals business to INEOS for a total consideration of $5 billion, subject to customary adjustments. The agreed sale, the next strategic step in reinventing bp, will further strengthen bp’s balance sheet and delivers its target for agreed divestments a year earlier than originally scheduled. 

#Thoughts seems to be getting mixed opinions

 

Share price up nicely.  Depends what they're going to do with the cash (what and how).  I'm going to hold, maybe add a bit, to be along with the ride.

[invalid]

On 24/06/2020 at 12:08, DurhamBorn said:

Maybe Cummings reads this thread,after all his family live near me.Political cycle is flashing red and has been for a while.Parties of the left dont understand it at all,but some people and parties on the right do start to get it.I think Cummings is one.BJ spent a lot of political capital to keep him,and rightly so,because it was Cummings who told the Tories exactly what people were feeling in working class areas.While the left was calling everyone who voted for Brexit (pretty much everyone up here outside of students and government workers) racists,all the guys i worked with in a factory were voting Tory,a lot for the first time ever,and one of the reasons is as they all used to say,"i like that Priti Patel,shes one of us",,.So people the left were calling racist were voting for the Tories because they wanted Priti in government,and seeing her as "one of us".A complete miss-read from the left.Not one of those guys gave a toss about the colour of Priti's skin,or her heritage,as far as they were concerned she understood them and was one of them.

The economy has lots of business cycles inside a longer cycle,but the real key inflection points are when the long sweep of deflation (really dis-inflation) and inflation (often more re-flation) turn.In political terms the left is looking the wrong way at a key turn.

 

 

Not wanting to derail the thread, you are spot on about Pritti and its why the left hate her so much ( a sign she must be doing something right). The left expected her to be like them because of her skin colour (the irony is lost on them).

Back on topic, I see oil prices are starting to pick back up and round my way the traffic levels are almost back to pre Covid19 levels. Still lots of people working from home, I wonder if their increased energy useage balances out the energy savings from the offices? I guess it depends on which is more efficient per capita. If lots of people still working from home by winter but enough people back in the office to mean it needs the heating fired up there could be a high demand for energy.

Recently a chat with the owner of small high street indy restuarant. They don't really get the Covid19 rules. Totally not practical for their kitchens or premises, no outside areas to set up as on a high street with narrow pavement. If they can reopen, with the reduced number of tables they would be at a loss even if they filled every table. They don't know if anyone will come back even if they do open, lot of the customers are local retirees. Sadly, I think they are going to go bust.

 

Although things are starting to get head towards normal (a journey we may never complete), the inefficencies and therefore cost to the economy must be huge. I'm seeing lots of extra steps in processes, extra costs for equipment, higher staff requirements.

 

[reformed nice guy]

37 minutes ago, invalid said:

the inefficencies and therefore cost to the economy must be huge. I'm seeing lots of extra steps in processes, extra costs for equipment, higher staff requirements.

This part is not being picked up by a lot of people. If you are a small business such as a pub or barbers then your revenue producing ability already has hard boundaries. Number of seats in a barbers limits haircuts per hour. Throw in these extra restrictions and the only option is to up prices... which leads to..... inflation!

[Popuplights]

1 hour ago, reformed nice guy said:

Number of seats in a barbers limits haircuts per hour.

Plus every bloke has now discovered it's a piece of piss to cut your own hair with some clippers, or at least get your missus to do it....