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

[Loki]

DXY just took a whack, anything to do with the fed announcement today?

[DurhamBorn]

4 minutes ago, Cattle Prod said:

I thought Powell was very poor in the presser. He was asked @DurhamBorns question about how they will tighten, by rates or by tapering, he fluffed it a bit and went back to script. Some good questions from the press today. 

Its the crucial question.Pulling liquidity would cause a massive crash where rates increases would simply slow down certain sectors.The market is almost to a man expecting nearly all the liquidity to be pulled back first before any rate increases.I think the CBs want the inflated money supply to remain in the system to increase tax take for governments etc and might throw a curve ball and raise interest rates instead.They might do some token liquidity draw first.

Most of our work is now unfolding nicely as we expected and while people are shocked at what unfolds now and concentrates on that we need to be moving along the roadmap to what follows.I dont think they have finished printing yet,i expect a few more tranches yet.

[DurhamBorn]

Im going to blow my trumpet on my dollar call yet again.I dont think anyone iv seen anywhere has called the dollar as well over the last four years as i have,im really pleased that the tools i use are proving so good even with extreme liquidity pulls.Check out the 1 month chart on the DXY when almost everyone again was saying it was going higher.

https://www.marketwatch.com/investing/index/dxy

[Noallegiance]

2 minutes ago, DurhamBorn said:

I dont think they have finished printing yet,i expect a few more tranches yet.

Only another $3.8T for the next CTRL P...

$1,400 Stimulus Checks Are Tiny: Joe Biden Has Bigger Plans For America | The National Interest

[Lightscribe]

https://www.reuters.com/world/europe/great-exit-central-banks-line-up-taper-emergency-stimulus-2021-04-28/
 

Canada first up with tapering...

[DurhamBorn]

1 minute ago, Lightscribe said:

https://www.reuters.com/world/europe/great-exit-central-banks-line-up-taper-emergency-stimulus-2021-04-28/
 

Canada first up with tapering...

Only slowing its purchases remember though,the question is do they remove any liquidity they printed,or do they use rates instead.I think they will use rates and not remove the liquidity so starting the cycle with a much higher monetary base.They are going to say theres the inflation,let the market share it out.

[Noallegiance]

31 minutes ago, DurhamBorn said:

Only slowing its purchases remember though,the question is do they remove any liquidity they printed,or do they use rates instead.I think they will use rates and not remove the liquidity so starting the cycle with a much higher monetary base.They are going to say theres the inflation,let the market share it out.

How does the method of tapering affect the potency of a potential market correction?

[Noallegiance]

Start your engines...

[Harley]

9 hours ago, DurhamBorn said:

......People get way way too interested in the smallest detail when its the big swoop that counts.Getting a roadmap sorted out means you dont waste your time on all the noise.The crazy thing is as well its people who are way clever who make the mistake the most.I spent 5 minutes per balance sheet when i was buying last March.If some had gone under,well tough.I didnt have time.More interested in how the Fed would react and map that than worry if BT had too big a pension deficit,or if some Swedish schoolgirl said oil was finished.Truth is it doesnt matter what the managers do compared to if they can put prices up by 4% a year.

Erroneous precision.  The art is knowing how far to go, regardless of the apparent potential.  You see that mindset everywhere, not just in finance. Trying to dissect everything because you apparently can, meanwhile killing that Leibensteinesque X factor. 

5 mins on a balance sheet is generous!  That's tops for all the financials for me!  I know what I care about, find it and make a decision there without over thinking it.  Nice and boring is great.  Of course I initially had to go deep to define my "simple" approach!

Diverged today as I saw a massive increase in the working cash flow tied up with accounts receivable for a Chinese water company.  Downloaded the accounts, looked deep into the notes, something about land rights and the directors view.

Waste of time.  If it ain't clear, move on.

[JMD]

5 hours ago, Harley said:

@Frank Hovismade a very insightful post on another thread about car usage, pointing out that the authorities here and in the US have done little to prepare the infrastructure for the massive implications of increased electric vehicles, etc.  Something I have also seen mentioned on several podcasts (i.e. scratching of heads and a feeling it's almost impossible to deliver in California).  Then the penny drops - maybe they don't intend for us all to have cars, just "them".  Maybe that's how to read these things.  They're thinking of a lot more changes!  Think it best I keep my SGC, etc!

But realistically we have 20+ years to make the transition to EVs and even then there might be combination of hydrogen and electric cars. First adopters will be those with driveways to enable easy home charging, but I suspect the rest of us will always have to make do with visiting centralised fuel stations. I think shared car ownership will become big if/when/eventually self driving cars become a reality, but in terms of control I think cbdc's and smart meters will provide ample scope for government to 'nudge'(?!) our behaviours along the way. This scatter-gun approach would be seen as a win-win by government because it enables them to achieve their policies without upsetting the voters too much, they can after argue that they are being flexible and offering people options.

[JMD]

6 hours ago, feed said:

I've been saying this for a couple of years and i expect i'll still be saying it for a while yet.

Mass private ownership of cars in the West is done

All western autos want EV's and cars as a service.  
 

You could be correct, but I think the way that would be achieved will take far longer than many think, similar to the self driving car becoming the dominant technology, which I think is at least 10 years away from happening. 

[Harley]

4 hours ago, JMD said:

But realistically we have 20+ years to make the transition to EVs and even then there might be combination of hydrogen and electric cars. First adopters will be those with driveways to enable easy home charging, but I suspect the rest of us will always have to make do with visiting centralised fuel stations. I think shared car ownership will become big if/when/eventually self driving cars become a reality, but in terms of control I think cbdc's and smart meters will provide ample scope for government to 'nudge'(?!) our behaviours along the way. This scatter-gun approach would be seen as a win-win by government because it enables them to achieve their policies without upsetting the voters too much, they can after argue that they are being flexible and offering people options.

Most people won't be able to afford anything!  Maybe rent for special occasions but that'll be it.

[CVG]

https://www.bbc.co.uk/news/uk-wales-56920734

Gold £10,000 coin weighing 22lb produced at Royal Mint in Llantrisant

Worth around £450K spot?

"The mint said the price of the £10,000 denomination gold version was available on application."

Probaby about £600K then. Who will apply to find out?

 

[planit]

I know this is a Macro thread and Tesla is as far as you can get from where we are but I want to comment, if you don't want to read then **c* off and skip this post.

This is not an indepth analysis but a couple of points

a) Companies that do things like this to hide information are trash and desparate:

Tesla and the obscure earnings JPEG

 

b) Profit includes $518m from 'regulatory credits'. These credits are paid by other car companies because they don't sell enough electric vehicles. This is completely crazy, Tesla is being funded by it's competitors. This is unstainable (as they can't grow with ggrowth beyond a certain value) and is likely to end when the other manufacturers start producing their own cars. 

c) So Tesla booked a $438m profit for Q1 2021. This includes the $101m from Bitcoin speculation and the $518m from regulatory credits. If you remove both of these Tesla actually made a loss of $181m for the quarter.

d) Growth obstacles. There are a plethora of potential problems that Tesla might come up against in the next 5 years including recessions, lack of resources like Lithium, supply chain problems like the chips for other car companies, bad sales, competition etc. Investors have priced in 40% growth to infinity so something is likely to fail.

e) Musk. Even though he is clearly capable fo changing and inventing entire markets across the globe he is also a bit unpredictable. Also he might get ill. Tesla future is pinned on one man and this is never a good idea. He also seemed to go through a phase where he looked to be eating too many burgers and overworking, hopefully he is looking after himself now.

I don't expect Tesla to fall from grace immediately and their investers are somewhere between religious and delusional but most of the above will start to drag on the share price over the next couple of years and the JPG shows they are manipulating expectations. The Bitcoin purchase might also be done to continue the hype for longer and allow drawdown of profits as and when needed to massage figures and earnings misses (at huge risk).

 

 

[Barnsey]

10 hours ago, DurhamBorn said:

Only slowing its purchases remember though,the question is do they remove any liquidity they printed,or do they use rates instead.I think they will use rates and not remove the liquidity so starting the cycle with a much higher monetary base.They are going to say theres the inflation,let the market share it out.

 

[feed]

Royal Dutch Shell plc announced on Thursday that income attributable to shareholders stood at $5.66 billion in the first quarter of fiscal 2021, significantly up from a loss of $24 million from the corresponding time span a year ago.

Diluted earnings per share totaled $0.72 in the first trimester, while total revenue and other income declined 3% on a yearly basis to land at $59.1 billion in the three-month period ending with March 31, 2021.

"Our integrated business model is ideally positioned to benefit from recovering demand. As previously announced, the first quarter 2021 dividend per share has been increased by around 4%, in line with our progressive dividend policy. We have reduced net debt by more than $4 billion this quarter, progressing towards the $65 billion milestone to increase shareholder distributions," CEO Ben van Beurden noted.

[feed]

8 hours ago, JMD said:

You could be correct, but I think the way that would be achieved will take far longer than many think, similar to the self driving car becoming the dominant technology, which I think is at least 10 years away from happening. 

The move towards it is breath-taking, it’s going to take many people by surprise how quickly it happens.  EV’s by 2030. 

Semi autonomous in passenger vehicles will be here sooner than you think.  But people really need to be thinking like more pilots in commercial aircraft.  Take off and landing.  The tech will control speed, gear change, breaking, communication etc to ensure max efficiency .  But there will be a pilot in passenger vehicles.

Fright may be different, but they’ll be more like trains on roads.  
 

[DurhamBorn]

31 minutes ago, Barnsey said:

 

I think we will be close to double digit here in the UK though i dont trust the way we measure to pick it up.Lots of items in the shops are going up 20% in one jump.Iv been stocking up on tins etc with 2 years supply 

[CVG]

8 minutes ago, DurhamBorn said:

I think we will be close to double digit here in the UK though i dont trust the way we measure to pick it up.Lots of items in the shops are going up 20% in one jump.Iv been stocking up on tins etc with 2 years supply 

I made the mistake of buying metal racking from B&Q. It buckled very quickly after only 60 cans of beans (plus 150+ assorted others)

[DoINeedOne]

54 minutes ago, planit said:

I know this is a Macro thread and Tesla is as far as you can get from where we are but I want to comment, if you don't want to read then **c* off and skip this post.

This is not an indepth analysis but a couple of points

a) Companies that do things like this to hide information are trash and desparate:

Tesla and the obscure earnings JPEG

I saw this yesterday and quite shocked they thought they would get away with it be a larger company thats followed by many, then i wondered do any other companies do this shit probably

 

[DurhamBorn]

Repsol results today as well.Its amazing really how these oil companies can de-leverage as quick as they are even with the affects of covid etc.Repsol is interesting because its smaller and goes under the radar a lot in the west,yet its able to launch projects in places no other big oil could.I was really pleased to see they are going to expand one of their pumped storage hydro schemes.There is going to be a lot of negative priced electrons out there in years to come (one of the reasons BP want a huge hydrogen plant) and pumped storage will become a fantastic business.It was one of the main reasons i bought Drax.

https://www.repsol.com/en/press-room/press-releases/2021/imaz-presents-aguayo-pumped-storage-expansion-project-to-cantabrian-regional-president.cshtml

If we go back to last March ,we were buying knowing what the roadmap was and that big cash flow was ahead for these companies and they would be able to build huge renewable companies off it.

One of the great lessons il remember from this period is that woke idiot in charge of NEST pensions selling all their BP etc right at the latest bottom.Over 50% up now.Thats low paid workers savings.

[Popuplights]

33 minutes ago, CVG said:

I made the mistake of buying metal racking from B&Q. It buckled very quickly after only 60 cans of beans (plus 150+ assorted others)

Maybe the tinfoil was the straw that broke the camel's back...

[planit]

55 minutes ago, Barnsey said:

 

The spike I am not interested in, it's what happens to that interesting little hook on the end.

I wanted to do a graph and predict the over/under reaction of the markets but I see it like this

Everyone knows that inflation will kick up with the figures in early May, gold moved in advance of this

Once those numbers kick in we might see a relief from the markets (gold down a bit?)

Then everyone starts looking to the next upleg but probably not much movement until slight adjustment as the figures come in.

The background to this will probably be increase in confidence which might move everything higher (DH's rally), India Covid is hopefully peaking at the moment and since it went up so quickly it might fall much faster than everyone expects at the moment.

Then is the interesting bit, there will be a game of brinkmanship on whether inflation will fall or not. I expect everyone to panic before the figures come out so there could be a really decent move up in gold at some point which might also cause a big drop in the overpriced tech stocks.

By the time figures come out, worst inflation case would already have been priced in so there will be a relief move too.

 

I suppose the main thing to highlight in this post is the large swings in sentiment. Anyone investing needs to not get caught up in this. If I think "everyone is going to be calling a crash next week due to X", then I am not surprised when it happens and I hope I will be less emotionally trigger happy on decisions.

 

[Majorpain]

Timber and steel shortages set to intensify | Construction Enquirer News

[AWW]

9 minutes ago, planit said:

I suppose the main thing to highlight in this post is the large swings in sentiment. Anyone investing needs to not get caught up in this. If I think "everyone is going to be calling a crash next week due to X", then I am not surprised when it happens and I hope I will be less emotionally trigger happy on decisions.

Exactly this. It's difficult, but short term sentiment swings should absolutely be ignored. Expect frequent 5% pullbacks in portfolio value. I've had a few psychological wobbles over the past six months (who hasn't in the current market?) but managed to ignore the gut and hold on to see portfolio make another ATH a few weeks later.

Dare I say it, there's something to the "HODL" meme.