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

[planit]

@DurhamBorn @Knickerless Turgid

Its' completely irresponsible, fine for woke middle class in rich countries (actually it won't be) but the only reason that the world can support 7bn people is because of oil.

Greta* should be made to stand up and pick the numbers in each country to kill off to get to a target of 2bn (number picked out of thin air, just like her assumptions on everything).

 

I still like Putins comments on her.

*I don't want to single out a stressed out teenager but her family decided to turn her into a pin-up representation of green.

 

[Animal Spirits]

51 minutes ago, planit said:

@Noallegiance

Many thanks for that, it is great to see a complete set of research that doesn't include [what I see as] impossible targets of EV use and peak oil so close into the future. 

 

99.999% of the world are not Hollywood actors willing to buy an EV even if running costs are higher (because oil is at $20).

The transition to electric requires high oil prices or it won't even happen. It's why China is still building coal plants, they are cheap units of electricity and supply can be guaranteed as it is local.

 

Things have moved very fast over the last week if you take into account the oil price increase, confidence in US/China economy and Saudi Prince's comments, look at the difference between the standard and bold type from article 

If MBS is even half correct, things will reach a head pretty quickly and this doesnt' even take into account what @Cattle Prod said about Aramco potentially declining.

 

BP and Shell doing terribly, if anyone has a way for me to read what this negative says 

FT: Oil stocks: liquidity-fuelled rally will not last - PREMIUM

then I would be grateful, my student subscription doesn't cover it 

There's a couple of options you have to read some paywalled articles:

• Clear your browser cookies and search the title of the article using a search engine.
• Install the Bypass Paywalls browser extension.

[Lightly Toasted]

1 hour ago, Animal Spirits said:

There's a couple of options you have to read some paywalled articles:

• Clear your browser cookies and search the title of the article using a search engine.
• Install the Bypass Paywalls browser extension.

Another way is to use an archive site like archive.is

search by pasting the URL into the "I want to search the archive for saved snapshots box".

If someone else has already archived it then you can read it immediately. Otherwise, ask the site to archive it (can take a few minutes if it's busy), then you can read it.

I generally use Bypass Paywalls for convenience, then use archive.is to create an easily-readable copy if I want to post it here.

[NogintheNog]

Channel 4 news now on from Whitelee Wind Farm in Scotland. Director of Scottish Power saying cheapest electricity in the UK being produced there, meanwhile behind the guests being interviewed the Turbines are barely moving....

Then from Aberdeen a guy from the oil industry saying the last 7-8 years have been brutal and there has been no investment in the sector.....

They are going to build a Hydrogen production plant near Whitelee apparently, gonna need to put up a lot more windmills!

[leonardratso]

aye, scottish wind turbine technology to power you 30 million cars;

[leonardratso]

even windy knows its hokum, see he has his trusty push trike there.

[Barnsey]

16 hours ago, Noallegiance said:

I'm not quite sure what to do with this question so I'll leave it!

Would we be seeing headlines like this this without furlough? All about inflating the debt away. Furlough, stimmy checks etc. Next, business loan forgiveness?

[Popuplights]

16 hours ago, leonardratso said:

even windy knows its hokum, see he has his trusty push trike there.

And his flagon of cider!!

[Barnsey]

Mighty Minerd speaks...

 

[Barnsey]

4 hours ago, Cattle Prod said:

Here's a demographic driver I hadn't considered, and I think very inflationary:

https://www.bloomberg.com/news/articles/2021-04-30/more-americans-are-considering-retirement-because-of-covid

So less workers means higher wages, and more cash chasing fewer goods and services. I think we here can relate to the sentiment of the article, personally I am where they are: I don't want to work any more and to spend time pursuing my passions. I'm in my 40s, so it may take a few years yet, but if I was in my early 50s I wouldn't be going back to the office either. I wonder how many will opt out? This is happening de facto in early careers too by immigrants 'retiriing' back to their home countries and not coming back. If the stimulus checks and generous unemployment benefit keep coming in the US, there will be a whole generation of young workers retired, too. 

As the article says, Powell mentioned it in his press conference, which is probably important.

Thinking outside the box then, perhaps a short but sharp deflationary event would halt this dynamic? Starting to see many consequences of generous support, albeit temporary of course. Will be hard for employers to unwind imminent pay increases once stimulus runs dry(ISH)? My expectations for the long term are also of much higher wage inflation ahead despite the deflationary counter effects of an older population. Tricky one.

In other news, highest since 1983!!!

 

[wherebee]

couldn't find the oil and gas thread.  My holdings in this Aussie oil and gas producer took a hammering on friday, but the overall message from the CEO was that they have a strong balance sheet and expect much higher gas prices in time.  I might top up some more, as I think if production is down 5% but sales up 14%, that's a win any day of the week.  They also have a lot of exploration going on (and many australia states stop production right now because of 'greenies', but that will change and these guys are at the table).

MORE than $900m was wiped from Beach Energy’s market value on Friday after the South Australian oil and gas producer downgraded full-year production expectations and predicted longer-term challenges.

Quarterly production to the end of March came in at 5.9m barrels of oil equivalent (MMboe) – a 5 per cent reduction on the previous quarter – while sales revenue increased 14 per cent to $393m.

[Sugarlips]

Anyone with a spare hour or 2 this weekend could benefit from listening to this. Yes there is lots of crypto discussion but I learnt a lot, not least that the future is bright albeit timing the entry/exit price remains one of the most aspects to investing in the new digital world.

[Lightscribe]

19 hours ago, Cattle Prod said:

Here's a demographic driver I hadn't considered, and I think very inflationary:

https://www.bloomberg.com/news/articles/2021-04-30/more-americans-are-considering-retirement-because-of-covid

So less workers means higher wages, and more cash chasing fewer goods and services. I think we here can relate to the sentiment of the article, personally I am where they are: I don't want to work any more and to spend time pursuing my passions. I'm in my 40s, so it may take a few years yet, but if I was in my early 50s I wouldn't be going back to the office either. I wonder how many will opt out? This is happening de facto in early careers too by immigrants 'retiriing' back to their home countries and not coming back. If the stimulus checks and generous unemployment benefit keep coming in the US, there will be a whole generation of young workers retired, too. 

As the article says, Powell mentioned it in his press conference, which is probably important.

I don’t doubt that this will force sectors into increasingly investing in automation and AI at a rapid clip, especially once UBI is implemented longer term.

However we’re all just ratcheting up to the peak top of the rollercoaster at the moment and everyone’s just enjoying the view.

The devastation of the post pandemic landscape is yet to hit. The majority of the masses financial set ups won’t fare well over the next stage and they’ll soon start changing plans. Companies will cut costs and outsource remote working abroad etc, costs of everything will rise, cheap debt will become harder to source.

All those that have swanned off to live their idealistic dreams in the countryside patting themselves on the back for saving on SDLT, may soon reconsider. Then there’s those that think they’ll be retiring very soon who’s  pensions are heavily invested in passive FAANG funds and bonds.

A bit of hardship can do amazing things to change the landscape rapidly and realign perspective.

[DurhamBorn]

For you Ferrari lovers the Caputo Blue 00 is on Amazon at the moment for £21.97 for 10 and i think this lot has 11 months date on it so a very decent price,not dispatched for a couple of weeks so likely fresh batch arriving.Iv ordered.Im trying a 36 hour cold proof on my dough for tonight.7 of us and my aim is to feed everyone for under a tenner ,thats everyone not each  ,Lidls pepperoni is only 89p and very decent and freezes well,i find i can get 4 pizzas from one without scrimping,Home bargains also now sell cooked bacon bits for 79p and they make an easy and lovely topping and also mixed in with the pasta bake.

The Tipo 00 flour seems expensive for a tight wad like me,but the difference at high temps is huge,its simply the best and with fresh yeast still works out only 60p a base for flour/yeast and about £1.40 a pizza all in with cheese,sauce topping.

https://www.amazon.co.uk/Caputo-Flour-Blu-Type-Kg/dp/B0173KM9EY/ref=bmx_3?pd_rd_w=2Puw9&pf_rd_p=6398e171-4f42-4318-a493-6aac0e34c3e5&pf_rd_r=0KPYNDCGV2KY7BGPWEYX&pd_rd_r=81fd551a-4327-4440-be87-5701a3f99274&pd_rd_wg=VQOp0&pd_rd_i=B0173KM9EY&psc=1

My fresh yeast is still performing great after being frozen in 20g blocks for a year,i find 20g to 25g does the 1kg of flour perfect.

https://www.ebay.co.uk/itm/313190219450?hash=item48eb977eba:g:Y4QAAOSwLc9fPq47

The kilo can be had for £9.65 

https://www.ebay.co.uk/itm/381172919674?epid=1354078083&hash=item58bfad2d7a:g:OFsAAOSw-7RVCuv8

Remember to cut into 25g blocks as soon as you get it and freeze,i just wrap each bit in some clingfilm.

 

[NogintheNog]

5 hours ago, Sugarlips said:

Anyone with a spare hour or 2 this weekend could benefit from listening to this. Yes there is lots of crypto discussion but I learnt a lot, not least that the future is bright albeit timing the entry/exit price remains one of the most aspects to investing in the new digital world.

Really interesting when he talks about the 'assets' of the world correlating with the supply of printed money since 2008, but CPI barely budging! Wages being hollowed out (think all of us on here can see that happening).

And the point that it's not just the US Fed doing the printing, milkshake theory and all that. Gold not performing as the monetary store of value that it should in terms of the debasement by all the CB's actions??? Compared of course to, you guessed it, Bitcoin.

Meanwhile the debasement continues.....

http://fingfx.thomsonreuters.com/gfx/rngs/GLOBAL-CENTRALBANKS/010041ZQ4B7/index.html

It's hard to get your head around these 5 CB's going from under $5 trillion in August 2008, to over $20 trillion + now. 4-fold in 13 years!!!!

 

[reformed nice guy]

Here some local data about inflationary pressures.

Was out with a friend that does "agricultural services" - digging ditches, putting up sheds, topping etc

Parts for JCBs have got a 12 week lead as lots are made in India then shipping to Uttoxeter for the "Made in GB" badge.

The best big tyres for machinary come from America. Suppliers are saying its a 10 week wait (maybe more), pre-order basis with no guarantee that the current price will be the same price in 10 weeks.

Good prices just now for lambs, steers so lots of farmers getting work done as they hate paying tax. More money in for them goes to more money out on sheds etc. They are grumping at the price for concrete, wood etc but swallowing it

Selling price is up but feed price, fertiliser price etc all up as well. Most have last years stock to use but they are smarting on buying in new supplies.

Lots of yards are selling shitty vans that dont run for crazy money to townies because the townies need to follow rules on number of people per van etc.

Every bit of wood that can be cut down is being cut down. Big bottle neck on getting it felled. Also a problem that companies that fell are often the ones planting new trees. Plenty of government money just now doing planting versus private money felling every tree possible - a funny paradox.

[Bobthebuilder]

2 hours ago, DurhamBorn said:

Im trying a 36 hour cold proof on my dough for tonight.

If you are doing that in the fridge it works a treat. It's what all the top pizza places do, more dough for your dough. Top stuff.

I'm surprised you haven't got into sourdough yet, no yeast to buy so even cheaper.

Mmmmh pizza. But not just pizza, that dough will make anything bread based, loafs, rolls, etc.

[DurhamBorn]

https://www.telegraph.co.uk/business/2021/05/01/perilously-close-another-inflationary-age-no-one-cares/

Interesting that the article uses our term "disinflationary" for the past cycle.

More and more are moving into our roadmap,but dont offer any advice to their readers on where to position.I still think the cycle risk is bonds,after maybe one last jump up in a BK

[Loki]

29 minutes ago, DurhamBorn said:

https://www.telegraph.co.uk/business/2021/05/01/perilously-close-another-inflationary-age-no-one-cares/

Interesting that the article uses our term "disinflationary" for the past cycle.

More and more are moving into our roadmap,but dont offer any advice to their readers on where to position.I still think the cycle risk is bonds,after maybe one last jump up in a BK

 

Quote

The economy is also less energy intensive, significantly reducing the inflationary impact of any repeat of the oil price spikes of those decades.

 

No mention of why it's less energy intensive, or what the disinflation could mean for energy use

 

Even I know that (I think!)

 

[JMD]

20 hours ago, Sugarlips said:

Anyone with a spare hour or 2 this weekend could benefit from listening to this. Yes there is lots of crypto discussion but I learnt a lot, not least that the future is bright albeit timing the entry/exit price remains one of the most aspects to investing in the new digital world.

A clear message from Raul Pal about how ramped he is about crypto, delivered in his own distinctive narrative style. I broadly agree with his analysis of what form and function future money, assets and institutions will look like. Whether and how we can make investment returns from crypto is a different question. Declaration, I own some crypto but view the sector currently as being more speculation and/or hedge, than investment. However i shall endeavour to learn more about the sector in order to help position/allocate a % of my portfolio, which I will then be prepared to hold for next few years and watch what unfolds.                                                                                                                                                                                                     The following is I believe on thread but i accept is slightly off the beaten track. It's just that the events of the past year have forced me to try to think more deeply/tangentially about things.                                                            I know most of us here rail against post modernist thinking and politics (relativism, identity politics etc) which now infects all of today's society. Until recently I thought that all this crazy thinking was a blip and sanity would resume in order that the West could continue with its rationalist enlightenment journey. However I now believe we have several decades ahead of more similar craziness until things get put back on track. A depressing thought but i can't see any sizemic social shifts rotating us back in the short term.... Anyway just my perspective on the 'v. super-wide' macro view. And I mention it because I found some of Raul Pal's thesis, as related to the crypto/tech space and his gaming comments in particular, as sort of road-mapping us toward living in a highly-virtual almost anti-reality lifestyle - which for me, chimes depressingly with more post-modern mantra... But to be clear, I don't think crypto itself is a negative (it's just a component part of the Fourth Turning cycle) - so for example, and for anyone who cares to comment - how about NFTs providing a potential solution for the 'tragedy of the commons' dilemma?     (if you have read this far, please excuse my ramblings)

[sancho panza]

On 30/04/2021 at 16:50, Cattle Prod said:

Here's a demographic driver I hadn't considered, and I think very inflationary:

https://www.bloomberg.com/news/articles/2021-04-30/more-americans-are-considering-retirement-because-of-covid

So less workers means higher wages, and more cash chasing fewer goods and services. I think we here can relate to the sentiment of the article, personally I am where they are: I don't want to work any more and to spend time pursuing my passions. I'm in my 40s, so it may take a few years yet, but if I was in my early 50s I wouldn't be going back to the office either. I wonder how many will opt out? This is happening de facto in early careers too by immigrants 'retiriing' back to their home countries and not coming back. If the stimulus checks and generous unemployment benefit keep coming in the US, there will be a whole generation of young workers retired, too. 

As the article says, Powell mentioned it in his press conference, which is probably important.

Interesting to see that a third of physicians are over 60.

It's one thing I've ntoiced with this 'no jab,no jab' policy they were looking at trying.They tired it with care home workers first to see how they got on before taking on the moneyed,close to retirement doctors.I don't think it's going to happen.In London 50% of care home workers haven't bothered-good luck replacing them in ahurry.

It's a sign,as it were of how tight the labour market is in some areas.I suspect care home workers wages might be about to get above minimum wage-and not before time too.

[Harley]

On 01/05/2021 at 05:58, Sugarlips said:

Anyone with a spare hour or 2 this weekend could benefit from listening to this. Yes there is lots of crypto discussion but I learnt a lot, not least that the future is bright albeit timing the entry/exit price remains one of the most aspects to investing in the new digital world.

Glad he did this video.  It was needed.  Thanks for sharing.  Nice to see someone talking about my burning building similie of old and talking about value.  That guy's got brains, he could go far!   Not that his picture of the outside may be 100% but must be close.  But the burning building, oh yea!

[sancho panza]

On 30/04/2021 at 21:14, Barnsey said:

Thinking outside the box then, perhaps a short but sharp deflationary event would halt this dynamic? Starting to see many consequences of generous support, albeit temporary of course. Will be hard for employers to unwind imminent pay increases once stimulus runs dry(ISH)? My expectations for the long term are also of much higher wage inflation ahead despite the deflationary counter effects of an older population. Tricky one.

In other news, highest since 1983!!!

 

I think a lot of 401k retirmenet accounts in the US have been flattered by the performance of the FAANG stocks as most will be tracking S&P500 performance.That new found retirement security could be illusory unless you can find a way-as this your average basement dweller has done-to transfer wealth into value stocks that are bringing income.Reality is that you can't jsut buy UST's and retire here.$1million in 30 yr's brings you,what $23,000 per annum.

On 30/04/2021 at 21:21, Cattle Prod said:

Super interview here folks from Michael Kao on RealVision. It's subscription only but you can do a trial for $1. Ok, he's got a bull thesis and it may be my selection bias, but it's the best analysis I've seen in a while, Art Berman seems to have lost the plot since Covid stuck. Lots of nuggets in there. US shale, long cycle production starved of capital, OPEC, backwardation, problems producers have hedging, I've said a lot of it here but if you want to hear a professional managing money saying it rather than a randomer off the internet, check it out:

https://www.realvision.com/shows/the-expert-view/videos/is-crude-oil-the-best-inflation-hedge-and-other-oil-questions

FWIW he mentions the contango to backwardation flip @sancho panza, and studied it back 30 years. Significantly higher prices a year later in all but 4 cases (for specfic reasons). I cant remember if I shared it here, but my base road map is off backwardation flips, which happened on 23rd November.

Teaser (though the editor didn't actually catch the best bits):

Thanks for the heads up on this CP,I'll do the one dollar option tonight if I get time amongst my domestic duties.Ref your other post,I remember drawing historical parameters for pre recesion bounces in oil prices where oil ran up from pre recession low were roughly 200% in 1990,270% in 2000,200% in 2008.

Giving us histoical precedent for a Brent price at peak of $100.If we use a little lattitude due to the man made nature of the covid panic,then the peak in this run could be higher.

I think the bull case is strong here so I'm looking forward to this vid.I've been active last week in the options market but I'll psoot the detail in @MvR options thread.

ALso,I think we need to look at what copper's doing as it often runs ahead of oil by a few months.That's looking higher.

 

[sancho panza]

21 hours ago, NogintheNog said:

Really interesting when he talks about the 'assets' of the world correlating with the supply of printed money since 2008, but CPI barely budging! Wages being hollowed out (think all of us on here can see that happening).

And the point that it's not just the US Fed doing the printing, milkshake theory and all that. Gold not performing as the monetary store of value that it should in terms of the debasement by all the CB's actions??? Compared of course to, you guessed it, Bitcoin.

Meanwhile the debasement continues.....

http://fingfx.thomsonreuters.com/gfx/rngs/GLOBAL-CENTRALBANKS/010041ZQ4B7/index.html

It's hard to get your head around these 5 CB's going from under $5 trillion in August 2008, to over $20 trillion + now. 4-fold in 13 years!!!!

 

Thats the key thing with current infaltion measures is that they've completely missed the huge rise in cost of buying a home or a dollar of pension income.

shocking in many ways,scale/act of omission etc.

Huge problem will occur when prices rise and people find their retirement income isn't what they've expected.  @DurhamBorn has been saying for years thats these IFA run 60/40 epsnion set ups are going to get bruned and looking at this picture you can see why

[planit]

I feel all low paid jobs are going to see a shortage, this had been hidden largely by Covid but within 6 months the hospitality sector will be on overdrive and there are not enough immigrants to do the work. There are also problems with the seasonal workers, buiilding trade and you mention the care homes. 

Brexit has been forgotten due to Covid but all the above will be brought back into focus at around the same time.

 

It is the same theme again, Covid had made statistical analysis impossible hiding the trends and everyone has been looking the other way so there has not even been any debate on these problems.

Over the next 2 years there will be issue after issue with "no one saw that coming" comments and on here we will be hitting our heads against the wall wondering why everyone is so stupid.

 

 

There is a good podcast with Jordon Peterson and Bjorn Lomberg

 Is Everything Better Than We Think?

If you have some time free, great discussion on the misallocation of effort/money with regards to the worlds problems. The money chucked at climate change is 3 times more than all other problems added together including disease/hunger/etc.

Also if just $150bn was thrown at Tuberculosis it could be eradicated (and that is probably 1% of the money chucked at Covid worldwide this year). TB kills as many people as Covid has every year!