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


spunko

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45 minutes ago, Noallegiance said:

Thanks.

I'm struggling with why the QE habit will be stopped, though. Can you explain and tie in with CB printing overdrive if the bust occurs? 

E.g. stop soon, restart when there's no other option? Why?

Inflation mostly.With dis-inflation they have massive room to print.Thats what the whole last cycle was about.The west,and the UK have pretty much printed while the Chinese worked.That is coming to an end now.This started in 82 and ends in 21 or 22.There is massive liquidity in the system ,enough for velocity to get moving as it will.They will re-start if we get a crash ,but if inflation is still high it will be one off bursts.Inflation causes all kinds of problems.Even today NHS managers get 3%,police nothing in pay increases.Tensions everywhere.CBs have been taken over by governments for fiscal injections as we predicted,but they are close to the point where it will move to tax rather than print.

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Interesting from the Scottish Share today.Nuclear is the real winner from the energy transition and its highly likely the below is due to government having a word and asking them not to sell to the Chinese.It also suggests that they think the new Rolls Royce small reactors could be a go,maybe government subs?.

"We have been re-considering whether Nuclear can play a role for Centrica in the future, having announced in 2018 that we intended to divest of 20% interest in the UK's operating nuclear fleet. Our focus remains on the customer, and as we look to help our customers reduce their carbon emissions, our Nuclear stake provides us with an important source of zero carbon electricity. Therefore, we may decide to retain our 20% interest."

 

 

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Underwhelmed
8 hours ago, Straingone said:

This chimes with an article by Alvaro de Menard referenced in Dominic Cummings Substack. He gives links to 'Some interesting things I've read recently'.  I would highly  recommend a monthly subscription. There is so much good information which more than justifies the cost of subscription.

God alone knows how he can keep across so many important developments in politics, economics and science. I genuinely believe he is one of the most important thinkers living in our times.

Is it this article?

https://fantasticanachronism.com/2021/06/14/on-the-pension-apocalypse/

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35 minutes ago, Straingone said:

Would you not give the guy a tenner, a lot of work goes into the articles he reads and comments on and I believe he deserves paying?

https://dominiccummings.substack.com/

If he's that smart why is he unaware that the casedemic is a fabrication from PCR tests at >30 cycles, and hence pissed off we couldn't match America for tests. 

https://dominiccummings.substack.com/p/the-pm-on-hancock-totally-fucking

80% asymptomatic, but totally worth imploding people's lives and mental health for.

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1 minute ago, Loki said:

If he's that smart why is he unaware that the casedemic is a fabrication from PCR tests at >30 cycles, and hence pissed off we couldn't match America for tests. 

https://dominiccummings.substack.com/p/the-pm-on-hancock-totally-fucking

80% asymptomatic, but totally worth imploding people's lives and mental health for.

That is way above my pay grade and I don't really follow the technical aspects of covids. 

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9 hours ago, DurhamBorn said:

We are already in the reflation now and any violent deflations will be short term events.Once QE stops government will have to borrow on the open market and pay higher rates.There are two big risks then.First is that the BOE blinks and starts printing simply to fund government deficits again.Second that government decides not to cut spending but raise tax instead.Death spiral in sterling would follow both.The government is in a terrible position.This pingdemic fiasco shows how clueless they are.

I reckon they'll take the easy option - continue printing. The size of the deficit is too big to fill with tax increases (we're already at the top of the laffer curve). The size of the cuts they'd have to make would cause mayhem and would see them out at the next election. We're past the point of no return. Gold/silver will be the most important things to hold going forward imo.

 

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14 hours ago, DurhamBorn said:

https://www.telegraph.co.uk/business/2021/07/21/putins-gas-showdown-europe-risks-epic-winter-fuel-crisis/

2023 iv got for the structural bull to really get going in gas,but these are the first shots coming now.The cost of carbon credits forcing coal out a big driver.This will lead to nature based solutions becoming the biggest factor in net zero at some point.Still struggling to find a way to play that though BP have a very interesting business in the sector.

I've been looking at the best ways to get exposure to natural gas, don't really trust the ETFs available like the Wisdom Tree one and it would be nice to receive dividends while waiting. BHP are apparently a major player in the gas arena and I like them for their huge copper exposure as well. Also Phillips 66, not seen them mentioned on this thread - pay a 5%+ divi at the moment as well.

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7 minutes ago, Cattle Prod said:

BHP are looking to sell their entire oil and gas division. They got into it accidentally, and were never very good at it. Gazprom is direct exposure if you are ok with Russia risk, while BASF (via Wintershall DEA has good exposure to gas). Energean is another one on the LSE if you want direct exposure (I don't own Energean as I think it's a bit expensive).

Thanks CP, some good info there. Already own Gazprom but have been thinking about increasing my holding, what's your own view on Russian risk? Mine is that it's no greater than the risks from the madness going on in the West at the moment. I hold Polymetal as well which I'm also thinking of increasing.

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Transistor Man
1 hour ago, DurhamBorn said:

Nuclear is the real winner from the energy transition and its highly likely the below is due to government having a word and asking them not to sell to the Chinese.It also suggests that they think the new Rolls Royce small reactors could be a go,maybe government subs?.

This is how I though nuclear would go, but I was one business cycle too early. Therefore, wrong! Looks like it’s going to happen this time.

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Castlevania
26 minutes ago, Cattle Prod said:

BHP are looking to sell their entire oil and gas division. They got into it accidentally, and were never very good at it. Gazprom is direct exposure if you are ok with Russia risk, while BASF (via Wintershall DEA has good exposure to gas). Energean is another one on the LSE if you want direct exposure (I don't own Energean as I think it's a bit expensive).

How did they accidentally get into oil and gas?

Their foray into shale was indeed a disaster.

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1 hour ago, Starsend said:

I've been looking at the best ways to get exposure to natural gas, don't really trust the ETFs available like the Wisdom Tree one and it would be nice to receive dividends while waiting. BHP are apparently a major player in the gas arena and I like them for their huge copper exposure as well. Also Phillips 66, not seen them mentioned on this thread - pay a 5%+ divi at the moment as well.

Yep, I tried that ETF but no good.  IMO, better with options, etc if I wanted to trade that.  I own Phillips 66, and BHP of course.  I also own the Russians (I agree with your balanced risk point), BASF, ENI and WPL.  Probably several others in the gas sector as part of being O&G.  I hope WPL comes good and the others dip so I can buy some adult portions!  Not recs, DYOR.

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32 minutes ago, Cattle Prod said:

I have no issue with Russian risk and am in the process of transferring my SIPP just so I can access the JP Morgan Russian Securities fund. I think all the risk is on the UK side, in terms of denying access in the future because 'Putin bad' or something. The Russians will pay up.

I am very comfortable investing in an uninvadable country with no debt, a currency pretty much backed by gold, and probably the largest stash of in ground commodities in the world.

Agreed.  You can trade MOEX with IB and their affiliates, naturally!  Alas no SIPP (unless you do a special) or ISA but so be it.

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1 hour ago, Transistor Man said:

This is how I though nuclear would go, but I was one business cycle too early. Therefore, wrong! Looks like it’s going to happen this time.

I'm late but sitting on a 15% loss on the Uranium Participation Company, but a bit of turbulence with the Sprott acquisition.  I'll buy more later but wanted to front run for S&Gs.

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1 hour ago, Cattle Prod said:

BHP are looking to sell their entire oil and gas division. They got into it accidentally, and were never very good at it. Gazprom is direct exposure if you are ok with Russia risk, while BASF (via Wintershall DEA has good exposure to gas). Energean is another one on the LSE if you want direct exposure (I don't own Energean as I think it's a bit expensive).

 

Basf looking to IPO its share of Wintershall


"IPO of Wintershall Dea will be targeted post 2021

With the merger of Wintershall Holding GmbH and DEA Deutsche Erdoel AG in May 2019, two successful companies with a long tradition have formed Europe’s leading independent natural gas and oil company: Wintershall Dea.

Based on the current market conditions, the shareholders of Wintershall Dea – BASF and LetterOne – have decided to postpone the Initial Public Offering (IPO) to a later point in time. So far, the IPO was envisaged for the second half of 2021, subject to market conditions. “Strategically, BASF remains fully committed to divest its share in Wintershall Dea,” said Dr. Hans-Ulrich Engel, Vice Chairman of the Board of Executive Directors and Chief Financial Officer of BASF SE.

While oil and gas prices at the spot market as well as at the shorter end of the forward price curve have recovered considerably, this improvement is not yet fully reflected in the forward-looking broker consensus assumptions. In addition, market valuations of oil and gas companies have for various reasons not again reached the level the shareholders expect to kick off the IPO. Due to its very robust performance, Wintershall Dea remains a strong cash contributor to its shareholders."

 


Basf appears to be a swiss army knife chemicals company. Oil, chemicals, renewbles, hydroponics...Diversified, I think is the right label.


"BASF Venture Capital invests in Indian hydroponics pioneer UrbanKisaan

Startup optimizes sustainable agriculture without soil in tropical climates
BASF Venture Capital’s first investment in this early stage Indian business strengthens AgTech activities in Asia

Hyderabad, India, and Ludwigshafen, Germany, July 13, 2021 – BASF Venture Capital GmbH (BVC) is investing in the Indian startup UrbanKisaan, which specializes in hydroponic cultivation of various types of vegetables, greens and herbs in tropical urban environments. This is BVC’s first investment in an early stage business focusing on India. Conceptualized in 2017, UrbanKisaan operates several suburban greenhouses and vertical indoor farms in Hyderabad and Bangalore. The company sells the fresh produce, some of which is grown directly in the shops, in its franchise-owned brick-and-mortar stores and via an app and website. Both parties agreed not to disclose financial details of the investment."


Basf is buying a stake in the largest offshore wind farm in the world. Appears to be a way to comply with the eu's renewable energy regulations.


"Vattenfall to sell 49.5% of the offshore wind farm Hollandse Kust Zuid to BASF

Once fully commissioned it will be the largest offshore wind farm in the world
First offshore wind farm ever to be built without subsidies for the power produced
Vattenfall will use Hollandse Kust Zuid to supply fossil-free electricity to its customers in the Netherlands, BASF to support chemical production in sites across Europe

BASF and Vattenfall have signed a contract for the purchase of 49.5% of Vattenfall’s wind farm Hollandse Kust Zuid (HKZ) by BASF. The purchase price amounts to €0.3 billion and takes into account the achieved status of the project. Including BASF’s contribution to fund the wind farm construction, BASF’s total commitment amounts to around €1.6 billion. Closing of the transaction is expected in the fourth quarter of 2021, subject to the approval of the relevant authorities. Offshore construction of the wind farm will start in July 2021.

Once fully operational, the wind farm will be the largest offshore wind farm in the world with 140 wind turbines and a total installed capacity of 1.5 Gigawatt. The Hollandse Kust Zuid wind farm will also be the first fully merchant offshore wind farm in the world which does not receive any price subsidies for the power produced. The project is expected to become fully operational in 2023. A significant part of the electricity production of HKZ is reserved for Vattenfall’s Dutch customers."

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Transistor Man
14 minutes ago, Harley said:

I'm late but sitting on a 15% loss on the Uranium Participation Company, but a bit of turbulence with the Sprott acquisition.  I'll buy more later but wanted to front run for S&Gs.

I moved jobs into the nuclear industry. 2008. Back to current job in 2010. 

They’ll still have to really commit. But I think they will. 

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11 hours ago, Straingone said:

This chimes with an article by Alvaro de Menard referenced in Dominic Cummings Substack. He gives links to 'Some interesting things I've read recently'.  I would highly  recommend a monthly subscription. 

God alone knows how he can keep across so many important developments in politics, economics and science. I genuinely believe he is one of the most important thinkers living in our times.

Is that Cummings you are talking about there, in terms of being an important thinker?

If so i coincidentally recently posted here that i thought the guy is an important contrarian macro thinker, particularly if/when he helps start new political party. I don't agree (to put it mildly!) with his covid stance - but then again i'm merely a pleb - so don't really have much choice in the shape of our future ruling class. So if Cummings does represent the philosophy of our 'incoming elites', it's important to hear and understand what he and his like minded freinds have to say... not saying the £10/month is necessarily worth the cost, though i think that he posts lot of his old articles free on the website.

   

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reformed nice guy
24 minutes ago, Majorpain said:

Untitled.png.e3e3cac524fa4a8908d4fd63bccf0e63.png

Coal is back online, emergency Diesel Genny farms will be firing up this evenin

With the lack of wind, if you listen closely, you can hear the feint sound of dividends flowing from O&G companies

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1 hour ago, Majorpain said:

Untitled.png.e3e3cac524fa4a8908d4fd63bccf0e63.png

Coal is back online, emergency Diesel Genny farms will be firing up this evening!

To be fair we are getting 20% from solar today,tough tonight :ph34r:.They will have to build more nuclear,or produce hydrogen and store it when the winds blowing and burn it in power stations when its not.

 

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If anyone could check this I would be grateful, I am not trying to get an exact figure but I don't want to be out by an order of magnitude or more.

We are going to transition to renewables in the future to achieve net zero.

So we need to generate enough electricity for existing needs plus need to charge our vehicles and produce hydrogen for HGV's/air travel.

We use 1M barrels of oil per day and each barrel has 1,700kWh of energy in it.

a) Producing hydrogen and using it in vehicles I assume is less efficient than just using diesel in a truck

b) Electricity driven cars are more efficient than ICE vehicles.

Because of (a) and (b) I will estimate that overall electric will be 20% more efficient than oil.

I will also reduce oil usage by 10% for oil used for non-energy uses.

Calculation becomes

1M x 1,700kWh x 90% x 80% = 1,224GWh per day of extra energy needed

Current energy usage in the UK is 290TWh per year which is 794GWh per day.

 

So we will need to produce 2.5 times the existing amount of energy per day and build the infrastructure to handle it. Plus the distribution network for hydrogen.

This is a serious undertaking which needs to be repeated worldwide. Unless I have made a serious error it looks like people are delusional.

 

I haven't included gas for heating homes which also must be substantial.

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