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

[Harley]

Well cheers guys for telling me I'm wasting my time with the FT.com stock screener and the Investing.com one is the one to use, even if I have to merge markets! The FT.com one is good in that you can do one screen for a sector across all markets but the sector granularity is too high.  The Investor.com industry granularity is however excellent.  So I'm off reworking things and will report back.

In the meantime may I highly recommend two podcasts from the Financial Sense Newshour, one on the markets and one on CV:  https://www.financialsense.com/financial-sense-newshour (the most recent ones on the list).

[sancho panza]

 

3 hours ago, DurhamBorn said:

Nasty short term shock no doubt.The big guys make a lot downstream as well though,and they increase margins when prices fall,it covers maybe 30% of the loss upstream.Big oil also is very big in gas.Repsol is 60% gas for instance and longer term demand is going up.I reckon demand will double by 2035.

The future is greener energy,but the way to play that is buy big oil,the forward looking ones.The likes of Shell can invest in the below.Slowly getting into position to then control hydrogen.I dont think anyone outside of big oil will have the capital to invest at the scale needed.

This is from Shell's annual report.

TAPPING THE POTENTIAL OF HYDROGEN Hydrogen, for example, could play a vital role in helping the move towards a lower-carbon world. Hydrogen can be extracted using the electricity generated by wind and solar power. It can then be stored, ready to be converted back to electricity with only one by-product, water. Shell is already working to increase the use of hydrogen, for example with refuelling sites for hydrogen-powered vehicles in Europe and North America. But we would like to open up more possibilities for using hydrogen, across heating, power and transport, helping it to become a significant fuel of the future. We are contributing to the development of a ship called the Suiso Frontier, which launched in December 2019, in Kobe, Japan. By 2021 it is expected to be the world’s first vessel to transport liquefied hydrogen across oceans, at temperatures of minus-253 Celsius. Shell is working with Kawasaki Heavy Industries and others to design the tank holding the liquefied hydrogen and develop further novel technologies for the ship. Those we have consulted include the USA’s National Aeronautics and Space Administration (NASA). They know how to handle liquefied hydrogen. They use it as rocket fuel. The Suiso Frontier is expected to allow us to develop and demonstrate the technologies needed for a commercial-scale hydrogen supply chain by around 2030. It shows the critical importance of technology – one of Shell’s core strengths – in the energy transition. By building on our strengths while embracing change as “the law of life”, we can help address those calls for more urgent action on climate change. With more and cleaner energy, we can make a better future.

Thanks for posting,confirms the thesis of many on here.

3 hours ago, Barnsey said:

.

I will both be investing wisely AND become a debt whore where appropriate in this next cycle.

 

If you take out a ten year fix with a decent size bank before the inflation runs then even I'd be tempted.I just struggle committing to a house or an area for ten years.And given the possible weakness in credit,they may not be the inflation hedge they've been since the 70's.

2 hours ago, Bricormortis said:

 Interesting times or what.....Just been googling a bit of this and that.  On the HL site I  noticed Telefonica Brazil divi yield being quoted as 17.7%. ?

I will be allocating in various sectors to my ISA over the next week, I don't think this is the bottom of a big Kahuna, I think there is plenty of carnage to come eventually so I am just going to take modest positions in divi payers  for now to make best use of the ISA.

 

I've readjusted out PM miners a couple of times,last was to exit Newmont and spread it around.Interesting to see the sell off late Friday but doesn't alter my thesis that weak dollar phase is inbound which will see gold and oil rocket.

 

1 hour ago, DurhamBorn said:

0 is bottom ,the bond holders could end up owning every listed stock.Of course very unlikely.A lot will depend on the Fed on Weds evening.If they dont print we might see more falls,if they do maybe a strong rally.Markets look 6 months ahead,right now they see GDP down 5%,with printing they might see it at minus 3% .

I think we're headed for a post correction rally here.Fed has plenty of ammo as there's no inflation problem …..yet.That will come and that's when I think we'll see the big kahuna ramp up.Althouhg the rpice action in TLT of late had me questioning my logic

I think we could rally from here and see some sector rotation starting to occur within the S&P.The chart action in someshares has been epic over the last week.

 

 

42 minutes ago, Agent ZigZag said:

I’m betting on the Fed printing Wednesday that will give what markets require at this moment confidence. No idea how much and I think the fed does not know the amount required. I think the markets will get excited by the amount  that will be Larger than any precedent set before. This sugar rush will boost the market then it will wear out then we are back to crash then more monetary injection etc. I can see the traders amongst us doing very well in this volatility. As an investor I am positioned along the lines of this thread in inflationary asserts and stocks. As long as they come good in 6 years time everything else in between is noise to me. if not then I may invest in a small amount of lead🤪

Big news today is the first Western govt acting with a bit of common sense.And it's ours.ASking vulnerable people in the 'at risk' age ranges to self isolate is the most appropriate response.

The reason this has become a crisis is because the Chinese playbook was taken up by the Italians and Spainish despite the fact that it lacked logic and actually might be worse than the illness it was aimed at sorting.

I suspect this blueprint will be taken up by a lot of Western govts and healthy people will start going about their normal business once more.

https://www.theguardian.com/world/2020/mar/15/coronavirus-uk-over-70s-to-be-asked-to-self-isolate-within-weeks-hancock-says

[sancho panza]

26 minutes ago, Noallegiance said:

This is what me and the missus were just talking about.

When the sugar rush from Friday runs out they can only do the same again but bigger. It'll run out of effectiveness pretty quickly, IMO.

Uncharted waters.

I think as someone earlier alluded the debt bubble has been pricked but much like in 08,the sub prime warnings came a year earlier.

Here I think US shale may well be the 2020 sub prime.It's going to take time to work through the system and force a draw down in credit issuance.I think the broader 'just above junk' corporate bond market will take longer to implode but implode it will.

Having said that,I'm open to the fact that this could be the big debt deflation moment,it just doesn't seem likely.Particualrly if Western govts follow the UK lead and ask people who feel they might be vulnerable to self isolate.Economic activity could pick up pretty quickly if there's a decent size stimulus package.

Going to be interesting to see how many govts replicate UK govt.

[Noallegiance]

18 minutes ago, sancho panza said:

Economic activity could pick up pretty quickly if there's a decent size stimulus package.

I guess we'll see how much impact record 'stimulus' has. Economic activity is already addicted to stimulus.

As Mr Schiff says, this hit could kill the addict.

[sancho panza]

28 minutes ago, Noallegiance said:

I guess we'll see how much impact record 'stimulus' has. Economic activity is already addicted to stimulus.

As Mr Schiff says, this hit could kill the addict.

I've been a debt deflationista since reading Shedlock in 08.I've learned patience.At some point the addict will overdose and Naloxone Hydrochloride won't save him.

It's a difficult call because I can see the dangers here,but we're positioning for a rally whilst keeping 25-30% back to dribble in.

The timeline I can see is US shale bonds unwind,clear the system but drastically raise awareness of corporate bond market rates not reflecting real risk->banks starts reining in credit expansion->real estate particularly CRE hits the skids in the US/EU->US/EU has inflation running from 2020 Corona bailout so can't stimulate like 2020->2021 bad debts start stacking up across various industries->Fisher's theory of Debt deflation gets it's second wind 90 years after the first

At any point we could get a $ crunch in the offshore markets

[UnconventionalWisdom]

Hi guys,

I've had this book for over a year and forgot about it. Seems good and goes along with a lot of what we are discussing. 

 

[JMD]

4 hours ago, DurhamBorn said:

Nasty short term shock no doubt.The big guys make a lot downstream as well though,and they increase margins when prices fall,it covers maybe 30% of the loss upstream.Big oil also is very big in gas.Repsol is 60% gas for instance and longer term demand is going up.I reckon demand will double by 2035.

The future is greener energy,but the way to play that is buy big oil,the forward looking ones.The likes of Shell can invest in the below.Slowly getting into position to then control hydrogen.I dont think anyone outside of big oil will have the capital to invest at the scale needed.

This is from Shell's annual report.

TAPPING THE POTENTIAL OF HYDROGEN Hydrogen, for example, could play a vital role in helping the move towards a lower-carbon world. Hydrogen can be extracted using the electricity generated by wind and solar power. It can then be stored, ready to be converted back to electricity with only one by-product, water. Shell is already working to increase the use of hydrogen, for example with refuelling sites for hydrogen-powered vehicles in Europe and North America. But we would like to open up more possibilities for using hydrogen, across heating, power and transport, helping it to become a significant fuel of the future. We are contributing to the development of a ship called the Suiso Frontier, which launched in December 2019, in Kobe, Japan. By 2021 it is expected to be the world’s first vessel to transport liquefied hydrogen across oceans, at temperatures of minus-253 Celsius. Shell is working with Kawasaki Heavy Industries and others to design the tank holding the liquefied hydrogen and develop further novel technologies for the ship. Those we have consulted include the USA’s National Aeronautics and Space Administration (NASA). They know how to handle liquefied hydrogen. They use it as rocket fuel. The Suiso Frontier is expected to allow us to develop and demonstrate the technologies needed for a commercial-scale hydrogen supply chain by around 2030. It shows the critical importance of technology – one of Shell’s core strengths – in the energy transition. By building on our strengths while embracing change as “the law of life”, we can help address those calls for more urgent action on climate change. With more and cleaner energy, we can make a better future.

Yep, i am buying Big Oil.

Also.... I know global stocks are already cheap but after/if world markets suffer a mega collapse after a melt-up, I will def. be buying a Japanese mid/large cap tech. etf holding Kawaski, Honda, etc. (etf is easiest way to buy many Japanese stocks as some stocks are not easy to buy). I think the world will be heavily utilising Japanese technology to quickly develop their infrastructure, and those tech. companies will rapidly overtake the current so called 'tech. giants' such as Tesla and FB.   

[JMD]

6 hours ago, Castlevania said:

Who’s going to build these houses? Actually who built council houses? Were the builders privately contracted or were they on the council payroll?

That's an interesting question: Who will build our new social housing?

Even the big house builders subcontract average of 60% (some higher) of their work to small national firms. I'm thinking most local councils will cut out the 'middle man' (Barratts etc) and deal direct with the small firms. Would some of our posters here who work within the building sector care to give their thoughts/recommendations?    

I will kick-off with some names, however none of these specialise in house building (they are UK engineering plays)... Galliford Try (owns morrison construction), CRH plc (owns tarmac), Babcock.

[JMD]

5 hours ago, Barnsey said:

As consumer spending won’t be nearly enough to aid recovery in a sizeable way (as folks will still be picking themselves up off the floor after job losses, IMPOSSIBLE for monetary policy to prevent this despite all the talk of temporary biz loans, zombies will go under on a large scale), I’m very sure of something playing out akin to many of the fine predictions on here. Won’t be a straight line of course, and we could have further waves of this virus over the next year or two, or even China-US tensions escalate into some kind of South China Sea conflict. Many have suggested this is certainly the beginning of a fourth turning period, however this could in fact have acted as the accelerant and brought it forward. Nothing like a good old black swan or clash of cultures to f**k up a good plan.

I will both be investing wisely AND become a debt whore where appropriate in this next cycle.

Barnsey, good reference I think you make to the 'fourth turning', do you know if Neil Howe has said anything interesting (I can find some google links but just wondering if anything specifically has caught your eye) about CV19 being the catalyst to a fourth turning? In the past it has been wars, etc, and I remember Howe saying that the next catalyst will be something unexpected - was he correct I wonder?

[Agent ZigZag]

Very tempted to become a trader tomorrow for the first time tomorrow and buy the miners for a mkt bounce then sell later on. Big risk for me but I consider it a worth while gamble. My thoughts are gold and silver were oversold and was a dump by a large fund or such like and b) they are going to print money to assist its assent. We’re wise men fear to tread fools step in gladly

[Democorruptcy]

6 hours ago, NogintheNog said:

It's a point. But with what's going on at the moment, most people are gonna hoard what has been by far the best investment over the last month. Cash.

Sure if the ISA limit was raised to £40,000 a few rich people might bung in some extra, but the rates on cash ISA's are punitive. We don't have a society with much savings, only debt!

The only people who have the necessary spending power are the people who created those savings in the first place! You know, the BofE counterfeiters!

I've written loads of emails to my MP's in the past, but it has made not a jot of difference. Like Barnsey said "We must try to read the path ahead no matter how much we disagree morally with it, and also consider the wacky side swipes that are simply impossible to predict"

Personally I'd rather spend the time trying to analyze at what point the gold price settles at in this current meltdown. And oil too!

All I was trying to do was get them to up the ISA limit, that doesn't mean people have to invest the cash when it lands in the account. Anyway never mind over and out.

[TheCountOfNowhere]

Lets see if i can call it right 4 days in a row... Big leg down Monday and Tuesday 

[TheCountOfNowhere]

5 minutes ago, Cattle Prod said:

How about Wednesday 

Depends on how quickly things fall apart 

[kibuc]

1 hour ago, Agent ZigZag said:

Very tempted to become a trader tomorrow for the first time tomorrow and buy the miners for a mkt bounce then sell later on. Big risk for me but I consider it a worth while gamble. My thoughts are gold and silver were oversold and was a dump by a large fund or such like and b) they are going to print money to assist its assent. We’re wise men fear to tread fools step in gladly

JNUG exploded on Friday.

JNUG is a triple-leveraged bet on junior gold mining. Absolute insanity, and it went down 66% (!) on the day. Since it holds a lot of GDXJ, when JNUG got panic sold, so did the GDXJ, and that cascaded down to individual stocks. 

[Castlevania]

2 minutes ago, kibuc said:

JNUG exploded on Friday.

JNUG is a triple-leveraged bet on junior gold mining. Absolute insanity, and it went down 66% (!) on the day. Since it holds a lot of GDXJ, when JNUG got panic sold, so did the GDXJ, and that cascaded down to individual stocks. 

Looked it up. It was USD 95 three weeks ago. Now below 5 bucks. Crazy.

[kibuc]

2 minutes ago, Castlevania said:

Looked it up. It was USD 95 three weeks ago. Now below 5 bucks. Crazy.

Tempting, isn't it :p

[Castlevania]

Just now, kibuc said:

Tempting, isn't it :p

Yeah. That leveraged fund was over USD 4,000 back in 2013. 

[Lavalas]

Good article here on leveraged gold ETFs and Fridays trading...

 

[Bricks & Mortar]

Fed cuts rates to 0% and $700bn QE

Hmmm.  Surprised they've gone mostly for the rates and not more with the QE. 

 

https://www.cnbc.com/2020/03/15/federal-reserve-cuts-rates-to-zero-and-launches-massive-700-billion-quantitative-easing-program.html

 

[BearyBear]

24 minutes ago, Lavalas said:

Good article here on leveraged gold ETFs and Fridays trading...

Cheers for posting!

[DurhamBorn]

So rates to zero and QE started,interesting to see how much they increase it.

[DurhamBorn]

The Fed also cut reserve requirement ratios for thousands of banks to zero. In addition, in a global coordinated move by centrals banks, the Fed said the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank took action to enhance dollar liquidity around the world through existing dollar swap arrangements.

So the world is now getting flooded with $s.

[TheCountOfNowhere]

Banks must be collapsing.

4 minutes ago, DurhamBorn said:

The Fed also cut reserve requirement ratios for thousands of banks to zero. In addition, in a global coordinated move by centrals banks, the Fed said the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank took action to enhance dollar liquidity around the world through existing dollar swap arrangements.

So the world is now getting flooded with $s.

Markets up tomorrow then the riots will start. 

All theyre fookinh worried abour is thw stock market. 

What a scam 

[BearyBear]

11 minutes ago, Bricks & Mortar said:

Fed cuts rates to 0% and $700bn QE

Hmmm.  Surprised they've gone mostly for the rates and not more with the QE. 

 

https://www.cnbc.com/2020/03/15/federal-reserve-cuts-rates-to-zero-and-launches-massive-700-billion-quantitative-easing-program.html

 

NZD is also down from 1.0% to 0.25% unexpectedly... this is not a global pandemic, it's a global panic!

[DurhamBorn]

15 minutes ago, TheCountOfNowhere said:

Banks must be collapsing.

Markets up tomorrow then the riots will start. 

All theyre fookinh worried abour is thw stock market. 

What a scam 

Nope,they worried about the single mum in Detroit juggling two part time jobs and kids in school.The rich gain,but that isnt why the Fed is acting.Its just hyperbole saying its for the rich.