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


spunko

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1 minute ago, Cattle Prod said:

Is this the downstream business? I don't know any upstream hub in Poland. Agree with you on the Polish work ethic though, great people. Have integrated very well in Ireland.

https://www.shell.pl/careers/shell-business-operations.html

I gathered the way he was talking it was more about pen pushers for want of a better term (i.e. management, ops people). Briefly reading online now this Polish hub is one of 7 operational hubs they have globally but sounds like it is being earmarked to increase in importance. What goes off in these operational hubs besides planning world domination I have no idea though...

 

 

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sancho panza
41 minutes ago, DurhamBorn said:

They have and will until the they can monetize enough for the government to fuel an inflationary recovery cycle.Dollar isnt far enough away from 100 so the Fed will be still fully engaged,at 100 systemic risk is on the table,they will print and print until under 90.Short end has liquidity so they will be flattening the long end so the treasury can get the T-bills away at very low rates.I think page one of the thread mentioned they would do this as the government spend direct into the economy.Fed might be getting close to halfway on the printing,unless derivatives start to unwind,then likely only a quarter through.Silver will run higher again very soon with the Fed working that far down the curve.

I'd be really intrigued to see the price og the yellow stuff at DXY 90.

Appreciate the insight in bold.I was looking at UST prices jsut now.

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40 minutes ago, sancho panza said:

I'd be really intrigued to see the price og the yellow stuff at DXY 90.

Appreciate the insight in bold.I was looking at UST prices jsut now.

I watch all that SP much more than i watch my portfolio share prices.I can pretty much see where and how much the Fed is engaged.Looks like they are buying treasuries now way along the curve so almost certain that is so the treasury can get T-Bills away at low rates.Rather than push dollars direct into the plumbing they are pushing it to the government.They must think they have the short end functioning and need to get the real economy moving.Forcing the long end says the Fed is doing as we thought,allowing government to allocate first,market second,big change.

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Bricks & Mortar
1 hour ago, sancho panza said:

As CP says it's the princicpale that's interesting.4.5 years souds extreme  and an outlier but maybe should be adjusted for the deficit and the amount of public sector jobs.

It's never been purely human labour vs oil though.  In ancient times, they did work with fire and water power.  Then windmills.  then coal fire.  Coke fire.  Steam power.   Electricity.  Oil took its place alongside all that and competed.  Today, the cost of wind power and lithium batteries should hold oil from going to anything like its human labour value, (whatever level it is).

 

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9 minutes ago, Sugarlips said:

Sorry no link but I’m told this is from Capital Economics, not very V shaped:

 

1A61D17D-A728-452C-B0C2-537F5E68C3DE.jpeg

Ill go out on a limb and say the US will recover quickly, showing slightly U rather than a V.

I think mainland Europe will be L.

UK will be somewhere between, as long asthey tunr off the slush fund ASAP.

 

 

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geordie_lurch

SSE up over 9% today so far...

Quote

SSE trims dividend, announces new decarbonisation investment plan

Operating profits from the firm's continuing businesses rose by 37% but reported profits were hit by charges on discontinued operations and the coronavirus pandemic.

SSE PLC (LON:SSE) has trimmed its final dividend after profits for the past year more than halved as it took £738.7mln of charges for restructuring and the impact of the coronavirus (COVID-19) pandemic.  

The FTSE 100-listed energy company also unveiled a £580mln capital investment in the Viking wind farm on the Shetland islands as part of plans to plough around £7.5bn over the next five years into projects to help its transition to net zero emissions.

From https://www.proactiveinvestors.co.uk/companies/news/922096/sse-trims-dividend-announces-new-decarbonisation-investment-plan-922096.html

 

 

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16 minutes ago, geordie_lurch said:

SSE up over 9% today so far...

 

And a lovely 28% from the price paid during the sell off.Tagged the bottom on these.I had some in my ISA that are only up 8%,but trebled the holding at the bottom to a big one so very happy about that.I was hoping this one would hold the divi (would hit my road map cycle target if they cut the divi by 17% and held there for 10 years) and they have.The tough bit is when stocks are showing returns after a few months for 4 years of the 10 ahead because you have to evaluate if to re-allocate some of the capital,top slice and increase reflation areas lagging.This one im not slicing though.Big oil should of bid when they were down at £10.60.Key company i think for hydrogen.

 

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sancho panza
9 hours ago, DurhamBorn said:

I watch all that SP much more than i watch my portfolio share prices.I can pretty much see where and how much the Fed is engaged.Looks like they are buying treasuries now way along the curve so almost certain that is so the treasury can get T-Bills away at low rates.Rather than push dollars direct into the plumbing they are pushing it to the government.They must think they have the short end functioning and need to get the real economy moving.Forcing the long end says the Fed is doing as we thought,allowing government to allocate first,market second,big change.

The reason I presume they're so focused on the short end is basically they'd be unable to shift a lot of 30yrs at 1%? Whereas even an old cynic like me can live with a year or less at neg rates to store cash.

I'm still looking and wodnering where punters fleeing USD will go,if you have any ideas DB?Straight to PM's?

It was interesting the point raised by CP yesterday ref Lyn Aldens assertion that the sharp drop in DXY during covid was down to punters seeking currencies with solid current accoutn surpluses.I'm struggling to understand why anyone would buy the yen for safety ref the USD.The subsequent upspike -and huge over reaction to the intial downspike in the USD- would hint that the inital fleeing of the dollar was panic rather than logical thought.Have you got a view?

Reason I ask and am intrigued by CP's inital point is that an important part of my sytrategy going forward is preparing to buy the dollar ahead of the Big Kahuna.Clearly,if the MO of the market has changed and people aren't goijg to flee to the dollar,then I need a rathink and PLan C.

Interesting changes in UST

https://wolfstreet.com/2020/06/16/but-who-bought-this-huge-pile-of-us-government-debt/

Foreign investors – including central banks, governments, companies, funds, and individuals – shed $44 billion of US Treasury securities in April, compared to March, according to the Treasury Department Monday afternoon. Over the same period, the mountain of US Treasury securities grew by $1.287 trillion. Someone must have bought this $1.287 trillion in additional US debt that was issued in April, plus the $44 billion that foreign holders dumped. This amounts to $1.33 trillion. But who bought it?

  1. Foreign Creditors.

All foreign investors combined – “foreign official” holders such as central banks, and foreign private-sector investors – dumped $44 billion in US Treasury securities in April, which took their total holdings down to $6.77 trillion,

  1. The Federal Reserve

In March, the Fed added $1.02 trillion to its pile of Treasury securities (including repos). As it then was cutting back its purchases, in April it still added $526 billion in Treasury securities, for a two-month total of $1.56 trillion. This brought its total holdings of Treasuries (including repos) by the end of April to $4.13 trillion.

  1. US government funds

US government funds – including the Social Security Trust Fund and pension funds for federal civilian employees and the military – dumped $91 billion in Treasuries in April, whittling down their total holdings to $5.9 trillion.

  1. US Commercial Banks

US commercial banks dumped $51 billion in Treasuries in April, compared to March, which brought their total holdings down to $919 billion,

  1. Other US entities & individuals

Other US entities – institutional investors, bond funds, pension funds, insurers, highly leveraged hedge funds engaging in complex trades, private equity firms, plus cash-rich corporations, and individuals directly or indirectly – gorged on US Treasuries, some of them likely in panic mode. They loaded up with an additional $948 billion in April and brought their total holdings to $7.24 trillion,

9 hours ago, Bricks & Mortar said:

It's never been purely human labour vs oil though.  In ancient times, they did work with fire and water power.  Then windmills.  then coal fire.  Coke fire.  Steam power.   Electricity.  Oil took its place alongside all that and competed.  Today, the cost of wind power and lithium batteries should hold oil from going to anything like its human labour value, (whatever level it is).

 

Excellent points.Donkeys/horse power too.For me,it jsut hints at the upward pontential for oil.

18 minutes ago, Sugarlips said:

Sorry no link but I’m told this is from Capital Economics, not very V shaped:

 

1A61D17D-A728-452C-B0C2-537F5E68C3DE.jpeg

The long term charts are even more striking

via Mish

image.png.2d220471855a8ec362aee437a6b8f3fd.png

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sancho panza
10 hours ago, DurhamBorn said:

https://www.bbc.co.uk/news/world-asia-53061476

"That is why Sunday's night's clash following months of roiling tension has taken many by surprise"

One of thsoe sets of troops was given permission to fire.There's no way two relatively well disciplined armies patrolling a sensitive area like that wouldopen up without a clear direct order to .

Indians taking 20 dead-claiming three initally,17 subsequently off wounds-sounds like they got ambushed tbh and were unable to medevac the wounded.Up those hills,carrying bleeding people down to a medical aid post with even a basic medical capability could take a while.And that's if it was even safe to medevac.If the Inidans had been planning it then I suspect their medevac capability would have been in place.Obviously only two chains of command will know the truth.

Thoughts to those Indian Toms whose forebears served alongside us in WW1+WW2

 

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6 minutes ago, sancho panza said:

One of thsoe sets of troops was given permission to fire.There's no way two relatively well disciplined armies patrolling a sensitive area like that wouldopen up without a clear direct order to .

Indians taking 20 dead-claiming three initally,17 subsequently off wounds-sounds like they got ambushed tbh and were unable to medevac the wounded.Up those hills,carrying bleeding people down to a medical aid post with even a basic medical capability could take a while.And that's if it was even safe to medevac.If the Inidans had been planning it then I suspect their medevac capability would have been in place.Obviously only two chains of command will know the truth.

Thoughts to those Indian Toms whose forebears served alongside us in WW1+WW2

 

No guns so far, Gentlemans rule to stop things escalating too much.

That doesn't mean that you cant do some real damage with bats and stones, some of which are starting to resemble WW1 trench melee weapons with nails etc.

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@sancho panza he Fed wanted the dollar down and they still do.Fed has unlimited ability in disinflation to pump until the dollar falls.Fed works on the plumbing,the markets,the real economy in that order usually,but this time they are pumping into the plumbing AND monetizing government debt.The dollar isnt falling because of the monetary action,but because of the fiscal action being mostly monetized.The market is saying,oh you want inflation then?

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I plan to take a break from here for a few months to coincide with some freelancing work that has recently come up. Hope to pick up again later in the autumn.

I've truly learnt so much form the discussion here around the macro economic cycles far more than from any economics I've previously studied. Many thanks to DB and all the regular contributors for this.

My asset allocation going into the next cycle will stay relatively fixed now. and is allocated (30% stocks (mainly reflation inc oil stocks), 30% gold, silver, commodities and miners (the gold and silver via Bullion Vault), 10% US bonds and 30% cash mix of £, $. I expect this will drawdown if we get more deflation later in the year or early next but will serve us well for the totality of the next cycle. I expect volatility to stay high now unlike the last decade perhaps averaging close to 30 for the decade. 

Lets see - good luck all 

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14 hours ago, MrXxxx said:

Perhaps I am just showing my own ignorance here @Harley but all this seems overly complicated, and I wonder at the end of the day whether it will really make that much of a difference over a) leaving it to an `expert` in a fund/ETF, or b) you making financial `mistakes` by trying too hard rather than just buying and waiting.

That said, if you are also doing it for the fun/challenge that's not a bad thing, and has worth in itself...assuming of course that you win! :-)

 

13 hours ago, SillyBilly said:

Not really showing any ignorance IMO. All sorts of strategies can win out. Personally I'd not be involved if it had to be rigid, mechanically designed, formulaic processes and to make decisions based on qualified data or tested models. But others thrive on that and are very successful with it. I've done okay thus far (I think) in life, school, business, investments etc. following a few simple principles and the rest trusting my gut. I like all the posts here mind including Harley's very solid contributions as lots to learn. 

My post was aimed at those currently having a discussion about the Permanent Portfolio, the issues it raises, and how to deal with them, clearly not you or another issue.  By all means write a post to question the merits of DIY and I will ignore accordingly. 

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19 hours ago, Majorpain said:

Didn't happen in 2008 did it?  Pound properly went down the toilet then and banker fatalities were "minimal".

Your anger is clouding your judgement, the UK will be fine in 3-4 years (as every other recession) and life will continue as normal for the vast majority of people.  You can accept reality or continue to live in the matrix, wondering why things are not happening like you thought they would, and thinking its actually reality that is wrong.

Yes I think the narrative of 'revolution' for the common man/woman/lgbt/intersex (apologies if forgotten anyone), is really just 'down the rabbit hole (through the looking glass)' wishful thinking.

I do remember that back in 2008 Fred Goodwin's windows were broken, oh and his knighthood was removed, but that was about it wasn't it? Pre-CV manipulation, I would have 'scored' future potential of public anger/riots, etc, as a possibility - but now realise how easily government could just introduce a health/security disorienting bogey-man, e.g. virus, Russia - or why not combine both in a novichok mashup!! (excuse my joke, the appalling bbc novi-poisonings drama must have triggered me!)  

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18 hours ago, Transistor Man said:

The design RR have come up with surprises me. 

It doesn’t look much like a “Small Modular Reactor” to me. 

It’s a brand new conventional PWR, shrunk a little to 440 MWe.

I thought they were going to go for something like: one of their submarine reactors in a shipping container. 

something a little like the Russian barge mobile power station, with 2 x 70 MWe reactors. 

That would have been a SMR.

if you can build a conventional 440 MWe PWR — running normal fuel,, then I’m sure you could do one of a 1000 MWe. Which would have done the UK just fine. They wouldn’t have needed EDF/ Areva/GE/Westinghouse/ China.

A new, UK designed and built conventional PWR would need a massive commitment from the government. It’d cost Billions to develop. 

TransistorMan, that's interesting. Plus project not due until 2029, I know these things take time but I thought sooner than that?

However, I am looking into the Rolls Royce partnership to see if the associate companies are worth investing...

Assystem (french, engineering), SNC Lavalin (canadian, engineering, energy services), Wood Group (UK, engineering, energy services), Royal Bam Group (dutch, construction), Laing O’Rourk (UK, global engineering/construction, would be great I think, but unfortunately a private company).

Any comments - positive or negative - on these?

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17 hours ago, Harley said:

Jim seems to love the more exotic trend investing stuff.  I'll certainly listen.

Harley, would appreciate you view on what he says. Mellon is a billionaire and is investing in those co's he mentions, but perhaps he is being too far exotic/speculative?    

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1 hour ago, Harley said:

 

My post was aimed at those currently having a discussion about the Permanent Portfolio, the issues it raises, and how to deal with them, clearly not you or another issue.  By all means write a post to question the merits of DIY and I will ignore accordingly. 

No need to be overly sensitive...dry essays ain't for me, tis all.

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13 hours ago, DurhamBorn said:

https://www.bbc.co.uk/news/world-asia-53061476

"That is why Sunday's night's clash following months of roiling tension has taken many by surprise"

DB, this is so interesting for next cycle macro trends. And congrats as I believe you flagged this up as potential some months ago? 

But if I remember correctly?... you have also said something about China going to war with Pakistan, or have I got this wrong? Only if you do think this, could you say more about it, as I believe China/Pakistan have good relations?

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Anyone using Investing.com know why BASF only appears in the "Chemical Manufacturing" industry screen as a ?545m company rather than the ?48bn it is?  The screen lists three exchanges all reporting this lower capitalisation but not the XETRA exchange (also available in Investing.com) nor the "Real Time Derived" with the correct ?48bn.  Worrying if you want to screen for the leaders in an industry in a particular country.  All these data sources (Investing.com, FT.com, MorningStar.com) do me head in!  Better get me terminal back!  Ta.

Capture.JPG.46da8f66cf75de8479f155e574315db2.JPG

Capture1.thumb.JPG.531e253ae312e068e493c4e2d060a390.JPG

Note BAFN (real time derived) defaults to BASFn in the detail screen above.

And the actual DAX ticker is BAS!

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1 hour ago, Harley said:

 

My post was aimed at those currently having a discussion about the Permanent Portfolio, the issues it raises, and how to deal with them, clearly not you or another issue.  By all means write a post to question the merits of DIY and I will ignore accordingly. 

Don't take offence @Harley, as it wasn't meant to cause any, I just wondered if the time spent on added complexity actually added any real benefits.

As for me knowing all the answers, far from it, which is why I come on here, contribute and encourage anyone to challenge my thoughts/postings...through a process of critical dialogue hopefully others will help me see the expensive mistakes I haven't appreciated before I make them.

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Transistor Man
1 hour ago, JMD said:

TransistorMan, that's interesting. Plus project not due until 2029, I know these things take time but I thought sooner than that?

However, I am looking into the Rolls Royce partnership to see if the associate companies are worth investing...

Assystem (french, engineering), SNC Lavalin (canadian, engineering, energy services), Wood Group (UK, engineering, energy services), Royal Bam Group (dutch, construction), Laing O’Rourk (UK, global engineering/construction, would be great I think, but unfortunately a private company).

Any comments - positive or negative - on these?

I only worked in the nuclear industry for a short time, before going back to electronics.

i worked for what became Wood group, I think they’ll do well with the oil and gas work ramping up world wide.

The nuclear bit has since been sold to Jacobs though. 

i worked with assystem people in France, but don’t know a great deal. Definitely Good engineers though.

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Transistor Man
1 hour ago, JMD said:

TransistorMan, that's interesting. Plus project not due until 2029, I know these things take time but I thought sooner than that?

 

It’s a completely new design though. Far bigger than their submarine reactors.

Who will do the forgings? Could it be done in Sheffield forgemasters? 

It’s difficult. Areava messed up the pressure vessel steel for the EPR.

Who will make the Steam generators? Etc. Etc. 

 

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