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

[DurhamBorn]

12 minutes ago, Cattle Prod said:

So I'm chasing up one of my wife's old pensions in Ireland, trying to get it transferred over here (any advice on doing that is much appreciated). Turns out she has been 100% invested in the Irish Life (a big fund provider) Consensus Fund:

And it's invested in, not quite FAANGM, but FAAGM . Only less than 10%, but still. Indicates the wisdom of the main investment managers in Ireland.

This is one of the most common default funds, and people won't know what they are invested in. Good luck, pension holders.

 

Id give Hargreaves pension team a ring,im sure they would sort it for you.You should also be able to put the pension into cash while you wait for the transfer.

[JMD]

33 minutes ago, jamtomorrow said:

A lovely summary of where we are, if you don't mind me saying @Majorpain.

I've long "felt" this as a cultural malaise - organisations and individuals with a long-term outlook are now a rarity, most just looking for the next quick buck. Private equity and asset strippers part and parcel of that. But you can see it everywhere if you look - in the shabby state of the buildings and infrastructure in the UK, in the new-build estates disintegrating after just 20 years, and in the ever-increasing financialisation needed to keep the whole sorry show on the road.

We've become a nation of short-cutters and short-termists, and now the piper wants paying.

Ideas such as 'legacy' have all but disapeared from the modern business lexicon. Family businesses that passed assets down through generations sound so very quaint  a concept now, but they operated sustainable businesses and valued long term decision making.

[Bricks & Mortar]

23 minutes ago, JMD said:

Yes 'mad' indeed. I suppose in the absence of critical thinking, political dogma and posing will eventually have that effect. Perhaps that's why my own mind (currently sane I hope) has been wandering a little off topic - its so scary to realise just how dumb and ineffectual our current crop of leaders are, just when we need them most.

Btw, what did George in the video keep calling the Corona virus? Is it my hearing going, or was he using an Americanism i'm not familiar with?

Cerveza Sickness.  I think it's his own invention, that runs through all his videos.  Done because Youtube is in the habit of downgrading videos that mention the coronavirus. 

I thought the video was excellent.

[Ellandback]

2 hours ago, TheCountOfNowhere said:

I really should start listening to myself 

Anyone getting nervous, thinking about selling out ?

Yes, even more so after watching George Gammon's subsequent video to the one posted on this page.

[Bricormortis]

20 minutes ago, Bricks & Mortar said:

Cerveza Sickness.  I think it's his own invention, that runs through all his videos.  Done because Youtube is in the habit of downgrading videos that mention the coronavirus. 

I thought the video was excellent.

I thought that was a hangover.

[Transistor Man]

16 hours ago, Cattle Prod said:

. If silver is currently over 10% the cost of PVs, a silver price spike will kill solar.

Substitution of materials is generally a poor solution

Short-term, I can believe it. On the timescale of 2050, I would say the demand for silver by the solar industry is unknowable. There will be many opportunities for graphene and nanostructured materials, and the semiconductor industry is highly innovative. E.g. Graphene-silver nanowire composites contain a lot less silver.

[leonardratso]

hehe, told you.

[TheCountOfNowhere]

1 hour ago, DurhamBorn said:

Count,you really need to stop watching the markets every day.Walk away,do something else etc.Markets are never linear and day to day,week to week moves will whipsaw you.Why would you want markets to go up anyway,are you drawing down as a pension?.Iv got many stocks iv been buying still paying dividends,i want reflation areas to stay down as long as they can,medium term would be fine,drops will be fine.VOD has gone ex divi,when that divi lands if im buying more Mosaic id rather they were $12 instead of $14 etc.Maybe il use the divi to expand my Telia holding,much rather they were lower than higher.

I sometimes think getting down to really simple thoughts helps people.In Feb my ex workmates were buying BP in their pension tracker funds at £4.60.I bought them at £2.60 in March.Its simplistic,but this game is about trying to outflank as much of the loss as you can,and capture as much of the gain,with a level of risk suitable for your age and financial position.

 

Im not worried about it everyday, I am thinking there is about to be a once in a lifetime slump, 50% haircut for all.

[Majorpain]

2 hours ago, jamtomorrow said:

A lovely summary of where we are, if you don't mind me saying @Majorpain.

I've long "felt" this as a cultural malaise - organisations and individuals with a long-term outlook are now a rarity, most just looking for the next quick buck. Private equity and asset strippers part and parcel of that. But you can see it everywhere if you look - in the shabby state of the buildings and infrastructure in the UK, in the new-build estates disintegrating after just 20 years, and in the ever-increasing financialisation needed to keep the whole sorry show on the road.

We've become a nation of short-cutters and short-termists, and now the piper wants paying.

Totally, the hard part is how do you get out of it, and to do that i think its time to see how badly i can individually "trash the pound".  Minimum wage job and own a home as benchmark.

Quote

I fancy a new car, a German manufactured Mercedes C300d AMG Line Edition Premium at £41,630 which is a little bit on the expensive side in one go.

That price includes 20% Vat of £8326 to the treasury, dealer costs and profit of about 5% or £2081 and Mercedes gets the other 75% or £31222.

So 25% of the purchase price stays in the UK and 75% gets converted into Euros and heads to Germany.  However the 75% is going to be slightly higher quality "GDP" than the 25% since it involves a factory with hundreds of robots....

I choose to PCP it from Mercedes Benz finance at £333 a month for 35 months (inc VAT) instead, which is well within my means, so the finance world magics up the £42,630, UK GDP increases by that amount and the pound gets debased by the same, then £31,222 gets converted to Euros and heads to Germany.

The car over the 3 year lease depreciates like a rocket powered brick, at about 50%, significantly impacting the UK total "assets", and come time to renewal i decide to swap it for a new one.  Unfortunately the Pound isnt doing to well as too many are being exchanged into Euros, luckily the finance companies are now doing 60 month deals to lower the payments so i can afford it.  This comes at the cost of more interest over the longer term again lowering my overall purchasing power and doing yet more damage to the pound.

I think that's a fair summary of the problems that just one person can cause, circa £17,000 yearly income can easily cause near double that in debasement, if that's multiplied by a few million people buying depreciating assets on finance then its going to be an issue in the long run.  And that's before you get onto cheap goods from China!

[AWW]

35 minutes ago, Majorpain said:

I think that's a fair summary of the problems that just one person can cause, circa £17,000 yearly income can easily cause near double that in debasement, if that's multiplied by a few million people buying depreciating assets on finance then its going to be an issue in the long run.

This is an excellent point and something I hadn't given much thought to. Does it follow that reduced demand for imports and Brexit should actually lead to a stronger pound, if it turns out that trade with the EU (I use the word "trade" loosely, given that we've always run a huge deficit with them) is impacted as significantly as predicted?

[Transistor Man]

1 hour ago, TheCountOfNowhere said:

Im not worried about it everyday, I am thinking there is about to be a once in a lifetime slump, 50% haircut for all.

I remember Buffett saying Berkshire had done that 3 times. Plus other 40% drops.

[Wheeler]

3 hours ago, jamtomorrow said:

A lovely summary of where we are, if you don't mind me saying @Majorpain.

I've long "felt" this as a cultural malaise - organisations and individuals with a long-term outlook are now a rarity, most just looking for the next quick buck. Private equity and asset strippers part and parcel of that. But you can see it everywhere if you look - in the shabby state of the buildings and infrastructure in the UK, in the new-build estates disintegrating after just 20 years, and in the ever-increasing financialisation needed to keep the whole sorry show on the road.

We've become a nation of short-cutters and short-termists, and now the piper wants paying.

A friend of mine is responsible for highway maintenance and whenever I complain to him about the use of chip and seal he just responds that it is all politics and economics. Doing it that way is 5 times cheaper than doing a proper job! He'd love to use some of the new technologies that are giving 50+ year road life which would cut costs in the long run, and make the roads so much better to use, but he won't when he can only win bids for 10 years maintenance at a time. He's not going to spend the money when there's no guarantee that he'll get a good return on it. If the government would pay him for 50 years maintenance then he'd put in a road that lasted 50 years!

[Majorpain]

58 minutes ago, AWW said:

This is an excellent point and something I hadn't given much thought to. Does it follow that reduced demand for imports and Brexit should actually lead to a stronger pound, if it turns out that trade with the EU (I use the word "trade" loosely, given that we've always run a huge deficit with them) is impacted as significantly as predicted?

Yes, if i'm right that trade deficit is being funding with debased/printed money and free trade with the Euro is in fact making the UK much poorer.  The trade deficit against the Deutschmark used to equalize to the correct level as they were not massively different in size, i don't think it can against the much larger Euro as basket case Club Med depresses it to keep German exports too cheap.

Being able to leverage up on £'s with massively depreciating assets which are then swapped for euros makes it 100 times worse, it does explain why the German car industry is so touchy about brexit.

Quote

In 2016, Britain was the largest single export market for German manufacturers, who sold 800,000 new cars there, or 20 percent of their overall global exports

 

[TheCountOfNowhere]

1 hour ago, Wheeler said:

A friend of mine is responsible for highway maintenance and whenever I complain to him about the use of chip and seal he just responds that it is all politics and economics. Doing it that way is 5 times cheaper than doing a proper job! He'd love to use some of the new technologies that are giving 50+ year road life which would cut costs in the long run, and make the roads so much better to use, but he won't when he can only win bids for 10 years maintenance at a time. He's not going to spend the money when there's no guarantee that he'll get a good return on it. If the government would pay him for 50 years maintenance then he'd put in a road that lasted 50 years!

If you drive in Holland the roads are noticeably quieter...they use the proper stuff

[Green Devil]

https://www.bbc.co.uk/news/business-53019360

 

BoE to the rescue. Print us into oblivion. 😂😂😂

[reformed nice guy]

Just spent some time reviewing my portfolio and setting ladders for future drops. Thank you to everyone that has contributed to the thread as Im currently up 21.5%.

My share allocation by current value broadly is: 39% energy, 26% raw material, 25% tech (including telecoms) with the rest misc.

In more detail its 34% oil & gas, 19% tech, 9% non-PM mining, 7% PM miners, 7% chemical producers, 6% telecoms, 5% consumer (mainly gambling + fags), 4.5% utilities, 3% potash then misc.

My main lesson from the review is that I want more exposure to potash. I have set the top level of my ladder at roughly the lowest purchase of shares I have or lows reached in March for those that I dont have.

If there isnt another big sell off then I will reassess, but I will still be delighted with the bargains I got in March! 

[TheCountOfNowhere]

1 hour ago, Cattle Prod said:

North America oil drilling rig count is now at 2005 levels, ie before they were ever drilling for shale. 199 for US oil to be exact, down from 788 a year ago, it's been fully devastated. As happy as I am to see a stupid business die, I feel for the tens of thousands of people affected; American hands are some of the best I've ever met or worked with. But they'll put their energy elsewhere, incredibly optimistic people.

OilLivesMatter

[DurhamBorn]

1 hour ago, Cattle Prod said:

North America oil drilling rig count is now at 2005 levels, ie before they were ever drilling for shale. 199 for US oil to be exact, down from 788 a year ago, it's been fully devastated. As happy as I am to see a stupid business die, I feel for the tens of thousands of people affected; American hands are some of the best I've ever met or worked with. But they'll put their energy elsewhere, incredibly optimistic people.

How long can the frack wells stay viable without new drilling on average? I would guess every month means some never come back,and 6 months the whole lots finished?

[jamtomorrow]

Makes sense - of all the stimulus options, construction sector could well be the best bet for now in the face of encroaching automation, and Government seem to get that.

What's the de-complex angle here? Already hold CRH, might run the rule over Lafarge, St. Gobain, Heidelberg Cement, Ferguson this w/e.

[Chewing Grass]

Shovel ready projects are generally can-kicking and a lot will have a very poor long-term return in investment if any because if money was to be made they would be building them now.

I would go for repairing all roads, fixing sea defences, painting stuff that has been left to rust and cutting all those overgrown hedges encroaching on roads.

We don't need 18 months of mass concrete pouring we need 18 months of general maintenance.

[jamtomorrow]

Just now, Chewing Grass said:

Shovel ready projects are generally can-kicking and a lot will have a very poor long-term return in investment if any because if money was to be made they would be building them now.

I would go for repairing all roads, fixing sea defences, painting stuff that has been left to rust and cutting all those overgrown hedges encroaching on roads.

We don't need 18 months of mass concrete pouring we need 18 months of general maintenance.

Agreed, although I doubt Government give a monkeys about ROI. They'll have us all painting coal if it heads off mass employment.

[Harley]

On 12/06/2020 at 10:25, Majorpain said:

Fab video, and it certainly supports the idea that the "West" has been consuming its own capital to sustain its standard of living, the government has been complicit in the cover up lest the great unwashed realize that things are not quite so rosy as the headline figures suggest.  What cant be hidden is the gradual slide in standards

I've believed this for a long time in the UK.  Certainly my takeaway after going through the weeds a long time ago. We joked about the French doing this decades ago but they all do it now.  They do a lot of other damage in the UK (e.g. uneconomic immigration, housing, etc) to maintain the lie.  Fingers in a dam though which will eventually blow.  The Civil Service institutionalised this in their "managed decline" mantra.  You can understand most of all governments policies from this one video.  Inept charlatans have really screwed us over, again.

http://www.shadowstats.com/

PS:  The guy did a cracking job and shows a lot of smarts ("Ceveza Sickness"!).

[Harley]

On 11/06/2020 at 20:08, sancho panza said:

Good luck with the move DB.Your lad is very lucky to have you as a Dad.

Interesting thesis here.

Guy states we've been in Depression since 2006 with no Real GDP growth,as  GDP not calucalted properly and deflated with CPI rather than  which reflects changes in living standards

1) GDP growth has been gamed by gaming GDP higher and infaltion down

2) much growth has been driven by govt expenditeure and driving debt to GDP ratios higher.

3) unemployment not being properly counted

Well worht 20 mins imho

 

 

Great.  Watching his other videos today.  Saw one explaining gold ETFs which was also good.  

Love his differentiation between between price and value in a lot of his videos.  Clarified my thinking - I try to trade price and invest in value!

[Don Coglione]

1 hour ago, jamtomorrow said:

Makes sense - of all the stimulus options, construction sector could well be the best bet for now in the face of encroaching automation, and Government seem to get that.

What's the de-complex angle here? Already hold CRH, might run the rule over Lafarge, St. Gobain, Heidelberg Cement, Ferguson this w/e.

INFA!

[mh9000]

2 hours ago, Cattle Prod said:

There are a few things happening.

1) Shut in wells are being opened again. May cause a modest uptick in production in the next six months.

2) Frac spreads are picking up. These are the crews that frac the wells and complete them before oil flows. Up from a low of 45 to 68 now, but I think most of these are gas. I can't get oil only frac crew numbers. They are fraccing wells that were drilled months or years ago but not completed (DUCs). 

3) Driiling rigs are down to 2005 lows. Lag time from drop in drilling rigs to corresponding drop in production is around 11 months. Hence I see the full effect of this drop in activity becoming apparent in Q1 2021. Probably visible by Q4.

4) All existing producing wells are declining. Ones drilled in say Jan are in steep decline, on their way from 500 to 50 bbl a day over the next year or so. They will continue to be produced at 50, 40, 30 barrels for 7 or 8 years, so it won't be finished for a while. 

5) Companies that can't drill new wells will suffer declining production and will go bust. Are going bust.

The reason I am so intetested in prices staying moderate for a few months is that this will blow out the drilling- production gap, and ensure shale production never reaches old highs. It won't disappear, just decline. Like all natural things, oil fields and mines decline, till they are euthanised. It's probably already baked in; in previous busts rig count only really picked up at around $50, and that was when financing was easier. 

It takes time to restart a rig, and especially to find crews. They aren't going to wait around. Onset of drilling activity to new production is very fast in shale compared to the rest of the industry, but it's still months. Probably 6. So more and more decline during this time.

But the key thing for me is that the perception of infinite supply will be gone. It was never true, and was dangerous. The market got so complacent that Iran bombed Saudi oil facilities last year, knocking out half of their production, and the market shrugged. Shockingly complacent, and the only reason for that was US shale industry. Once demand trend becomes clear, maybe late this year, and inventory builds are worked off, maybe early next year, mr. market is going to look around at supply again, and see US shale in decline.

Does the decline of US shale mean good news for offshore/subsea O&G in the longer term?