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

[Loki]

4 minutes ago, Sasquatch said:

Ta. 

Nice avatar by the way. I think it's sending me into a trance.

Wait until you see what happens when he finally gets it

[AWW]

7 minutes ago, Loki said:

Wait until you see what happens when he finally gets it

Haha! I was not expecting that! I must have sat here and watched it for hundreds of cycles. Worth it though!

[leonardratso]

trouble is how long will BK take - fast according to hunter and how long to recover, maybe 6-12-18 months, as in how long to get to a point where its worth a buy up again.

 

[DurhamBorn]

27 minutes ago, Hardhat said:

I only bought K&S, I was down 50% at one point, I'm now back at break even 

I expect holding for the cycle will prove rewarding on them.

[AWW]

Interesting post on a Pistonheads article about lithium ion batteries in electric cars. Relevant to those invested in or eyeing up hydrogen plays. I hadn't even considered off-grid type use cases for hydrogen fuel cells.

Quote

There has been fierce competition for years on this within the technology space so its not like its not had competition to push it forward. Most of the investment seems to be heading into incremental improvement space (about 80% from an investment report I'm reading) rather than genuine ground breaking research. Agreed we will see more manufacturers emerge/scale to meet demand, but very doubtful we will see some sudden step change in offering, after all you are looking at roughly $6bn capital investment for even a baby anode plant these days!

As a proof point my current employer operates one of the largest datacentre estates globally (our private intra region fibre network is the 2nd largest globally by miles laid). As part of our constant upgrade/improvement we are switching out diesel generators and last year invested about $100m prototyping both a lithium battery backup (similar to a Tesla megapack) and a hydrogen fuel cell solution for localised region power backup. We looked at both power density, lifetime costs (some interesting disparities within global regions) as well as ability to sustain reliable power provision for up to 48 hours (consistent discharge rates).In short, lithium even with the promised improvement's (our founder is also is the main investor in Quantum Scape so we definitely had the inside line of what was coming), just didn't cut it, so we have selected hydrogen fuel cells.

I worry that quite a few companies are throwing their lot in with a technology that has a fundamental disconnect between marketing and reality, when it fails to manifest there will be quite a few red faces all around! I do hope I'm wrong.

 

[Hardhat]

9 minutes ago, DurhamBorn said:

I expect holding for the cycle will prove rewarding on them.

Thanks. It's a lesson for me, to try to buy 2-3 companies in the sector instead of one!

[DurhamBorn]

57 minutes ago, Noallegiance said:

Intrepid took a while to get going but they've kept red days blue for me in the last few weeks.

Skimmed some non-divi profits today. Kept some as cash and bought divi payers that are still down as well as another few nuggets chucked at HZM.

I'm in danger of starting to know what I'm doing.

Overall portfolio is up 15% in the 9 months since I opened my SIPP. Dragged down by firms like VOD and Babcock but they'll have their runs.

It's fascinating just to be in charge of one's own (currently pathetic) pension.

 

Remember to add in divis as well,Vod will of given one and gone ex div on one.When i was starting out it i always rolled profits from more cyclical/speculative plays into blue chip divi payers and it served me very very well.Iv been adding some BAT and GSK with some slicing profits from Potash.Buying BAT with money that more than trebled is like getting them on a 23% yield .I also sold a few BHP that had doubled for some GSK.

I actually expected oilies to run up first and potash to be a bit later,but its turned out the other way around.It shows why you should cover all the likely sectors and not try to second guess who runs first.Even i was tempted to go heavier oilies in March and sell/buy potash later.Its a good job i didnt and stuck to allocation rules,though i stretched them on the oilies.This game is always about learning.

[Loki]

1 minute ago, Hardhat said:

Thanks. It's a lesson for me, to try to buy 2-3 companies in the sector instead of one!

I was down bigly on them at one point but not now. You'll be ok 

 

[sancho panza]

12 hours ago, Cattle Prod said:

You see that Total has just bagged itself a cargo of pure profit, as a shareholder, I have a tear in my eye at the level of price gouging on display. This is an example of "just buy a swath of the majors, because they will have a piece of every decent project going". You can have fun ferreting out geographies that will need to pay premium for gas: mostly ones not connected by pipeline to Russia or the ME, like Indonesia for example, but again, the big companies will already be there (Repsol, ENI, BP in Indonesia, Shell in Brunei).

..

On the matter of US rates and gold,Shaun Richrads psoted on this t'other day

https://notayesmanseconomics.wordpress.com/2021/01/11/what-is-happening-to-gold-and-the-gold-price/

'The bull case for Gold

The macroeconomic uncertainty one is so clear we need spend little time with that but the inflation one is quite complex. It opens quite easily and as we recall my subject of Friday and this from Andrew Hauser of the Bank of England.

Since March of last year, G10 central bank balance sheets have risen by over $8 trillion.

That seems likely to rise as we note a Brent Crude Oil price of around US $55 and the general outlook has led to this.

US Inflation Expectations (10-yr breakevens) continue their vertical ascent, now above 2% for the first time since November 2018. ( @charliebilello )

The Bear Case

One factor would be a turn in the trend for the US Dollar and maybe we are seeing that as recently it has regained a little of its losses. But underneath that I think there is a bigger factor in that we have seen something of a shift in US interest-rates. I do not mean the official US Federal Reserve one which remains around 0.1% I mean this.

US 10Y yield is 17bp higher on the week ahead of the Dec jobs report, having done this:

Jan 7 +4.4bp

Jan 6 +8.1bp

Jan 5 +4.2bp ( @business)

The ten-year yield in the US is now 1.11% and whilst that is low in historical terms it is up quite a bit since the 0.5% or so of last March. Also it is taking place in spite of the fact that the US Federal Reserve is buying some US $120 billion of bonds of which 2/3rds are Treasuries each month.

From Gold’s point of view there is no some sort of cost of carry albeit not much as we find ourselves in a bit of a twilight zone. If you look at the inflation trend and expectations then bond yields should go higher, but the counterpoint is whether the US Federal Reserve would then increase its purchasing rate. Indeed it could implement a type of Yield Curve Control and we are at yields where some have expected this to be deployed.

[Harley]

1 hour ago, Yellow_Reduced_Sticker said:

 

Good evening folks, I just did my usual scavenging search on FB Marketplace for free stuff and BLANKED for my area, However came across an OIL TANK ...going for FREE! 

 

This would cost around  £700 quid new!

 

@Harley Where do ya live?  ...OR maybe @Democorruptcy will want it?!

 

https://en-gb.facebook.com/marketplace/item/233229971720888

 

 

 

Reminds me of the time I went to pressure test a boat's new fuel tank and blew the doors off!

[DurhamBorn]

@sancho panza i think we need to keep a tight watch on where on the curve the Fed move here.If they try to keep the long end down they are trying to help government with fiscal spending,thats more inflationary ,if they force the short end down more,they are trying to keep more companies alive for now and that will be less inflationary.

If its the long end they are trying to get liquidity into the real economy without the banks.

[sancho panza]

4 hours ago, DurhamBorn said:

Exactly,Centrica managed gas supply well until the government decided to half destroy the company to cut bills by £1 a week while seeing it as ok to put council tax up 5% every year.Il be blad when the pips are squeaking.

On the long bond i suspect the FED would like to keep it below 2.2% .A BK is more of a risk when the 10 year yield falls.When its rising it shows people are selling bonds to invest in the real economy,or inflation hedge,so invest in oil etc.The short end can add or take away from real economy liquidity quickly.

Governments finance from the long bond mostly,companies finance off the short end.

Genuine question here DB.How much does the size of the Fed balance sheet affect the normal behaviour of Bond markets these days?Given the Fed and BoE have bought much more of issuance this year.

 

[jamtomorrow]

Haven't picked over the composition yet, but seems worth a once-over: 

 

[RJT1979]

1 hour ago, Noallegiance said:

Intrepid took a while to get going but they've kept red days blue for me in the last few weeks.

Skimmed some non-divi profits today. Kept some as cash and bought divi payers that are still down as well as another few nuggets chucked at HZM.

I'm in danger of starting to know what I'm doing.

Overall portfolio is up 15% in the 9 months since I opened my SIPP. Dragged down by firms like VOD and Babcock but they'll have their runs.

It's fascinating just to be in charge of one's own (currently pathetic) pension.

 

15pc is nothing. My dad turned 600k now into 1800k from April to now in his sipp.

[Talking Monkey]

1 hour ago, Loki said:

I will see what I can do

Yous a goodun

[sancho panza]

1 hour ago, DurhamBorn said:

Hope your all enjoying your potash profits.I thought we might get 500% over the cycle.Mosaic has turned £10k into £43k already from the lows in less than a year,we got a real bullseye on the sector

We went the other way and overloaded on the oilies.Mainly for the divis to be fair.

I've reflected on this year and not getting a proper allocation in potash was one of my biggest regrets

Having said that,oilies are beginning to run at last.XOM at $48,I can hardly believe it.

 

18 minutes ago, DurhamBorn said:

@sancho panza i think we need to keep a tight watch on where on the curve the Fed move here.If they try to keep the long end down they are trying to help government with fiscal spending,thats more inflationary ,if they force the short end down more,they are trying to keep more companies alive for now and that will be less inflationary.

If its the long end they are trying to get liquidity into the real economy without the banks.

You've answered my question before I asked it.I was intrigued by your earlier comment about the short end.

[Talking Monkey]

47 minutes ago, DurhamBorn said:

I expect holding for the cycle will prove rewarding on them.

On K&S DB, are they still at risk in a BK of going under, I might be wrong but I recall some chat

[mattydread]

1 hour ago, Loki said:

Wait until you see what happens when he finally gets it

Are you ripping the piss? I've just spent the last 15mins watching it & he's not got it yet..

[Loki]

2 minutes ago, mattydread said:

Are you ripping the piss? I've just spent the last 15mins watching it & he's not got it yet..

Wait two more weeks

[sancho panza]

Some WOlf charts that paint a 1000 words.

 

https://wolfstreet.com/2021/01/11/brick-mortar-retail-meltdown-in-stunning-manhattan-style-years-before-during-the-pandemic/

https://wolfstreet.com/2021/01/12/electricity-generating-capacity-additions-retirements-2021-change-u-s-power-mix/

In 2021, developers and power plant owners plan to bring 39.7 gigawatts (GW) of new electricity generating capacity on line, and retire 9.1 GW in generating capacity, for a net increase in capacity of 30.6 GW, according to the EIA today. 70% of the capacity additions will be from wind and solar, 16% will be from natural gas, and 3% will be from a nuclear reactor. These are utility-scale power generators and exclude rooftop solar. Of the retirements, 86% will be coal and nuclear.

Capacity Additions:

• Solar photovoltaic, utility scale: 15.4 GW
• Wind: 12.2 GW
• Natural gas: 6.6 GW
• Batteries: 4.3 GW
• Nuclear: 1.1 GW (Southern Company’s new reactor at its Vogtle plant in Georgia)
• Other: 0.2 GW

 

 

[sancho panza]

I wonder where these loan defaults will fall?

Nick Corbishley on Wolf St-Spain going pop.The numbers are eye watering.

https://wolfstreet.com/2021/01/09/keeping-a-business-alive-thats-generating-no-revenues-is-an-uphill-struggle-friend-and-hostel-owner-in-barcelona-as-an-industry-collapses/

Bankruptcy proceedings in the sector were up 60% in November on a year ago. Most of the hotels affected are small or medium-sized, with fewer than 100 rooms. Many other hotel owners now face the problem of trying to sell their business at a time that many others are trying to do the same.

In 2020 through November, tourist arrivals by air, land, and sea collapsed by 77% from the prior year, to just 18.3 million foreign tourists, according to Spain’s National Statistics Institute. During April and May, the two months of total lockdown, “zero” foreign tourists arrived in Spain, and foreign tourists spent “zero” money in the country. After the borders were reopened in June, foreign tourists began returning but only at a fraction of normal numbers. In November, just 456,000 foreign visitors arrived in Spain, down 90% from November 2019. Foreign tourist expenditure collapsed to less than €20 billion, from €92 billion in 2019:

 

[Loki]

6 minutes ago, Cattle Prod said:

Sancho, I'm getting vibes that countries could open up very quickly after minimal vaccination. I think they've realised they overplayed their hand and killed their economies. A final hurrah before crack up. It's spooky how the bones of this were foretold by our macro yodas, like db, before the virus was an itch in a Chinese throat.

We've had Bill DeBlasio, Hancock, Biden etc all out with "we must vax and open" messages in the last few days. Spain looks like it needs some tourists. I'll go if they don't hassle me on the way there or the way back!

Wind down the pcr cycles, announce a mild mutation, get the word out to the media, job done. Let's hope

[AWW]

They're not going to reduce PCR cycles, they're going to move testing over to lateral flow tests.

Lateral flow tests are currently getting a kicking in the more Marxist media outlets because they are "not as good" as PCR tests - they "miss lots of cases".  In reality, LF is simply more accurate, as it doesn't pick up dead bits of that cold you had last year, like a 45 cycle PCR test does.

Moving to LF tests should reduce "cases" by 60-70% on its own.

[JMD]

2 hours ago, jamtomorrow said:

Haven't picked over the composition yet, but seems worth a once-over: 

 

Looks good, plus Horizon Kinetics are imo great fund managers. They specialise in finding value stocks with assets, growing cash flow, inflation protected companies of the type discussed here. Had a quick look and the new fund you mention is very globally diversified and contains a number of this threads favourites. I also like how HK are critical of much of the investment industry, particularly etf's. Having said all that I can't find where to that fund in the UK!?!

[wherebee]

2 hours ago, RJT1979 said:

15pc is nothing. My dad turned 600k now into 1800k from April to now in his sipp.

I'm up 33% from June.  That's insane, and 90% thanks to this thread.

I'm really wondering at what point I topslice some of those oilies.  If there is no crash, it's stupid.  If there is a crash, it's brilliant.