Jump to content
DOSBODS
  • Welcome to DOSBODS

     

    DOSBODS is free of any advertising.

    Ads are annoying, and - increasingly - advertising companies limit free speech online. DOSBODS Forums are completely free to use. Please create a free account to be able to access all the features of the DOSBODS community. It only takes 20 seconds!

     

IGNORED

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


spunko

Recommended Posts

  • Replies 35.1k
  • Created
  • Last Reply
On 05/09/2020 at 23:19, Noallegiance said:

Right on cue:

 

I've taken some notes for this interview.

 

6 mins-At the extremes bullish/bearish,if you're with the crowd,you'll get slaughtered

8 mins-there are times when I'm out of favour for some time,don't worry about market timing so much

10 mins-long term calls are easier to be accurate.typical investment timeframe tend to be 1 year to 5 years,in certain cycles maybe 8 years.Recovery cycle to follow 2021 bear market.

     Metals will be to the 20's what dot com stocks were to the 90's.

13 mins Pay more attention to the quantity of money rather than the price of it.Technicals/macro fundamentals/fed policy form the basis of investment.

15 mins- five cycles since 1970's-in each one the Fed drove the cycle.What's changed is the degree and the magnitude of fed involvement.Super cycles exist in between depressions.Debt will go from $250trillion to $400 trillion

19 mins-people look at markets and see it disconnected from economic reality.Fed stimulus takes 6-9 months to take effect.The expansion will show 6 months from now.

23 mins-global deflationary bust 2021,bust started in March.It's all one bust.

25 mins-difference between good investors and bad investors is that they learn from their mistakes.We all make mistakes.

26 mins- We've been in disinflation since early 80's.Policy makers overshoot.Inflation reached 20% in 1981.People are still worried about inflation.It's not so much about manipulation of inflation indices but more excess capacity globally.

31 mins-2021 is deflation.Fed balance may grow to $20trillion,poss $30 trillion because Fed doesn't have to worry about inflation.Could see 3%-5% deflation.

34 mins-people expect a Japanese expereince but reality will be double digit GDP drops.Fed printing won't stop it.Fed can take care of liquidity but it can't stop insolvency.

36 mins-Important to focus on what Fed will do,not moralize about it.Fed is doing what it has to do but it won't end well stop depression in 2030's 40's which will dwarf 1930's depression.

39 mins-got it wrong in march 2020 going back in too soon.

40 mins- 1982 secular market bottom,beginning of disinflation.Most of whats driven markets is IRs going from 15% to zero.Expect to see a parabolic move ahead of big bust 2021.

42 mins-S&P to 4200 or 4500.Could go higher.Most likely top will be pre election.Nasdaq to 15,000.

44 mins-roll over after election,first half 2021 bear market which could see up to 80% bear market in S&P,more likely 65%.This will be the secular top in the stock market.We may not get near those highs for a long time.

46 mins-leadership will change,70's was energy/commodity stocks,80's consumer stocks,90's was tech,00's was banking housing,10's social media/tech.Next cycle will be commodities and industrial stocks.

48 mins-up until last few months,DH thought gold and silver would get hit as hard as the market-silver to single digits.Now sees silver to $35 then corrects to mid 20's.Gold to $2300-$2500 then $1800 in the bust.Could be defensive areas.Before thought everyhting was going down but USD and UST's.Now PM's won't go down with market.Next cycle will gold $10,000 + silver $300+

50 mins-global bust-Euro zone will get hit harder than US.Every CB will be printing.

52 mins-doesn't follow Bitcoin,sceptical.Prefers gold as can have conviction in it.If you can't sleep whilst owning it,don't own it.

56 mins-looking for 85 on DXY this year.Next year all about capital preservation.Next year dollar could reach  140 and UST 10 yr yield could go to 0.

56 mins-2021 bear market could be quicker than 2008/09 due to derivatives

59 mins-passive investors do well in disinflation.In the envrionment coming after this bust,it won't work.

 

 

 

Link to comment
Share on other sites

RMG: I seem to remember someone, maybe @DurhamBorn mentioning something about maybe a decade ago about royal mail and saturday deliveries plus maybe parcels driving business cf. letters.

My memory not as good as it used to be, so ignore if im wrong;

I know its DM, but sometimes it surprises;

https://www.dailymail.co.uk/news/article-8713067/Royal-Mail-stop-delivering-Saturday-letters.html

 

 

Link to comment
Share on other sites

I quite like the way this website sets out information in multi-slice views:

https://simplywall.st/stocks/au/energy/asx-bpt/beach-energy-shares?blueprint=1329079#executive-summary

 

disclaimer: I bought some Beach a few months ago as I wanted more Aussie based oil and gas.  Australia has a lot of unexploited fossil fuels due to political resistance, and it's my expectation that as oil price rises, and the US wants oil from allies not enemies, these may come online via local companies.

Link to comment
Share on other sites

1 hour ago, wherebee said:

I quite like the way this website sets out information in multi-slice views:

https://simplywall.st/stocks/au/energy/asx-bpt/beach-energy-shares?blueprint=1329079#executive-summary

 

disclaimer: I bought some Beach a few months ago as I wanted more Aussie based oil and gas.  Australia has a lot of unexploited fossil fuels due to political resistance, and it's my expectation that as oil price rises, and the US wants oil from allies not enemies, these may come online via local companies.

used them for a while tracking portfolios the main page is nice too with updates

172889829_Screenshot2020-09-10at08_23_11.thumb.png.594356c1ac607e01604a651fc7fa5f14.png

Link to comment
Share on other sites

5 minutes ago, Heart's Ease said:

 

Whats really interesting here is how BP have invested yet Equinor are still running them and a 50/50 split.Equinor are involved in a huge project in the UK that will likely feed hydrogen production at DRAX.BP are looking to build a big position on Teesside.We might see BP take a big stake alongside Equinor now and sow up the wind power to produce the hydrogen.

If Shell wanted to get in alongside the best thing they could do would be to buy SSE.

Its incredible how the market is missing the fact that the big energy players will have huge cash flow as they slow exploration etc to invest.

Link to comment
Share on other sites

4 hours ago, wherebee said:

I quite like the way this website sets out information in multi-slice views:

https://simplywall.st/stocks/au/energy/asx-bpt/beach-energy-shares?blueprint=1329079#executive-summary

 

disclaimer: I bought some Beach a few months ago as I wanted more Aussie based oil and gas.  Australia has a lot of unexploited fossil fuels due to political resistance, and it's my expectation that as oil price rises, and the US wants oil from allies not enemies, these may come online via local companies.

Wherabee, the Simplywall.st site does look good. As you say it sets out the data well and i'm tempted to subscribe.

However - its probably me and my finance misunderstanding - but can you explain why (for Beach) it says, in section 6.1: 'short term assets do not cover its long term liabilities'? ...Only i don't understand why that would be a criteria - i.e. why doesn't it just compare long term assets with long term liabilities (which for Beach there would be full cover)? 

The reason i ask is because i am wondering if this is an error on the web site?

https://simplywall.st/stocks/au/energy/asx-bpt/beach-energy-shares?blueprint=1329079#summary

Link to comment
Share on other sites

#debtdeflationcometh

when people take their stimulus cheques and pay down debt,the end is nigh.

https://www.breitbart.com/politics/2020/09/09/survey-american-consumers-post-record-60-billion-first-quarter-credit-card-debt-pay-down/

Americans started 2020 with more than $1 trillion in credit card debt after a $76.7 billion net increase last year, but a survey finds that during the first quarter of the year, consumers paid down a record $60 billion.

The personal finance website Wallethub reported on its survey:

Americans began 2020 owing more than $1 trillion in credit card debt after a $76.7 billion net increase during 2019. Consumers quickly changed course, however, posting the biggest first-quarter credit card debt paydown ever, at $60 billion. This was followed by another record in Q2, when consumers payed down $58 billion more in credit card debt. Although first quarter paydowns are normal, Q2 2020 marks the first time in more than 30 years that credit card debt has dropped from April through June.

As a result, WalletHub now projects that U.S. consumers will end the year with a slight reduction in credit card debt for the first time since the end of the Great Recession in 2009.

Outstanding credit card debt dropped by roughly 6.7% during Q2, compared to the previous quarter.

Link to comment
Share on other sites

3 minutes ago, sancho panza said:

#debtdeflationcometh

when people take their stimulus cheques and pay down debt,the end is nigh.

https://www.breitbart.com/politics/2020/09/09/survey-american-consumers-post-record-60-billion-first-quarter-credit-card-debt-pay-down/

Americans started 2020 with more than $1 trillion in credit card debt after a $76.7 billion net increase last year, but a survey finds that during the first quarter of the year, consumers paid down a record $60 billion.

The personal finance website Wallethub reported on its survey:

Americans began 2020 owing more than $1 trillion in credit card debt after a $76.7 billion net increase during 2019. Consumers quickly changed course, however, posting the biggest first-quarter credit card debt paydown ever, at $60 billion. This was followed by another record in Q2, when consumers payed down $58 billion more in credit card debt. Although first quarter paydowns are normal, Q2 2020 marks the first time in more than 30 years that credit card debt has dropped from April through June.

As a result, WalletHub now projects that U.S. consumers will end the year with a slight reduction in credit card debt for the first time since the end of the Great Recession in 2009.

Outstanding credit card debt dropped by roughly 6.7% during Q2, compared to the previous quarter.

And then governments have to take up the slack ,so instead of a consumer driven cycle we get an industrial one.A widget costs so much energy and commods,but putting in the factory,roads,supply chain takes up multitudes more over a shorter time frame.Dis-inflation cycles gain from the massive investments made during reflations.What nearly everyone will miss is the fact the CBs are increasing liquidity by large amounts (and much more to come) and as a lot of debt is liquidated,that liquidity will find its way to the areas that feed that reflation.

There is a very large chance that the cycle is defined by the energy transition seeing huge investment.That looks the most likely.That will mean the biggest profits in history for the energy that investment is going to put out of business longer term.People will be shocked by that because they dont understand about leads and lags and macro strategy.Big energy will build and fund it from free cash.They are about to shove out everyone else (and probably buy a lot out).The energy space is giving people once in a generation prices here.I think my children and grandchildren will be glad i took them.

Link to comment
Share on other sites

reformed nice guy
31 minutes ago, Cattle Prod said:

I don't bother posting up every deal that comes through my work feed as people might get bored, and some of it paid for services that I can't, but it's every week, if not every day. Some headlines in the last couple of weeks, you could google these and find the rehashed stories:

- Eqinor forms offshore wind JV in Japan

- Total creates JV to maufacture batteries in Europe

- Total enters S Kores floating offshore wind sector

- PetroChina first NOC to announce carbon neutrality

- Eni renewables JV grows US capacity via acquisition

- Petronas takes aim at renewables as it reshapes portfolio mix

- Latin Americas renewable energy capacity set to skyrocket to 123GW by 2025 (and which oil company is best placed to help with that....)

And of course BP today. These are amongst a bunch of regular oil and gas headlines of course, but it's real, and that is 2 weeks worth. It's notable that XOM is still not interested in any of this. If you want pure play oil and gas, XOM is your man. And Chevron, to a lesser extent.

Also:

- Shclumberger, IBM and Red Hat announce major hybrid cloud collaboration for the energy industry. 

Keeping the R&D dollars on the high margin stuff, I'm sure it's not escaped their notice the profits Amazon and Microsoft make on their cloud businesses. 

Very interesting insight. Thanks for sharing. This is what makes this thread so amazing!

Quick question: am I right in saying that Shclumberger are the number one supplier of software services in the oil and gas sector? Does it look like they are positioned to take a dominant role in renewable related software, even if via purchasing smaller firms? 

Link to comment
Share on other sites

I've been looking at Siemens Gamesa who make a lot of wind turbines - wish I'd bought in March, as they are up almost 80% since.

 

Anyone holding these or have a view on them?

Link to comment
Share on other sites

56 minutes ago, Cattle Prod said:

I don't bother posting up every deal that comes through my work feed as people might get bored, and some of it paid for services that I can't, but it's every week, if not every day. Some headlines in the last couple of weeks, you could google these and find the rehashed stories:

- Eqinor forms offshore wind JV in Japan

- Total creates JV to maufacture batteries in Europe

- Total enters S Kores floating offshore wind sector

- PetroChina first NOC to announce carbon neutrality

- Eni renewables JV grows US capacity via acquisition

- Petronas takes aim at renewables as it reshapes portfolio mix

- Latin Americas renewable energy capacity set to skyrocket to 123GW by 2025 (and which oil company is best placed to help with that....)

And of course BP today. These are amongst a bunch of regular oil and gas headlines of course, but it's real, and that is 2 weeks worth. It's notable that XOM is still not interested in any of this. If you want pure play oil and gas, XOM is your man. And Chevron, to a lesser extent.

CP, ...I need to ask (i'm one of the slow ones in this class!) - but would that be Repsol?

Link to comment
Share on other sites

1 hour ago, JMD said:

CP, ...I need to ask (i'm one of the slow ones in this class!) - but would that be Repsol?

Yes,and they are in a stunning position for the cycle.They are heavy gas that will fly during the cycle,have the perfect range and spread of refineries for hydrogen that are pipeline connected.They have good wind and solar positions in great locations and will be the partner of choice for massive parts of South America.They are 1/3 of the price they were 20 years ago.Just need a divi cut really to ensure a fantastic cycle for them.

Link to comment
Share on other sites

ThoughtCriminal
31 minutes ago, DurhamBorn said:

Yes,and they are in a stunning position for the cycle.They are heavy gas that will fly during the cycle,have the perfect range and spread of refineries for hydrogen that are pipeline connected.They have good wind and solar positions in great locations and will be the partner of choice for massive parts of South America.They are 1/3 of the price they were 20 years ago.Just need a divi cut really to ensure a fantastic cycle for them.

Even better than that DB: it was five times higher in 2008!

Link to comment
Share on other sites

4 hours ago, DurhamBorn said:

Whats really interesting here is how BP have invested yet Equinor are still running them and a 50/50 split.Equinor are involved in a huge project in the UK that will likely feed hydrogen production at DRAX.BP are looking to build a big position on Teesside.We might see BP take a big stake alongside Equinor now and sow up the wind power to produce the hydrogen.

If Shell wanted to get in alongside the best thing they could do would be to buy SSE.

Its incredible how the market is missing the fact that the big energy players will have huge cash flow as they slow exploration etc to invest.

SSE have been selling wind farm assets recently.

Re RDSB

Quote

 

Publication of Final Terms

The following Final Terms are available for viewing:

Final Terms dated 8 September 2020 (the "2030 Notes Final Terms") relating to the issue by Shell International Finance B.V. of £500,000,000 1.000 per cent. Guaranteed Notes due 10 December 2030 (the "2030 Notes") pursuant to the Multi-Currency Debt Securities Programme

Final Terms dated 8 September 2020 (the "2052 Notes Final Terms") relating to the issue by Shell International Finance B.V. of £500,000,000 1.750 per cent. Guaranteed Notes due 10 September 2052 (the "2052 Notes") pursuant to the Multi-Currency Debt Securities Programme

 

 

Link to comment
Share on other sites

18 minutes ago, Democorruptcy said:

SSE have been selling wind farm assets recently.

Re RDSB

 

Yes they are similar to Equinor,develop and then sell some,fund the next ones etc.I think SSE are very interested in hydrogen as they seem to be investing in both the wind production,but also the heavy cables to get it onshore at the right places.SSE might be a bit big for BP to take out (when including debt) but Shell could pounce.I think the sector and also 5G telcos will have a fantastic decade.

Link to comment
Share on other sites

This is the 'explosive Tesla podcast' that Grant Williams has recently featured on his own podcast. It spills the beans on the company and its management apparently, and GW seems to believe it.

I am about to listen, but wondered what others think (is it all just American hyperbole, or is there really a weirdo (or worse!) running Tesla)?

https://www.listennotes.com/podcasts/tcs-chartcast/episode-41-karl-hansen-part-yaXKfYhriCc/

 

Link to comment
Share on other sites

5 minutes ago, Cattle Prod said:

Astonishing. Free money.

Who wouldn't borrow $500m you didn't have to pay back for 30 years at below the rate of inflation? I work for a whole other tier of oil company with much higher finance costs, it's going to be very very hard to compete with these guys. Just looking at that it has occurred to me that it'll drive a huge consolidation of the industry over the next cycle, because part of the industry is junk bonds, and part is effectively government gilt. I don't know what Kosmos's coupon is, but it's probably between 4-8%. Shell just financed that purchased for free, based on the way the bond market is currently. The majors are just going to cherry pick the best projects, with the cost of capital slashed as soon as they do. I'm surprised there isn't more of it while this bond window is open for them.

1.75% for 32 years maybe they should open a residential mortgage lending arm? :ph34r:

I have some UU and had a moan at them about this one in July. Why index link debt for 20 years while rates are so low?

Quote

Final Terms relating to the issue by United Utilities Water Finance PLC of GBP 95,000,000 0.01 per cent. Index Linked Notes due July 2040

Their August one was fixed rate.

Quote

Final Terms relating to the issue by United Utilities Water Finance PLC of USD 35,000,000 1.474 per cent. Fixed Rate Notes due August 2031

 

Link to comment
Share on other sites

4 hours ago, Cattle Prod said:

I don't bother posting up every deal that comes through my work feed as people might get bored, and some of it paid for services that I can't, but it's every week, if not every day. Some headlines in the last couple of weeks, you could google these and find the rehashed stories:

- Eqinor forms offshore wind JV in Japan

- Total creates JV to maufacture batteries in Europe

- Total enters S Kores floating offshore wind sector

- PetroChina first NOC to announce carbon neutrality

- Eni renewables JV grows US capacity via acquisition

- Petronas takes aim at renewables as it reshapes portfolio mix

- Latin Americas renewable energy capacity set to skyrocket to 123GW by 2025 (and which oil company is best placed to help with that....)

And of course BP today. These are amongst a bunch of regular oil and gas headlines of course, but it's real, and that is 2 weeks worth. It's notable that XOM is still not interested in any of this. If you want pure play oil and gas, XOM is your man. And Chevron, to a lesser extent.

Also:

- Shclumberger, IBM and Red Hat announce major hybrid cloud collaboration for the energy industry. 

Keeping the R&D dollars on the high margin stuff, I'm sure it's not escaped their notice the profits Amazon and Microsoft make on their cloud businesses. 

I jsut wouldn't come across this type of newsflow in my daily reading so much appreciate the heads up.When you piece it all together and below ref the debt profile.The investment picture jsut gets better and better.

1 hour ago, Democorruptcy said:

SSE have been selling wind farm assets recently.

Re RDSB

 

image.thumb.png.670eb5351b1b2ffb2d730d2a7276a762.png

SImply stunning.I remember it was a psot of your a year or two back that first got me looking through Vodafone debt profile.

It's beyond incredible that they're floating 32 year bonds off at 1.75% with CPI(I know,I know) at 1.6%........................when infaltion gets to 5%+ which it going to at some point they'll be buying that back for 40% of face value if they don't let it run further down which is what I'd do.

Link to comment
Share on other sites

15 minutes ago, DurhamBorn said:

@Democorruptcy nuts,what is their Finance director doing? why would you index link over that period.The only reason they would is if they expect long term deflation.

can you explain DB?I thought those are nominal sums not index linked?

Link to comment
Share on other sites

37 minutes ago, Cattle Prod said:

Astonishing. Free money.

Who wouldn't borrow $500m you didn't have to pay back for 30 years at below the rate of inflation? I work for a whole other tier of oil company with much higher finance costs, it's going to be very very hard to compete with these guys. Just looking at that it has occurred to me that it'll drive a huge consolidation of the industry over the next cycle, because part of the industry is junk bonds, and part is effectively government gilt. I don't know what Kosmos's coupon is, but it's probably between 4-8%. Shell just financed that purchased for free, based on the way the bond market is currently. The majors are just going to cherry pick the best projects, with the cost of capital slashed as soon as they do. I'm surprised there isn't more of it while this bond window is open for them.

When you look at it like that you do wonder why people are bitching about BP's balance sheet and others......

Link to comment
Share on other sites

Archived

This topic is now archived and is closed to further replies.

  • Recently Browsing   0 members

    • No registered users viewing this page.

×
×
  • Create New...