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

[MrXxxx]

38 minutes ago, Panda said:

Roll on next week. Hope the quarterly's are positive and we see some uplift.

Well I'm hoping they're negative, so it looks as though one of us is going to be disappointed! :-) :-) :-)

[Democorruptcy]

2 hours ago, headrow said:

I'm just glad i avoided cineworld , it was on my radar because it started to pay quarterly dividends , to an income investor like me i find that very attractive but for some reason i never got tempted . I remember getting the Greene Kind windfall and thinking abut buying Cineworld but bought Man Group instead. Got lucky that day.

I was anti-cineworld in this thread well before covid, well done on avoiding it.

[Democorruptcy]

2 hours ago, headrow said:

I have no reason to work now , i get 11k rental income which takes care of my tax free allowance , i haven't touched this in 4 years though and it just sits as cash , i like the feeling of security it gives me. I'm single, my only child has left town for London and got a very well paid job and i have got my bills down to about £200 a month for CT , gas , electric , water and phone . if needed i could feed myself for £20 a week . i worked from aged 16 to 50 so have full contributions when i get my pension in 15 years and a private pension that will hopefully pay out about 7k a year when i am 60 in 7 years time.

I'm not knocking people who still want to work , i've just discovered that i don't want to and more importantly don't need to. I just love having a stress free life , working and in a relationship didn't offer me that

I haven't worked since 2003 just made a few quid gambling from home. I even decided to take a rest from that last year and don't miss it. I don't know how people find the time to work!

Unlike you I don't have rental income and am renter scum, £150 a week inc CT, utilities, etc.

I only have 28 years contributions so 4/5 state pension because I stopped paying in 2004. Topped up my SIPP with an old deferred work pension transfer last year, got £124k out for £2k in contributions

[Loki]

I am semi-retired at the moment, but not through choice 

[DurhamBorn]

https://www.telegraph.co.uk/business/2020/10/22/jcb-tests-worlds-first-hydrogen-powered-digger/

These are the sort of things that give the UK a big chance to have an industrial recovery.JCB are a superb company.

[Noallegiance]

Dave does it for this thread, I'm sure...

 

[sancho panza]

On 23/10/2020 at 06:40, Castlevania said:

The whole market is about stimulus at the moment. The above is stimulus optimism.

I like that perspective-stimulus optimism/pessimism.Sums up the reality of whats driving things

On 23/10/2020 at 07:43, Knickerless Turgid said:

After last night's presidential debate, the oilies are likely to get whacked today, surely? If Biden wins, lots more short-term pain to come here.

It's a 50/50 imho

[sancho panza]

On 22/10/2020 at 13:16, DoINeedOne said:

Another interesting site if you like animated data https://ourworldindata.org

Amazing that coal use-depsite all the plattitudes has only plateaued since 2010...

 

Great site btw

[sancho panza]

On 23/10/2020 at 15:42, Cattle Prod said:

CEO of Conoco agrees with my thesis, good to see it percolating out into the MSM:

https://www.ft.com/content/cddf0d0a-be85-4bc2-a236-70ab87c22201

...

There's nothing that ground breaking about what I say on here, really. Any oilman or geologist can see the decline curve problem etc, but I have to give credit to this guy for betting $13bn on it.

It's interesting timing.And certainly hints that they foresee some sort of supply side squeeze coming.It's not going to be long before it cuts through.Looking from my laymens perspective when you look at the size of cuts to capex,the other side of this trough could steepen very quickly indeed,especially if external factirs eg Geopolitics plays into it's hands.

No pressure CP but what's your rough guesstimate for capex cuts across the industry per centage wise at the minute?

On 23/10/2020 at 15:08, DurhamBorn said:

The interim is very hard to be known as there are so many moving parts.However longer term things get easier from a macro position.Money supply growing faster than debt destruction for instance means its almost certain real asset prices will increase in time.There is room for cross market work,for instance trying to work out what might move first etc and when,but thats different to a macro roadmap.I understand people have different needs and reasons to invest.My investing has changed over the years.My aims now are to outperform inflation over the cyclet.If inflation averages 65% by 28/30 and i make 66% i consider that job done,though of course i hope and expect to way outperform that.Dieing doesnt matter to me.

Remember as well the 8 year window should be most of the cycle,we should be well underway within two years,its just the big parabolic moves will come late cycle,and the hardest part will be holding through big gains for that period.

using the ols KISS principale,that phrase in bold is one of the best summations of where we are I've read.You forget it at your peril.Debt deflation(and subsequent banking crisis) and BK will only likely occur when they run out of printing room.

[Harley]

14 hours ago, Panda said:

Harley old chap.

With my luck. My entry points. Re. RDSB and BP.

CGT is the least of my worries. I'm down big time. Not seen a blue number since I first opened my HL Share and Stock Trading account. 

This market the last few months has been brutal.

But you know what. Found shit out about myself I never knew.

Learnt so much. It's not till your doing it with real money, your cash do your really learn from your own mistakes.

Loved every minute of it. Roll on next week. Hope the quarterly's are positive and we see some uplift.

Fantastic attitude and a timely reminder.  As would be said, "he's got it" (touching head).  I really get what you're saying.  Been there and still do!  Despite it all, there's something also perversely good about getting chewed out.  Especially when things turn around over time, as they tend to do.  Keeps you grounded, honest, and closer to real life, and can power you forward 'cause it's how you look at things that matters.  Ying yang.  I've been hurt, cold and in pain many times over all sorts of things so had every flimflam excuse to quit.  Those times I did were a stain I try not to repeat.  But, as they say, just keep going 'cause you never know what's over the next hill and most never will.  It should be the money, why I play this game, but in all honestly, not particularly.  And I'm not alone.  So bank those losses to offset against the incoming CGT liabilities!!!!  And if not, well, whatever!  IMHO, just keep one foot on the ground and your bug out route and grab bag ready!  No one got sorted by being silly!

PS:  I was down big back in 2000.  Down far more than that right now.  Made double that trading the next year, so those losses came in handy come tax time!  Far too soon to be jumping in the back of the Rover!

[JREWING]

On 24/10/2020 at 13:06, DurhamBorn said:

@Panda id see the chance of a divi cut from BP as close to zero.They can fund everything with Brent at $40 and a cut now would see the entire executive team removed.The thing to see is how close they are to their debt target,because once that hits i expect they will move to share buy backs quickly.They will want to try to get some away before the price moves.Hopefully then the woke funds etc sell into any strength etc and we can take the share count down while the price stays down.I want all weak hands out of these sectors before they move higher.I dont want them moving yet,id far rather they stay down for longer.

You know what DB.

Reading some other forums, there's twitchy ass holes out there convinced and convincing others the cut is coming. Quoting the 120 mill loss and 40 oil..

Now if she opens tomorrow and falls. I know oil dropped Friday pm. Which will probably not help.

But if she falls tomorrow based on misguided assumptions that a cut is coming Tuesday.

Then Tuesday no cut.

Whoosh. That could create some uplift across the sector for the rest of the week.

I was always in the mindset the market would price in no cut so we'd be in the mid 2's by now. But if you are correct we could be there by week end.

Maybe a nervy day tomorrow. I guess if you have the cash and a big pair of balls. Should BP and Shell fall tomorrow morning. What an opportunity to ride the upside for the rest of the week.

My two penneth. 

I don't see any cuts. Not so soon after the last one. What effect this has on the SP.

[Barnsey]

 

[nirvana]

@PandaI think the likes of BP and RDSB are reacting more to the 'stock market moves' at the moment rather than the oil price movement...although I admit I got excited when oil had a 10% rise from the 36 area......but it's gone nowhere for a month now....stuck in a channel I believe they say

Edit: it's been stuck in a channel since the beginning of June I'd say......and trading a 'channel breakout'..... that's interesting 

I did think about you last week when the prices were going down.....hope her indoors is not bashing you with the rolling pin too much 

[Popuplights]

10 minutes ago, Cattle Prod said:

Personally I have a stack of flying to catch up on next year as long as no one is going to hassle me about it.

For fucks sake don't tell WorkingPoor....

 

[DurhamBorn]

2 hours ago, Panda said:

You know what DB.

Reading some other forums, there's twitchy ass holes out there convinced and convincing others the cut is coming. Quoting the 120 mill loss and 40 oil..

Now if she opens tomorrow and falls. I know oil dropped Friday pm. Which will probably not help.

But if she falls tomorrow based on misguided assumptions that a cut is coming Tuesday.

Then Tuesday no cut.

Whoosh. That could create some uplift across the sector for the rest of the week.

I was always in the mindset the market would price in no cut so we'd be in the mid 2's by now. But if you are correct we could be there by week end.

Maybe a nervy day tomorrow. I guess if you have the cash and a big pair of balls. Should BP and Shell fall tomorrow morning. What an opportunity to ride the upside for the rest of the week.

My two penneth. 

I don't see any cuts. Not so soon after the last one. What effect this has on the SP.

At $55 oil BP can fund the divi,buy back 16p a share in buy backs invest $5 billion a year in new energy and $6 billion in upstream oil and gas and have a few billion spare.At $120 oil they can do that and buy back 80p a share.At $160 oil they can do all that and buy back £1.25 a share.Given i expect oil to go to $200 in the next cycle,maybe $300 and it should spend a long time over $120 i have no interest in the results now,apart from them not going bust.Moving into the 2nd half of the cycle on my numbers BP is trading on a return ration (buy backs and divi) of 2.Thats well before the parabolic rise that is likely down the road.

BPs market cap is around £44 billion now.I expect we will see them deliver nearly £25billion free cash flow one year towards the end of the cycle.Thats 1.7 times market cap today.

Markets are never linear.The sector is hated and no bell will ring on the turn.I dont care what they are next week to be honest,id rather they stay down as its another stock that can be added to as divis flow in.Id also like to see all the virtue woke funds sell out and be out of the sector for when it runs,so inflation smashes their capital as it will.BP can stay down another year or two for me,or go lower,just more return compounding in several years.

[sancho panza]

6 hours ago, Cattle Prod said:

I have the figures sonewhere but 40% is ringing a bell as in below what they need to be to maintain growth. It's widely reported that non opec supply is 'secularly stagnant' and will be for years. In fact it has been since 2010 outside US shale, which is also now not going to grow.

In March you saw the industry react to a price signal be shutting off the taps within a couple of months. It takes far, far longer to turn on new taps. There are some projects in the wings waiting for better prices, but oil supply is very inelastic and will take years of high capex to react to a price signal. Bust to boom, like $10 in the late 90s to $147 a barrel. I think it'll happen quicker this time, less low hanging fruit to pick like deep water, Africa, Brazil. Everyone thinks shale and opec will respond easily and cap prices, I don't think either will. Once demand is normalized and opec has normalized cuts, there is no more supply growth. Shale won't respond. A little, but not enough. 

I've just been studying EIA global supply, demand and inventory figures, and they just don't add up. They have supply and demand in balance from q2 next year, with supply back up to 100mbpd toward the end of the year, with US shale almost back to full capacity. That is physically impossible, and there will be a supply deficit all year if demand normalises.

Vaccine talk ramping up even this side of Christmas, I think there will be an explosion of spending and consumption once the fear lifts. Personally I have a stack of flying to catch up on next year as long as no one is going to hassle me about it.

WHat you say makes a lot of sense in terms of the likely rebound being quicker given' the low hanging fruit' from the post 07/8 world is gone.

As ever worth remembering that great Art Berman stat about 83% of new oil since 08 being US shale.Which makes the production drop since Febraury fascinating to watch and observe as we go forward.From what youve said and we've read from the likes of Berman,those timescales you outlined early doors would mean supply dropping lower than the 3mn bpd by end Q4,which in itself will amke for an interesting start to Q1.

Why would the EIA bodge the figures,when it's widely known in the industry that US shale will still be down by next year?Are they trying to game the Saudi's?

Like you say,all could end up in a decent run up in oil price.

[sancho panza]

5 hours ago, DurhamBorn said:

At $55 oil BP can fund the divi,buy back 16p a share in buy backs invest $5 billion a year in new energy and $6 billion in upstream oil and gas and have a few billion spare.At $120 oil they can do that and buy back 80p a share.At $160 oil they can do all that and buy back £1.25 a share.Given i expect oil to go to $200 in the next cycle,maybe $300 and it should spend a long time over $120 i have no interest in the results now,apart from them not going bust.Moving into the 2nd half of the cycle on my numbers BP is trading on a return ration (buy backs and divi) of 2.Thats well before the parabolic rise that is likely down the road.

BPs market cap is around £44 billion now.I expect we will see them deliver nearly £25billion free cash flow one year towards the end of the cycle.Thats 1.7 times market cap today.

Markets are never linear.The sector is hated and no bell will ring on the turn.I dont care what they are next week to be honest,id rather they stay down as its another stock that can be added to as divis flow in.Id also like to see all the virtue woke funds sell out and be out of the sector for when it runs,so inflation smashes their capital as it will.BP can stay down another year or two for me,or go lower,just more return compounding in several years.

After saying I wouldn't buy any more oilies,we ended up selling some PM miners Sept and I jsut couldn't stop myself adding a few extra BP/RDSB/XOM/REP at these levesl.I originally intened to sue the goldies to sell and buy yield.At these prices,you don't need to have made much to buy some pretty decent yields.

And as you say that's before oil starts heading back up.If Shell goes back to it's old divi or anywhere near,I'll be retiring earlier than I could have hoped.

Think you said someting the other day ref these chances come along only a few times in your life.I'd go with that.

[DurhamBorn]

6 hours ago, sancho panza said:

After saying I wouldn't buy any more oilies,we ended up selling some PM miners Sept and I jsut couldn't stop myself adding a few extra BP/RDSB/XOM/REP at these levesl.I originally intened to sue the goldies to sell and buy yield.At these prices,you don't need to have made much to buy some pretty decent yields.

And as you say that's before oil starts heading back up.If Shell goes back to it's old divi or anywhere near,I'll be retiring earlier than I could have hoped.

Think you said someting the other day ref these chances come along only a few times in your life.I'd go with that.

I think Shell will nearly double the divi from here in a few years.Its likely though a lot of the return will come from buy backs.Im not a big fan of those as it means they buy the most when the shares are highest,but it should add rocket fuel later.

I think BP will hold the divi for a few years,then do special divis on top each year,probably 5p to 8p special so a reverse of just under half the divi cut.

Repsol might cut its divi as well now,maybe 30% cut.Id expect buy backs from them as well going forward.

I think the sector will make enough cash flow to cover its market cap in around 2 years later in the cycle.With buy backs along the way we might get some 5/6 baggers even in the big companies.For the moment they have done the right thing conserving cash etc.

[Barnsey]

Just a reminder that for the short term at least, the reflation trade is very popular. Makes me think we might have one last shake out.

 

[nirvana]

DAX is dumping like a shitting dog.....crash alert.....

 

 

+100 off the lows.....dip buyers are in for now......fascinating stuff 

[nirvana]

Here's an interesting chart, DXY has actually been in an uptrend for the last 10 years 

 

[Loki]

Pension hit HL SIPP today and is £5000 not £1000 

First purchase XOM when the market opens

[NogintheNog]

51 minutes ago, 5min OCD speculator said:

Here's an interesting chart, DXY has actually been in an uptrend for the last 10 years 

 

The 'Reserve' currency and least dirty shirt syndrome.

DXY of course logs the relative strength of the $USD against other advanced economy currencies. Most of those are even more of a basket case than the US (like the UK for example!) Some of those have negative rates, and only Canada has the same rate! Compare all of them against real money (Gold, or even bitcoin) and frankly it's no contest!

[NogintheNog]

26 minutes ago, Cattle Prod said:

China crude imports by origin:

There is a lot of geopolitics and trends for the next decade you can read from that.

First one for me is: they've gone from ~5m to over 11m in the last ten years. If that trend is to continue, even just linearly, where you get an extra 6m bpd from? The only ones with real growth potential on that list are Iraq, Iran, Venezuela, UAE and Oman. Maybe incremental from Russia, if they feel like it. Flat are Saudi, Kuwait, Qatar, Colombia. In decline are Malaysia, Angola, Congo, US, and Norway (temporary Johan Sverdrup bump). 

Most notable is the absence of Canada, which has the highest growth potential of all. The US essentially controls Canadian exports, but an interesting point to watch is the Trans Mountain Pipeline across the Rockies to Vancouver which is being expanded in capacity. Let's see if they sell any to China, and watch how China is currently meddling in Canadian politics.

Edit: Brazil is also a supplier here, but I'm not sure what that's about, as Brazils has very little export capacity relative to its consumption. Perhaps they lack refining capacity so export crude and import products.

My concern would be will they always be happy to be paid in the currency which is part of the increasingly dirty DXY basket

[NogintheNog]

One thing that I did notice on this chart, which isn't obvious (because oil isn't on the chart!) is how DXY bounced back strongly against Gold when there were large sudden falls in the oil price. 2008, and 2014 being very notable. Yet so far despite the oil price being slaughtered this year that hasn't happened this time around....???