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

[Castlevania]

8 minutes ago, Harley said:

US too?  I tend to buy the Canadians on the US markets as they have higher volumes.  Also because all of the dividend on US stocks is free of WHT in a SIPP.  Is this the same for Canadian stocks?  Regardless, not sure yet if this works for the listed Canadian stocks or just the US stocks as WHT depends on the domicile of the company.  Anyone know?

Domicile for WHT. The shares traded are the same regardless of exchange.

[Hancock]

 

https://www.telegraph.co.uk/business/2021/05/18/net-zero-means-no-new-oil-gas-fields-warns-iea/

Net zero means no new oil and gas fields, warns IEA

IEA calls for abrupt halt to fossil fuel era as it warns demand must fall by 75pc to attain climate goals

ByRachel Millard18 May 2021 • 6:00am

The age of oil and gas exploration is already over and no new fields will need to be developed if the world succeeds in bringing global warming under control, the International Energy Agency has said.

In a landmark report on the path to net zero carbon emissions by 2050, the organisation (IEA) says that oil demand will need to drop by 75pc over the next three decades - rendering the need to exploit new reserves obsolete. No further coal mines will be needed either.

Its forecasts suggest that the age of fossil fuels is coming to an abrupt end, and could raise fresh fears that investors have ploughed billions of pounds into worthless oil and gas projects.

The IEA - whose 30 member states include the UK, US, Germany and France but not China, the biggest carbon emitter - also calls for a worldwide ban on new petrol and diesel cars from 2035, and says that a dramatic increase in solar power will be needed to turbocharge the green revolution.

Panels equal in size to the world's largest solar park must be added every day as part of a colossal overhaul of power sources, it says in the report released today.

It expects natural gas use to drop 50pc as batteries replace petrol and diesel in cars, and hydrogen and electric pumps take a bigger role in home heating.

Gas and renewables have largely replaced coal

Bar chart with 6 data series.

The IEA report says: “Fossil fuel use falls drastically in the net-zero emissions scenario by 2050 and no new oil and natural gas fields are required beyond those already approved for development. 

“No new coal mines or mine extensions are required. Low-emission fuels - biogases, hydrogen, and hydrogen-based fuels - see rapid growth.”

The global energy system is already undergoing a huge overhaul, with money pouring into renewables and oil and gas behemoths such as BP and Shell pledging to slash their carbon emissions.

But the stark vision of an end to the development of new oil and gas fields is likely to send tremors through the industry, and bolster calls from activists for projects to be ditched now. The IEA said investment in existing projects will continue to be needed.

In 2019, then-Bank of England Governor Mark Carney said that millions of savers' pension funds could lose their value because of the switch away from oil and gas development.

The IEA report has been published six months ahead of the United Nations' Cop26 international climate change conference, which will be hosted in Glasgow by Prime Minister Boris Johnson.

Countries from around the world will meet to try and build on the agreements set out at Cop21 in Paris in 2015 to limit global warming to well below 2C, and preferably to 1.5C. 

The UK two years ago became the first major economy to pledge to slash greenhouse gas emissions to net zero by 2050. 

The IEA said several other countries have since followed suit, with net zero pledges now covering around 70pc of global GDP and CO2 emissions.  

But executive director Dr Fatih Birol warned global greenhouse gas emissions continued to grow and  said: “This gap between rhetoric and action needs to close if we are to have a fighting  chance of reaching net zero by 2050 and limiting the rise in global temperatures to 1.5 degrees.  

“Doing so requires nothing short of a total transformation of the energy systems that underpin our economies. We are in a critical year at the start of a critical decade for these efforts.”

The UK is already ahead on some of the IEA’s calls, with its own ban on the sales of new petrol and diesel cars bought forward to 2030. It has also set out plans to quadruple the amount of offshore wind.

However, ministers have so far stopped short of naming a date for when oil and gas exploration licences in the North Sea will no longer be allowed. 

Instead, new licencing rounds will be subject to a ‘climate compatibility checklist’ and will not go ahead if they are deemed to be incompatible with the UK’s net zero goals. 

The IEA said it is mindful that any overhaul of the energy system needs to be fair and that developing economies must get any help they need to help provide energy in a sustainable way. 

Greenpeace said the report makes clear that there is no need or justification for new oil and gas wells in the North Sea. 

Charlie Kronick, senior climate adviser for Greenpeace UK, added: “Yet the UK government undermines any claims to climate leadership by planning to press ahead with more oil and gas extraction. 

“To deliver on this government’s own climate rhetoric, and what the IEA now demands, Business Secretary Kwasi Kwarteng must rule out new oil and gas licences.”

[wherebee]

8 minutes ago, Hancock said:

 

https://www.telegraph.co.uk/business/2021/05/18/net-zero-means-no-new-oil-gas-fields-warns-iea/

Net zero means no new oil and gas fields, warns IEA

IEA calls for abrupt halt to fossil fuel era as it warns demand must fall by 75pc to attain climate goals

ByRachel Millard18 May 2021 • 6:00am

The age of oil and gas exploration is already over and no new fields will need to be developed if the world succeeds in bringing global warming under control, the International Energy Agency has said.

 

in other words - be prepared to freeze to death, plebs, whilst us elites enjoy garden heaters and open coal fires.

[Harley]

1 hour ago, CVG said:

.....

Anyone else got a BK target?

I'll sell down to x% per holding (two thirds of my max allocation per stock) when my amazing system tells me to!  A lot looks toppy though so I'm boogying by the door and focussed on portfolio allocations. 

[DurhamBorn]

1 hour ago, planit said:

Any VOD holders here got any comments, was a revenue decline expected and is this temporary?

I have been watching for a while and thought this might be a good entry point .

Dropped from 142 to 132.

 

Id buy any of the big telcos on weakness,if i didnt already own an allocation.The whole industry is at a turning point where investment falls as a proportion of sales as inflation kicks in.The likes of VOD will see revenue increase slightly later than the likes of BT and TEF because  the incumbents will put their regulated prices up first,then others will follow.

VOD had too many small parts,but they have mostly got shot of those now and should be much easier to manage going forward.They still have far too much debt of course,but it should fall by around 6% a year going forward.

Inflation is the key to the industry because it makes a massive difference when you can increase prices at 4%,with a fixed depreciation charge.

Telcos wont provide big capital gains quickly,but i see them as a solid part of a reflation portfolio.

 

[Majorpain]

59 minutes ago, Castlevania said:

It’s Tuesday. We all know what happens on a Tuesday.

 

Bullion banks gearing up for a completely natural multi million oz dumping smash....

[DurhamBorn]

1 hour ago, Loki said:

My SIPP punt into BTU has gone mental. My first double bagger i think

Making money from coal,you should be ashamed  ,gas and coal futures up in US.

[Castlevania]

1 hour ago, Loki said:

My SIPP punt into BTU has gone mental. My first double bagger i think

 

3 minutes ago, DurhamBorn said:

Making money from coal,you should be ashamed  ,gas and coal futures up in US.

 

[Loki]

HL app is as reliable as a politicians promise this morning

[Hancock]

14 minutes ago, wherebee said:

in other words - be prepared to freeze to death, plebs, whilst us elites enjoy garden heaters and open coal fires.

Go on Charles stick another "oik" on the fire, my feet are tepid.

 

[Harley]

38 minutes ago, Castlevania said:

Domicile for WHT. The shares traded are the same regardless of exchange.

Ta.  My real question was do we get the same nice WHT exemption for Canadian stocks (wherever listed) as US stocks - ie.  Is Canadian tax law the same as the US?

[DoINeedOne]

Vodafone Group Chairman bought 305,000 shares 

Aggregated price: GBP 1.350

[Harley]

13 hours ago, Boon said:

Interesting as I was thinking of adding some of those ETFs that Burry was on about.

Is there a guide to an optimal amount, for instance if you wanted to hedge £100k of equities?

Cazy times when I'm considering shorting bonds with a BK lurking due to concerns the old inverse correlations have broken down.

[nirvana]

33 minutes ago, Loki said:

HL app is as reliable as a politicians promise this morning

 

[Wheeler]

26 minutes ago, Harley said:

Ta.  My real question was do we get the same nice WHT exemption for Canadian stocks (wherever listed) as US stocks - ie.  Is Canadian tax law the same as the US?

I don't think so Harley. I couldn't find anything definitive but HL only do it for US domiciled companies according to their website, and based on my experience with Pan American Silver where I've received the same dividend per share for ISA, SIPP and taxable trading account holdings.

[Craig]

1 hour ago, Harley said:

Duh, I looked it up and was scratching my head - how does an AsiaPac ETF help?

Different PAXG, this is Paxos Gold, a gold-backed crypto stablecoin - https://www.paxos.com/paxgold/

[Harley]

2 hours ago, nirvana said:

in other news Dick Cheney has a new tie 

Liz Cheney: Biden Military Budget 'Too Low' Despite Being Highest Of All Time

 

FFS!  I heard she might run from the presidency.

[planit]

40 minutes ago, wherebee said:

in other words - be prepared to freeze to death, plebs, whilst us elites enjoy garden heaters and open coal fires.

And the amazing thing is the author is a pleb, they are rushing to buy tickets to their 'own death by 100 cuts' show.

 

 

There is also an FT article Beware the looming net zero car crash

I haven't read it all but you need to add together three things to see how low the stock market might get:

 

• Economic bad recession due to Covid plus other cyclical effects plus added tax and worry about future

 

• Companies being forced to fully accept the 'need' to be carbon neutral within a small timeframe which will substantially reduce profits (include feedback like energy costs rising, even a simple delivery might be doubled+ in cost due to the carbon footprint)

 

• Interest rates/inflation rising sustained - supply chain issues, smallish amount of deglobalisation, lack of productivity due to people not working, prices rising to be green ie green energy*. 

This stock market level could be really low and it will probably take down everything.  I guess DB would agree that the inflation commodities will recover, but slowly, their rise back out of the other stocks might not be perceptible over short time frames so everyone needs to be patient. It could just be that after a while these plays stop falling whereas the others keep going. Reinvested divis are important then.

 

* I have a problem with the current state of energy production. Green energy is counted twice. The government says X% of energy in the UK is green. Then energy suppliers sell 100% green energy so some people/companies can say that they are 100% green. The difference in green/non-green prices is not high enough for this to be anything other than a farce. It will be sorted out in time.

I also enjoy asking these customers how they get their power when there is no wind at night.

 

ps Glad Elon finally made the point about the Crypto energy use, current crypto is not compatible with ESG. If a systemically important multinational can be bought down by ESG then Crypto will be like a fly being swotted (although it will be more like a cockroach once it has fallen by the first 80% LOL). Something might rise from the ashes but I don't see a way of the value being transferred, Bitcoin will trend to zero as the replacement trends up. Also energy is energy and it is precious. The bollox about mining using green pisses me off as that is just taking green capacity off someone else who could use it to replace coal.

F**k I ended up on Bitcoin FFS - I am really sorry everyone so please don't reply to that point, erase it from memory.

[planit]

26 minutes ago, Cattle Prod said:

Update on US production:

.........

Short answer: Art Berman's production collapse this summer is being forestalled by them smashing down the DUCs. It may kick in at any point as the quality 'wall' is reached, wherever that is, but either way I think the message will reach the market this year that there are structural problems in shale supply. I haven't seen the above point on DUCs out there yet, but I'm sure it will be soon enough.

 

Thanks CP, this all fits in very nicely with the FT article from a while back, reposted here for convenience

 

US shale oil: can a leaner industry ever lure back investors?
 

Quote

Cash flow and earnings growth must be the new priorities, Ms Hollub says. “I believe that the watershed moment is here and our industry will, I don’t think, ever be the way we have been in the past.” Can the industry’s new pitch be trusted?

Some investors remain sceptical, remembering how past promises of capital discipline crumbled when oil prices rose. “Give an oilman a dollar and he’ll drill a well,” runs the old industry adage. In an era when environmental concerns are already deterring investment in fossil fuels, and long-term growth in oil demand is no longer assured, shale executives know they cannot risk breaking more promises.

“Why should investors trust it?” asks Matt Gallagher, who headed Parsley Energy, a shale producer acquired by larger operator Pioneer Natural Resources last year. “They shouldn’t.”

 

It's pretty simple, the better their earnings and financials, the more chance of getting funding which we already know is almost impossible for fossil fuel development. A 'black' finance market it probably developing at the moment for fossil fuels but these investors will be expecting big and certain returns.

I also doubt they are stupid enough to fall for this current play by the drillers so the decision will be taken on the outlook for oil and the history of losses on shale against the backdrop of Biden in office. (probably somewhere between no chance and fat chance).

If oil prices stay high they can only recycle profits to drill but I think the investors will want some money out whilst they can to make up for previous losses. Like suddenly winning on roulette at the end of a bad night in the casino.

 

[Harley]

On 17/05/2021 at 08:05, MvR said:

Funnily enough I've just been looking into this as I've got to the point I could consolidate various accounts into one and make use of portfolio margin rules to sell futures and index options. 

The plan, which may well change, is to use something like this as the core holding of a options selling account. The idea is to make better use of the cash that otherwise sits there as margin collateral.  

The stocks, bonds and gold portions are easy enough. I can't buy the ETFs directly due to KIDD nonsense, but I can sell an in-the-money put(s) just before expiry and have the ETF put to you that way instead.  Or I might create the deltas that are equivalent to the stock position with some short vol structure ( e.g. Jade lizards, short put spreads etc).

The trend following commodities could be CFDs or spread bets, or commodity futures. For a long term low maintenance portfolio you could time the trend with a simple 50/200 MA crossover or something similar.  There's also a timing model called "Duel Momentum" which appears to be another good way to time things.

The tricky one is the long vol obviously. In my case I'm looking into ways of constructing  something with 30-90 DTE SPX options, along the lines of this..

Or, given I trade so actively anyway, I may do something a bit more manually timed with VIX.. maybe naked puts funding long VIX call spreads?  The trick of course is to minimise hedging costs or ideally take in small profits from the hedge in case we don't get a crash/vol spike.

When I figure something out, share it here.

BTW I learned of a great site for back testing portfolio allocations/timing models etc. The free service is pretty good on it's own.  https://www.portfoliovisualizer.com

 

Ta.  As part of my research, this European guy's (based in Sweden?) approach to constructing the portfolio.  Probably a bit too much for me though.

https://driftwoodpalace.github.io/Dragon-Portfolio/

PS:  I really need to get into options given the previous need and now this and my recent look at writing options for income.  I have everything set up but need to swot up on the execution on the various platforms.  Maybe I can lean on you a bit on your options thread?

[Harley]

On 16/05/2021 at 22:05, Viceroy said:

This is a free report from Goehring & Rozencwajg

What, those two reprobates...

[Harley]

56 minutes ago, Wheeler said:

I don't think so Harley. I couldn't find anything definitive but HL only do it for US domiciled companies according to their website, and based on my experience with Pan American Silver where I've received the same dividend per share for ISA, SIPP and taxable trading account holdings.

Ta.  Then I'm gonna need a bigger divi Canada.  Assuming a reduced 15% WHT like the US, that makes a 3.53% target for me otherwise I'll be discriminating against the 0% Asians, etc.

[JMD]

3 hours ago, Loki said:

My SIPP punt into BTU has gone mental. My first double bagger i think

Congrats!!.. is that Peabody Energy the coal miner? I bought the likes of Whitehaven and Warrior Met and they have gone nowhere for me so far. Can i ask why you bought that one (others?), was it on the financials or sector knowledge?

[Loki]

Just now, JMD said:

Can i ask why you bought that one (others?), was it on the financials or sector knowledge?

Honestly?

Because i saw it tweeted along with Arch and saw my SIPP as free punt money😂😂😂

[Harley]

1 hour ago, Craig said:

Different PAXG, this is Paxos Gold, a gold-backed crypto stablecoin - https://www.paxos.com/paxgold/

Now you effing tell me.  What the eff am I'm going to do with a cupboard full of this stuff...