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

[sancho panza]

5 hours ago, spygirl said:

Years ago, before 2007, I was reading an article on the BoE pension scheme.

Merv was in charge.

To avoid risk and compromise it only invested in index linked gilts.

To meet the projected returns andprojecte life exptectancy, they had to invest 50% of the salary i.e.

If BoE employee earned 100k, then buy 50k of index links Gilts. Every year.

That is how expensive index linked, DB public sector pensions are..

Although they cant differ on sexes/gender/whatever,  the most expensive publlic sector jobs are female coppers and firemen.

The rate at which they accrue pension benefits and the extra (5-10) years women live is ruinous.

ZIRP is also partly responsible for creating larger liabilities.Obviously not a problem for the BoE,they don't have to worry about the effect of their policies on their ability to feed a family.

I'm sjut gobsm,acked by what that Economists article you linked to said about councils needing to run balanced budgets.If that is teh case it won't be long before Leicester heads south.Warrington ...£700mn real estate,....serously,wtf thave they been doing?

Our counil has purcahsed virtually every piece of retail space in the city once the private sector had decided it didn't want it.And we're talking some real dog poo sandwich sites that have become de facto pigeon lofts.

 

 

5 hours ago, DurhamBorn said:

Really good results from Mosaic,looks like potash doesnt care much about people taking a jolly across the Atlantic on a Virgin jet.8 bucks to 80 i hope by 28.

Iv been busy on the PM sector the last few days and think silver is close to breaking out.Iv bought right across the silver mining sector just after the markets opened today and finally got my holdings back to where i wanted.Silver looks good for $21+ this year.

Look at the FTSE today and all the stocks the MSM has been tipping to buy for "the recovery" that are mainly dis-inflation loving are falling including the housebuilders.The risers are mainly the areas the MSM say should be avoided at all costs and reflation loving.

US government is borrowing $3 trillion,so as the Fed has QEd that amount and more it looks like a 100% monetize the fiscal responce,so even more inflationary than expected

 

I was having a flick through the building shares and associated cosntruction co's yesterday.Shocking how few have had a taste of reality yet.....eg Ferguson/ashtead.

Big lay offs announced by Air BnB today.25% staff.Travel is fubar for a while.

Ref PM's...I see DXY has hit some lower highs on the dailies since march.Weakening dollar will be rocket fuel for PM's.Could we see UST's taking a bath?

3 hours ago, Agent ZigZag said:

Take away the government benefits teat and the huge army of those working for the state and I am sure we will all be shocked at the level non-compliance.  There is a swarm of people that have not been affected in monetary terms by this lock down and so they do not give a flying XXXX. Private sector please meet public sector

Be under no illusion that whislt there's a lot of people do well out of the public sector,tehre's a lot that don't. eg Nurses/paramedics.Once you've lasted 6 years it's not bad but the kids coming out now have £50k debts for jobs that pay £25k.They'll agree with you.All of them have had to work through covid in the main.The public sector is really a tale of the have and have nots.Your average hosptial cleaner works for a private company,takes the same risks as nurses and Dr's ref viral load but on no money.I think we're getting a lot closer to that moment when the productive start getting tired of the incessant demands on their cash from the unproductive.

 

Especially local govt...if councils stasrt going under could get interesting.In Leicestershire we have something like 10 local councils,each with CEO and managemnet team...............HQ that looms over the towns they run.....successive govts have let it slide.

[DurhamBorn]

26 minutes ago, Cattle Prod said:

Shell the company is a hell of a lot better than those management decisions. Dutch are pragmatic, he might get the boot soon.

Do you ever notice rugby coaches tend to be changed at the end of the world cup? Same with economic cycles I think. A bunch of CEOs have just run off with their loot, a bunch more will be booted. BP an example of the former, Tullow the latter. And good - rugby coaches are stale after one world cup cycle!

I look at the way Repsol have managed things so far and its far superior to Shell.They have a nice steady plan on expanding renewables.Its easy to understand and looks a fair investment of shareholder funds.It gives them options to expand and grow the areas,provides options should the enter hydrogen etc.They are still getting great drill results even during this in South America.They seem to of balanced holding the divi with careful capex cuts.Shell on the other hand seem to be saying we cant be bothered to earn our salaries,we will blame corona and slash the divi.The worst part was the attitude at the conference call.They were almost shrugging it off as a none event and seemed to be saying even when oil goes back up we wont increase the divi.If they had said until debt hits x amount,or some sort of guidance fair enough.If others cut in the next few quarters they will get away with it,but if not i expect them to be removed.

4 minutes ago, Castlevania said:

Great Panther? That’s brave.

Very,small holding as are several of my silver holdings.

[sancho panza]

2 hours ago, Cattle Prod said:

And so it begins:  

 

Looks fairly cack handed (Trumpian) but a coincidence - I think not. The yanks have realised that their energy "dominance" was an illusion, and is about to very rapidly go in the other direction. Following Monroe doctrine, it won't be long before they are 'influencing' Guyana too.

In other news, henry hub natural gas has broken out of its downtrend as expected, but I was very surprised to see Shell sell some Appalachia assets. That and the divi cut points to a potential management issue at the top, and there is already some rumblings about removing the CEO. Think I'll  rebalance some toward Total and XOM, I probably have too much anyway.

Agree with DB on silver, I'm waiting patiently!

Who's bought the assets CP?

[DurhamBorn]

2 minutes ago, sancho panza said:

Who's bought the assets CP?

https://www.hl.co.uk/shares/shares-search-results/n/national-fuel-and-gas-com-stk-usd1

[Castlevania]

25 minutes ago, DurhamBorn said:

Very,small holding as are several of my silver holdings.

I bought a small holding last year. It’s now a very small holding

[sancho panza]

14 minutes ago, DurhamBorn said:

https://www.hl.co.uk/shares/shares-search-results/n/national-fuel-and-gas-com-stk-usd1

Cheers DB.

Jsut tread up on it NFG paying $541mn saying they expect $100mn in FCF from it in 12 months....

https://www.offshore-technology.com/news/deal-news/shell-appalachian-sell-natural-fuel-gas-shale/

NFG will pay for most of the deal in cash, with the option to pay $150m in shares. Using its existing hedges, it expects to see $100m of free cash flow from the fields over the next 12 months.

 

 

[DurhamBorn]

45 minutes ago, sancho panza said:

Cheers DB.

Jsut tread up on it NFG paying $541mn saying they expect $100mn in FCF from it in 12 months....

https://www.offshore-technology.com/news/deal-news/shell-appalachian-sell-natural-fuel-gas-shale/

NFG will pay for most of the deal in cash, with the option to pay $150m in shares. Using its existing hedges, it expects to see $100m of free cash flow from the fields over the next 12 months.

 

 

I cant understand why Shell would sell those gas assets at that price.Its probably the best gas area in the US.$100 million free cash flow at these prices.I reckon mid cycle Shell has sold them at 2.5x cash flow.They should be buying at this stage in the cycle,not selling.

[sancho panza]

 

ref silver.Futures showing commericals decreasing shorts which historically bodes well for the metal.Doesn't look baked in yet like april/may 2019 somethigns clearly afoot.

Historical context

[sancho panza]

5 minutes ago, DurhamBorn said:

I cant understand why Shell would sell those gas assets at that price.Its probably the best gas area in the US.$100 million free cash flow at these prices.I reckon mid cycle Shell has sold them at 2.5x cash flow.They should be buying at this stage in the cycle,not selling.

i thought the figures show poor judgenent but I'm a bit of a novice compared to you and CP.I'm stunned to be honest but I don't have the understanding of people closer to the industry but what I do know is that I'd like to see them picking up some distressed oil&gas assets with the divi they're saving not dropping assests like this for what appears to be cheap money.It looks a good deal for NFG from their financials

One of the reasons we ended up with XOM as our biggest holding due to the fact that they don't tiptoe around the fact they're a fossial fuel company.WE're in too deep with RDSB but I may well look to lighten the load some and use the proceeds to buy Total/Repsol/EQNR.I hope they're working on something.

 

[Eventually Right]

DB (or anyone else), as we’re talking silver miners, do you have any opinion on Discovery Metals?

[DurhamBorn]

17 minutes ago, Eventually Right said:

DB (or anyone else), as we’re talking silver miners, do you have any opinion on Discovery Metals?

I mainly only look at producers,not development companies as i always think you need insiders to really understand them.

28 minutes ago, sancho panza said:

i thought the figures show poor judgenent but I'm a bit of a novice compared to you and CP.I'm stunned to be honest but I don't have the understanding of people closer to the industry but what I do know is that I'd like to see them picking up some distressed oil&gas assets with the divi they're saving not dropping assests like this for what appears to be cheap money.It looks a good deal for NFG from their financials

One of the reasons we ended up with XOM as our biggest holding due to the fact that they don't tiptoe around the fact they're a fossial fuel company.WE're in too deep with RDSB but I may well look to lighten the load some and use the proceeds to buy Total/Repsol/EQNR.I hope they're working on something.

 

A bid for Centrica hopefully 

[Popuplights]

1 hour ago, sancho panza said:

i thought the figures show poor judgenent but I'm a bit of a novice compared to you and CP.I'm stunned to be honest but I don't have the understanding of people closer to the industry but what I do know is that I'd like to see them picking up some distressed oil&gas assets with the divi they're saving not dropping assests like this for what appears to be cheap money.It looks a good deal for NFG from their financials

One of the reasons we ended up with XOM as our biggest holding due to the fact that they don't tiptoe around the fact they're a fossial fuel company.WE're in too deep with RDSB but I may well look to lighten the load some and use the proceeds to buy Total/Repsol/EQNR.I hope they're working on something.

 

I work for XOM, have some shares via a sharesave scheme, and also my pension. Already got a few eggs in that basket!

[reformed nice guy]

Something against the grain:

https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2020/eight-centuries-of-global-real-interest-rates-r-g-and-the-suprasecular-decline-1311-2018.pdf

I saw this on another board and it got me thinking. It suggests an average of 0.01% drop in real interest rate yer year and that the current negative interest rates seen everywhere are to be expected as a trend that has been going on for 700 years.

 

[Majorpain]

10 hours ago, Eventually Right said:

DB (or anyone else), as we’re talking silver miners, do you have any opinion on Discovery Metals?

Very low grade resource similar to Penasquito, that type of resource needs lots of water which Mexico is rationing quite heavily.  The Locals got quite upset over the water situation and blockaded the mine earlier this year so its not an overblown problem.

Its a play on if anyone else would be interested in developing it, and there are much more interesting projects to put my capital in IMO.

DYOR as always.

[Harley]

14 hours ago, Cattle Prod said:

Monroe doctrine

Ooh a scholar!  Wasn't expecting to hear that! 

[sancho panza]

[Eventually Right]

1 hour ago, Majorpain said:

Very low grade resource similar to Penasquito, that type of resource needs lots of water which Mexico is rationing quite heavily.  The Locals got quite upset over the water situation and blockaded the mine earlier this year so its not an overblown problem.

Its a play on if anyone else would be interested in developing it, and there are much more interesting projects to put my capital in IMO.

DYOR as always.

Thanks for your replies, Majorpain and DB.

I'll put it on the backburner for now.

[DurhamBorn]

The silver stocks i see with the biggest beta to the silver price (so most likely to outperform in a rising silver price,but bend you over and roger you in a falling one).This is not based on fundamentals quality,reserves or anything ,just beta to silver price.

Endeavour Silver 2.46 beta

American Silver Corp 2.32

Fortuna Silver 2.30

First majestic 2.17

Avino Silver 2.09

Great Panther 1.72

Coeur Mining 1.70

 

I own them in that order.I would add they are very very risky,and if silver falls they will inflict great pain.I could take an entire wipe out from them all without worrying much, and thats the way to view silver miners.However i think at least one of the above will 20x or even 50x in the cycle ahead and a couple probably fail.If i was young and only had a small amount of capital,but was prepared to lose it all,then thats where id put it for the cycle.

Not advice DYOR etc,

[JMD]

On 04/05/2020 at 11:57, Nicolas Turgeon said:

DB have you looked into the bitcoin ETF available through Hargreaves Lansdown? Ticker is BIT-XBT

It's a Bitcoin tracker which I understand holds a 1:1 ratio of bitcoins proprtional to the money in the fund. Based in Sweden, priced in Kroner, low spread,2.5% fee. Seems to track the bitcoin price okay? The fee is a bit of a disadvnatge but compared to the hassle of using exchnages with bank transfers, wallets and the CAPITAL GAINS TAX when the ETF can be held in your SIPP.... Theres another BTC one priced in Euro (less volume I think) and ethereum ones too.

As someone mentioned before, Plan B is on twitter and his stock to flow model is addictive and I read through his articel on medium. Amazing if the model continues to fit.

Harley, you mentioned recently that you might be investing in bitcoin. Would you consider using the above Bitcoin etf?

I think I might already know your answer to this question - you having previously written about efts/synthetics/counterparty risks. I learned a lot from those posts, so was wondering what your thoughts were about this Bitcoin etf?

I think that Vendetta has already commented on the potential exchange hacking risk. Would be interested to hear if others own this etf.

[sancho panza]

worth noting we're hitting some exponetnial phases on the big goldies when you look at the monthlies.Possibly a sign of the big institutional moeny coming into the big boys.

the more a resistance gets tested the more likely it is to fail/hold

[Bricormortis]

6 hours ago, JMD said:

Harley, you mentioned recently that you might be investing in bitcoin. Would you consider using the above Bitcoin etf?

I think I might already know your answer to this question - you having previously written about efts/synthetics/counterparty risks. I learned a lot from those posts, so was wondering what your thoughts were about this Bitcoin etf?

I think that Vendetta has already commented on the potential exchange hacking risk. Would be interested to hear if others own this etf.

That ETF I had a look at it, it is not available as an ISA other wise I might have taken a small punt.

[DurhamBorn]

18 minutes ago, Bricormortis said:

That ETF I had a look at it, it is not available as an ISA other wise I might have taken a small punt.

Agree,its the sort of punt you want inside a tax free wrapper isnt it.Its not the sort of thing youd want to sell yearly up to your capital gains allowance.

[afly]

50 minutes ago, DurhamBorn said:

Agree,its the sort of punt you want inside a tax free wrapper isnt it.Its not the sort of thing youd want to sell yearly up to your capital gains allowance.

Seems to be purchasable under SIPP at least. Not under LISA tho 🤷‍♀️

[Barnsey]

 

[TheCountOfNowhere]

Lockdown to end on Monday.

Banksters some £500,000,000,000 a week better off.

Expect the FTSE to fly.