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

[DurhamBorn]

43 minutes ago, Loki said:

Why did they import a load of labour from Eastern Europe if they're scared of unemployment?  

Because 30% of our population wont work because welfare is so high.New Labour decided to import new workers instead of deal with the above fact.Brown hoodwinked Blair on it with tax credits.My Aldi had 5 Polish girls working there,20 yards away is an estate with over 200 single cough cough mothers on benefits.Labour couldnt get them 20 yards so brough in people 1000 miles instead.

House in my close sold a few months ago.Woman two doors down her sister bought it.She is renting it to the woman two doors away daughter and her 5 kids.She is using the housing benefit to pay the house off.The daughter has never worked.She also has a brand new BMW and seems as thick as pig shit.So an ex council worker is using her tax payer funded massive pension to buy  house and then let taxpayers pay it off for her at the same time as forcing prices up for couples who are working and paying tax to pay that womans pension and fund the sack of shit niece to live in a lovely house free.

[Castlevania]

52 minutes ago, Loki said:

Why did they import a load of labour from Eastern Europe if they're scared of unemployment?  

I think at the time (in the late 90’s/early 2000’s) they were still a bit worried about inflation. More recently in a world without meaningless growth they used it to pump up the glorious GDP figures.

[DurhamBorn]

13 minutes ago, Castlevania said:

I think at the time (in the late 90’s/early 2000’s) they were still a bit worried about inflation. More recently in a world without meaningless growth they used it to pump up the glorious GDP figures.

My dad knew Blairs agent very well and he told him that they pushed immigration and welfare because it meant there would never be another Conservative government.Incredible to think what it really made sure was that there will never be another Labour government,at least in their present form.

Im not sure the Tories really understand the Red Wall yet though.They voted Tory because the ones not getting welfare are sick to the back teeth of how much people are getting and blame Labour for that and immigration.The Tories dont seem to be doing much to sort out these things though.

[Loki]

34 minutes ago, Castlevania said:

I think at the time (in the late 90’s/early 2000’s) they were still a bit worried about inflation. More recently in a world without meaningless growth they used it to pump up the glorious GDP figures.

That's a couple of good financial points thanks

[Loki]

17 minutes ago, DurhamBorn said:

My dad knew Blairs agent very well and he told him that they pushed immigration and welfare because it meant there would never be another Conservative government.Incredible to think what it really made sure was that there will never be another Labour government,at least in their present form.

Im not sure the Tories really understand the Red Wall yet though.They voted Tory because the ones not getting welfare are sick to the back teeth of how much people are getting and blame Labour for that and immigration.The Tories dont seem to be doing much to sort out these things though.

Totally agree about benefits etc. No colour tie seems to have made a positive difference to anything in my limited interest and experience of politics and work!

[planit]

US reaction to oil prices rising 60% to $70 per barrel - 

 

Blue line shows the 4 week average, it was higher in December than it is now!

There were articles saying output would recover by May but it has not materialised, even slightly. In fact there seems to be a slow downwards trajectory. I think @Cattle Prod was expecting the downwards trend to be clear later this year. 

OPEC is growing in confidence that they have control over supply now and they must be laughing that western politics is helping.

I doubt they want to shock any economies, but if I was them ,a gradual rise to $80 per barrel would be in order.

 

All this is before any potential oil squeeze in the medium term.

 

PS. BP/Shell share price is low and lots of negative sentiment but I am just concentrating on the profit - 

$450m per $1 of refining margin + $350m per $1 of oil price 

Extra profit in Q2 over Q1 at average prices so far

= $450m x 5.2 + $350m x 5.41 = $4233.5m per year so divide by 4

$1.06bn extra profit this qty form the oil and refining conditions, I am hoping this is enough to make the qtr cash flow positive, even with the Horizon $1.1bn payout and capital investments.

Source

[Shamone]

2 hours ago, DurhamBorn said:

Because 30% of our population wont work because welfare is so high.New Labour decided to import new workers instead of deal with the above fact.Brown hoodwinked Blair on it with tax credits.My Aldi had 5 Polish girls working there,20 yards away is an estate with over 200 single cough cough mothers on benefits.Labour couldnt get them 20 yards so brough in people 1000 miles instead.

House in my close sold a few months ago.Woman two doors down her sister bought it.She is renting it to the woman two doors away daughter and her 5 kids.She is using the housing benefit to pay the house off.The daughter has never worked.She also has a brand new BMW and seems as thick as pig shit.So an ex council worker is using her tax payer funded massive pension to buy  house and then let taxpayers pay it off for her at the same time as forcing prices up for couples who are working and paying tax to pay that womans pension and fund the sack of shit niece to live in a lovely house free.

I will never work full time again because of just this. 

[MrXxxx]

3 hours ago, Loki said:

Why did they import a load of labour from Eastern Europe if they're scared of unemployment?  

To build all of those London apartments cheaply, to those Asians at overpriced values, who are going to default on their loans, so the UK government can bail them out again....is this what Elton meant when he sung 'The circle of life'?

[MrXxxx]

3 hours ago, DurhamBorn said:

Because 30% of our population wont work because welfare is so high.New Labour decided to import new workers instead of deal with the above fact.Brown hoodwinked Blair on it with tax credits.My Aldi had 5 Polish girls working there,20 yards away is an estate with over 200 single cough cough mothers on benefits.Labour couldnt get them 20 yards so brough in people 1000 miles instead.

House in my close sold a few months ago.Woman two doors down her sister bought it.She is renting it to the woman two doors away daughter and her 5 kids.She is using the housing benefit to pay the house off.The daughter has never worked.She also has a brand new BMW and seems as thick as pig shit.So an ex council worker is using her tax payer funded massive pension to buy  house and then let taxpayers pay it off for her at the same time as forcing prices up for couples who are working and paying tax to pay that womans pension and fund the sack of shit niece to live in a lovely house free.

Thats it @DB you have finally 'sold' moving the the NE...where do I sign the deeds?!

[reformed nice guy]

4 hours ago, DurhamBorn said:

Because 30% of our population wont work because welfare is so high.New Labour decided to import new workers instead of deal with the above fact.Brown hoodwinked Blair on it with tax credits.My Aldi had 5 Polish girls working there,20 yards away is an estate with over 200 single cough cough mothers on benefits.Labour couldnt get them 20 yards so brough in people 1000 miles instead.

House in my close sold a few months ago.Woman two doors down her sister bought it.She is renting it to the woman two doors away daughter and her 5 kids.She is using the housing benefit to pay the house off.The daughter has never worked.She also has a brand new BMW and seems as thick as pig shit.So an ex council worker is using her tax payer funded massive pension to buy  house and then let taxpayers pay it off for her at the same time as forcing prices up for couples who are working and paying tax to pay that womans pension and fund the sack of shit niece to live in a lovely house free.

You should buy those 3 houses with your dad and rent them to three dosbodders that are on housing benefit

Soon enough Durham will be a commune of mostly middle aged, grumpy, balding, techy geeks

[JMD]

7 hours ago, sancho panza said:

 

Before I begin rambling,I'd like to define a BK (to me) as a huge generational deflationary wave in the credit markets.

There are a few caveats when I predict a BK(and I do) and that's that whilst one may not be apparent from looking at nominal GDP if fiscal stimulus is added immediately and to good effect,it will still have an effect in terms of structural unemployment as the stimulus is put through govt rather than the banks.

In terms of the banks,I'm not sure the UK banks are fine.I think the US faces a different set os issues given that fannie and freddie are such a big part of their mortgage lending bubble.The UK banking sector jsut doesn't have that fall guy in place to tkae the biggest hit.

If we take HSBC's msot recent set of accounts as an example.(Let's remember they get something like 60% of their profits from Hong Kong.)

Balance sheet gives shareholder equity at 6.5% of assets.But that comes with a warning about risk weighting assets using IRB approach which is based on their own data rather than the standardized approach used by smaller banks(and likely less skewed by sample bias)

If we dig a little deeper.Goodwill and intangibles=$20bn,

net laons and other assets $2,417,846mn 2020 up from $2,103,091mn 2017 so the increase is nearly one and a half times equity.

deposits have grown to $1,765,749mn in 2020 from $1,517,271mn an increase of $248,478 mn or one and a quarter times.

long story short it won't take much of a hit to HK/UK home prices/CRE or a drop in deposits and HSBC is heading up rights issue creek.

if we take the preferred measure of capital adequacy from Prof Kevin Dowd& Dean Buckner  then HSBC's capital ratio is

$124bn/$2984bn=4.1%

and HSBC is probably the pick of the bunch.

from May 20

http://eumaeus.org/wordp/wp-content/uploads/2020/05/Can UK banks pass the COVID-19 stress test 6 May 2020.pdf

The core metrics of the Big Five UK banks have deteriorated sharply since the New Year, and even more since the end of2006, i.e., the eve of the Global Financial Crisis. Their market capitalisation is now £140.6billion, down 61% since December 2006; their average price-to-book ratio is 39.2%, down from 255% at end 2006; their average capital ratio, defined as market capitalisation divided by total assets, is 2.3%, down from 11.2% at the end of 2006; their corresponding leverage levels are 43.3, up from 8.9 (end 2006). By these metrics, UK banks have much lower capital ratios and their leverage is nearly 5 times what it was going into the previous crisis.

 

 

 

As above DB,I jsut don't see a way we can get through the next ten years without a number of zombie companies and banks going to the wall.I've been a deflationist for 15 years at least now and I still hold to that.Where I've been persuaded to alter course is in this transfer from bank stimulus to govt stimulus and the inflation that will result.I was listening to an excellent jeff Snyder interview on Macrovoices the other day and whislt I hear his argumetns,I think a lot of deflationistas aren't getting their head around the size of the hole we're in and are relying on govt utilising the same stimulus methods psot BK as they did post 2008.

Overall small headline drops in GDP could mask a massive sectoral shift.Personally,I think we're headed for a junk bond collaspe/CRE collapse/Rresi collapse and all the resultant bail outs that will be needed to keep voters in their homes.Further zombifying an already zombified economy.

The worst of all worlds is where we get defaltionary collapse and rising prices.I feel too many deflationistas eg Snyder/Rosenberg think that credit deflation and price inflation are mutually exclusive.They're not imho

This article argues against the deflationists, and cites Rosenberg in particular. The article author used to be a deflationist himself, but now makes interesting points about the expected huge amounts of MMT spending that will almost certainly prove to be hugely wasteful, but adds also that lots of the spending will be directed toward green energy which is itself highly unproductive, ie seeking to replace high density energy sources with lower density, therefore forcing less productivity/efficiency and so ultimately causing  yet more inflationary pressure. Apparently Rosenberg counter's all this by saying the big spending bills won't get voted in in the first place.                                                                                                               https://blog.evergreengavekal.com/to-be-or-not-to-be-transitory/

[JMD]

8 hours ago, planit said:

Neither, I think the political class are spineless idiots all acting in their own interests and they take every action on a

'will this make me look better/worse in the polls' basis.

Every idiot acting in their own interests has interesting outcomes, like a school of fish avoiding a shark. The individual effects are very small but the outcome is very visible.

 

Edit: to make clear that the political class don't care about the environment and no one cares enough about their personal carbon footprint to actually impact their lives adversely. So the politicians are just making decisions to look good and avoid negativity. 

Thanks, I think I misinterpreted your original post so just wanted to check. I do agree that the economics drives the politics.

[CVG]

7 hours ago, reformed nice guy said:

You should buy those 3 houses with your dad and rent them to three dosbodders that are on housing benefit

Soon enough Durham will be a commune of mostly middle aged, grumpy, balding, techy geeks

Could you imagine the bloodbath in the yellow sticker zone?

[planit]

8 hours ago, Cattle Prod said:

It should be even steeper, but there putting their drilled but uncompleted inventory on production without drilling new wells. OPEC knows  what's going to happen. Saudi has plenty of shale, believe it or not. They know how it works. They just don't waste money on it because its relatively shite.

Thanks for all the insights and info, extremely good for filling gaps in knowledge.

I tried not to make the previous post too long but I posted now because production obviously takes some time to ramp back up and May was  when  commentators thought this would be done by.

On top of that it made sense that shale investors would be desperate to get some cash out to make a further investment case (and make up for previous losses).

The result of the ramp up was absolutely nothing. Last weeks figure was the lowest since Nov 6 2020 if you exclude the Texas weather shutdown.

 

I know this is a big if;

but if we are at the end of the production ramp, now is the time we will get a trajectory change to one that is more obvious and visibly downwards.

It may or may not get picked up by the press and get political. It may well change a lot of people's calculations with regards to future oil supply.

[DurhamBorn]

https://www.bbc.co.uk/news/business-57353624

Media always looking for reasons because they have zero understanding of macro leads and lags.Our job is to do that.When food was cheap and markets collapsing how many were pushing potash outside of us basement dwellers.Lifting base money was always going to do this.During the German hyperinflation the people didnt blame money printing until after the event years later,they blamed everything else and lastly the Jews.They saw the problem as other currency going up,not theirs going down,and the elite of the time,the industrialists loved it because they produced in Germany,sold in harder currency and kept it all there in the selling currency.History chimes.

In other news 

https://www.proactiveinvestors.co.uk/companies/news/951054/royal-mail-worth-10-a-share-says-citigroup-951054.html

 

 

[Popuplights]

Does the hive mind think RMG is still worth a punt?

[nirvana]

[Loki]

1 minute ago, nirvana said:

The printer under the arm

[M S E Refugee]

I have had a little punt on Village Farms International, they are trading at CA$12.37 but Simply Wall St values the company at CA$167.97 per share.

TSX:VFF

Business Profile

Village Farms International, Inc., together with its subsidiaries, produces, markets, and distributes greenhouse-grown tomatoes, bell peppers, and cucumbers in North America. It operates through three segments: Produce Business, Energy Business, and Cannabis and Hemp Business. The company also owns and operates a 7.0 megawatt power plant that generates and sells electricity to British Columbia Hydro and Power Authority; and produces and supplies cannabis products. It markets and distributes its products under the Village Farms brand name to retail supermarkets and fresh food distribution companies, as well as products produced under exclusive arrangements with other greenhouse producers. The company was formerly known as Village Farms Canada Inc. and changed its name to Village Farms International, Inc. in December 2009. Village Farms International, Inc. was founded in 1989 and is headquartered in Delta, Canada.

 

 

[planit]

2 minutes ago, M S E Refugee said:

I have had a little punt on Village Farms International, they are trading at CA$12.37 but Simply Wall St values the company at CA$167.97 per share.

TSX:VFF

Business Profile

 

 

Are they selling the produce as carbon neutral or green energy food?

Very good business idea and attaching the brand to it offers good potential. What is their turnover and growth?

[M S E Refugee]

8 minutes ago, planit said:

Are they selling the produce as carbon neutral or green energy food?

Very good business idea and attaching the brand to it offers good potential. What is their turnover and growth?

Earnings vs Savings Rate: VFF's forecast earnings growth (63.1% per year) is above the savings rate (1.5%).

 

Earnings vs Market: VFF's earnings (63.1% per year) are forecast to grow faster than the Canadian market (13.7% per year).

 

High Growth Earnings: earnings are expected to grow significantly over the next 3 years.

 

Revenue vs Market: VFF's revenue (28.2% per year) is forecast to grow faster than the Canadian market (5.7% per year).

 

High Growth Revenue: VFF's revenue (28.2% per year) is forecast to grow faster than 20% per year.

[M S E Refugee]

https://villagefarms.com/clean-energy

[wherebee]

TSX:VFF

They've never paid a dividend.  Supply to Walmart, Amazon, Wholefoods, etc etc.  My knowledge is that those rapacious beasts drive down price year after year from their suppliers, gobbling up any profit that is there?

 

[planit]

1 minute ago, wherebee said:

TSX:VFF

They've never paid a dividend.  Supply to Walmart, Amazon, Wholefoods, etc etc.  My knowledge is that those rapacious beasts drive down price year after year from their suppliers, gobbling up any profit that is there?

 

Read the link on energy, heat and CO2 use, really impressive (if true LOL)

If they get the brand going then they will be able to demand high prices, people will pay double the price for those veggies.

 

I see the main problem as growth, they are limited in the amount of produce they can produce by the size of the plant and land area which needs to be near the plant.

If they can build similar stations elsewhere then growth is possible but everyone might start fighting over rubbish dumps 

They could also get bought out as the brand is good (although do Aldi also sell "Village Farms" ).

[M S E Refugee]

2 minutes ago, planit said:

Read the link on energy, heat and CO2 use, really impressive (if true LOL)

If they get the brand going then they will be able to demand high prices, people will pay double the price for those veggies.

 

I see the main problem as growth, they are limited in the amount of produce they can produce by the size of the plant and land area which needs to be near the plant.

If they can build similar stations elsewhere then growth is possible but everyone might start fighting over rubbish dumps 

They could also get bought out as the brand is good (although do Aldi also sell "Village Farms" ).

They also have a foothold in the Cannabis sector.