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

[NogintheNog]

Was watching the BBC last night on Greta Thunberg;

https://www.bbc.co.uk/iplayer/episode/p099f5jp/greta-thunberg-a-year-to-change-the-world-series-1-episode-2

At 36:45 Dr Ajay Gambhir from Imperial college London stated that mankind has discovered up to 15 times more fossil fuels than we can burn to stay within our climate goals on Carbon dioxide release into the environment.

I think it's sad but true that developing nations with large populations are going to likely pay lip service to these goals, something along the lines of "You've burnt your quota, now it's our turn!"

[DurhamBorn]

21 minutes ago, NogintheNog said:

Was watching the BBC last night on Greta Thunberg;

https://www.bbc.co.uk/iplayer/episode/p099f5jp/greta-thunberg-a-year-to-change-the-world-series-1-episode-2

At 36:45 Dr Ajay Gambhir from Imperial college London stated that mankind has discovered up to 15 times more fossil fuels than we can burn to stay within our climate goals on Carbon dioxide release into the environment.

I think it's sad but true that developing nations with large populations are going to likely pay lip service to these goals, something along the lines of "You've burnt your quota, now it's our turn!"

Just checked, the entire UK windmill fleet are producing less than 1% of our power today.Drax biomass is doing nearly 8%,gas 56%.Still the lads running the windmills can go and have a fag break at least,or two fags if they reduce the nicotine in them 

[JMD]

5 hours ago, Lightscribe said:

In theory yes. But there lies the point, will it *actually* be completely transparent or will they use a separate blockchain? 

Marketed as socialism but in reality would it really just be Neo-feudalism. History of human nature has proven that there has always been one set of rules for those at the top and another for the masses.

As others have said on here, would all this bring about a barter economy? Maybe, unless people wouldn’t want to risk stepping outside of the lines. China could be the template as they already control nearly 20% of the world’s population.

The question remains however, could the westernised world transition to a similar format and live under similar government control? There would have to be major shift in westernised behaviour and people would have to be reliant on government for everything, UBI, feed family etc. What could cause that? Hard times, global depression, war, food shortages etc.

Maybe that’s what’s already been gradually happening over the years. How many grew their own food and made everything from scratch 70 years ago until now. Self sufficiency becoming less and less as time goes on.

Lightscribe, right or wrong, I have slowly built my own 'base case' (Lynn Alden phrase), over the last 10 years and although my base-case of course changes I still find it useful for orienting myself for future investment trends/decision making, or to help interpret current events. Anyway, In terms of what you say above, my take is that after we all get issued our (covid?) digital id's, I would then next expect all internet access to be controlled via personal logins (the 'panic justification' will be China/Russia security concerns). So, in a flash, anonymity will be cancelled! Given blockchains (public or private) are immutable I certainly wouldn't want to attempt to commit company tax fraud using one.                                                                           And before anyone should respond by going full Gretta T. on me, ie- '...how dare you!!'. Please remember I am merely reading aloud from my personal 'crystal ball', so please (if so inclined) attack the ball and not the man. That's to say I neither say these things are good or bad, just that I expect them to happen. I say this because this thread is for helping decide investment choices, not to impune the character of our Lizard Overlords!?!              

[Loki]

25 minutes ago, JMD said:

the 'panic justification' will be China/Russia security concerns

Ties in with the cyber polygon "prediction" of a big event. Like event 201 predicted a "pandemic"

[JMD]

3 hours ago, Noallegiance said:

This is not good news.

The ability for unproductive bloated government to increase the amount of wealth it can steal from the private sector is not to be celebrated, IMO.

I bet governments don't Blockchain themselves so we cans we what they're doing.

Small government leaving us the fuck alone is what I'm after.

Just for clarification. I'm all for small government, I am a libertarian. I wasn't passing judgement and was certainly not celebrating. However this thread is about what we expect to happen over the next 10 years or so, and mainly in terms of the effects on our wealth and strategies for keeping hold of it. 

[Loki]

With the knowledge from this thread i was mostly stoic about what the next decade holds but now i worry if it will be enough.

[JMD]

1 hour ago, NogintheNog said:

Was watching the BBC last night on Greta Thunberg;

https://www.bbc.co.uk/iplayer/episode/p099f5jp/greta-thunberg-a-year-to-change-the-world-series-1-episode-2

At 36:45 Dr Ajay Gambhir from Imperial college London stated that mankind has discovered up to 15 times more fossil fuels than we can burn to stay within our climate goals on Carbon dioxide release into the environment.

I think it's sad but true that developing nations with large populations are going to likely pay lip service to these goals, something along the lines of "You've burnt your quota, now it's our turn!"

I also saw it. I'm not sure how to interpret the '15x' and 'mankind' bit (I expect Dr Ajay would have trouble explaining also!). But as I understand it each nation has its own allocated carbon budget which it must not exceed before 2030, else global extinction, etc, etc!! But does anyone know how economically 'limiting' the UK carbon budget actually is? After all, I thought the long running criticism, by the greens, was that the targets from the Paris climate accord were pretty generous and/or meaningless. 

[Chewing Grass]

This interested me whilst observing everything in the red today.

Meanwhile, economic data showed that Britain's unemployment rate fell for a second month in a row to 4.9% while employment levels declined less than forecast. However, the jobs report also showed that the number of employees on company payrolls fell by 56,000 between February and March, the economic inactivity rate increased and the employment rate continued to fall.

So unemployment falls but the number of employees falls along with employment rate and economic inactivity increasing.

Seems a load of people have statistically 'disappeared'.

[JMD]

1 hour ago, NogintheNog said:

Was watching the BBC last night on Greta Thunberg;

https://www.bbc.co.uk/iplayer/episode/p099f5jp/greta-thunberg-a-year-to-change-the-world-series-1-episode-2

At 36:45 Dr Ajay Gambhir from Imperial college London stated that mankind has discovered up to 15 times more fossil fuels than we can burn to stay within our climate goals on Carbon dioxide release into the environment.

I think it's sad but true that developing nations with large populations are going to likely pay lip service to these goals, something along the lines of "You've burnt your quota, now it's our turn!"

I forgot to mention the best bit for me in that TV program, was when they found what must be the only existing woke  miners in Poland, who then all clamoured for selfies with their hero Gretta... The unbiased BBC at its best!!

[Inigo]

18 hours ago, Bobthebuilder said:

Oi.

Want your boiler fixed? Pay me in tobacco if you want a good price.

Tobacco would become a currency itself in that scenario. Why bother with money? cut out the middle man, go straight to the product/services. Rubbish fiat.

A friend spent some time in Bosnia just after the war.  He said that you could buy just about anything with 200 Marlboro.

[wherebee]

7 minutes ago, Inigo said:

A friend spent some time in Bosnia just after the war.  He said that you could buy just about anything with 200 Marlboro.

I did think in feb 20 of buying 400 cigs and sticking them in the roof.  I read somewhere cigs never degrade if in the wrapper, and they are barterful in the extreme.

[RickyBacker]

3 hours ago, Noallegiance said:

They're a hated sector again!

Tobacco stocks drop on report Biden is planning to limit cigarette nicotine (cnbc.com)

As an ex-smoker I remember moving to 'Silk Cut' low nicotine. Result; I smoked twice as many.

[Barnsey]

3 hours ago, Lightscribe said:

https://www.newsweek.com/dogecoin-gets-support-newegg-snickers-milky-way-doge-day-1584885?amp=1

And if you needed any more proof of peak cycle clown world...

A digital meme coin with a dog on with no white paper or technical roadmap becomes official currency.

Due to the 130 billon circulating supply if it continues to increase in value, you can see why economies like Turkey want crypto banned. Maybe it will be allowed to continue to be the ‘straw’ that breaks the camels back for regulation.

You could argue is it any more silly than a plastic promise note with the queens head on I suppose. 

I'm still of the belief is that it's acting as an ideal flood bank for stimmy checks

[sancho panza]

On 19/04/2021 at 11:11, Cattle Prod said:

Middle East rig count averaged 414 in 2019. Worldwide was 2177. This is a measure of activity. Bear in mind that this level of activity produced no growth outside of the US, just kept things broadly flat. Today the numbers are ME - 257, World - 1228. All over the world, producers are doing what the above map shows: high grading. Trying to do more with less. This has baked in a structural supply problem which not be turned around for 3,4,5 years. It should show up later this year, if not, next year. Saudi or whoever will announce 'voluntary cuts' or just not bring back to the market what the market thinks is off it. But the numbers don't lie. It is impossible to go back to 2019 rates of production with almost a thousand rigs not working. High grading may mask for a little while, I don't know how long. But it's baked in, there has been a year now of low activity. If demand gets back to 2019 levels, the supply won't be there.

 

Thanks for that full and detailed response.

As you say @planit poses the question rightly as to how the oil supply gap gets solved without higher prices.Those rig numbers,to my very untrained eye,tell me that the supply gap will get worse before it gets better,especailly if the position is being skewed by producers high grading(soemthing I wouldn't have thought of if you hadn't mentioned it).If and when the West returns to normalcy-looks like the rest of the world is already headed there-then maybe my $80 call for the top in oil ahead of the BK is short of the mark.

I just can't get my head around the drop in the rig count.I know that US shale used a disproportionate amount of rigs but still,that's a lot of capacity mothballed.

It's also interesting to see that @DurhamBorn call on weaker DXY appears to headed in the right direction after tapping 93.3 on the dailies.Two weeks later 91.That dollar rally wasn't as bouyant as many were predicting in the commenterati

We jsut cashed some options from last year,which I'm rolling back on.DYODD as ever.I'm avoiding the long dated stuff because my timeline here ends in October 21 for the time being.

Here's a couple of charts I've played with.RDSB drawing my eye at the mo.from the bottom in oct 20 and then from the more recent top 11/3/21.Trading at a discount to Brent-not that that always matters.

 

[sancho panza]

On 19/04/2021 at 12:03, Cattle Prod said:

Thanks Sancho, very useful and timely.

Interested to see that the South African big two Harmony and Sibanye come in at only 14.

@kibuc raised this question re HMY and I pointed out to him,that the coma scores are done on the last full year so companies like VOD/BT/HMY for instance.Looking at HMY accoutn for the half year to Dec 20,they look very good and will likely pick up a bigger score on the back of those.In all honesty,I should probably not have psoted the HMY score as their current postion is materially differnt to that reflected in teh coma score.

 

Decl:We're currently in the process of selling Peru exposure and have a biggish postion in BVN that's going.I suspect some of that will be rolling back into HMY(we sold at $6 in August),B2G,Ymana,Anglogold &Eldroado.We already have enough in Kinross and Barrick or I'd have some of them too.

 

ref Sibanye,Here's their full year to Dec,their chart score is a 1 because they're at a peak and y chart score relates to historical upside/downside.

Essentially,the score reflects the fact that it's a company producing steady profits/cashflows but is priced at 'fair value' to others imho.Hence I now list the price it was measured at for context.

 

[DoINeedOne]

On 18/04/2021 at 21:44, DoINeedOne said:

Interesting video about Nordstream 2 its pretty much done apparently

Think the funniest part was the US sanction on the construction ship fews day later it just carried on as normal

 

[AWW]

5 hours ago, DurhamBorn said:

Indeed,and what i find interesting is the fact football hasnt cared about fans for 15 years+.Its just an argument over who the parasite sucking the blood should be now.Though i admit iv never understood why people watch it anyway.

Exactly. The fans are all out making banners in protest, but they carry on buying season tickets and paying Sky subscriptions.

[sancho panza]

@Cattle Prod as a for instance,KGC,looks to be around CAD$1bn for 2020...........

Yamana CAD$315mn

 

[sancho panza]

On 19/04/2021 at 12:22, planit said:

They have supply currently at 9mbpd of spare capacity, hopefully this is overly optimistic as CP points out

Saudi 4m

UAE 1m

Iraq 1m

Rest OPEC 1.3m

NON-OPEC+ 2.2m

They also have 4m off the market due to geopolitical reasons (Venezuela and Iran = 3.7m of that)

They have current supply at 92.5mbpd

The report paints the impression that there is loads of available supply (92.5+9+4 = 105.5mbpd) to cover demand going forwards.

Most countries around the world are desperate for cash and I can't think of a reason why they wouldn't be producing as much as possible at current prices (outside OPEC+). Perhaps they are ramping back up after the cuts last year but the report implies its more like supply can be switched on or off.

 

 

Thanks for that data.I wonder how much of Non OPEC is US shale.Even if this could be brought back to market,how long will that take with the rig count worldwide around 1200?

 @Cattle Prod  has allready taken a geologists scythe to the Saudi spare capacity .Be interesting to know how long that Sauid number at 4mn would last if they went full throttle?

 

Edit to add:one of the rpoblems of reading four days worht in one go is that you miss some of the replies and I see CP has already chopped those numbers off at the knees.

Simply incredible to see that US shale fiugre being quoted as sparecapacity.

[AWW]

4 hours ago, Noallegiance said:

They're a hated sector again!

Tobacco stocks drop on report Biden is planning to limit cigarette nicotine (cnbc.com)

Therefore cig companies put less tobacco in each cig, manufacturing costs go down, price stays the same and smokers end up smoking more cigs.

[Lightscribe]

40 minutes ago, Barnsey said:

I'm still of the belief is that it's acting as an ideal flood bank for stimmy checks

It most certainly is.

Remember in the dot com mania before the crash, it was still relatively unwieldy for the average person to buy shares (share certificates etc)

Now it’s peak bubble multiplied by peak accessibility. Any person with internet access globally can buy a few doge with a relatively inexpensive phone. Apps like Robin Hood has made the interface as easy as any simple app. You have kids chucking their allowance money into it.

Stimulus cheques was just free money to go all in and pour petrol on the fire.

[Boon]

Seems like a massive sell-off going on. Another hedge fund being liquidated maybe?

[Noallegiance]

23 minutes ago, Boon said:

Seems like a massive sell-off going on. Another hedge fund being liquidated maybe?

Massive may be over-stating it.

My understanding is that melt-ups experience frequent dips of up to 3-4%. Which, in order to continue the melt-up, means bigger and faster up-legs.

Was there ever a more hyphenated sentence? Not in a post-GFC world.

[Harley]

55 minutes ago, Boon said:

Seems like a massive sell-off going on. Another hedge fund being liquidated maybe?

Where?

[planit]

@Cattle Prod

Here is the OIES April report link. Hopefully we are not oiling up the thread by delving deeper into this.

I agree with you regarding the Saudi production situation, I feel the press don't want to call Saudi out because of the history but there does seem a good case here that they won't be able to consistently produce the stated figures. They probably like this current "voluntary" production drop as it is giving their wells a couple of years to become fertile again. If we take that graph as production limits they will be able to reach 10.3mbpd for a year, or 10mbpd for a longer period. If their production drops to 9.5mbpd at end of 2022 that would be a real surprise to everyone.

 

@sancho panza

This looks like a bit of a binary bet to me, if OPEC stay in control of people's beliefs then iol will not go over $70. If the market gets a hint that there will be a shortage 12 months into the future then they will start trying to trade the squeeze and oil will rise fast.

Goldman nailed their DXY call, they must have needed to sell some Dollars to their clients .

I am hoping RDSB get pulled up by BP but they really screwed up their hedging and trading by the sounds of things and the voting at the AGM isn't what investors want to hear. Medium to long term I am sure it will be fine.

 

Edited to add after reading another of Sancho's posts:

Theory is that the prices of BP and RDSB (and potentially the others that have risen further already) are good value working on the predicted prices of oil for this year of $60-$65 (we are already 4 months in), this covers the buy and we get these free 'bets' as a bonus

Seems like there is a couple of bites of the cherry for the lack of supply trade:

Firstly that the hibernating supply will take longer to get back on line than the market needs. Secondly, a year or 2 out, the lack of investment along with the limit of Saudi production will cause a  structural shortage lasting a couple of years.

High demand also has a bite of the cherry if all the stimulus and green energy spend sends demand rocketing as we have a 'roaring twenties'

 

Not such a good day today