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


spunko

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sancho panza
1 hour ago, jamtomorrow said:

Cummings is a first class data-behavioural-political scientist. He's taken Google's concept of A/B testing and applied it to political campaigning, with stunning results. 

Does that mean he gets it? Measured by political outcomes, yes of course. Does he get it at the level of knowing how to enact that as a programme for Government? For me, that remains to be seen - at this stage, all we can say for sure is his creation passes the political Turing test.

Edit to add: this all overlaps amusingly with a fave topic of mine, automation. Who needs armies of policy wonks when you can rent a handful of AWS instances and let the data take the strain (*and* get better results)? I expect what Cummings is really wrestling with is: can those same automation concepts that worked so well for campaigning be made to work for Government too?

Cummings genius was mainly in getting the Brexit party aka Nigel Farage to stand down.I analysed chunks of the tory gains at the last election(I've done a lot of politcal betting in the past) and one of the main themes that leapt out at me was the fact that in key swing seats,it was the labour vote staying home rather than a substantial uplift in the Tory vote that won it.

Reasonable example would be Don valley.Where tories polled 19,000 in 2017 and 19,000 in 2019.Difference was labour vote stayed at home to the tune of 8372 or voted BP

My dear old mother has a lot of faith in Cummings/Rees Mogg, but the evidence generally shows it wasn't the tory campaign that won it but rather Labour/Brexit party that lsot it.

Having said that,there's no reall surety about which way the BP vote wouldhave gone.there are a lot of Tories who convince themselves that BP voters are jsut lapsed Toreis but I'm not sure the evidence shows that.

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sancho panza

Wolf with a nice expermient

https://wolfstreet.com/2020/06/23/wild-ride-to-nowhere-since-january-2018-what-the-overall-us-stock-market-looks-like-minus-apple-microsoft-amazon-alphabet-facebook/

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jamtomorrow
5 minutes ago, sancho panza said:

Cummings genius was mainly in getting the Brexit party aka Nigel Farage to stand down.I analysed chunks of the tory gains at the last election(I've done a lot of politcal betting in the past) and one of the main themes that leapt out at me was the fact that in key swing seats,it was the labour vote staying home rather than a substantial uplift in the Tory vote that won it.

Reasonable example would be Don valley.Where tories polled 19,000 in 2017 and 19,000 in 2019.Difference was labour vote stayed at home to the tune of 8372 or voted BP

My dear old mother has a lot of faith in Cummings/Rees Mogg, but the evidence generally shows it wasn't the tory campaign that won it but rather Labour/Brexit party that lsot it.

Having said that,there's no reall surety about which way the BP vote wouldhave gone.there are a lot of Tories who convince themselves that BP voters are jsut lapsed Toreis but I'm not sure the evidence shows that.

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Interesting. And I bet he barely had to touch the goods to get to that point - just perfect the machine, the political model, and the goods shall magically appear.

That's the thing about Cummings - he's not really a political operator, he's more a creator/designer of political machines.

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1 hour ago, The_Doc said:

The issue with that is that it would have had wide confidence intervals as trying to predict human behaviour in this particular scenario is difficult

Indeed, and that technically expresses why it's fair to say this genuinely was something new.  My issue, other than recipients "failing" (for whatever reason) to interpret the model correctly, is that there seemed no onward monitoring, analysis, feedback and change.  Models are not a one shot. They should be adaptive systems, either within or manually by their creators.  One way to judge a good model is to look at the assumptions, the sensitivity analysis (the degree of changed outcome due to a change in assumptions, including the rates of change), and the process for monitoring and onwardly evaluating the validity of these assumptions.  There can never be a lock and load.  It's things like this that make me conclude all of this has been a feck up.  They talk about following the science.  God help us if this is the quality of the science!  But then politics corrupts everything and "they" all belong to the current version of the court of Louis XVI!  We should call "them" all "courtiers"!

PS: Again the joke:  What's the difference between a bookkeeper and an accountant?  The bookkeeper tells you the number while the accountant asks you what number you want!  And so with models and their assumptions.  Happens all the time.  I just assume (actually extrapolate based on research!) that every report you hear on the news has used data, assumptions, etc to craft the desired answer.  Look at the last US jobless report!  Anyone offering a time saving soundbite is a worthless annoyance.  That's the edge we can have.  We should know to look deeper. 

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16 minutes ago, sancho panza said:

Reasonable example would be Don valley.Where tories polled 19,000 in 2017 and 19,000 in 2019.Difference was labour vote stayed at home to the tune of 8372 or voted BP

This is the new way of winning.  Destroy your opposition's base rather than strengthen your own.  We are seeing that a lot right now.  The more diversity, division and confusion, the better for the well organised few.

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12 minutes ago, sancho panza said:

The FANGs and their market cap have fecked up just about every collective instrument (e.g. ETF).  Never been a better time to be a stock picker, assuming their end is nigh.

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jamtomorrow
2 minutes ago, Harley said:

This is the new way of winning.  Destroy your opposition's base rather than strengthen your own.  We are seeing that a lot right now.  The more diversity, division and confusion, the better for the well organised few.

Exactly - then you just need Big Data to tell you the optimum solution to rounding up a majority based on playing different policy options against each of those electoral fragments.

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sancho panza
12 minutes ago, jamtomorrow said:

Interesting. And I bet he barely had to touch the goods to get to that point - just perfect the machine, the political model, and the goods shall magically appear.

That's the thing about Cummings - he's not really a political operator, he's more a creator/designer of political machines.

Cummings genius was to possibly set up Farage and BP, to basically head off an uncontrollable Ukip(which needed doing due to the seemingly deranged way in which they attempted to win hearts and minds).

If he didn't set up BP then he played Farage beautifully.Extracted the activist heart out of Ukip and then neutralised it by not letting it stand.

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2 minutes ago, sancho panza said:

Cummings genius was to possibly set up Farage and BP, to basically head off an uncontrollable Ukip(which needed doing due to the seemingly deranged way in which they attempted to win hearts and minds).

If he didn't set up BP then he played Farage beautifully.Extracted the activist heart out of Ukip and then neutralised it by not letting it stand.

But was it all worth it!!!!!!!!!

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Alexco finally got their draft water licence and are now proceeding with their development of Keno Hill, with first silver production and sales scheduled for Q4 2020.

They also announced financing that can (and will) reach roughly 23mil CAD so the price is under-performing today but make no mistake, this is one superb piece of news.

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sancho panza
58 minutes ago, kibuc said:

Alexco finally got their draft water licence and are now proceeding with their development of Keno Hill, with first silver production and sales scheduled for Q4 2020.

They also announced financing that can (and will) reach roughly 23mil CAD so the price is under-performing today but make no mistake, this is one superb piece of news.

Amazing timing there Kibuc old friend.I've literally jsut halved our Hochschild holding and am looking for somewhere to deploy it.B|

First bought AXU in our first tranche way back in Nov 18.

Nice 8%pullback this morning........could it go further?

I'd like some more.All I ever hear from the people in the know ie you, IKN and a few on here, is how well they are run.

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Talking Monkey
8 hours ago, sancho panza said:

You need to separate out the deaths that were caused by Covid-not insubstantial I admit- and those deaths caused by the response-also substantial(you'd need a higher level clinical opinion than mine for an assessment of this).That's hard to do because of the way that deaths have been certified over the period(as I understand,but happy to be educated by someone that knows.)

Inherently this discussion is backward looking but the damage the lock down has done more broadly to the health of the nation going forwards,also needs to be considered.

The key figure-ie do nothing- and we get 500,000 deaths was blatantly wrong if we look at Sweden.

Without Sweden,there'd be no natural comparator and many sceptics wouldn't have an argument.

Huge damage has been done to the health of the nation from the lockdown, tens of thousands, hundreds of thousands maybe have been put on the path of alcoholism, or obesity and in turn an early death.

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2 hours ago, Harley said:

The FANGs and their market cap have fecked up just about every collective instrument (e.g. ETF).  Never been a better time to be a stock picker, assuming their end is nigh.

Amazon need to get to $140 billion free cash flow within 2 years and then keep increasing it with around inflation or reach $140 billion in free cash in 4 or 5 years then increase higher than inflation to make them a good investment here.The 19% of the market gets even worse when you add in lots of other hugely over valued tech companies.

If Amazon needs to get to roughly $140 billion a year in free cash to justify its price,then why does it need to borrow $10 billion?

https://markets.businessinsider.com/news/stocks/amazon-raised-10-billion-through-record-low-borrowing-costs-2020-6-1029272938

You could argue the Fed is what is destroying the high street.

 

 

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Castlevania
7 hours ago, DurhamBorn said:

For anyone holding Telefonica,here are the details on the tax situation of the divis.

Do nothing and take the rights no tax,

Elect to take the cash Spanish Withholding tax of 19%

Sell the rights,no withholding tax,but telephone dealing charges,with Hargreaves these are 1% with a minium of £20/max £40.

I would guess Repsol will be the same.

So option two is a no no of course,so its let the rights become shares,or sell the rights.Repsol do this most years,hopefully Telefonica will as well going forward.

 

What is happening?

Telefonica SA recently announced details of a Stock Dividend to Shareholders as at close of business on 16 June 2020 with a cash option, giving you the right to receive additional Shares or a cash payment. As a holder of Telefonica SA Shares in your Hargreaves Lansdown Account you have been issued with one Right for each Share held at the qualifying time.

What are my choices?

You now have 3 options to consider relating to the Rights and these are explained below in more detail.

Option 1 - Do nothing - DEFAULT. If you do not return an election by the deadline below and take no action you will receive 1 New Telefonica SA Share for every 24 Rights held. The issue of New Ordinary Shares will not be subject to Spanish withholding tax. Any Rights that are not converted into New Shares i.e. not multiples of 24, will lapse and a cash payment will be made in their place. The New Shares are expected to be issued from 17 July 2020.

Option 2 - You can receive a cash payment. If you elect for this option by our noon Tuesday 30 June 2020 deadline you will receive a cash payment of EUR0.193 per Right. The proceeds will be subject to a 19% Spanish withholding tax, i.e. you will receive EUR0.15633 per Right after tax. Cash proceeds are expected from 3 July 2020 and will be converted to Sterling upon receipt subject to the prevailing exchange rate at that time our standard currency conversion fees.

Option 3 - You can sell your Rights. If you elect for this option by our 4:30pm Tuesday 30 June 2020 deadline you will receive the prevailing market price of the Rights at the time of the sale subject to our standard telephone dealing fees. The proceeds of the sale will not be subject to Spanish withholding tax. You can only elect for this option by telephone on 0117 980 9800. N.B. we are unable to accept instructions to sell your Rights that are sent via the Corporate Actions section below or by email and such instructions will not be executed. No guarantee can be given that a market will continue to exist for these Rights until the 4:30pm Tuesday 30 June 2020 deadline. If we are unable to sell your Rights you will receive Shares under the default option (Option 1) instead.

Full details of this event will be sent to Qualifying Hargreaves Lansdown clients by either post or secure message. Please note that any instruction you give must be based on the full details provided in the letter and not on the summary information outlined above.

You currently hold 4,383 shares. 

 

Doing the maths, for options 1 and 2. If you’re guaranteed €0.193 for every share held or receive 1 share for every 24 shares held then you’re paying €4.632 per share.

So if the share price is below €4.632 you’re better off taking option 2. However, that’s before withholding tax. So if I apply a 19% haircut, option 1 is the better option if the share price is above €3.75, otherwise it’s option 2. Have I missed anything?

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1 hour ago, Castlevania said:

Doing the maths, for options 1 and 2. If you’re guaranteed €0.193 for every share held or receive 1 share for every 24 shares held then you’re paying €4.632 per share.

So if the share price is below €4.632 you’re better off taking option 2. However, that’s before withholding tax. So if I apply a 19% haircut, option 1 is the better option if the share price is above €3.75, otherwise it’s option 2. Have I missed anything?

Looks right,the 4.63 was the price when they went ex divi.Repsol buy back the shares on the market i think so they dont dilute shareholders,where i dont think Telefonica are,so the portion who take shares will be diluting EPS,though it will be interesting to see the breakdown of how many took rights etc.

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2 hours ago, DurhamBorn said:

Amazon need to get to $140 billion free cash flow within 2 years and then keep increasing it with around inflation or reach $140 billion in free cash in 4 or 5 years then increase higher than inflation to make them a good investment here.The 19% of the market gets even worse when you add in lots of other hugely over valued tech companies.

If Amazon needs to get to roughly $140 billion a year in free cash to justify its price,then why does it need to borrow $10 billion?

https://markets.businessinsider.com/news/stocks/amazon-raised-10-billion-through-record-low-borrowing-costs-2020-6-1029272938

You could argue the Fed is what is destroying the high street.

 

 

Interesting.  I know you were a bit bearish on Amazon a year or two back.  The logic makes sense in an environment where interest rates and inflation are rising and they are selling possibly to a distressed consumer... Say compared to a company with lots of tangible assets like say a bus company that owns their own fleet etc. 

I know Amazon do a lot more than just sell and part of me thinks they will be one of the companies like the old GM or IBM who consistently remain on top.  Another part of me thinks that Amazon only has one way to go realistically or at least can't keep going up (much more downside risk than up).  Of course there are other tech companies too, thinking say like Ali Baba so it's not a complete given they will always have a monopoly on online sales.

Anyway off tangent to what I was going to say re Fed.  Been watching max keiser amongst others on YouTube recently always banging on about how much a rigged market they have created - or to be more precise they are the market.

Don't know what the end will be.... Common sense says all this printing money will just cause currency depreciation.  So hard assets or just assets full stop are where to be positioned.   Hard to get ones head round but certainly I can't think of bonds being anywhere I would like to be.  It's nice having cash but seems inherently like a losing game.  Again I feel like we are being forced to essentially become gamblers if you want to keep your head above water.

Really don't know where this will end.  I see some sort of basic income now much more likely now.  Yes a lot of stimulus will be given direct to industry but that's surely neither going to keep a lid on unemployment or provide the income from those jobs to keep a bit of oil in the wider economy

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On 23/06/2020 at 11:10, DurhamBorn said:

“When the hurly-burly’s done, when the battle’s lost and won.” The Scottish Play

2139.jpg

I saw that play on stage once and the witches were naked.

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jamtomorrow

So this is what a Government-led industrial cycle looks like in Russia ... moar oil!!!

Caveat: much unattributed insider comment in the article, which makes me wonder whether this is more about shaping market expectations of future supply? As in: make sure the lid on US shale's coffin really is nailed shut.

"Not authorised to talk to the media" but "whoops, I accidentally called Reuters" - nah, this is Kremlin-approved.

Also: 4.5% central bank rate? F***in ell, Rouble savings account anyone?

https://www.reuters.com/article/us-oil-global-russia-insight-idUSKBN23V3CQ

MOSCOW (Reuters) - Russia is taking a leaf out of the U.S. shale playbook so it can ramp up oil production quickly and hang on to its share of the global market when demand finally recovers after the coronavirus pandemic.

At least two state-owned banks, Sberbank (SBER.MM) and VEB, plan to lend oil firms some 400 billion roubles ($6 billion) at effectively almost zero interest rates to drill about 3,000 unfinished wells, officials involved in the scheme told Reuters.

Once oil prices recover, the wells can be finished off faster than starting from scratch so Russia can get its output back to levels reached before it agreed along with other leading producers to cut supply because of the fallout from COVID-19.

U.S. shale producers tend to drill but not complete wells when oil prices are low, rather than freezing all activity, so they can finish off the wells and quickly boost production when demand picks up.

A geologist advising Russian oil firms said the new wells would add at least 200,000 barrels per day to output based on average flow rates but if their assumptions about large reserves pan out the wells could boost output by 2 million barrels.

The geologist declined to be named because he is not authorised to talk to the media.

While Energy Minister Alexander Novak said last week how much would be invested in the drilling programme, details of how the scheme will work, the number of wells and by how much oil output could increase have not been disclosed.

Novak's deputy Pavel Sorokin, a former oil and gas analyst at U.S. bank Morgan Stanley and one of the architects of the plan, declined to comment on the number of wells or their expected output.

Russia pumped an average of 11.3 million (bpd) from 180,000 wells last year, according to the energy ministry. Since the OPEC+ deal to curb global crude supplies, its output has fallen by 2 million bpd, Novak said last week.

Russia has mainly shut down old or less-productive wells that won't necessarily be revived when the supply deal expires in April 2022, so the government is helping oil companies to ensure lost output can be replaced quickly.

"Such support ... would allow us to create an essential number of unfinished wells, ready to be launched when we will need to increase production," Sorokin told Reuters.

Russia has outlined various stimulus measures to cope with the fallout from COVID-19 and spending over the next two years is expected to reach 5 trillion roubles. It was not clear if the planned support for oil companies would come from these funds.

CHEAP LOANS AND TAX BREAKS

Saudi Arabia and the United States are able to resume halted oil production faster than Russia, analysts say, and Moscow is wary about losing out as and when the market returns to normal.

Cold weather is the main reason it is more expensive and takes longer to restart wells in Russia than in Saudi Arabia, said Daria Surova, an analyst at consultancy Rystad Energy.

Russian oil tends to be deeper in the ground and in thicker layers, while heavy drilling equipment needs to be moved to Siberian fields during winter when swamps and rivers are frozen, said Sergei Klubkov, a research director at Vygon Consulting.

The level of investment announced by Moscow would be enough to drill about 3,000 production wells of varying types, according to Klubkov at Vygon, which does research for Russia's energy and natural resources ministries.

The drilling plan, which has yet to be finalised by the energy and finance ministries, would involve bank loans, as well as tax breaks and preferential interest rates, according to a banker and a draft document.

Sorokin told Reuters the ministries were finalising an idea that would mean oil companies only pay the interest on loans over and above the central bank's main lending rate, which is at 4.5%, so the loans would probably be almost interest free.

Anatoly Popov, deputy chairman of the executive board at Russia's biggest lender Sberbank, told Reuters it was in talks with the energy ministry about the scheme and details had yet to be finalised.

State development bank VEB confirmed to Reuters that it was involved in talks over its possible role in Moscow's broader coronavirus stimulus package, without elaborating on details.

According to a draft plan for Russia's post-pandemic recovery strategy to the end of 2021, seen by Reuters, the oil companies may also get tax breaks on the loans.

One Russian oil industry insider, however, questioned whether global oil demand would ever recover enough to justify the new wells: "Will we ever need them?"

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16 hours ago, sancho panza said:

Amazing timing there Kibuc old friend.I've literally jsut halved our Hochschild holding and am looking for somewhere to deploy it.B|

First bought AXU in our first tranche way back in Nov 18.

Nice 8%pullback this morning........could it go further?

I'd like some more.All I ever hear from the people in the know ie you, IKN and a few on here, is how well they are run.

I've got to say that this new placement gave me a pause. I don't like the size, I don't like the price, I don't like the fact that I came out of the blue and was tacked on to the end of a multi-news release. I'm going to give them a pass for the old times' sake, but I'll be watching them. I'd hate them to descend to the bottomless pit of their Canadian junior mining peers.

That being said, the market took the financing in its stride and Alexco finished the day on par (if not better) with other silver juniors.

Well-run silver miners with decent assets and solid track record are few and far between, especially if you're looking for pure silver plays. I'd go as far as saying that there're only two such names: Alexco and Silvercrest. Alexco might seem like a better bet for proper leverage due to smaller market cap and being closer to production, but I see Silvercrest as the Kirkland Lake of the silver space. They cannot put a shovel in the ground without digging out 000s grams per tonne. A new resource estimate and PFS is expected by end of year, which should include all those juicy 5k, 8k, 16k hits from Spring plus many more, and if it coincides with silver reaching price levels we except it to reach then Lord have mercy.

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