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


spunko

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15 minutes ago, Heart's Ease said:

Anyone else 'lucky' enough to own Infastrata - had a message today from HL explaining that I could buy additional shares at 30p as part of a (iirc) rights issue. Just a heads up.

In brighter news, got seven either XD or XD today.  While I'm sitting on my hands as much as I can with 21/22 ISA/SIPP funding it's good to have a few bob arriving.

🍻 everyone.

Yeah and the shares were 29p when i read itxD i declined their kind offer

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2 hours ago, MrXxxx said:

I assume silver is allocated the same way as gold?....if this is the case then the vaults are just plain lying, and it reinforces the point regarding paper/vaulted PMs that "its only real if you have it in YOUR possession"

Yes, Its my understanding the majority of silver in Comex/LBMA is held by ETF's, the problem with that is that there is nothing to stop them lending it out either outside the vault or to each other and covering with paper PM.  They can (and did earlier this year) change the rules as they want, so the silver/gold exists, but how many people think they own each bar?  If they try to withdraw at once who gets it?

Comex is being dragged through the mud, the LBMA isn't squeaky clean but it does at least have the metal, although its going to cop some reputational collateral damage as Comex fights to stay alive.  Its really up to the UK Financial Regulators/Rishi to decide how much they turn the screws on the bankers as punishment, the more they do it the less damage London takes.

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jamtomorrow
7 minutes ago, arrow said:

The contrast between Crowley and Lee is extreme. I could be wrong, but I feel it shows what's happening in the West v East. In the West it's hostility and warfare against the oil companies, but in the East it's not.

This whole question of how we get to higher energy costs is a storm in a teacup.

We (here) know world energy prices need to rise in the short/medium term to drag new supply into the market (whether that be higher-cost O&G fields, or renewables, or nuclear, or whatever).

All the ESG moral panic can do is cause that natural swing of the pendulum (which was coming anyway) to occur a little faster and harder than it might otherwise have done by distorting the cost of capital at the margins.

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Don Coglione
39 minutes ago, Hancock said:

The director and his assistant are worrying where next years million pound bonus is coming from; the robbing bastards.

I think even the most blinkered of fanbois of INFA realise that they have been had by those scamming cunts now.

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3 hours ago, MrXxxx said:

I am always suspicious of anyone who offers to sell me their "This is how I make my millions" technique....if it was that good a) why do they need to sell it to me?, and b) why are they?...if I had this `Golden Goose` I wouldn't be sharing it with you guys!....well maybe @YRS, the poor lad needs all the help he can get! :-)

Yes agreed. But i think the motivation for Raoul Pal is that he makes a lot 'risk-free' money from his channel subscriptions/fees. 

I was/am critical of Raoul Pal but i still think he is a very useful alternative opinion to 'critically observe'. He is extremely smart and very investment savvy. And I think it interesting, from (this thread's?) macro investment perspective, that Pal is reinventing his channel, shaking off his own old bond market/pension skill set image, and re-positioning himself as a Crypto King (or 'Tiger King'!?, judging from others negative comments). To be clear, I'm not ramping crypto, just saying that it may be instructive to watch Pal's moves in coming months.  

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DurhamBorn
5 hours ago, Lightscribe said:

30% oranges stickers? I thought you would be making the most of the 70p and 90p green stickers in Lidl. (Often get mince reduced with these so I fill up the freezer) You’re portfolio must be getting too big these days DB for such extravagance ;)

Very little makes the 70p one in ours,though i do usually get some lovely bags of superfood salad for 20p.Iv actually found a new way of doing it,iv trained my partner and i send her,then i pay nothing.She is starting to notice though so i have to tread a fine line xD

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M S E Refugee

As a general rule of thumb, what is a good percentage of cash to hold in your portfolio?

I'm currently at around 25% cash.

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2 hours ago, Don Coglione said:

I think even the most blinkered of fanbois of INFA realise that they have been had by those scamming cunts now.

Killik and Co seem to like them.

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2 hours ago, arrow said:

Looks like Legal and General has joined Engine no.1 in trying to destroy Exxon from the inside. It's supporting Engine no.1 in its election of directors bid. L&G is 17th in  the list of the largest shareholders.

<snip>

There’s a “huge disconnect” between Exxon’s perception of what’s needed to meet Paris goals and the reality, said Iancu Daramus, a senior sustainability analyst at Legal & General. “We want a clear commitment to net zero and interim targets for reducing full-scope emissions that are credible.”"

It looks like the parasites have taken over L&G.

It's one of the reasons I sold my L&G index fund I had. The other was their drive to get 50% of directors as women or PoCs or trans or something. No point in giving them votes to use against my interests.

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2 hours ago, Hancock said:

The director and his assistant are worrying where next years million pound bonus is coming from; the robbing bastards.

A couple of decent contracts and it should spike, and then i'm out ... i do think as a company it'll do well in the coming years as it'll have govt backing, but im not so sure for shareholders. I'm only about 12% down on my overall holding at the moment. Pity as it could have made some nice gains elsewhere in the last 14 months.

Certainly a live and learner that one!

 

My biggest loser at the moment, in percentage terms. It was just a wild punt with a token amount. I'd sell but then I'd miss seeing the red -78.6% in the profit column of my spreadsheet! Plus it stops the share we don't talk about from being the worst performer.

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DurhamBorn
10 minutes ago, Wheeler said:

It looks like the parasites have taken over L&G.

It's one of the reasons I sold my L&G index fund I had. The other was their drive to get 50% of directors as women or PoCs or trans or something. No point in giving them votes to use against my interests.

Carbon capture and nature based offsets will become massive when the world wakes up to the fact renewables wont cut it alone.Still for myself im over the moon the woke sentiment is alive and well.My ex workmates had BP sold at £2 from their NEST pensions,i made 50% on my portfolio in a year.Thats why im at home,and they are at work.I hate ordinary people been shafted,but anyone can educate themselves these days.

The more extreme sentiment gets the better,because the rubber band snap back is even bigger.Plus the macro picture is right as well.Longer they hold down the better to let the companies buy back and cancel shares.I want that coming cash flow for myself in divis shared among less holders.

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https://www.teletrader.com/us-inflation-at-12-year-high-of-4-2-in-april/news/details/55459952?internal=1

The Consumer Price Index (CPI) for all items in the United States jumped 4.2% on an annual basis in April, the US Bureau of Labor Statistics said on Wednesday. The figure marks an increase from the annual inflation rate of 2.6% recorded in March and is the highest since September 2008.

The index for all items except food and energy was up 3% year on year, while food prices rose 2.4% on an annual basis and energy prices increased 3%.

On a monthly basis, the CPI for All Urban Consumers added 0.8% compared to March, while the index less food and energy gained 0.9%, marking the largest monthly jump since 1982.

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1 hour ago, DurhamBorn said:

Carbon capture and nature based offsets will become massive when the world wakes up to the fact renewables wont cut it alone.Still for myself im over the moon the woke sentiment is alive and well.My ex workmates had BP sold at £2 from their NEST pensions,i made 50% on my portfolio in a year.Thats why im at home,and they are at work.I hate ordinary people been shafted,but anyone can educate themselves these days.

The more extreme sentiment gets the better,because the rubber band snap back is even bigger.Plus the macro picture is right as well.Longer they hold down the better to let the companies buy back and cancel shares.I want that coming cash flow for myself in divis shared among less holders.

In general I agree. If it meant they stayed away from the sector and left the profits to us I'd be delighted. However they aren't content with that and want to change the companies so we don't get the profits.

Hopefully they will fail.

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50 minutes ago, feed said:

https://www.teletrader.com/us-inflation-at-12-year-high-of-4-2-in-april/news/details/55459952?internal=1

The Consumer Price Index (CPI) for all items in the United States jumped 4.2% on an annual basis in April, the US Bureau of Labor Statistics said on Wednesday. The figure marks an increase from the annual inflation rate of 2.6% recorded in March and is the highest since September 2008.

The index for all items except food and energy was up 3% year on year, while food prices rose 2.4% on an annual basis and energy prices increased 3%.

On a monthly basis, the CPI for All Urban Consumers added 0.8% compared to March, while the index less food and energy gained 0.9%, marking the largest monthly jump since 1982.

 

On 13/04/2021 at 14:57, Wheeler said:

I've been watching the actual figures for the past couple of months and it is clear that CPI is accelerating. Obviously the US Fed will try and spin it as temporary but a month on month increase of 0.62% isn't impacted by last year's base effect! There have been 5 months now where the percentage increase over the previous month has increased:

image.png.7ee17b111a0a2737b1e7032b8b0d6f45.png

My prediction is it will show year on year CPI of 4% next month and 4.8% the month after. We could be on for 6% by October with the Fed talking about tightening, just in time for the BK.

 

Quoting myself from last month and adding this months data (date, index and month on month %age change):

image.png.ce3bb270ebb36d7bd5ffeb835c987d85.png

It was a bit higher than I predicted (4.2% actual versus 4% predicted). We might be on for 6.5% by October though it might only be transitory!

 

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A further anecdotal around inflation and CPI, UK this time. I've a small local government pension that is linked to CPI. Last month the scheme administrators sent me an email to say that this year's pension is increasing by 0.5% in line with the government's estimate of CPI. I've a feeling they use the figure from last September. 

I suspect that inflation will be a little bit higher than that this year!

It's one way that inflation linked pensions and benefits will not keep up with prices in an environment of increasing inflation.

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1 hour ago, Wheeler said:

It looks like the parasites have taken over L&G.

It's one of the reasons I sold my L&G index fund I had. The other was their drive to get 50% of directors as women or PoCs or trans or something. No point in giving them votes to use against my interests.

I worked for L&G in their pension review in the 90s when they had to top up all the pensions they'd robbed from good private sector schemes.  It was a very woke type of company then before woke was even a thing and very corporate to the extent that we had "state of the nation" department meetings in a local hotel where all the corparatists could spout forth on how wonderful the company was etc etc.  I stuck it for 2 years.

Saying that, I recently bought some shares as they do have a decent divi:)

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DurhamBorn
1 hour ago, feed said:

https://www.teletrader.com/us-inflation-at-12-year-high-of-4-2-in-april/news/details/55459952?internal=1

The Consumer Price Index (CPI) for all items in the United States jumped 4.2% on an annual basis in April, the US Bureau of Labor Statistics said on Wednesday. The figure marks an increase from the annual inflation rate of 2.6% recorded in March and is the highest since September 2008.

The index for all items except food and energy was up 3% year on year, while food prices rose 2.4% on an annual basis and energy prices increased 3%.

On a monthly basis, the CPI for All Urban Consumers added 0.8% compared to March, while the index less food and energy gained 0.9%, marking the largest monthly jump since 1982.

The interesting thing is that for me 1982 marked the end of the inflation cycle and the start of the great dis-inflation.The highest increase print since that date shows how moving from extremes of a cycle work.Inflation is slowly flowing into all the little cracks and veins in the economy.Like a paddy field when the water is let in.

My roadmap had inflation at around 3.7% here so its printing slightly higher.Dollar will increase slightly on the expectation of rate increase,then fall towards 85 when the marked understands even if it gets a token,the real rate is staying at -3%+ because that is the rate needed to make sure the government can increase revenues through tax to stop blowing up.

This is the theft stage from cash and bond holders.

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3 minutes ago, DurhamBorn said:

work.Inflation is slowly flowing into all the little cracks and veins in the economy.Like a paddy field when the water is let in.

Interesting observation. Water always follows the path of least resistance, is that comparable to inflation too?

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Lightscribe

Can't remember the last time I saw the FTSE break away up nearly 1% while the SP500 is nearly down 1%.

Even though the FTSE is full of some shite, it’s less overvalued speculative bubble shite than the FANNGs. I think that trend is slowly emerging and showing itself now to diverge, plus resistance form the actual stocks backed by actual asset values (including reflation stocks energy/telco/pm etc).

 

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5793B3EC-6D4B-4D79-9C84-B069DDF9A8BF.jpeg

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DurhamBorn
1 minute ago, Loki said:

Interesting observation. Water always follows the path of least resistance, is that comparable to inflation too?

Inflation depends on how advanced the economy etc.Western style are very efficient,so input costs are quite low as a % of total cost.However during a cycle like this it pushes everything else.Companies dont have the margins to swallow the inflation so try to pass it on,and even add some more.Slowly this removes demand from other sectors as before consumers understand the inflation, then push for more wages.Then it self feeds.

In simple terms CBs by monetising for governments have increased the assets of the private sector,this part of the cycle is where the government takes some of it back.

 

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sancho panza
On 11/05/2021 at 14:30, Cattle Prod said:

It's nice to have company from a non MSM respected analyst such as Lyn. I really like listening to people with her backgrounds: no silver spoon, didn't always have it easy, STEM trained, self made. Much like myself, so there is that bias I suppose. But the reason the MSM and main stream investing is the way it is because the vast majority of people are from well off backgrounds, went to the same unis, same finance-ish degrees, same internships, same financial/journalistic bubbles, same clubs, same social circles. You need someone outside all of that to see patterns, join dots a different way. DB is the same of course as are most of us here I'm sure.

That is a cracking way of explaining Asian oil demand. Remember that the next time some Henry from the City or Wilbur from the Street is navel gazing about EVs, house insulation or vehicle miles travelled.

Edit:

To reiterate: there is no supply to meet another 10-15mbd of demand. So that can only mean three things:

1. Asia stops growing: revolution in China, starvation in India

2. A fight over oil supply. Already underway low level, but open war likely

3. Oil prices go significantly higher to dampen demand, and stimulate new supply in 4-7 years time.

MSM commentators go on about higher prices killing demand like it's a bad thing. None of them realise we need it to be killed in the coming years.

I think what's really hit me with both this Lyn Alden piece(she's widely read,puts a lot out for free and features on a lot of interweb shows like George Gammon) and also the Michael Kao interview is that a year or two back,the only place I knew of talking like that was this very basement being educated by your good self.There will have been others but the alt media you tube types weren't on it.

This supply deficit thesis is going mainstream soon and when it does,we could see some interesting firewroks in energy markets.

The other intriguing thing is that you come at the problem from a sub surface geology perspective. @DurhamBorn comes at it from a macro roadmapping/liquidity flow perspective. Both pointing the same way with very convincing arguments.

 

22 hours ago, Animal Spirits said:

Luke Gromen more or less summarised the situation as the government either has to impose real austerity and renege on unfunded spending commitments or print the difference. In the latter case, you don't want to be a bond holder.

Back in 2016, Bill White formerly of the BIS said "It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something".

In 2008, former chair of The Dallas Fed Richard Fisher delivered a speech to the audience about unfunded liabilities. The numbers will have changed quite a bit since but worth reading in full if you have the time and its not too long, here are a couple of quotes:

"For the existing unfunded liabilities to be covered in the end, someone must pay $99.2 trillion more or receive $99.2 trillion less than they have been currently promised".

"Throughout history, many nations, when confronted by sizable debts they were unable or unwilling to repay, have seized upon an apparently painless solution to this dilemma: monetization".

https://www.dallasfed.org/news/speeches/fisher/2008/fs080528.cfm

Luke gromen's analysis is top drawer.A while back in a Macrovoices podcast he raised the prospect of the fed revaluing gold up to $50k per ounce as one way of dealing with their debt problems.Makes a lot of sense when you look at the situation.For msot otehr countries,the defaults will occur and either bond holders will get wiped out (unlikely as the 1% have a lot in the bond market) or there'll be a soft default in bonds and/or a lot of ordinary joes who are expecting a epnsion when they retire will get wiped out.

Number 2+3 look a raging certainty.There's going to be a lot of dissappointed people either way.

23 hours ago, Talking Monkey said:

When you see demand for oil articulated like that it really brings into perspective the narrative from Surplus Energy Economics. The upward trajectory in standard of living for the global average guy is coming to a screeching halt soon. Factor in population growth over the next decade and it points to some serious social dislocation. 

Absolutely.I think the West is much more exposed on that basis.the dislocation will occur as a result of declining real incomes.Brexit was the warm up for the political class.

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Fully Detached
38 minutes ago, DurhamBorn said:

This is the theft stage from cash and bond holders.

So for now the options I guess are:

1. Stay in cash/bonds and risk taking a hit until it's clear whether a BK will occur, then get into stocks

2. Jump into stocks and risk temporarily losing a load to a BK

3. Try to time the market

3 is out, I don't have the balls or the skills for that. 2 is out, I don't have the discipline to stay in when I'm double digits down. So it's a squeaky bum number one for me.

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sancho panza
6 hours ago, arrow said:

Looks like Legal and General has joined Engine no.1 in trying to destroy Exxon from the inside. It's supporting Engine no.1 in its election of directors bid. L&G is 17th in  the list of the largest shareholders.

The story in Bloomberg showed the contrast between the west and the east.

The story was written by Kevin Crowley who puts in his story "Major Exxon Investor Joins Activist Battle to Reform Oil Giant". So, it's reform. Reform is positive, right? So, Engine no.1 must be doing the right thing. He follows up with "Vote on overhauling board will take place later this month ". An overhaul. Another positive.

He goes on to write

"After posting its first loss in four decades and taking on record debt last year, Exxon’s stock is up more than 50% in 2021, outperforming the S&P 500 Energy Index by about 10 percentage points.

While short-term performance, driven in large part by surging oil prices, may appease some investors, others believe serious questions remain over Exxon’s stated commitment to the United Nations’ Paris climate accord.

There’s a “huge disconnect” between Exxon’s perception of what’s needed to meet Paris goals and the reality, said Iancu Daramus, a senior sustainability analyst at Legal & General. “We want a clear commitment to net zero and interim targets for reducing full-scope emissions that are credible.”"


I think these others are mainly msm journalists from Blooomberg, FT, etc putting their own views in stories.


The next story about "Pumping CO2 Deep Under the Sea Could Help Korea Hit Net Zero" is by Heesu Lee

He writes:-

"Thirty-six miles off the coast of South Korea, the Donghae gas field is running dry. When it closes next year, its pipeline to the port of Ulsan could go into reverse, creating the Asian nation’s first major carbon-capture reservoir by injecting CO2 into the rock below the sea bed.

The plan is to store 400,000 tons of carbon dioxide emissions annually for 30 years from 2025, according to Korea National Oil Corp., which will run a feasibility study on the project this year. It would be South Korea’s first major carbon capture and storage (CCS) project and could become one of the biggest in the world."

No reforms. No overhaul. Just positives.

Support from academics as well

"South Korea’s plan helps “geotechnical stability” because pumping CO2 back into the subterranean rock strata would balance the loss of the extracted gas, said Kwon Yikyun, a geo-environmental sciences professor at Kongju National University, who’s working on the Donghae feasibility study. The technique has been used previously by the energy industry to force out crude oil or gas from reservoirs by pumping in CO2.

“Storing CO2 would actually help stabilize the pressure, so it’s a good place for the nation’s first CCS project,” said Kwon. The Donghae field was discovered in 1998."

The only criticisms are the cost, won't be a "silver bullet" and a mild one from Greenpeace which wants more renewables.

"“CCS is like a unicorn that will only live in our imagination because it has long been a costly and risky distraction,” said Kim Jiseok, a climate and energy specialist at Greenpeace in Seoul. “Focusing on expanding renewable energy will be a more efficient way of getting closer to carbon neutral.”

But as governments raise penalties for companies that fail to curb or offset pollution, the cost equation is likely to change, making CCS more attractive.

“The main goal of CCS is to sequestrate carbon dioxide, but it’s also meant to stay economically competitive,” said Yoo Dongheon, a senior research fellow at Korea Energy Economics Institute. “It’s going to be an incredibly important technology in our race to net zero.”"

So, the author rounds off on positives and praise for the Korean oil company.

The contrast between Crowley and Lee is extreme. I could be wrong, but I feel it shows what's happening in the West v East. In the West it's hostility and warfare against the oil companies, but in the East it's not.


https://www.bloomberg.com/news/articles/2021-05-11/major-exxon-investor-joins-activist-battle-to-reform-oil-giant

https://www.bloomberg.com/news/articles/2021-05-10/pumping-co2-deep-under-the-sea-could-help-korea-hit-net-zero

 

This reminds me why we invest our own money.If they had a conscience they'd cut their fees before they worry about Exxons morals.

5 hours ago, Majorpain said:

Yes, Its my understanding the majority of silver in Comex/LBMA is held by ETF's, the problem with that is that there is nothing to stop them lending it out either outside the vault or to each other and covering with paper PM.  They can (and did earlier this year) change the rules as they want, so the silver/gold exists, but how many people think they own each bar?  If they try to withdraw at once who gets it?

Comex is being dragged through the mud, the LBMA isn't squeaky clean but it does at least have the metal, although its going to cop some reputational collateral damage as Comex fights to stay alive.  Its really up to the UK Financial Regulators/Rishi to decide how much they turn the screws on the bankers as punishment, the more they do it the less damage London takes.

Fascinating there MP.This is how Fractional reserve ledning started in Roman times.....history sure rhymes etc...

4 hours ago, JMD said:

Yes agreed. But i think the motivation for Raoul Pal is that he makes a lot 'risk-free' money from his channel subscriptions/fees. 

I was/am critical of Raoul Pal but i still think he is a very useful alternative opinion to 'critically observe'. He is extremely smart and very investment savvy. And I think it interesting, from (this thread's?) macro investment perspective, that Pal is reinventing his channel, shaking off his own old bond market/pension skill set image, and re-positioning himself as a Crypto King (or 'Tiger King'!?, judging from others negative comments). To be clear, I'm not ramping crypto, just saying that it may be instructive to watch Pal's moves in coming months.  

Much as people critiscize raoul,he put the following out some time back-covered on here-and it really was some top drawer analysis for free for ordinary people.Kudos imho.

https://drive.google.com/file/d/1nWQVpbyeVqwB1qHHVXs1G19b9_iUvrX9/view?_hsenc=p2ANqtz-90Z_Cma8zbS-Pilf-YbIeBSglk7dA0rWaFY8Q0BEq8WJdl6SFOMndlnkOUmjMq_Talo8MXiVQykk0_y6k1cFrNwl5KMg&_hsmi=86574321

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