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


spunko

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jamtomorrow
6 hours ago, JMD said:

TransistorMan, I agree and think the CEGB will return in a new, even more expanded, quango guise. Strategically it will be needed, and the last few months of government economic intervention shows I think the direction of travell. I wonder though which companies will be the biggest beneficiaries of a potential national and/or global nuclear big-build? I'm thinking in terms of the West, and where China will now be shut out, so will a raft of proven French firms be ready to take advantage (if they still exist?). I guess each nation will do their own different thing, but are there some good engineering company prospects to look out for... or will it be mainly Siemens as per usual!

I'd also be interested to know from @Transistor Man whether an indiginous nuclear industry could be stood back up in this country in relatively short order.

It *seems* like we still have the engineering skills and expertise in wider industry, we "just" need something like the old CEGB to pull it all back together - I'm thinking civilian nukes we still run, Sellafield and general decommissioning expertise, marine nukes at Rolls, world class civeng consulting, and then the wider nuclear engineering diaspora like your good self.

Or am I taking 2 and 2 and getting 5?

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13 hours ago, TheCountOfNowhere said:

Was this posted

https://www.ft.com/content/4fd04fd9-7209-4b7c-97a1-97466f226159

 

The pound is now an emerging-market currency in all but name, according to analysts at Bank of America, who say that Brexit has turned it into a mirror of the “small and shrinking” UK economy.

Yes while the US maintains people's confidence, but if sentiment goes we will see things change quickly (or a war instigated to deflect attention)...take a look at Debt/GDP ratios, that gives the real perspective.

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Transistor Man
42 minutes ago, jamtomorrow said:

I'd also be interested to know from @Transistor Man whether an indiginous nuclear industry could be stood back up in this country in relatively short order.

The way the UK nuclear plants were built was by these various consortia.

For each station you had a (I) civil contractor, (2) someone responsible for the design and purchasing of the nuclear island, and a (3) supplier of the turbine island, GEC, Alston etc. 

All the nuclear parts of the various consortia was eventually combined to form  NNC - the National Nuclear Corporation. 

For Sizewell B, which is still very similar to what you would build today, CEGB commissioned NNC to build the power plant.

it was a very successful project. On time, on budget, with excellent performance over the last 25 years.

As you’d expect, parts came form all over.

Westinghouse did the reactor system, but with some UK design. Pressure vessel forgings were from France and Japan, steam boilers - Babcock, turbines gec alstom turbines, civil engineering - John Laing. 

NNC was bought by AMEC, then Wood Group, and is now owned by Jacobs. 

Sheffield forgemasters can do large forgings, but I don’t know how big. 

 

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leonardratso

i dont know anything about all this nuclear malarky, what i do know is that in the cutlery draw, the best and most hardwaring cutlery is over 30* years old and has made in sheffield on it, but then again i suppose that was probably made in a time when it meant something and it was built to last.

* god knows how old it is, its from my mums cutlery draw and shes been dead for many years.

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jamtomorrow
17 minutes ago, leonardratso said:

i dont know anything about all this nuclear malarky, what i do know is that in the cutlery draw, the best and most hardwaring cutlery is over 30* years old and has made in sheffield on it, but then again i suppose that was probably made in a time when it meant something and it was built to last.

* god knows how old it is, its from my mums cutlery draw and shes been dead for many years.

Wonder if things would have been much different if that Forgemasters loan hadn't been pulled in 2010

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1 hour ago, Cattle Prod said:

More on infrastructure, I suspect @DurhamBorn might get his arc furnace ;-) 

Screenshot_20200629-100921_Twitter.thumb.jpg.7cb8b169c0120eb01bba017805d7bf61.jpg

(And of course they have the money. It's just going to come with a massive dose of inflation)

This is where good macro strategy is crucial.Most people have no understanding of macro cycles,inflection points and the interaction between CBs and government.People have this idea that the CBs can do as they please,and that governments have no control.They couldnt be more wrong.Governments drive cycles,the CBs simply adjust to it with leads and lags.That is their job.As this (and the last) thread said from page one,the economic backbone of the country cannot sustain the demands on it.For all we read in the MSM and fringe websites the UK and the west in general are not some banana republic.The Tories see belief in capitalism at risk,as do the republicans in the US.In such times they need to show the population better times.

Its laughable when everyone thinks the government have no money,when the CB will print whatever they need 100% certain.Complete lack of understanding of our system.

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bp today announced that it has agreed to sell its global petrochemicals business to INEOS for a total consideration of $5 billion, subject to customary adjustments. The agreed sale, the next strategic step in reinventing bp, will further strengthen bp’s balance sheet and delivers its target for agreed divestments a year earlier than originally scheduled. 

#Thoughts seems to be getting mixed opinions

 

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Castlevania
7 minutes ago, DoINeedOne said:

bp today announced that it has agreed to sell its global petrochemicals business to INEOS for a total consideration of $5 billion, subject to customary adjustments. The agreed sale, the next strategic step in reinventing bp, will further strengthen bp’s balance sheet and delivers its target for agreed divestments a year earlier than originally scheduled. 

#Thoughts seems to be getting mixed opinions

 

BP sold Grangemouth to Ineos back in the day. Ineos paid around a third of the replacement cost of building such a plant from scratch. My guess is Ineos are getting the better deal here.

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3 hours ago, Transistor Man said:

The way the UK nuclear plants were built was by these various consortia.

For each station you had a (I) civil contractor, (2) someone responsible for the design and purchasing of the nuclear island, and a (3) supplier of the turbine island, GEC, Alston etc. 

All the nuclear parts of the various consortia was eventually combined to form  NNC - the National Nuclear Corporation. 

For Sizewell B, which is still very similar to what you would build today, CEGB commissioned NNC to build the power plant.

it was a very successful project. On time, on budget, with excellent performance over the last 25 years.

As you’d expect, parts came form all over.

Westinghouse did the reactor system, but with some UK design. Pressure vessel forgings were from France and Japan, steam boilers - Babcock, turbines gec alstom turbines, civil engineering - John Laing. 

NNC was bought by AMEC, then Wood Group, and is now owned by Jacobs. 

Sheffield forgemasters can do large forgings, but I don’t know how big. 

thanks TransistorMan, excellent info. on the companies. I've been looking into the sector and did have my eye on Wood Goup. But i think John Laing is now Laing O'Rourk, and the company has been taken private so not for the likes of us!! (a real pity as i think it would have made a great buy)

Is Jacobs you mention the US one - Jacobs Engineering Group (nyse:J)?  Excuse my follow up question, only i am looking to buy into some of these if/when we get another market correction. 

 

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1 hour ago, DoINeedOne said:

bp today announced that it has agreed to sell its global petrochemicals business to INEOS for a total consideration of $5 billion, subject to customary adjustments. The agreed sale, the next strategic step in reinventing bp, will further strengthen bp’s balance sheet and delivers its target for agreed divestments a year earlier than originally scheduled. 

#Thoughts seems to be getting mixed opinions

 

Share price up nicely.  Depends what they're going to do with the cash (what and how).  I'm going to hold, maybe add a bit, to be along with the ride.

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On 24/06/2020 at 12:08, DurhamBorn said:

Maybe Cummings reads this thread,after all his family live near me.Political cycle is flashing red and has been for a while.Parties of the left dont understand it at all,but some people and parties on the right do start to get it.I think Cummings is one.BJ spent a lot of political capital to keep him,and rightly so,because it was Cummings who told the Tories exactly what people were feeling in working class areas.While the left was calling everyone who voted for Brexit (pretty much everyone up here outside of students and government workers) racists,all the guys i worked with in a factory were voting Tory,a lot for the first time ever,and one of the reasons is as they all used to say,"i like that Priti Patel,shes one of us",,.So people the left were calling racist were voting for the Tories because they wanted Priti in government,and seeing her as "one of us".A complete miss-read from the left.Not one of those guys gave a toss about the colour of Priti's skin,or her heritage,as far as they were concerned she understood them and was one of them.

The economy has lots of business cycles inside a longer cycle,but the real key inflection points are when the long sweep of deflation (really dis-inflation) and inflation (often more re-flation) turn.In political terms the left is looking the wrong way at a key turn.

 

 

Not wanting to derail the thread, you are spot on about Pritti and its why the left hate her so much ( a sign she must be doing something right). The left expected her to be like them because of her skin colour (the irony is lost on them).

Back on topic, I see oil prices are starting to pick back up and round my way the traffic levels are almost back to pre Covid19 levels. Still lots of people working from home, I wonder if their increased energy useage balances out the energy savings from the offices? I guess it depends on which is more efficient per capita. If lots of people still working from home by winter but enough people back in the office to mean it needs the heating fired up there could be a high demand for energy.

Recently a chat with the owner of small high street indy restuarant. They don't really get the Covid19 rules. Totally not practical for their kitchens or premises, no outside areas to set up as on a high street with narrow pavement. If they can reopen, with the reduced number of tables they would be at a loss even if they filled every table. They don't know if anyone will come back even if they do open, lot of the customers are local retirees. Sadly, I think they are going to go bust.

 

Although things are starting to get head towards normal (a journey we may never complete), the inefficencies and therefore cost to the economy must be huge. I'm seeing lots of extra steps in processes, extra costs for equipment, higher staff requirements.

 

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reformed nice guy
37 minutes ago, invalid said:

the inefficencies and therefore cost to the economy must be huge. I'm seeing lots of extra steps in processes, extra costs for equipment, higher staff requirements.

This part is not being picked up by a lot of people. If you are a small business such as a pub or barbers then your revenue producing ability already has hard boundaries. Number of seats in a barbers limits haircuts per hour. Throw in these extra restrictions and the only option is to up prices... which leads to..... inflation!

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Popuplights
1 hour ago, reformed nice guy said:

Number of seats in a barbers limits haircuts per hour.

Plus every bloke has now discovered it's a piece of piss to cut your own hair with some clippers, or at least get your missus to do it....

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Castlevania
1 hour ago, Popuplights said:

Plus every bloke has now discovered it's a piece of piss to cut your own hair with some clippers, or at least get your missus to do it....

Yes. I’ve effectively already recovered the cost of the clippers I bought.

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2 hours ago, reformed nice guy said:

This part is not being picked up by a lot of people. If you are a small business such as a pub or barbers then your revenue producing ability already has hard boundaries. Number of seats in a barbers limits haircuts per hour. Throw in these extra restrictions and the only option is to up prices... which leads to..... inflation!

So we're back to a consumer services inflation economy. Great. xD

It's not even 'organic' inflation, it's all contrived by the COVID scamdemic.

 

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I started receiving this newsletter (after someone linked to it previously on here) from Lyn Alden which mostly chimes with @DurhamBorn and I can mostly understand it! Plus she shows the detail of her investments:

"The stock market has been bid-up by the combination of fiscal and monetary policy response, while the raw economic indicators remain in a troubled state."

https://www.lynalden.com/june-2020-newsletter/

 

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Transistor Man
4 hours ago, JMD said:

thanks TransistorMan, excellent info. on the companies. I've been looking into the sector and did have my eye on Wood Goup. But i think John Laing is now Laing O'Rourk, and the company has been taken private so not for the likes of us!! (a real pity as i think it would have made a great buy)

Is Jacobs you mention the US one - Jacobs Engineering Group (nyse:J)?  Excuse my follow up question, only i am looking to buy into some of these if/when we get another market correction. 

 

Yes, I think Wood group didn’t want the nuclear stuff. 

its mostly oil and gas services, but also minining, paper pulp, cement, process consultancy etc.

Yes, it’s the American Jacobs Engineering. 

Laing o rourke is private, looks like a great business.

Their partner or Sizewell C and HPC is Bouygues S.A.  In the CAC 40.

 

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https://www.zerohedge.com/markets/fed-chair-powell-says-full-recovery-unlikely-until-people-feel-safe

Quote

 

Fed Chair Jay Powell has released his prepared remarks for his testimony before the House Financial Services Committee tomorrow (with U.S. Treasury Secretary Steven Mnuchin).

”We have entered an important new phase and have done so sooner than expected,” Powell noted.

“While this bounceback in economic activity is welcome, it also presents new challenges—notably, the need to keep the virus in check.”

While noting the push to lift restrictions on commercial activity, Powell critically expressed the need to contain the virus, noting that "a full recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities."

 

So there it is.  Take your vaccine or the puppy gets it.

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19 minutes ago, Errol said:

There won't be an effective vaccine.

My old workmates are putting machines in now at GSK Barnard Castle and they are running so they can produce ajuvant for the vaccine they already have with Sanofi.Its novel,so they need to boost the immune response to have an affect and thats what the ajuvant will do.Vaccine alone wont do it.

 

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sancho panza
On 28/06/2020 at 08:25, jamtomorrow said:

Pleasure. Although I'm currently finding EROI/EROEI fascinating and infuriating in equal measure.

As as an engineer, energy economics seems to me to be self-evidently a useful and important perspective for energy policy - it's just a pity the methodologies aren't similarly self-evident and therefore consistent. Example: the study I linked implies an upper EROI of 86 for wind, but I've also seen single-digit values mentioned elsewhere - that doesn't even qualify as a Fermi estimate, never mind allowing different technologies to be compared reliably.

Luis de Sousa sums it up nicely to Euan Mearns here: https://euanmearns.com/eroei-for-beginners/

"On the grand scheme of things: PV ERoEI estimates range from 30 down to 0.8. Before asking the IEA (or whomever) to start using ERoEI, the community producing these estimates must come down to a common, accepted methodology for its assessment. As it stands now, EROEI is not far from useless to energy policy."

Same link also discusses the "net energy cliff" (i.e. "why we *should* care about EROI"):

If only the analyst community could convince us they knew how to estimate/measure EROI!!

Ye olde surplus energy site @Democorruptcy introduced me to has given me some education on this topic.HAdntre ally thought of it before.it sjut sort of explained everything CP had been on about in that there was nothing to repalce oil in the near future.

I think with renewables there'll be two sets of data,the real ones and then the ones they want people to see.

 

 

11 hours ago, DurhamBorn said:

This is where good macro strategy is crucial.Most people have no understanding of macro cycles,inflection points and the interaction between CBs and government.People have this idea that the CBs can do as they please,and that governments have no control.They couldnt be more wrong.Governments drive cycles,the CBs simply adjust to it with leads and lags.That is their job.As this (and the last) thread said from page one,the economic backbone of the country cannot sustain the demands on it.For all we read in the MSM and fringe websites the UK and the west in general are not some banana republic.The Tories see belief in capitalism at risk,as do the republicans in the US.In such times they need to show the population better times.

Its laughable when everyone thinks the government have no money,when the CB will print whatever they need 100% certain.Complete lack of understanding of our system.

The problem is that western govts aren;t in the same space as the 1929+ crisis in terms of debt to gdp.Like you I see the govts driving the spending.How much room theyve got before curencies crash I'm not sure??

And if currncies crash will we see the mother of all PM bulls?

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1 hour ago, sancho panza said:

Ye olde surplus energy site @Democorruptcy introduced me to has given me some education on this topic.HAdntre ally thought of it before.it sjut sort of explained everything CP had been on about in that there was nothing to repalce oil in the near future.

I think with renewables there'll be two sets of data,the real ones and then the ones they want people to see.

 

 

The problem is that western govts aren;t in the same space as the 1929+ crisis in terms of debt to gdp.Like you I see the govts driving the spending.How much room theyve got before curencies crash I'm not sure??

And if currncies crash will we see the mother of all PM bulls?

No currency crash this cycle.The key is the fact we are in dis-inflation.Currency cant become worthless when it can buy more over time.The problems for currency come later in an inflation cycle.UK government debt for instance will be around half of the stated figures after BOE printing,because half will be sat on the CBs balance sheet,never to be paid back.The market has got itself into the situation where it is saying to governments spend what you want and pay us 1% a year in coupon.Its crazy,but thats where we are.The irony is the government will be paying around 0.5%,because the BOE will hand back the government the interest.

The MSM and the markets need to understand the only way to deal with the size of the debt is to inflate the economy faster than the coupons on the debts.That is exactly what is coming.

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