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

[HousePriceMania]

24 minutes ago, Hancock said:

Should have put my ISA money into BP @290p the other week, would have covered this years inflation in a matter of weeks. Live an learn.

Everything seems to be going parabolic at the moment, my SIPP it seems to go up by a grand on a daily basis, can't but help feeling something has got to give soon. 

I'm in the odd position of wanting my SIPP to fall by 50% or more!

Given the farting noise the BoE  made today on IRs I dare say the US are about to tighten.

Tho, they could be lying.

Will everyone have forgotten the FED members had sold out by the next FED meeting ?

 

[Yadda yadda yadda]

5 minutes ago, Cattle Prod said:

They're going to be surprised, again, at the lack of response from short cycle production form core OPEC, Russia, and shale.

The apparent global energy crisis is a bit of a concern. Economy down the toilet long term. A substantial burst of inflation at a minimum.

Are we hitting the buffers on affordable energy and on the brink of a structural living standards decline? What would hit us as a decline would hit others as a famine. Or is this a bump in the road?

[Yadda yadda yadda]

4 minutes ago, Cattle Prod said:

Yes, this has been apparent for some time. This is why they are ramming debt up our holes, they are trying to avoid a standard of living decline. Or in many parts of the world, famine. You can argue peak oil if you want, but peak cheap oil has passed: look at us today 18 months on from the biggest dislocation in oil markets ever. This is no bump in the road. I think we could have a big price correction in a BK, and people will say 'bump in the road' but it'll be even shorter lived than the Covid bump. 

I've gone on about how oil and gas is practically free, for the energy we get from it. And we have built a society and population based on giving it away. We need to move on to the next stage in a sensible manner, and that means using the declining stocks of cheap oil and gas to build massive storage for renewables. But nobody is discussing that. Honestly, I think lots of people will die, unfortuntely, social unrest, currency wipeouts etc and then a leader will emerge who will ...lead... and then plan and deal with the transition. You just dont get leaders from easy times, you twats like Johnston, Biden, Trudeau and Macron. You get the Eisenhowers, Churchills and Thatchers from hard times. Or at least people remember you need to elect a real leader after a does of hard times.

On the bright side, all the current nonsense will get washed away as people get the biggest reality check of their lives. No more benefits, woke, gender studies, FAANG craziness, Greta, champagne socialism, and we will love our truck drivers and factory workers again. It will be a severe dislocation I think, there is no dressing it up.

That is what I was thinking but I hoped we had a bit longer. Oh well, as you say there are some benefits. I just wish more people had an inkling of what it means rather than thinking renewables will be cost neutral.

[sancho panza]

On 25/09/2021 at 10:32, DurhamBorn said:

The inflection point is crossed now and we will reverse that.The pro single mum is going to have to pay more for her basics,increasing faster than her bennies,and pass it back to the lad flogging on in the warehouse on nightshift for less money than she gets for doing nothing.This is just the start lots more dislocation to come,but this thread has done its job so far helping us leverage the situation.The irony yesterday as i watched the news about fuel shortages and BP sent me a big fat wedge of cash on an entry 7% yield.

 

This thread has done it's job amazingly well.Kudos to all who chuck in and particuarlyl your good self as the de facto 'thread leader' for putting so much time in to educating people in the way you were once educated by your mentor.The more I see of life the more I realsie that getting teh right mentor in any walk of life can make a huge differnce to people.

Ref that point in bold,we're getting the first taste of of the dislocations to come.I'm starting to sense at work that more and more of my collegues are saying how much unpredicatble the shifts are getting.Saturday night was jsut a night of call outs coming over th radio's for crews to free up as there was Category 1 call after Category 1 call with noone to go to them.Sunday night was calm by comparison.It won't take much for big cities in the UK to have susbtantial no go areas for the few police that are on imho.

This thread has educated me in so many ways to teh changes that are coming,not jsut economically,but opened me up to the huge societal changes that will accompany them

On 25/09/2021 at 16:38, Cattle Prod said:

I think my work here is done! I hope you all got positioned, made money, and made good heating choices at home. There is a long way to go before this gets fixed.

 

I was sat watching TV with Mrs P last week as brent hit $77 and she was asking me about things.It was when I started explaining to her aobut how saudi spare capacity isn't really what the market thinks it is ,cant run for long ayway, began explaining about coning in wells and the limits that puts on it,that she said I'd already explained it to her before but that it was a lot more interesting than my explaantions of fractional reserve lending.

Genuinely,can't thank you enough for the insights and edcuation you've provided me into the oil industry.We're ready for this inflation that's coming because of it.

I'm having a cider tonight.Reasons below.really feels like the thesis you've been developing has come of age of late.

 

On 25/09/2021 at 18:38, JMD said:

Retarded bunch aren't they? I satisfy myself with the continuing declining readership of the Guardian. But I also note that the 'Financial'??? Times has taken a real hit over last 12 months figures. I wonder why? Rhetorical question of course!!                                                                                                                                                                https://en.m.wikipedia.org/wiki/List_of_newspapers_in_the_United_Kingdom_by_circulation

They're some amazing drop offs.FT is a left wing rag these days.

[Animal Spirits]

25 minutes ago, Cattle Prod said:

Yes, this has been apparent for some time. This is why they are ramming debt up our holes, they are trying to avoid a standard of living decline. Or in many parts of the world, famine. You can argue peak oil if you want, but peak cheap oil has passed: look at us today 18 months on from the biggest dislocation in oil markets ever. This is no bump in the road. I think we could have a big price correction in a BK, and people will say 'bump in the road' but it'll be even shorter lived than the Covid bump. 

I've gone on about how oil and gas is practically free, for the energy we get from it. And we have built a society and population based on giving it away. We need to move on to the next stage in a sensible manner, and that means using the declining stocks of cheap oil and gas to build massive storage for renewables. But nobody is discussing that. Honestly, I think lots of people will die, unfortuntely, social unrest, currency wipeouts etc and then a leader will emerge who will ...lead... and then plan and deal with the transition. You just dont get leaders from easy times, you twats like Johnston, Biden, Trudeau and Macron. You get the Eisenhowers, Churchills and Thatchers from hard times. Or at least people remember you need to elect a real leader after a does of hard times.

On the bright side, all the current nonsense will get washed away as people get the biggest reality check of their lives. No more benefits, woke, gender studies, FAANG craziness, Greta, champagne socialism, and we will love our truck drivers and factory workers again. It will be a severe dislocation I think, there is no dressing it up.

In an interview with George Gammon, Art referred to it as a day of reckoning. Timestamped:

Art's comments on politicians he's discussed energy with:

The Energy Matters Blog (no longer updated) did a 3 part blog post on energy and man, a useful starting point to share with people less familiar with energy related topics.

Part 3 (links for part 1 and 2 also in the post):

http://euanmearns.com/energy-and-man-part-3/

From part 3, puts things into perspective...

[Yadda yadda yadda]

11 minutes ago, Cattle Prod said:

I think it'll take a while. I'm good with @DurhamBorn cycle to 2027 or 2028, with a ton of money printing. But that's as much as we can do with fiat money I think, papering over the energy problem. If oil is over $100 dollars a barrel (today's money), we'll squeeze enough out to keep the world turning by then (though many countries will have to do without). It'll be interesting to see if governments start to take it seriously over the next 5 or 6 years, I suspect not. It's just easier to make noise, and get on the after dinner speaker circuit. Wankers.

At least it will be interesting.

 

10 minutes ago, sancho panza said:

This thread has done it's job amazingly well.Kudos to all who chuck in and particuarlyl your good self as the de facto 'thread leader' for putting so much time in to educating people in the way you were once educated by your mentor.The more I see of life the more I realsie that getting teh right mentor in any walk of life can make a huge differnce to people.

This thread is an education. Very much appreciated. Wish I had specialist knowledge to contribute.

[Loki]

6 minutes ago, Animal Spirits said:

I can remember looking down at a motorway, years and years ago, and thinking just how much energy it represented.

[Loki]

4 minutes ago, Cattle Prod said:

And how much effort it would be to build with a pick and shovel. And tow the cars with ropes 

I wasn't even thinking of the embedded energy in the road itself, just the cars! 

It's only once you've done some groundwork by hand then watched a digger close-up you realise just how much power is in a litre of diesel (Should your mind work that way)

Doing tree work then watching a chipper effortlessly snatch and mince the branch you just struggled to even lift...also a good one

I suppose electricity is just as powerful, but not as visceral as internal combustion. Give me a v8 over a Tesla any day

[DurhamBorn]

The thing now is to concentrate on the cross market macro affects of high energy prices,not the prices themselves.I have no intention of selling any energy stocks until way later in the cycle even if they shot up now.

What this will awaken in the space is the need for more nuclear,the need for more renewables storage.I think hydrogen and pumped storage might lead that,and more of the finding ways to save energy.BP building a massive hydrogen site on Teesside and Rough being used to store lots of it are my expectations.

My way of investing these macro tides is not to drill right down to find the multi baggers,though we do get some,it is to see the most likely sectors to be winners.By winners i simply mean the cycle should help them,even just a little bit because a little bit of help will be gold dust in the horror show economy we are getting.

The main thesis of this thread was actually very very simple and it goes back to the days when mankind first decided live as a collective rather than hunters.That the economy couldnt produce enough for the demands placed on it.Some consumption will need to be exchanged for more production,and i think that less consumption will come from lmost everybody,but more so from those who live off the work of others.

[Yadda yadda yadda]

4 minutes ago, Loki said:

I wasn't even thinking of the embedded energy in the road itself, just the cars! 

It's only once you've done some groundwork by hand then watched a digger close-up you realise just how much power is in a litre of diesel (Should your mind work that way)

Doing tree work then watching a chipper effortlessly snatch and mince the branch you just struggled to even lift...also a good one

I suppose electricity is just as powerful, but not as visceral as internal combustion. Give me a v8 over a Tesla any day

I dug a load of clay out of my garden a few years ago. By hand with a shovel. I worked it out as being over 1.5 tons. Hard work.

[Loki]

Just now, Yadda yadda yadda said:

I dug a load of clay out of my garden a few years ago. By hand with a shovel. I worked it out as being over 1.5 tons. Hard work.

But doesn't the beer afterwards just taste all the better for it?

[Yadda yadda yadda]

4 minutes ago, Cattle Prod said:

This is exactly it. I moved 10 ton of topsoil earlier this year with a shovel and barrow, it was a good reminder. Chainsaw ...same thing. But not many people remember this. Not many people have ever done hard work!

Lol, you must have a larger garden!

[Loki]

1 minute ago, Yadda yadda yadda said:

Lol, you must have a larger garden!

Or a deeper one 

 

That's my mathematical contribution to the thread for this year.  Numbers  how do they work?

[ThoughtCriminal]

Nothing to see here....... 🧐

[Loki]

4 minutes ago, ThoughtCriminal said:

Nothing to see here....... 🧐

Upwards from here then.  "See, we didn't sell at the top, you nutters."

[Yadda yadda yadda]

Just now, Cattle Prod said:

It's steeply sloping so I've cut notches in for sheds and stuff. No access for a mini digger, so back to the shovel! As an anecdote, I broke three handles. They don't make them like they used to. When I worked on the sites as a teenager, I'd wear down the tip (you guys seem to call them Irish Shovels over here...what on earth else do you use, the rest are the wrong length!!) before the handle gave way. I searched high and low for replacement handles, they used to be in a bin by the checkout at the builders providers. It was cheaper to buy a new shovel. So now I have three spare shovel heads and one handle. What a waste.

But I suspect those shovel heads will have a value again in years to come.

That will change!

[Loki]

3 minutes ago, Cattle Prod said:

Irish Shovel

That's what I call a fork 

"Fookin hell Paddy I've been digging all day and this hole is barely any bigger"

[Hancock]

26 minutes ago, DurhamBorn said:

The thing now is to concentrate on the cross market macro affects of high energy prices,not the prices themselves.I have no intention of selling any energy stocks until way later in the cycle even if they shot up now.

What this will awaken in the space is the need for more nuclear,the need for more renewables storage.I think hydrogen and pumped storage might lead that,and more of the finding ways to save energy.BP building a massive hydrogen site on Teesside and Rough being used to store lots of it are my expectations.

My way of investing these macro tides is not to drill right down to find the multi baggers,though we do get some,it is to see the most likely sectors to be winners.By winners i simply mean the cycle should help them,even just a little bit because a little bit of help will be gold dust in the horror show economy we are getting.

The main thesis of this thread was actually very very simple and it goes back to the days when mankind first decided live as a collective rather than hunters.That the economy couldnt produce enough for the demands placed on it.Some consumption will need to be exchanged for more production,and i think that less consumption will come from lmost everybody,but more so from those who live off the work of others.

Hunter seems to think prices have almost peaked!

[leonardratso]

44 minutes ago, Loki said:

Or a deeper one 

 

That's my mathematical contribution to the thread for this year.  Numbers  how do they work?

maybe theres a big hill in his garden (or there used to be).

aha, a slope, nearly right.

should have moved 10 tons in and brought the garden up to the 2nd floor of the house, then you could have joined the shed to the bog and had an en suite in the bat man cave.

[Hancock]

10 minutes ago, Cattle Prod said:

Yeah I don't like being on the wrong side of him. But he's on record saying it's because he thinks production will respond. No shame in that if it's not your specialty, 99% of finance people think production will respond. But it won't.

Is it not possible demand falls short of expectations in the short term as opening up would have been priced in ... his BK seems to be just a matter of months off.

I'm just going to put the fact i lacked the balls to go all in at 290p down to living and learning, and see if a BK happens for my plan B. Would have been my preference to have had 50% of my money in oil stocks for the next few years ... but on the other hand it'd have been a tad overweight. Closer to 14% as of today.

 

[Talking Monkey]

7 hours ago, DurhamBorn said:

I love this line below.Funny enough BAT made me a quarter of a big one during 25 years of volume and demand declining.Its easier to make money in a declining market with sticky products and no new entrants.Macro page 1 stuff.

“Industries where volume is declining, where demand is declining, have a lot of trouble making money,” Jampel told Bloomberg in an interview published on Friday."

Below is wrong wrong wrong,government bond holders and cash holders will be the biggest losers due to inflation.

"The oil industry will be the loser of the energy transition, says Jampel, whose $187-million hedge fund is focused on shorting the most overvalued and vulnerable stocks in the carbon value chain,"

The below is correct,it is.Terminal.No chance it survives long term,zero,none,ziltch.The question is how much free cash will be generated between now and that date and what do the companies do with it?.If they buy back shares,pay increasing dividends and end up owning the new industries too then its likely shareholders continue to get a good return on capital employed.

"The oil industry is in a terminal decline,"

 

As for his others talk of oil and gas being dead.My model shows gas value trebling by 2050 and oil down around 12%.Thats value,not volume.Big integrated have a very very long runway of massive free cash flow to buy up the new areas.

The long term where it goes to zero is a long long way out right DB, last quarter of this century type thing 

[macca]

14 hours ago, Democorruptcy said:

Not a Tory fan but just saying

 

Labour did not really create any debt it was fairly flat on borrowing though the Blair years,, (I don't like Blair and never voted for him)

The financial Crisis caused all of the borrowing. (Banker fraud). But under Tories the borrowing has never ended and the debt has gone out of control whilst everything has been fucked to death and all of the money sent to corporations, friends, family and donors..

We have been asset stripped! in 11 years of Tory

40'000 less nurses 

22'000 less police

700 less police stations

23'500 less back of house police

97% of all rapist now just walk free..

They closed courts

They privatised prisoner rehabilitation to a mate and re offending rates jumped 70%

7000 less firemen

Less fire stations 

Council budgets cut 49.5%

adult social care destroyed

Legal aid destroyed 

sold everything including ramping up NHS destruction to private vultures of big USA corporations and offshore tax avoiders like virgin care that pays 0% tax

GP surgeries sold to USA firm with terrible record for care

and on and on

But they kept borrowing? where did the £1.6 trillion go?

Tories are criminals.. I hate Blair but this is legalised corruption now

[Talking Monkey]

3 hours ago, Hancock said:

Its the job market that needs to change i.e. end the need for a degree to become a copper, nurse, solicitor, politician etc ....

I just cant see it meaning the lower paid paying less tax, as those who can earn decent money will just bugger off leaving those left to carry the can .. or people will just not bother working extra to give it to the govt.

Going to be interesting times if inflation shoots up with student paying RPI+ 3%

 

At RPI+3% the outstanding debt runs away if inflation moves up, there's going to be a fair few who give up meaningful work when they see the outstanding balance going up by several thousand each year

[DurhamBorn]

David will be making his oil and oil stocks call based on when he sees the Fed tightening.He is one of the best in the world at understanding the Fed and how it operates.He understands their leads and lags into the credit markets as thats where they operate,not the stock markets.I suspect his oil call relies on production coming back just as demand falls again as the Fed tightens.However if production doesnt come back then that clashes with the demand situation.Davids call on the bust is because he sees the size of the credit and derivative markets being so large,that any tightening from the Fed will place too much strain somewhere and set off a bust.I think he might even see it starting very simply as corporate profits fall due to inflation shocking the markets.

[Hancock]

29 minutes ago, macca said:

Labour did not really create any debt it was fairly flat on borrowing though the Blair years,

If you ignore the epic levels of private sector borrowing, that destroyed the banking system and priced a generation out of home ownership. Followed by the debt needed for the bank bailouts to cover that decade of bad loans .... and the printing of money to cover that decade of financial illiteracy on steroids.

Oh and not to mention PFI which merely badly hid the debt under the table, and was the start of blatant corruption in full sight.