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

[CVG]

The Money Morning email today carried an interview with DB (well could have been) about the Energy sector right now and ended with.....

"Moreover, as Cris Sholto Heaton points out in the current issue of MoneyWeek, out today, the oil price doesn’t have to be high for oil producers to make money. If the majors are no longer squandering money in the hunt for new oil, and are instead just hunkering down and running down their existing resources – well that could be very profitable indeed. The oil stocks could be like the tobacco stocks were – unpopular, dirty, but absolute cash machines."

[janch]

Max Keiser's latest suggests digital currencies are likely to be introduced imminently in China and US:

/www.rt.com/shows/keiser-report/503499-central-bank-digital-currency/

 

 

[feed]

4 minutes ago, janch said:

Max Keiser's latest suggests digital currencies are likely to be introduced imminently in China and US:

/www.rt.com/shows/keiser-report/503499-central-bank-digital-currency/

 

 

China have lunched their digital currency.  Test bed in Shenzhen. 

China's central bank has issued 10 million yuan ($1.5m; £1.1m) worth of digital currency to 50,000 people in the Shenzhen area via a lottery.

https://www.bbc.co.uk/news/business-54519326

 

[DoINeedOne]

45 minutes ago, CVG said:

The Money Morning email today carried an interview with DB (well could have been) about the Energy sector right now and ended with.....

"Moreover, as Cris Sholto Heaton points out in the current issue of MoneyWeek, out today, the oil price doesn’t have to be high for oil producers to make money. If the majors are no longer squandering money in the hunt for new oil, and are instead just hunkering down and running down their existing resources – well that could be very profitable indeed. The oil stocks could be like the tobacco stocks were – unpopular, dirty, but absolute cash machines."

 

was just reading it

 

[janch]

Some quotes relating to China's digital currrency:

 

"DCEP is the antithesis of Bitcoin. The ultimate goal of a cryptocurrency is the separation of money and state," says Stewart Mackenzie, a cryptocurrency expert based in Hong Kong. "It's easy for them to say that it's like Bitcoin when it's worlds apart."

Linghao Bao agrees. "DCEP is built on an idea of centralised control. The value of Bitcoin lies in its decentralisation nature and its isolation from the financial system," Mr Bao says.

https://www.bbc.co.uk/news/business-54261382

 

So whereas BTC is completely independent of any government, digital caurrencies give governments more control over their populations.

[geordie_lurch]

16 minutes ago, janch said:

Some quotes relating to China's digital currrency:

 

"DCEP is the antithesis of Bitcoin. The ultimate goal of a cryptocurrency is the separation of money and state," says Stewart Mackenzie, a cryptocurrency expert based in Hong Kong. "It's easy for them to say that it's like Bitcoin when it's worlds apart."

Linghao Bao agrees. "DCEP is built on an idea of centralised control. The value of Bitcoin lies in its decentralisation nature and its isolation from the financial system," Mr Bao says.

https://www.bbc.co.uk/news/business-54261382

 

So whereas BTC is completely independent of any government, digital caurrencies give governments more control over their populations.

It's EXACTLY like the guy in the video @Lokiwas talking about above

[NogintheNog]

1 hour ago, janch said:

Some quotes relating to China's digital currrency:

 

"DCEP is the antithesis of Bitcoin. The ultimate goal of a cryptocurrency is the separation of money and state," says Stewart Mackenzie, a cryptocurrency expert based in Hong Kong. "It's easy for them to say that it's like Bitcoin when it's worlds apart."

Linghao Bao agrees. "DCEP is built on an idea of centralised control. The value of Bitcoin lies in its decentralisation nature and its isolation from the financial system," Mr Bao says.

https://www.bbc.co.uk/news/business-54261382

 

So whereas BTC is completely independent of any government, digital caurrencies give governments more control over their populations.

Just got this email from Glint;

Another week, another creep of state control.

The Financial Conduct Authority (FCA), has just announced it will ban from 6 January the sale and promotion of derivatives of bitcoin and other cryptocurrencies to retail investors.

The ban is prompted because the FCA reckons that retail investors are at risk of “sudden and unexpected losses”. If protecting investors against sudden and unexpected losses is a mission for the FCA then it has failed a number of times since 2008.

I am all for protecting people from unexpected disasters that are not their fault, but equally I am at heart a libertarian. People should have as much freedom as possible. There is a tension between protecting the defenceless and allowing people to judges for themselves what risks they want to run.

In the UK, about 4% of the population have a cryptocurrency holding, 75% of them owning less than £1,000.

The FCA is going to prevent retail investors from buying and selling the likes of cryptocurrency futures and options, which people often use as a way of hedging their bets on an underlying asset. For example, you might buy an option to sell a certain number of bitcoin at today’s price if the price falls by 10%, giving you an insurance policy in case the market moves against you. That seems a reasonable and indeed self-protective thing to do, given the extreme volatility of cryptocurrencies. Derivatives make markets more efficient by allowing investors to hedge their bets, which is one way they can protect themselves against rapid extreme movements. Derivative markets exist in just about everything, from aluminium to hogs.

But people will not be allowed from January to hedge cryptocurrencies within the UK. The vast majority, 83%, use exchanges outside the UK. So it’s easy enough to avoid the FCA’s jurisdiction.

The FCA acknowledges that “technical knowledge appears high among most cryptocurrency owners”. Around half of the people the FCA questioned about cryptocurrencies said they bought them as “a gamble” and 89% of them correctly thought they had no regulatory protections. That’s a pretty sophisticated audience.

Given the relentless moves towards governments creating their own cyptocurrencies, so-called Central Bank Digital Currencies (CBDCs), and the moves by the G7 club of the world’s seven biggest economies to oppose Facebook’s own digital currency, Libra, the cryptocurrency world – which started as a movement to develop a form of money free from government interference – seems all set for the kind of distortions it wanted to free itself from.

Cryptocurrencies are indeed difficult to value and in many ways are similar to fiat or paper money – the value is all related to how much confidence you have in the issuer. Which is why the digital money I use for my spending and saving is Glint’s gold – no-one controls gold, and it is much less volatile than Bitcoin.

Disclaimer! I own some Bitcoin with Coinbase However less than £1000 worth. I have moved it to my PC, my phone, exchanged it for Litecoin and then paid for my VPN service with it. I think Bitcoin will remain as a top layer 'Gold' crypto, with another crypto being the currency layer which peeps will use at payment level.

[DoINeedOne]

Latest End Game Podcast With Felix Zulauf: https://podcasts.apple.com/gb/podcast/the-grant-williams-podcast/id1508585135

 

[UnconventionalWisdom]

What are people's thoughts on transport like go-ahead, stagecoach, national express? 

There was a lot of talk after corona hit and the they took a drumming. I didn't get any as I wasn't sure things would be good in the short term. The price then recovered but is now heading back towards the march lows. Long term I do think there will be demand. The only way governments can save the economy from our debt- reliant position is infrastructure improvements fueled by fiscal spending. Take on debt and then inflate it away. 

That would require getting people working and moved around- big demand for transport. 

Covid is now not new so I think they want take such a loss as before (lockdowns are now done in stages so there's more time for them to plan) but they could go down a lot when the BK hits.

I have no exposure so will prob get some soon, just not sure if Covid is going to cause them too much pain in the short-term.

[Bricormortis]

16 hours ago, Tingles said:

@Loki Since mid April I have been coordinating my investment strategies (and research) to factor the possibility that Covid-19 (aside from being potentially highly lucrative for Big Pharma) is a catalyst to bring about the following:

1)  A social credit system.

2)  Mandatory vaccination (probably incorporating biometric identification).

3) A digital currency.

4) Universal Basic Income.

George's video covers three of the above.  So my thoughts on said video are that it's plausible and on point.  I think that we may be witnessing the controlled demolition of existing global economic systems and a systematic assault on the freedoms that we have historically taken for granted.  Control certainly seems to be the order of the day.

To be clear I am not pitching or bogged down by 'conspiracy theory', I am simply and objectively interested in how the above interacts with the macro economic picture.  Equally I understand your hesitancy in posting but appreciate it nonetheless.  We live in fascinating times. 

Interesting video, I cant see the "Banking for all Act" getting through and becoming a thing, too many vested interests in maintaining the existing banking system.

When George Gammon goes on about communism, I think he does not understand the nature of the game being played by technocrats and their masters who disdain democracy...nature of the game being  is about power and control not Marxism in my opinion.

As infants we have basic drives beyond food and warmth,  these being approval, security and a sense of control, these remain massive complexes for us through out our lives, and some people are just unbalanced when it comes to the distribution of these drives.

Technocrats,   for example see chunks of the EU administration, or people like Mandelson, Claus Schwab, or Soros, are an example of people so poisoned by their arrogance and neurosis it manifests as an insane need for control and possibly combines with a lust for  personal wealth,  so I dont agree with Gammons reds under the bed conclusions so much, though I do see where he is coming from and I agree it is evident from the avove mentioned Bill that there is a desire in some high quarters to transfer banking functions to the government.

Someone last week posted a very interesting snippet from Martin Armstrong saying a power grab would come from the United Nations...I will watch with interest and concern. Certainly I think democracy is in danger of being replaced with a pseudo democracy, just not necessarily a communist one.  Does depend on your definitions though.

[BurntBread]

54 minutes ago, NogintheNog said:

Just got this email from Glint;

As soon as I read that central banks were thinking of issuing digital currencies - and in particular digital currencies that are not block-chain based - my immediate reaction was: isn't that what we already have?

Am I missing something here, or is the only novel aspect of these currencies the fact that there is no way to remove them, even temporarily, from a bank? If so, that's not too far from what we have now, as only a small fraction (1%?) of currency circulates as coins and notes, and if the bank wants to charge (for example) a negative retail interest rate, that would be no harder, and no less likely to induce a bank run, than implementing a wealth tax. We already have negative real interest rates anyway.

On a related matter: this fca intention to prevent retail investors playing with blockchain derivatives. I had an immediate conspiraloonery reaction, that this may be an attempt to prevent a deep and liquid derivatives market, which could stabilise crypto currencies. This is part of my wild speculation that a stable, non-inflationary currency could compete with, and replace, fiat in business transactions (and ultimately retail transactions), thus severely hampering governments' ability to inflate.

I then thought that, somewhat uniquely, we now have a way to do that very easily, without using crypto. Since the last great inflation in the 70's, it has become very easy to hold (for example) a gold ETF on a digital trading platform, and write contracts with other parties that are settled in terms of a certain number of ETF units. The exposure to fiat and therefore inflation during the momentary transactions would be minimal. We therefore have a situation now, where we have access to a fairly convenient form of hard money, which is independent of government. The idea suggested by Hazlett (in some sense of the opposite of Gresham's law, because only one is legal tender) that a hard currency could out-compete a treacherous one, could at last be tested in practice.

If so, that would rein in government spending during the next 10 years, making us eat some of the deflation before everything goes to pot in 2030.

Sorry: just some vague thoughts I'm trying to find a home for. Please pick holes...

[Loki]

24 minutes ago, Bricormortis said:

Interesting video, I cant see the "Banking for all Act" getting through and becoming a thing, too many vested interests in maintaining the existing banking system.

When George Gammon goes on about communism, I think he does not understand the nature of the game being played by technocrats and their masters who disdain democracy...nature of the game being  is about power and control not Marxism in my opinion.

As infants we have basic drives beyond food and warmth,  these being approval, security and a sense of control, these remain massive complexes for us through out our lives, and some people are just unbalanced when it comes to the distribution of these drives.

Technocrats,   for example see chunks of the EU administration, or people like Mandelson, Claus Schwab, or Soros, are an example of people so poisoned by their arrogance and neurosis it manifests as an insane need for control and possibly combines with a lust for  personal wealth,  so I dont agree with Gammons reds under the bed conclusions so much, though I do see where he is coming from and I agree it is evident from the avove mentioned Bill that there is a desire in some high quarters to transfer banking functions to the government.

Someone last week posted a very interesting snippet from Martin Armstrong saying a power grab would come from the United Nations...I will watch with interest and concern. Certainly I think democracy is in danger of being replaced with a pseudo democracy, just not necessarily a communist one.  Does depend on your definitions though.

I think he just uses it to mean centrally-planned and administered economy, which is a fair use of the term.  You can see how the need for approval would line up perfectly to be 'weaponised' with a system that can deduct from or freeze accounts at liberty.  

There can't be too many vested interests in the current system - or it wouldn't be on track to implode in a decade! 

[Craig]

30 minutes ago, Loki said:

I think he just uses it to mean centrally-planned and administered economy, which is a fair use of the term.  You can see how the need for approval would line up perfectly to be 'weaponised' with a system that can deduct from or freeze accounts at liberty.  

There can't be too many vested interests in the current system - or it wouldn't be on track to implode in a decade! 

Indeed. I'd imagine the ability to determine what people can spend their money on has a great deal of appeal to governments too. 

[Loki]

1 minute ago, Craig said:

Indeed. I'd imagine the ability to determine what people can spend their money on has a great deal of appeal to governments too. 

Tasty tasty bugs have got the green light

https://agfundernews.com/uk-government-earmarks-10m-for-industrial-insect-farming.html

[Loki]

 

[UnconventionalWisdom]

Trunp is fully behind a big fiscal stimulus. It may be to get votes but now the shift from Wall Street to Main street is starting. Prob the ripple that will spread through the Western world. Article also states people paying off debt.

https://www.marketwatch.com/story/trump-says-im-ready-to-sign-a-big-beautiful-stimulus-but-it-doesnt-look-like-many-americans-are-counting-on-it-2020-10-16?mod=home-page

President Donald Trump is ready to sign a “big, beautiful stimulus,” he said during a Thursday night town hall, despite ongoing talks that include skeptics in the Republican-controlled Senate and, earlier in the month, when he said he was done negotiating.

[Loki]

LIBOR is starting to be transferred over to SOFR this weekend

 

[Errol]

UK Downgraded To Aa3 By Moody's

https://www.zerohedge.com/markets/uk-downgraded-aa3-moodys

[Sugarlips]

BP flirting with March lows, surely it can only bounce off them as a retest, it’s hard to envisage it becoming the next stock that can’t be named..👀

[TNS]

1 hour ago, Sugarlips said:

BP flirting with March lows, surely it can only bounce off them as a retest, it’s hard to envisage it becoming the next stock that can’t be named..👀

Silence! 

[wherebee]

4 hours ago, Sugarlips said:

BP flirting with March lows, surely it can only bounce off them as a retest, it’s hard to envisage it becoming the next stock that can’t be named..👀

oh for fucks sake.  do you want to try 'they could never shoot me from that far away' next, or 'it's not going to rain, I'll leave the umbrella at home'.

[sancho panza]

On 14/10/2020 at 17:40, Cattle Prod said:

Interested that you sold Hochschild, Sancho, I recently added as I thought it looked quite bullish. Though I am very limited by choice in my SIPP.

I was jsut tinkering with our PM miners,moving marginal holdings into companies that offer more leverage.We have a core holdings of the larger ones(incl Hochschild) so we lightened up a bit and dropped it from a 0.5% position to 0.2%.We had some profit in there too.

We took some profits in the space in Sept and I've struggled to redploy it .Can't see much value beyond EGO/BVN at $12,RIO2,OGC(??),NCM.

Think Hoch is at a discount to FRES which has run a lot more.

On 14/10/2020 at 16:47, Cattle Prod said:

Much of it - oil is in everything. Though I'm also watching their nuclear building. Here's what they did when prices cratered:

That to me is the oil consumer equivalent of street kids rushing to gather loaves of bread that have fallen off the bakers truck. It's what you do when you're hungry.

They bought so much most of it ended up in floating storage outside Chinese ports. Most of that is drawn down though. I note this graph has exports to China peaking at just over 10mbbl, which is less then than the ~11 mbpd I get from the BP data, must be refinery gains or something.

 

Incredible chart .SO while oil was plummeting to -$37,the CHinese were buying up as much as they coud store......?

I've added some more oilies over the last week.The value in the sector makes buying PM miners a real struggle.

[MrXxxx]

13 hours ago, UnconventionalWisdom said:

What are people's thoughts on transport like go-ahead, stagecoach, national express? 

There was a lot of talk after corona hit and the they took a drumming. I didn't get any as I wasn't sure things would be good in the short term. The price then recovered but is now heading back towards the march lows. Long term I do think there will be demand. The only way governments can save the economy from our debt- reliant position is infrastructure improvements fueled by fiscal spending. Take on debt and then inflate it away. 

That would require getting people working and moved around- big demand for transport. 

Covid is now not new so I think they want take such a loss as before (lockdowns are now done in stages so there's more time for them to plan) but they could go down a lot when the BK hits.

I have no exposure so will prob get some soon, just not sure if Covid is going to cause them too much pain in the short-term.

GOG and NEX very different company structures I.e GOG uk centric in trains and local busses; govt changing rail franchise model so GOG will be pain a per passenger rate thus limiting profits. NEX more worldwide I.e US Greyhound and school buses, Germany local rail. Also NEX don't own/have cost of vehicles, use local firms more like subcontractors.

[sancho panza]

On 15/10/2020 at 00:56, JMD said:

 Tbh, despite watching this unfold, I still can't believe the crazy politics we now find ourselves in - this 'search for identity' - but this time by the majority, will in my opinion only snowball. It is a poisonous concept, introduced by the far left, and it will fracture society for a generation. The only think of light is that I think our first past the post system will at least 'save us' from getting any charismatic Weimer types. And the US has its own checks and balances. However the rest of Europe is I think fair game for far right/left politicians to hoover up the many unrepresented voters there, ie those who merely want a decent job. Tragically such 'luxuries' are no longer in the gift of our politicians and time will tell if it will end up with 'history repeating' on the continent.

I think the UK is more leveraged than say Europe where various types of PR systems allow disparate groups a voice in parliament.

If you look at the 2005 result.LAbour got a working majority with 35% of the vote.Therein lies the weakenss of FPTP.Ukip polled 4 million votes ,tories got 11.3 million

On 15/10/2020 at 03:44, Tingles said:

Short sighted, tiresome and inconvenient:

https://www.fca.org.uk/news/press-releases/fca-bans-sale-crypto-derivatives-retail-consumers

trying to steer you into 30 year bonds at 1%

 

On 15/10/2020 at 13:13, kibuc said:

Wesdome comes up with 3Q production numbers that disappoint for the first time in human memory. Mill maintenance in August resulted in big drop in ore tonnes processed, and grades are also down from absurd 18g/t to 13.8g/t, resulting in 20koz production (compared to 25koz in Q1 and Q2 each). Annual guidance of 90-100koz not threatened at all but it's likely that I won't be beaten for the first time in years, a mid-point more likely.

WDO is obviously a fantastic company, very well run and with great potential in Kiena, but there's a risk that it's all been priced in already, along with specatular beats on production guidances. I wouldn't be surprised if these results brought a short-term correction.

All these companies have the end of their 'sweet' run when everything goes right.Even AAPL.One day

[Castlevania]

47 minutes ago, sancho panza said:

I was jsut tinkering with our PM miners,moving marginal holdings into companies that offer more leverage.We have a core holdings of the larger ones(incl Hochschild) so we lightened up a bit and dropped it from a 0.5% position to 0.2%.We had some profit in there too.

We took some profits in the space in Sept and I've struggled to redploy it .Can't see much value beyond EGO/BVN at $12,RIO2,OGC(??),NCM.

Think Hoch is at a discount to FRES which has run a lot more.

I ran out of patience with Centamin so redeployed that a couple of weeks ago along with some William Hill gains into Harmony; Sibanye; Hochschild; Elderado; Iamgold and uhh Great Panther. At current spot prices they’re all reasonable value in my opinion. 

If you’re willing to look into the cesspit that is AIM Shanta Gold still looks cheap despite solid gains over the year - it’s my largest holding yet I’m unwilling to sell given their low (in my opinion) valuation. Clearly do your own research and don’t take my views as advice as I’m often very wrong.