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

[leonardratso]

ah thats better, i must get me some of that umber now its cheap again, might wait though, may become cheaper.

Nowt like cheap umber.

[Talking Monkey]

13 minutes ago, Cattle Prod said:

We're terrible gossips. Some operators cordon off the well floor of a sensitive well to try and stop the hands running off to call their brokers. You don't see the oil gushing out, it's all well contained but you might get a few drops from rock fragments. I remember Cameron went up to the Shetlands around indyref time, papers full of a a huge find. It was just the next phase of a giant well known field, Clair. Nothing to see here, though Clair could be one of the few generating tax revs.

Scotland actually did their notional budget on 100 dollar oil IIRC, not even actual banana repuplics do that 😅

If the Scots theoretically got control of the oil, how much oil is actually left

[invalid]

18 minutes ago, Talking Monkey said:

If the Scots theoretically got control of the oil, how much oil is actually left

 

To give some credit to DECC, they used to present the data on production in a very easy and accessible format. You could get nice monthly data and a nice graph of output data going back to the 90's. This very clearly showed the decline in output with some great historical context.

Now that its the Oil and Gas authority the data I'm sure is there but its hard for a layman like me to find it.

I used to like the simple graphs that looked like this ( not from DECC but they had similar):

 

 

[Barnsey]

 

[Heart's Ease]

18 minutes ago, Barnsey said:

 

Thanks for this.  The short thread is worth a look and leads to his latest newsletter:

https://www.crescat.net/june-performance-estimates/

A snippet to whet the appetite:

"In our analysis, the disinflationary trend is unsustainable, has been way overdone, and is at major risk of reversing under a new regime that we call the Great Rotation. The catalyst for this regime is rising inflation combined with investors looking out for their best interests in typical fear and greed fashion. We believe investors should get positioned ahead of what we view as a highly probable if not inevitable stampede.

The Great Rotation

We believe forward-thinking investors will increasingly be selling historically expensive stocks and fixed income securities and buying true inflation-hedge assets, including commodities in scarce supply and high demand, and stocks in a narrow group of sectors such as energy and materials that offer both low valuation and high cyclical near-term growth prospects. This is what we call the Great Rotation.

From a macro standpoint, in our analysis, the opportunity for our activist precious metals strategy has never been brighter. Inflation expectations are only beginning to take off. The Conference Board’s 1-year forward inflation expectation survey just hit 6.7% the highest since March 2011, a time when the leading junior gold mining ETF was 236% higher. As the chart below shows, it is still early in what is likely to be a rip-roaring bull market for gold and silver mining and especially our expertly crafted exploration-heavy portfolio."

[sancho panza]

13 hours ago, Cattle Prod said:

Yep it was a cash cow for the UK for many years and it was blown on welfare it seems. They've tried tax grabs in more recent years (UK is regarded as an unstable tax regime in the industry, many third world countries are ranked higher). But the industry just goes "ok, we'll run our assets down and invest elsewhere". So you'll read about x number of billions of barrels of oil left in the North sea" but the fact is if the UK wants this energy security, there will be no tax to be gained, and will soon have to subsidy it (unless price does the same). The time to bank it us the middle of the production curve, say 1985 to 2000, not as its declining.

I think teh West more broadly is going to pay a high price for it's wokeness of late.We'll be competing with India and China for oil & gas with depreciating currencies and a missplaced sense of our own importance as nations.

We've been behaving like we have a raft of better viable options than oil/gas/coal/nuclear and quite simply the reality is that we don't.

13 hours ago, Cattle Prod said:

It's all about the DUCs,they are drawing on wells that were previously drilled (2000 so far) and fracking them to save money. When these run out, likley in mext few months, they either have to ramp up rigs to drill new ones or production will fall. Hedging may prevent this.

Note: most of the wells remaining are unuseable, though I don't know where that point is. They've left no well stock for next year either way.

wow,that's some downward trajectory there CP,steeper and deeper than 2015 with no bottom in sight........It's going to be really interesting when we reach the point you describe where the market becomes aware that US shale isn't coming back ...well,not in 2021 anyway.

 

 

[sancho panza]

13 hours ago, Majorpain said:

Doesn't matter if they don't, how much longer can the economy keep functioning normally without something breaking?  I very much doubt that printing past December will be on the table, at least not without staring into the Weimar/Zimbabwe abyss.

I really need to find the propaganda poster from 1919 with the government telling the young it was their patriotic duty to risk going to work to stop the economy from collapsing, funnily the exact opposite to this time round.

I think this is the key here MP,they're running out of lockdown road,hence the July 19th unlocking.I can confirm the hosptials are rammed with loads of non covid patients.The NHS has a big enough job without another counter productive lockdown.

Not only do they need things starting to function like normal in the NHS,they also need the taxes to flow to pay for it.

Personally,I think sterling will be toast in this decade,and would have been sans covid,but covid will speed up the process of trashing our currency.

 

13 hours ago, Cattle Prod said:

The % of hospitalisation and deaths/cases in the UK. Totally different to previous case waves. Unless that data is made up, thats what says it. That, and the empty hospitals. This winter will be carnage for sure, with flu alone, and I'm sure that'll be spun into whatever. But I really don't think there is any great drama with the vaccines. I'll leave my 2c there and take it to the corona thread,sounds fun over there!

as @Democorruptcy and @Yadda yadda yadda have already said, there are a whole host of reasons that it's hard to draw firm conclusions about vaccine efficacy.

Never mind the winter,this summer is carnage already in the NHS.

Personally,I'm pretty sure vaccines have reduced hopitalisations due to covid but said hospitalisations were probably overstated in the first place(along with covid deaths).

The issue with the vaccines is that we don't know/aren't sure of the long term side effects as @Lightscribesays and what the costs of those side effects will be.Hopefully,they will be insubstantial. Having said that,I have had some experiences at work that have given me cause for concern and very much line up with issues discussed by Dr Malcolm Kendrick in this post on vasculitis-my experiences relate to a rise in new onset AF cases that I've diagnosed in the last few weeks.

AF raises clotting risks more generally,but these cases I saw won't be put down to the jab because they were two months post vaccine(there were various reasons that they weren't typical new onset AF presentations).The similarities between the cases and the fact that AF is generally diagnosed in primary care/hospital environments long before we arrive is the key issue for me.There's a high risk of sample bias clearly,but I'm looking for developments in this area and also to see if this recent experience is repeated going forward or  if it was just a freak couple of shifts(although on one shift where I handed over a third pt with new onset AF,the sister taking the handover said they'd had a lot presenting at A&E with it lately- but again I'd prefer firm data to two anecdotals.)

Interesting paper here by the Swiss Dr on rising US vaccine deaths.I'd generally agree with his conclusions on the risk/reward being skewed by age

US vaccine-related deaths increasing rapidly

 

13 hours ago, MrXxxx said:

I find this interesting [and off topic], and you don't have to answer if you don't want to, does this mean that you don't eat processed food and/or does shopping take twice as long as Mrs P looks at all the labels?....must be great learning for your kids in nutrition....MrS P covers healthy diets and Mr P covers a healthy bank balance/investment strategy!

We do eat processed food,just within reason.Mrs P bless her just looks at the ingredients for a second and that's all the time she needs.She's that proficient -bless her- she can even tell when Aldi have changed the recipe in a sauce or a cereal and even tells me what they've added and taken out.Impressive tbh.

[sancho panza]

What debt problem?

 

[The Grey Man]

Why are Amazon bombarding me with requests for cash.

Sorry , my ignorance , chance for a second income according to the ads.

Just as  Bozo has left, rather stepped down.

Hmmm... something is brewing.

They have been a leading seller this last 18 months. Getting more expensive right from the start to.

Where have the economies scale gone? 

Havent ordered from these scallies for over  a year.

[Democorruptcy]

8 hours ago, sancho panza said:

as @Democorruptcy and @Yadda yadda yadda have already said, there are a whole host of reasons that it's hard to draw firm conclusions about vaccine efficacy.

Never mind the winter,this summer is carnage already in the NHS.

Personally,I'm pretty sure vaccines have reduced hopitalisations due to covid but said hospitalisations were probably overstated in the first place(along with covid deaths).

Portugal's deaths were overstated by 99% according to a court case! Makes you wonder about ours.

Quote

 

According to the ruling, the number of verified COVID-19 deaths from January 2020 to April 2021 is only 152, not about 17,000 as claimed by government ministries.

https://rightsfreedoms.wordpress.com/2021/06/28/lisbon-court-rules-only-0-9-of-verified-cases-died-of-covid-numbering-152-not-17000-claimed/

 

Do you know anything about the number of PCR cycles being used now? Or if there is a difference between what they use on jabbed or non jabbed folk?

 

[geordie_lurch]

If after reading the following you guys still can't see what TPTB are trying to do are the largest coordinated 'macro' changes the world has ever seen i.e. France, Greece and UK all announcing mandatory vaccines for care workers on the same day and restricting people's freedoms via 'health' apps then I don't know what will make you reassess where things are going

To put it bluntly, if TPTB get their way and we all just accept this, our ISAs and everything else we have discussed on this great thread will be the least of our worries

https://www.dailymail.co.uk/news/article-9780733/amp/Covid-France-Three-days-opening-nightclubs-President-Macron-announce-new-rules.html

 

[Noallegiance]

While not useful, here's an interesting fact:

If the US stopped accumulating debt now and paid it off at $6billion per month at 0.25% interest, it will be paid off in the year 3847.

[DurhamBorn]

8 hours ago, The Grey Man said:

Why are Amazon bombarding me with requests for cash.

Sorry , my ignorance , chance for a second income according to the ads.

Just as  Bozo has left, rather stepped down.

Hmmm... something is brewing.

They have been a leading seller this last 18 months. Getting more expensive right from the start to.

Where have the economies scale gone? 

Havent ordered from these scallies for over  a year.

They make around 17% of everything a marketplace seller sells plus storage and prime fees and dont have to source or import.Much easier than actually importing and selling themselves.I was top seller on there in two categories,one i could of displaced the UK no1 seller in the space in physical retail if id really pushed.Amazon phoned me a few times to actually partner them and increase the range and they would provide an account manager etc but i turned them down as id decided to run all my stock down and buy gold miners with the money instead.

My import business needed the same things as Amazon need,and inflation in every part of the chain isnt it.

The question is can they increase prices as fast as the inflation.

[Sugarlips]

Are we having a US CPI sweepstakes? 

I assume it will be massaged down prior to released then revised up next month when no one is looking.

[planit]

9 hours ago, Cattle Prod said:

I needed to update that, new data out today, another 400 or so DUCs gone, and trajectory is increasing. Smacks of desperation to me, its a one time only play you can make after years of over investment.

This is like a Mexican standoff, between the operator, their investors, and the shale decline treadmill. If the investors don't give up money for a shitload of new wells, that's it. Bear in mind, production has been flat with those ~2500 wells put on production. At say 800bbl a well, that's 2 million barrels added to stay flat. That's where I was out in my figures, I didn't think there were enough usable DUCs to use. Impossible to know, its probably the most confidential info in a company. But it begs the question: when they run through the DUCs, are they going to be allowed the money to drill 2500 extra wells? And if not, where is the next 2mbpd coming from, just to stay flat?

 

There is a delay in the investors receiving money from profits*, investors will not make decisions to invest more money until they have seen some of the profits, especially since the promised money didn't materialise in the past.

After the investor delay there is then the delay whilst the new drilling is planned and implemented.

The companies are doing such a good job of using the resources they have that there might also be a lack of realisation by investors on the immanency/speed of the production drop looming.

If we assume your mechanism is correct then human nature and the system will ensure production will drop. The length of the delays, ESG insanity and confidence in the future oil price will determine how deep the dip will go before rising again.

If, as you say, no one knows when the DUC's will run out, this will be a 'no one saw it coming' shock to everyone.

 

*  (Profits are also worse if shale hedged at lower oil prices as reported)

 

[planit]

22 minutes ago, Sugarlips said:

Are we having a US CPI sweepstakes? 

I assume it will be massaged down prior to released then revised up next month when no one is looking.

This is interesting this month. The year on year figure changes are affected by the monthly increase the previous year dropping out of the figures.

 

 

The last 3 months we have been dropping the figures in section A, the decline in A means year-on-year inflation would have been rising even if there were no price increases over the last 3 months. It is not surprising that we had a steep increase up to now.

 

This month is the first month in section B,

May-June 20 was a 0.52% increase so the figure posted today would have to be over 0.6 to increase the annual rate of inflation. Last month was 0.64% and I doubt it will be higher this month as supply shocks are starting to be addressed. If the YoYrate did increase to 5%, it would be a nice headline figure.

Next month is also in section B so it would be easy for there to be a dip in inflation over the next 2 months. Lets guess that inflation drops to 4.6%

 

Section C, the average inflation rate per month is 0.25% and this would be easier to beat over the 7 months so after dropping to 4.6% it could start increasing again with only a 0.3% per month increase.

 

In reality the monthly increases will probably keep going down from now on  so even if yearly inflation did rise at the beginning of section C it would be short lived. The crazy headline grabbing increases are over.

 

A yearly rate of 2% inflation would need 0.165% per month.

 

[MrXxxx]

Q regarding SIPPs.

Say you have set-up a SIPP,

do you/your employer have to transfer capital in directly 

OR

can you pay in from your post-tax capital and then have the SIPP provider add the 25% tax into your SIPP?

[reformed nice guy]

39 minutes ago, Sugarlips said:

Are we having a US CPI sweepstakes? 

I assume it will be massaged down prior to released then revised up next month when no one is looking.

The forecast from investing.com is 4.0% so Il guess 4.2%

In 12 months oil has went from ~$40 to $75, Americans average petrol from about $2.5 to $3.5 etc, used car price up, lumber up, houses up bigly. Its probably really 10% but Il stick with an "official" 4.2%

[reformed nice guy]

Just now, MrXxxx said:

Q regarding SIPPs.

Say you have set-up a SIPP,

do you/your employer have to transfer capital in directly 

OR

can you pay in from your post-tax capital and then have the SIPP provider add the 25% tax into your SIPP?

It is usually more efficient for the employer to transfer in directly as they can take it off their top line, so its just another expense

[Hancock]

15 hours ago, Cattle Prod said:

 I remember Cameron went up to the Shetlands around indyref time, 😅

I was there at the gas plant that was being built, the scousers and jocks called an illegal strike and he had to cancel his visit to the site.

[Hancock]

Ive just been to Poundland to buy some toothpaste and some sunglasses.

Price has gone up from £1 per item to £1.50 each .... 

Anyway for those that have the time, here is why manufacturing isn't coming back to the UK anytime soon.

https://www.lrb.co.uk/the-paper/v43/n14/james-meek/who-holds-the-welding-rod 

[MrXxxx]

10 minutes ago, reformed nice guy said:

It is usually more efficient for the employer to transfer in directly as they can take it off their top line, so its just another expense

But is it possible to do it the other way, and would there be any disadvantages for the PAYE employee?

[Sugarlips]

14 minutes ago, reformed nice guy said:

The forecast from investing.com is 4.0% so Il guess 4.2%

In 12 months oil has went from ~$40 to $75, Americans average petrol from about $2.5 to $3.5 etc, used car price up, lumber up, houses up bigly. Its probably really 10% but Il stick with an "official" 4.2%

I’m gonna stick my finger in the wind and say it’s going to be a transitory 5%+ 

[MrXxxx]

Just put a book review in the 'The Library' thread with an ideal book for the Newbie investor that needs a firm foundation on the metrics used, how to set-up a portfolio, when to buy/sell, and maximizing tax benefits.

The Equity Edge by Mark Jeavons ISBN:978085719786

234 pages so not a mammoth read, and one of the best finance books for practical investing that I have read so far.

[arrow]

On 11/07/2021 at 16:23, Harley said:

I have the same issue.  Sometimes ok, other times not.  Might be the browser.

PS:  Yep, possible as I've just saved this with FF Focus which has more success than Duckduckgo.

Thanks I'll try that. Kiwi is working now!