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

[Lightscribe]

7 hours ago, Noallegiance said:

There will be no uprising. Just the next set of controls.

I’ll make it clear what I meant by uprising in my previous comment. I don’t mean pitchforks at dawn and Fed heads on sticks.

I meant by banning crypto through regulations ‘for your own protection’ will cause lots of animosity in the younger generation.

They don’t feel that they need to be ‘saved’ through restrictions. The current financial system has nothing to offer them. They’d rather gamble what they have on all or nothing. One browse through the Reddit and Biz forums, and you’ll see some have no intention of ever cashing out to fiat.

So by banning it, that animosity (with lots of crypto gain money behind it) will filter out to cause havoc in the mainstream financial system like GME in return. It could be labelled as ‘financial terrorism’. Pumps and dumps, coordinated running against shorts and generally causing volatility. 

But to think that BTC/crypto will fizzle out without a trace like tulip mania is in itself naive in my opinion. Pandora’s box has been opened.

[Don Coglione]

Just now, Lightscribe said:

They don’t feel that they need to be ‘saved’ through restrictions. The current financial system has nothing to offer them. They’d rather gamble what they have on all or nothing. One browse through the Reddit and Biz forums, and you’ll see some have no intention of ever cashing out to fiat.

What is their plan, then?

[Lightscribe]

Just now, Knickerless Turgid said:

What is their plan, then?

Defi. Cashless payments between users that has no involvement from any financial institutions and fiat.

That is what the governments will ban, not BTC through centralised exchanges where they can rake in tax revenues.

[Don Coglione]

2 minutes ago, Lightscribe said:

Defi. Cashless payments between users that has no involvement from any financial institutions and fiat.

That is what the governments will ban, not BTC through centralised exchanges where they can rake in tax revenues.

So they are fucked?

[Democorruptcy]

1 hour ago, Cattle Prod said:

Gasoline is not increasing, down 401k on last year, but diesel is up on 488k. A lot of car journeys are being taken up via diesel (trucks and trains). All I see is fuel substitution in an efficient market.

Maybe partly people staying at home due to lockdowns (or successful fear mongering) and not going out in the car. Instead they order online and have stuff delivered by couriers etc using diesel vans.

[Hardhat]

24 minutes ago, Knickerless Turgid said:

So they are fucked?

Unless you can take down the distributed ledger, which you can't, or crack the ledger, which you maybe can with a quantum computer, you could never actually ban crypto. You could make it very very hard to use (as it was in the very early days), but it wouldn't be possible to destroy it.

[Lightscribe]

21 minutes ago, Knickerless Turgid said:

So they are fucked?

Defi as well as staking, running nodes to get rewarded more crypto etc. Theres options basically, how much of which the government will allow through future regulations and what they can do about it all we shall see. 

Thats why I think we’ll see worldwide censorship of the internet eventually modelling ourselves on China. Problem is it just drives it all underground, privates networks etc. They either work with it, or make it incredibly harder for themselves to track everything. Whichever they choose, we’ll find out one way or the other in the coming years.

[Don Coglione]

6 minutes ago, Hardhat said:

Unless you can take down the distributed ledger, which you can't, or crack the ledger, which you maybe can with a quantum computer, you could never actually ban crypto. You could make it very very hard to use (as it was in the very early days), but it wouldn't be possible to destroy it.

No need to ban or destroy anything, simply make all crypto transactions illegal.

[Hardhat]

Just now, Knickerless Turgid said:

No need to ban or destroy anything, simply make all crypto transactions illegal.

Sure, but how would you know who held each wallet address? I don't think it's enforceable. As long as people are willing to accept crypto as payment without ever cashing it out to Fiat, it will continue to be used. See Silk Road in early 2010s etc.

[AWW]

"If anyone offers to transact an unlicensed crypto currency with you, report them for a $50,000 reward."

Try trading crypto after that.

[Don Coglione]

4 minutes ago, Hardhat said:

Sure, but how would you know who held each wallet address? I don't think it's enforceable. As long as people are willing to accept crypto as payment without ever cashing it out to Fiat, it will continue to be used. See Silk Road in early 2010s etc.

The threat of illegality is sufficient to deter the vast majority.

Don't underestimate the lengths to which The Establishment would be prepared to go to maintain the status quo. Being a rebel is really cool an' all, until it isn't.

[Hardhat]

5 minutes ago, Knickerless Turgid said:

The threat of illegality is sufficient to deter the vast majority.

Don't underestimate the lengths to which The Establishment would be prepared to go to maintain the status quo. Being a rebel is really cool an' all, until it isn't.

Sure. I think the price would also come down massively in this kind of situation. But, I don't think it's possible or enforceable to completely destroy the network now, you just need enough willing participants. Same as any black market.

[Harley]

4 hours ago, planit said:

Exactly, which should mean packaging companies are making huge amounts of money at the moment. Demand has outstripped supply so prices have risen, should be the conditions for a packaging company to make lots of money.

This is the problem I have implementing the "at source" approach", the devil being in the detail.  Some packaging companies and similar came up on my value screens but do they fit the bill?  I passed as I adopted an "added value" approach - does a company/sector/industry deliver enough relative value add to the chain to make them a possible price setter?  I suggest not in this case, relative to say the raw materials producer.

[Lightscribe]

14 minutes ago, AWW said:

"If anyone offers to transact an unlicensed crypto currency with you, report them for a $50,000 reward."

Try trading crypto after that.

Monero and privacy crypto use goes through the roof in that scenario. Yes the normies will be scared off, but BTC still will act a digital standard peg. Transactions will continue regardless of legality and crypto like XMR is impossible to trace. The government would rather keep it all in the open.

[Barnsey]

Some like it hot...

Edit: everything I'm seeing coming out this meeting is about maximum employment, and righting the wrongs of previous recessions and the policy being far too slow to improve not only employment but wages too. States unemployment rate likely 10% not 6.3%. Gives the Powell/Yellen/Biden partnership a very clear runway to go a bit nuts.

[AWW]

https://www.reuters.com/article/us-usa-fed-powell/feds-powell-calls-for-broad-national-drive-to-full-employment-idUSKBN2AA2KT

“Given the number of people who have lost their jobs and the likelihood that some will struggle to find work in the post-pandemic economy, achieving and sustaining maximum employment will require more than supportive monetary policy,” Powell said in remarks to the Economic Club of New York. “It will require a society-wide commitment, with contributions from across government and the private sector.”

[Noallegiance]

This conversation seems to be concluding that non-state-issued crypto will end up not as a store of value or a widely adopted currency but as underground barter which will end up with a lot of effort for not much of anything unless a large amount of fiat is cashed out at a decent sum and swapped for an asset pre-marginalisation. Rhetorically, will the last coins ever be mined if all you can swap it for come 2141 is a bag of weed? Even then would 0.04 BTC be worth anything to a dealer if he can't go and buy water with it?

In the mean time, I don't have enough spare fiat to make a big enough gamble worthwhile. I could chuck £500 at it, but even if it trebles a year from here I'd only be looking at £1500. And even then, based on recent evidence, the outlay might have to pass £250 first. From there that's a heck of a bounce to £1500 but it has been done already so consequently I'd be watching it like a hawk just to capture some gain out of £500. Not worth it, for me.

If I were a gambler with £100k spare I suppose my outlook would be different, but in order to benefit from it I'd need to risk losing that life-changing money to make life-changing money. Which (with stratospheric doses of irony) limits it's benefit to the already well-off with cash to spare (Hedge funds? Institutions? Aka some of the very people BTC was designed to wallop? Irony overload). I've not yet seen any reports of central banks buying BTC. That could be a reason to buy it as it would be looking at wider adoption, but I'd have to put my pot of irony pills down because the current speculators value would plummet.

The only way I'd be remotely pro-BTC would be if I'd bought £100 worth in 2010 and now a multi-multi millionaire. But I'd be swapping it for tangible-related assets via fiat to realise the value contained within. So by default that wouldn't make me pro-BTC and still determines the value by fiat. Which wasn't the point of it, allegedly. But I missed that boat, as most people did.

Crypto seems to be such a confused thing with confused application prospects and a confused following that can't decide what it's use is. And if the confusion is mine through a lack of technical understanding, so be it. If I understood it in a technical way it wouldn't make me part of a revolution, I think.

[Noallegiance]

29 minutes ago, AWW said:

https://www.reuters.com/article/us-usa-fed-powell/feds-powell-calls-for-broad-national-drive-to-full-employment-idUSKBN2AA2KT

“Given the number of people who have lost their jobs and the likelihood that some will struggle to find work in the post-pandemic economy, achieving and sustaining maximum employment will require more than supportive monetary policy,” Powell said in remarks to the Economic Club of New York. “It will require a society-wide commitment, with contributions from across government and the private sector.”

That made me shudder. And not metaphorically.

Communism inbound for the land of the free.

[arrow]

I don’t usually pay much interest to “mad money” Jim Cramer , but yesterday he chose chose Cummins for his industrial stock tip. Hydrogen has been discussed before on this thread

In November 2020, Cramer talked about hydrogen, Cummins, Linde, BP and Shell

 “CNBC’s Jim Cramer recommended Linde and Cummins as two non-pure plays on the future of hydrogen energy.
    “The technology’s not there yet — just too darned expensive for the moment — that’s why I prefer the non-pure plays,” the “Mad Money” host said in explaining his outlook on hydrogen fuel cells.
    “This whole industry’s getting a major tailwind once the Biden administration takes over because the Democrats love alternative energy,” he said.
CNBC’s Jim Cramer on Monday endorsed two stocks as plays on hydrogen fuel cells in the current market environment.
While Cramer is convinced that hydrogen fuel technology, a frontier in clean energy, is the way of the future, he thinks there is a long runway before that future arrives.
“The technology’s not there yet — just too darned expensive for the moment — that’s why I prefer the non-pure plays, like Cummins ... or Linde,” the “Mad Money” host said. “I’d be even more bullish on Cummins if we saw a national rollout of hydrogen fueling stations by an integrated oil company with lots of gas stations, maybe a BP or Royal Dutch, but that doesn’t seem like it’s on the horizon yet.”
Cummins is a big engine manufacturing operation that’s working on a hydrogen-based engine. Linde is an industrial gas distributor that counts hydrogen among its products.”

 

In the Telegraph, there’s a story about hydrogen cars,
“Hydrogen-powered cars to be built in Wales with Siemens support
The start-up Riversimple is teaming up with the German industrial giant to get zero-pollution cars on British roadsA British start-up building hydrogen-powered cars has won backing from Siemens, which will help mass-produce the vehicles.
Riversimple, based in Wales, has joined forces with the German industrial giant to collaborate on product design, supply chain management and industrialisation as well as helping secure financial backing for the “Rasa” cars. 
Powered by a hydrogen fuel cell, the Rasa – “clean slate” in Latin – is pollution-free. 
The two-seat cars, which have a top speed of 60mph and a 300mph range, will be leased rather than sold to drivers.
Riversimple estimates the total cost of ownership – including fuel, insurance and tax – will be about £500 a month to drive about 10,000 miles a year. That is about the same total cost of running a VW Golf, according to founder Hugo Spowers. 
Rasas are expected to have a 20-year life and then be recycled, with many of the components going into new models, promoting environmental sustainability.
 Mr Spowers said Siemens' backing was a very significant seal of approval. 
“The are looking at future technologies and models in ways that existing cars companies can’t because of their legacy with the internal combustion engine," he said.
“Siemens is engaged in understanding business models of the future, and their support brings options for accessing financing that does not fit into the models of existing car makers.”
Brian Holliday of Siemens said the company was delighted to work with Riversimple and support firms producing "boundary-breaking products”. 
Although they have a range comparable to conventional cars, the Rasa is intended for “local use”, hence their low top speed.
It also eliminates concerns about the lack of hydrogen fuel stations, as customers are likely to be those who live near one.
As hydrogen becomes more popular as a fuel source, Mr Spowers said industry – rather than government – would build more hydrogen fuel stations to meet demand.
Riversimple electric
In October Riversimple launched a four-year £150m funding round, with the first tranche closing in May. 
It plans to open a factory in Wales capable of building up to 5,000 cars a year by late 2024.
A second similar-sized factory at an as-yet undecided location is planned for 2026. Each factory is expected to create 220 direct jobs and twice as many again in the supply chain.
Riversimple is already building test cars for pilot programme in Wales.”

One of the interesting things about the Riversimple car is that “The fuel cell comes from Hydrogenics in Canada, via Germany”. In 2019 most of Hydrogenics was bought out by Cummins. It’s now part of their New Power division. Cummins now owns 81% and Air Liquide 19%. So, that’s Air Liquide, Cummins, Linde, BP, Shell and Siemens that could be hydrogen plays.

[DurhamBorn]

55 minutes ago, Barnsey said:

Some like it hot...

Edit: everything I'm seeing coming out this meeting is about maximum employment, and righting the wrongs of previous recessions and the policy being far too slow to improve not only employment but wages too. States unemployment rate likely 10% not 6.3%. Gives the Powell/Yellen/Biden partnership a very clear runway to go a bit nuts.

When they fear unemployment more than inflation,its only a matter of time.Thats what caused the 70s inflation.

[Noallegiance]

5 minutes ago, DurhamBorn said:

When they fear unemployment more than inflation,its only a matter of time.Thats what caused the 70s inflation.

 

[Democorruptcy]

27 minutes ago, DurhamBorn said:

When they fear unemployment more than inflation,its only a matter of time.Thats what caused the 70s inflation.

It's not like deciding to target unemployment more than inflation is anything new. This was Bernanke 10 years ago!

Quote

 

Our economy is suffering today from an extraordinarily high level of long-term unemployment, with nearly half of the unemployed having been out of work for more than six months. Under these unusual circumstances, policies that promote a stronger recovery in the near term may serve longer-term objectives as well.”

“Longer-term objectives?” Is the Chairman hinting that maybe the Fed can target the long-term unemployment rate?

In fact, he is. And that's key to understanding why he likely believes easy monetary policy is the best prescription for the economy—and why it could remain easy as long as long-term unemployment remains high.

https://www.cnbc.com/id/44819836

 

 

 

[Harley]

4 hours ago, Cattle Prod said:

Looking at that, I think it's better to break into sections like you have. Too much give in trying to fit a curve. I hadn't thought of the options trade you mention... hmmm... food for thought. Thanks for the feedback.

Gents, maybe price comparisons are too simplistic in this case.  Maybe look at price characteristics (first/second order derivatives?) like momentum (stochatics), etc for cleaner correlations and/or triggers.

[DurhamBorn]

28 minutes ago, Democorruptcy said:

It's not like deciding to target unemployment more than inflation is anything new. This was Bernanke 10 years ago!

 

 

Different now.It was a front last time to save the banks balance sheets.This time its full on fiscal spending,avoiding the banks mostly.The CBs are telling governments to flood the economy.

[Talking Monkey]

5 hours ago, sancho panza said:

CP.A very thought provoking post...If I could offer a slightly different view (essentially agreeing the long term correlation with medium term dissaociations) and jsut based on my own experience.Using monthlies,Ive taken some snapshots of charts.Intersting that your point of maximum correlation coincides with teh end of the flat market.

Also,you raise the important issue of bringing in divis to the calcs.Even allowing a 5% compunded for four years gives a return from divis of 21.5%.This will be pertinent given teh levels many on here have bought at over the last year,.

Conclusion:as I think you've psoted before,oilies outperfrom oil in flat and bear markets,oil outperforms in bulls.Key thing I'm seeing is tight correaltion in the weeklies in terms of up/down moves.Doesn't necesarily correpsond with matching moves in %age terms but the medium term is tradeable.This discussion has made me consider looking at trading some complex options trades as per @MvR has discussed,ie long the underlying,less long the oilies etc.

Context

 

Bottom 1/1/02->Peak June 08->Bottom Jan 09->Top April 11 whereupon it was flat to June 14->bottom Jan 16 ->top Sept 18->bottom march 2020

Jan 02-June 08 bull:Brent outperfoms Brent +560%,XLE +233%

 

 

 

 

June 08 toJan 09 Bear:Brent undershoots to the downside.XLE outperforms

 

 

Jan 09 to Apr 11 bull:tight correlation in terms of moves in the weeklies ie when Brent moves up XLE does...but  Brent outperforms.Brent +172% XLE +70%

 

 

 

Flat period April 11 to June 14:you'll see the disparaty you identified in march 2012 disappears from view if you only started using the cycle peak.You can see by the end of this phase that XLE is +23% vs Brent -10% .Including Divi's outperformance would be substantial

The corraltion in the early phase here was quite tight.

 

June 14 bear to the Bottom Jan 16:XLE -41% vs Brent -69%.

 

Jan 16 to Sept 18 bull:Brent handily outperforms +120% XLE+23%

Sept 18 Bear to March 20:XLE -60% Brent -70%.Extrmemely tight correlation in the moves.

 

March 20 bull to now:Brent +179% XLE +50%

 

That's some top notch analysis SP