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


spunko

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Democorruptcy
58 minutes ago, Cattle Prod said:

This is true. I was talking to a friend in BP last week, and they really have hugely reduced their oil and gas exploration. They've effectively cut it right back and merged it into another department. Equinor is similar.

This is a concern to me as an investor. I don't mind too much if they have to pander to the current investment crowd, but if they are cutting their capability, they won't be able to react in the future. BP have usually kept their people through bad times. Bean counters hate exploration, and at times like these, it is often considered a luxury. At times of higher prices, exploration people would be stepping into a room twice a day to speak to recruitment agents, retention bonuses, ridiculous salaries. Because when prices are high, exploration is the cheapest way to add new reserves. It's much more difficult to buy them when prices are high. Companies currently have the luxury of buying whatever they feel like, at good prices.

I'm currently more disposed to other oil and gas majors than BP for this reason. I'll hold what I have, but I'll add elsewhere till I see this play out a bit more.

That said, BP was I think the biggest 'finder' of oil through exploration last year of the western majors. How? Because of their share of Rosneft, who found by far the most worldwide. If their strategy is to 'hide' their organic growth in Russia, fine with me. If they sell their Rosneft stake (how could that sit well with the woke crowd), I'll be selling a chunk too.

I suppose it's a balancing act these days, trying to keep institutional investors on side. I wondered if BP transitioned quicker such as RDSB might benefit from the oil side. RDSB have had some of their green energy execs resign as they didn't think the firm were transitioning quick enough.  Though they are announcing their own new strategy in Feb, I suppose the charging network buy is partly for that.

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55 minutes ago, geordie_lurch said:

What do the 3 lines underneath mean / show in your opinion @Harley as even I can understand the top line?

Technicals (Stochastic, using two sets of parameters (fast and slower) and the MACD).  Not necessary in this case.  Top line are monthly candles rather than just the "normal" line chart.  Again, not necessary in this case.  The case being RDSB, BP, etc prices are near historic lows.  BATS is similar but did fine on divs for a long time.  But even BATS didn't fall relatively as far to its historic lows (maybe different re peak to trough though) as RDSB, etc.

However, looking at the RDSB technicals at the bottom (explanations on the net), MACD started falling way back in 2019 and is now at a historic low but looks to be turning up (bullish?).  The stochastics are also on the floor.  Both technicals measure price momentum (energy) - a dead parrot soon to come back to life?  IMO we could either be on the up from here or at least stay in a channel like BATS.  Worse case further falls as anything is possible.  But assuming one of the first two, at least there are the divs (just need to assess their security), again as with BATS.

The plus for RDSB, etc over say BATS is they are diversifying.  Sure, BATS are moving into vaping but that's after a long time and not such a major move as say BP's (at least on paper) moves.  

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26 minutes ago, Cattle Prod said:

It's not the Robinhood traders they're afraid of I think Harley, more the virtue signalling institutional investors led by Larry Fink at Blackrock. Once price signals that there is a supply problem and there's a trade to be had for another 5-10 years, they'll be back in like sharks in bloody water of course. My concern is that BP needs to retain the capacity to react to that.

My point was to look beyond the the western markets (US in particular), as it seems from your post BP is doing on the QT.  And if BP gets it wrong, others will benefit.  BP (and some others) is not in the best of financial shape on a relative basis.  There are a lot of attractions in going further afield and this is just one of them.  As you seem to be doing, I've been investing (especially in resource companies) elsewhere, in Asia, Russia, etc myself, but things there have mostly run ahead faster than my investing.  If you believe the data, there are often far better financials and valuations, and a degree of immunity (indeed upside) from any "on message" risky/destructive actions from others, although the likes of Blackrock are obviously there too (but maybe only in their non-US ETFs/funds).  Not to say I don't keep a foot in both camps though, just a bit of my own form of diversity! 

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Democorruptcy
28 minutes ago, feed said:

When was that ever the case.  The big moves (off the 90's bottom) started in 98/99 where i live.  Inflation (RPI) adjusted we still haven’t hit the 2008 peak. 

I remember a conversation with some of our grads a few years ago, their dissatisfaction of not being able to buy a place now they had jobs.  They seemed somewhat perturbed when we all explained that we hadn’t been able to get a place until we were all in our mid/late 30’s. 
 

and with buy, i mean get a mortgage.   

Tony Bliar's first big policy was the 1998 Bank Act, that made the BoE independent and gave them the power to set interest rates.

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34 minutes ago, feed said:

When was that ever the case.  The big moves (off the 90's bottom) started in 98/99 where i live.  Inflation (RPI) adjusted we still haven’t hit the 2008 peak. 

I remember a conversation with some of our grads a few years ago, their dissatisfaction of not being able to buy a place now they had jobs.  They seemed somewhat perturbed when we all explained that we hadn’t been able to get a place until we were all in our mid/late 30’s. 
 

and with buy, i mean get a mortgage.   

Yep, mid 30's for me, and a small flat only after I'd moved way out of London.

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1 hour ago, geordie_lurch said:

Wow that's a great find @Democorruptcy and with a Chief Executive called Bernard Looney xD

Just repasting the following bit again as will his job be on the line if he doesn't do the following? O.o

"Over the next decade, he wants to cut BP's oil output by a million barrels per day or about 40%. At the same time, its output of renewable energy is supposed to rise 20-fold. Looney is driving the exploration budget down to around $400 million per year. That's less than a tenth of what it was in 2010."

Part of me wants them to announce:

"BP supports the aim to stop climate change and as we have no desire to go against the government's carbon free agenda we have decided to stop supplying any oil and oil based products to the west from 1st April 2021. All of our supply will be going to asia."

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6 minutes ago, Harley said:

From upstairs in the "Dark Ages" thread"???????

F***in ell. And to think I chuckled "idiot, you'll never need this" when I decanted the last can of diesel into my 55 gal drum in the bedroom wardrobe.

(Only kidding, it's in the lounge)

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13 hours ago, DurhamBorn said:

The woke left mean it,no doubt about that,Pelosi has put $1million into Tesla 

https://www.foxbusiness.com/markets/tesla-stock-pelosi-bet-biden-administration

Its incredible to think how corrupt the dems are so they will do all they can to push green energy.They will run up against rising rates once we get into the cycle though.All these funds,Biden,government here,EU governments etc are all placing policy based on fully engaged CBs.Those CBs will stop printing within 18 months,maybe within 12.

Of course the left really wants to remove transport etc from ordinary people,its political,not climate related.2022 to 2025 massive uplift in fossil fuel prices.

@DurhamBorn I'd like to explore this a bit further if you don't mind. My understanding was that the inability of the CBs to print would, with a lag, lead to the end of the reflation cycle. I can't imagine that it could carry on until 2028-30 if the CBs stop in 2022.

Perhaps governments can still borrow (from whom though?) once the CBs stop buying. If they do for the rest of the decade then the inflation rate and interest rate would get much higher than expected. I suppose I'm wondering if it collapses earlier (say 2025) or inflation gets much higher before it collapses in 2028-2030.

Another thought is if they continue with a merging of the Fed and the US treasury, and going full MMT. The Fed might want to stop printing but be unable to: hyperinflation ahoy!

I'd be interested in your thoughts, and anyone else's of course.

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2 hours ago, Democorruptcy said:

I was wondering who gained from Biden cancelling the Keystone pipeline. BP in there again, you can't keep the little bugger down!

 

 

Thanks DM, you've made my day! Also i note that some of the companies mentioned in that article have been part of Lyn Alden's online portfolio for long while (someone referred to her as the 'darling of this thread', was it you DM?)... not advice of course, just saying maybe worth a look at what she picks/owns, eg. Enbridge and Canadian National Resources are still relatively cheap and pay good divis... anyone buying?

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2 minutes ago, JMD said:

Thanks DM, you've made my day! Also some companies mentioned in that article have been part of Lyn Alden's online portfolio for long while (someone referred to her as the 'darling of this thread', was it you DM?)... not advice of course, just saying maybe worth a look at what she picks/owns, eg. Enbridge and Canadian National Resources are still relatively cheap and pay good divis... anyone buying?

I own a little of one and will check out the other, along with Buffet's rail holdings which someone posted also benefited from pipeline closure!!!!!!

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2 hours ago, jamtomorrow said:

Yes, it might get worse before it gets better.

Way I see it, it's the responsibility of the previous generation to lay foundations for the next generation to thrive, with the moral hazard that if/when that doesn't happen it's the responsibility of the next generation to tear down eveything the previous generation holds dear and remake it.

The generational contract has been in default for some time, but I suppose we'll find a way of putting off the inevitable a while longer.

For as long as the boomers continue to make the rules. I can't help thinking they're letting this run hot and blow up to teach them a lesson.

In other news...

 

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14 hours ago, sancho panza said:

Funny you should post this, I was thinking about the fall of Rome the other day with regard to the USA. 

'There is something of the late Roman empire about this, the arrogance of a ruling elite in terminal decline. The world's most powerful man gets into office at a time of unprecedented crisis and one of his first priorities is to ensure that men who identify as women should be allowed to use female changing rooms and pulverise any woman he comes across in competitive sports. 

SP, you say you were thinking about Rome's fall... thought you might be interested (might already be aware?) that Camille Paglia (ironically a militant feminist; but i think she is a kind of social barometer for USA) says similar things regarding the end-days of empires which she says are typically marked by political pre-occupation with sexual topics (of all things!) 

In link below, Paglia makes her main point between 4.00-6:00. Ok she perhaps stretches her theory and even manages to weave in ISIS !!; but for me, i think the discussion is very informative, because these are the type of social topics that are dividing America, ie its not just about 'race' - but you'd never know that by listening to MSM here in the UK.  

(i note that Obama's last days as president had him passing bills regarding trans-gender bathrooms - the extroardinary thing is that Biden, seems has learned nothing, and during his first days in office he is enacting more similar legislation (again by executive order no less!))

Lesson from History: Transgender Mania is Sign of Cultural Collapse - Camille Paglia - YouTube

...excuse the off-piste post!!

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2 hours ago, Lightscribe said:

With the Gen Z’ers I work with, I think they are generally pissed off at the hand of cards they’ve been dealt and rightly so.

Politically I think it’s the same of all youth, the desperation of change and with the onslaught of the mainstream media narrative paving the way (Which has capitalised and infiltrated every avenue of their lives - far more than older generations).

They will never have the opportunity to have a house and a family all wrapped up and paid for at 30-40. They know the system has been stacked against them.

Hence that’s why I smiled at the GameStop debacle. Just a little nudge at the old hedge fund brigade (who’s been comfortable in their domain for ages) that have entered into the digital world. The Gen-Zers aren’t silly and can collaborate when needed and are for more interconnected which can turn things with enough numbers just to say f**k you.

That is also is what concerns me. Cycles, political madness, debt/capital flows, nothing being based on actual asset realisation. If we are truly experiencing the end of the western world power (like the downfall of Rome) and a transfer to a global world power the $ may as well be the Denarius without the precious metal content.

All the average Joe’s like us can do is prepare like we have done and hope for the best. We may still just be arranging the deckchairs on the Titanic however.

Well, thankfully we don't have a pissed off younger cohort alongside sweeping socialism.

That's always been good news.

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3 hours ago, Cattle Prod said:

This is true. I was talking to a friend in BP last week, and they really have hugely reduced their oil and gas exploration. They've effectively cut it right back and merged it into another department. Equinor is similar.

This is a concern to me as an investor. I don't mind too much if they have to pander to the current investment crowd, but if they are cutting their capability, they won't be able to react in the future. BP have usually kept their people through bad times. Bean counters hate exploration, and at times like these, it is often considered a luxury. At times of higher prices, exploration people would be stepping into a room twice a day to speak to recruitment agents, retention bonuses, ridiculous salaries. Because when prices are high, exploration is the cheapest way to add new reserves. It's much more difficult to buy them when prices are high. Companies currently have the luxury of buying whatever they feel like, at good prices.

I'm currently more disposed to other oil and gas majors than BP for this reason. I'll hold what I have, but I'll add elsewhere till I see this play out a bit more.

That said, BP was I think the biggest 'finder' of oil through exploration last year of the western majors. How? Because of their share of Rosneft, who found by far the most worldwide. If their strategy is to 'hide' their organic growth in Russia, fine with me. If they sell their Rosneft stake (how could that sit well with the woke crowd), I'll be selling a chunk too.

CP, (cant remember if i have asked this question before?), but as we are on the topic of oil/gas exploration/reserves, I wondered if you had any thoughts on what the investment firm Horizon Kinetics term 'land royalty companies in oil/gas' (similar to the gold/silver royalty streamers). I have put my notes below. They all appear cheap, but notice that Texas Pacific Land price is up/down/up. Just wondering if they are a possible 'asset' opportunity?

PrairieSky Royalty (canada, owns oil/gas rights, 2% divi, v low debt), Freehold Royalties (canada, 4% divi, v low debt, owns oil/gas rights in canada/us), Brigham Minerals (us, 8% divi, owns oil/gas rights, v low debt), Dorchester Minerals, (us, 12% divi, no debt, owns oil/gas rights), Texas Pacific Land Trust (us, 2% divi, v low debt, land in Texas, oil/gas royalties, water services)

 

 

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4 minutes ago, Barnsey said:

You can see where we're going with this right? ;)

Kiss of death!  Especially if the capital gains policy in the clip below is her idea, quickest way to crash an economy.

 

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Democorruptcy
1 hour ago, JMD said:

Thanks DM, you've made my day! Also i note that some of the companies mentioned in that article have been part of Lyn Alden's online portfolio for long while (someone referred to her as the 'darling of this thread', was it you DM?)... not advice of course, just saying maybe worth a look at what she picks/owns, eg. Enbridge and Canadian National Resources are still relatively cheap and pay good divis... anyone buying?

I think I referred to her as a 'thread darling' when quoting her top 5 dividend picks that included BATS.

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Talking Monkey
1 hour ago, JMD said:

Thanks DM, you've made my day! Also i note that some of the companies mentioned in that article have been part of Lyn Alden's online portfolio for long while (someone referred to her as the 'darling of this thread', was it you DM?)... not advice of course, just saying maybe worth a look at what she picks/owns, eg. Enbridge and Canadian National Resources are still relatively cheap and pay good divis... anyone buying?

I bought some enbridge a few weeks back

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Still a great thread this thanks to DB and the other regulars. Been working for last nine months so don’t have time to contribute much but appreciate the time that others put in.

There is a very interesting article on the FT today

Vaccines have been oversold as the pandemic exit strategy 

which is behind a paywall so I can’t post but which argues that even with everyone who needs to be having been vaccinated in the U.K.  with new variants, open borders and potentially reduced efficacy of vaccines to new strains there may end up being suppression measures for many years to come.
 

Whilst no one wants to here this I wonder if this is the potential trigger for the deflationary event many of us are still waiting for as markets don’t seem to be pricing in that kind of long term restrictions and might now even be the contrarian narrative?

 

 

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3 hours ago, Lightscribe said:

With the Gen Z’ers I work with, I think they are generally pissed off at the hand of cards they’ve been dealt and rightly so.

I can assure you that Gen X (which is always forgotten in these conversations) also feels pissed off. The life they can have is far removed from that which their parents enjoyed.

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4 hours ago, Harley said:

DYOR!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

.....But you can help with mine! :)

.....Time to dust down that (very early) WIP spreadsheet of mine. 

.....Further corrections? 

Advanced Battery Technologies-Battery stocks
AFC Energy-Hydrogen, fuel cells
AKASOL AG-Lithium
Albermale-Lithium resources
AMG ADVANCED MET-Lithium
Atlantica Yield-Utilities
Axion Power International-Battery stocks
Ballard Power Systems-Blue hydrogen, fuel cells
BEIJING EASPRI-A-Lithium
BioSolar-Battery stocks
Blink Charging-EV charging
Bloom Energy-Blue hydrogen, fuel cells
Boralex-Utilities
BP-Blue hydrogen
BYD Company-Lithium
Canadian Solar-Solar
CBAK Energy Technology-Battery stocks
Cell Impact AB-Hydrogen, fuel cells
Ceres Power Holdings-Fuel cells
Companhia Energetica de Minas Gerais-Utilities
Companhia Paranaense de Energia-Utilities
Contact Energy-Utilities
Contemporary Amperex Technology Co-Lithium
Cummins-Electrolysis
Dais Analytic-Fuel cells
Daqo New Energy-Information Technology
Doosan Fuel Cell-Industrials
Dresser-Rand Group-Fuel cells
DYNAPACK-Lithium
EDP Renovaveis-Utilities
Eguana Technologies-Battery stocks
Electrovaya-Battery stocks
Encavis-Utilities
Enel-Renewables
Enercon -Wind turbine
EnerSys-Lithium
Enlight Renewable Energy-Utilities
Enphase Energy-Software
EnSync, Inc-Battery stocks
Envision-Wind turbine
Equinor-Blue hydrogen
EVE ENERGY CO LTD-A-Lithium
First Solar-Solar components
Flux Power Holdings, Inc-Battery stocks
FuelCell Energy-Blue hydrogen fuel cells
GALAXY RESOURCES LTD-Lithium
GANFENG LITHIUM CO LTD-A-Lithium
GE-Wind turbine
Graftech International-Fuel cells
GS YUASA CORP-Lithium
Hazer Group Limited-Hydrogen
Highpower International-Fuel cells, battery stocks
HONBRIDGE HOLDINGS LTD-Lithium
HydroPhi Technologies Group, Inc. -Hydrogen
HyperSolar-Hydrogen
ILJIN MATERIALS CO LTD-Lithium
Impact Coatings AB-Fuel cells
Innergex Renewable Energy-Utilities
Invenergy-Wind turbine
Invinity Energy Systems-Battery stocks
IONEER LTD-Lithium
ITM Power-Hydrogen, electrolysis, fuel cells
JinkoSolar-Solar panels
Johnson Controls-Battery stocks
Kemet-Fuel cells
L&F CO LTD-Lithium
LG CHEM LTD-Lithium
Li Auto-EV manufacturing
Lithium Americas-Lithium
Lithium Technology Corporation-Battery stocks
Livent Corporation-Lithium
MagneGas Corporation-Hydrogen
McPhy Energy SA-Hydrogen, electrolysis, fuel cells
Meridian Energy-Utilities
MINERAL RESOURCES LTD-Lithium
MingYang-Wind turbine
mPhase Technologies-Battery stocks
myFC-Hydrogen, fuel cells
Nano One Materials Corp-Battery stocks
NAURA TECH GR -A-Lithium
Neah Power Systems-Fuel cells
NEL-Hydrogen storage
NEMASKA LITHIUM INC-Lithium
Neoen-Utilities
NextEra-Wind, solar
NGK Insulators Ltd-Battery stocks
Nikola Corporation -Hydrogen, fuel cells
Nio-EV manufacturing
Nordex -Wind turbine
OM Group-Battery stocks
Ormat Technologies-Utilities
OROCOBRE LTD-Lithium
ORSTED-Utilities
Panasonic Corporation-Lithium
Parker Hannifin-Electrolysis
Pilbara Minerals-Lithium
Plug Power-Blue hydrogen, fuel cells
POWER LOGICS CO LTD-Lithium
Powercell Sweden-Hydrogen, fuel cells
PowerHouse Energy Group plc-Hydrogen
Powin Energy Corp-Battery stocks
Proton Power Systems-Hydrogen, fuel cells
Quantum Fuel Systems-Hydrogen
QuantumScape-EV lithium batteries
Redflow-Battery stocks
ReneSola-Solar
Renewable Energy Group-Energy
Saft Group-Battery stocks
SAMSUNG SDI CO LTD-Lithium
Scatec Solar-Utilities
SEwind-Wind turbine
SFC Energy AG-Fuel cells
SGRE (Siemens)-Wind turbine, electrolysis
SHANGHAI PUTA-A-Lithium
SHENZHEN CAPCH-A-Lithium
SHENZHEN YINGH-A-Lithium
SIMPLO TECHNOLOGY CO LTD-Lithium
Sociedad Quimica y Minera de Chile-Lithium miner
SolarEdge Technologies-Solar components
SOLARIA ENERGIA Y MEDIO AMBIENTE S-Utilities
Sunnova Energy International-Utilities
SunPower-Sloar panels
Sunrun-Industrials
SUNWODA ELECTR-A-Lithium
Suzhou Maxwell Technologies-Fuel cells
Suzlon -Wind turbine
Telsa-EV manufacturing
TESLA INC-Lithium
ThyssenKrupp-Electrolysis
TIANNENG POWER INTL LTD-Lithium
Ultralife-Battery stocks
Umicore-Fuel cells, battery stocks
VARTA AG-Lithium
Velodyne Lidar-EV components
Vendum Batteries-Battery stocks
Verbund-Utilities
Vestas Wind Systems-Wind turbine
VITZROCELL CO LTD-Lithium
W-SCOPE CORP-Lithium
WUXI LEAD INTE-A-Lithium
Xebec Adsorption-Hydrogen
Xinjiang Goldwind-Wind turbine
Xinyi Solar Holdings-Information Technology
YUNNAN ENERGY-A-Lithium
Zinc8 Energy Solutions-Battery stocks

DYOR!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Must say, that's an epic list Harley. Is it from using your screens?

Some look Chinese, but given the geopolitics would you consider buying those ones? (btw, i'm assuming you are buying for long-term hold, but could be wrong?)

You seem to have all of mine, i can double-check if you are wanting more(?), but a couple for the pot might be... Wartsila, hyrdrogen? CAP-XX, battery tech?

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1 hour ago, Majorpain said:

Kiss of death!  Especially if the capital gains policy in the clip below is her idea, quickest way to crash an economy.

 

I might have to play that again. I'll listen to what she's saying this time.

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4 hours ago, wherebee said:

I was at a presentation by one of the Big US banks about 5 years ago where they mapped out their view of the world for the next 50 years, and investment strategy to go with it.  It was all about megacities growing ever bigger, huge urban populations, and suchlike.

I was the one in the room who asked what would happen in megacities when cheap food stopped, as it would at some point.  Wouldn't all investments get trashed? Never got a coherent answer.

Wherebee, in the age of covid 'Megacities' are beginning to sound a quaint, almost comic-book type idea!!

Anyway, i think if you asked your question today, and if you also got a truthful answer (v. dubious), you might be referred to the US city of Portland last summer. A lot of trashing went on - though not of investments (which was to be fair you question) - actually it was mostly the trashing of shops, oh and many ideals and culture were also thrown on the fire! 

 

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