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

[JMD]

23 hours ago, Cattle Prod said:

Not going to happen, it's a fundamentally racist society in the truest sense. They believe the Han Chinese are above all other races. Their name for China is the Middle Kingdom, i.e. between heaven and the rest of us plebs. Us whites were called routinely called laowai (hairy monkeys), I supect other races will have a pretty hard time of it. Japan is similar in that they don't want immigration to help their demographics, and social cohesion is more important. Fair enough, but Japan still earns plenty of dollars, and didn't cover up a likely virus leak that destroyed word economies.

Chinese also believe they evolved from a different species of human. Interesting theory but the discovered bone genetics doesn't back them up, though they are very reticint to give West proper access to run scientific tests. It all goes back to the 'Peking'(Beijing?*) Man discovery in the 40's, but last couple decades have seen Chinese scientists really 'stretching the fossil science'.                                                                                      *Actually much of Europe never adopted the 1990's Chinese name changes, the UK did so eagerly (of course!), but interestingly Germany have resisted to this day. But the real interesting thing for me is that foreign countries, including China, don't reciprocate when referring to UK towns, etc. Just a small, inconsequential indicator perhaps?, of how different nations think/behave/engage (watch this space I guess!!).                                                                                                                             https://www.scientificamerican.com/article/how-china-is-rewriting-the-book-on-human-origins/#:~:text=Studies of Chinese populations show,such as Neanderthals and Denisovans.

[jamtomorrow]

Put this together with the small/modular concept being pushed by the Rolls consortium, might make 2030s interesting from an energy policy perspective. And if one or more of these technologies comes to maturity just as we're in the throes of the brewing energy crisis, I can see a *lot* of nuclear generating capacity getting commissioned in a short space of time by panicked governments.

https://www.world-nuclear-news.org/Articles/Pilot-Natrium-plant-to-be-built-in-Wyoming

Pilot Natrium plant to be built in Wyoming

Plans to construct a Natrium reactor demonstration project at a retiring coal plant in the US state of Wyoming were announced yesterday by TerraPower, PacifiCorp and Wyoming Governor Mark Gordon. The companies are evaluating several potential locations in the state for the plant, which will feature a 345 MWe sodium-cooled fast reactor combined with a molten salt energy storage system that can boost the system's output to 500 MWe for more than five-and-a-half hours when needed. They expect to announce the selected site by the end of 2021.

[JMD]

1 hour ago, jamtomorrow said:

Put this together with the small/modular concept being pushed by the Rolls consortium, might make 2030s interesting from an energy policy perspective. And if one or more of these technologies comes to maturity just as we're in the throes of the brewing energy crisis, I can see a *lot* of nuclear generating capacity getting commissioned in a short space of time by panicked governments.

https://www.world-nuclear-news.org/Articles/Pilot-Natrium-plant-to-be-built-in-Wyoming

Pilot Natrium plant to be built in Wyoming

Plans to construct a Natrium reactor demonstration project at a retiring coal plant in the US state of Wyoming were announced yesterday by TerraPower, PacifiCorp and Wyoming Governor Mark Gordon. The companies are evaluating several potential locations in the state for the plant, which will feature a 345 MWe sodium-cooled fast reactor combined with a molten salt energy storage system that can boost the system's output to 500 MWe for more than five-and-a-half hours when needed. They expect to announce the selected site by the end of 2021.

Interesting that these pilot schemes are beginning so soon. And when the increasing costs of oil and renewables becomes terrifyingly real this type of nuclear infrastructure will become the only economic option. Just hope that the oil companies can benefit, but perhaps their business model means they will always be a competitor to nuclear? In which case I assume that  I/we will need to pivot from oil and into nuclear over the next decade. That would be a pity as I had wanted to keep my oilies for longer term, but maybe nuclear will provide even greater investment gains for us if played correctly? ...Decisions for the future I guess.

[Loki]

33 minutes ago, JMD said:

Interesting that these pilot schemes are beginning so soon. And when the increasing costs of oil and renewables becomes terrifyingly real this type of nuclear infrastructure will become the only economic option. Just hope that the oil companies can benefit, but perhaps their business model means they will always be a competitor to nuclear? In which case I assume that  I/we will need to pivot from oil and into nuclear over the next decade. That would be a pity as I had wanted to keep my oilies for longer term, but maybe nuclear will provide even greater investment gains for us if played correctly? ...Decisions for the future I guess.

Does it get geopolitical though with some countries not being "allowed" nuclear and being forced to use oil/gas?

[Bobthebuilder]

1 hour ago, JMD said:

Interesting that these pilot schemes are beginning so soon. And when the increasing costs of oil and renewables becomes terrifyingly real this type of nuclear infrastructure will become the only economic option. Just hope that the oil companies can benefit, but perhaps their business model means they will always be a competitor to nuclear? In which case I assume that  I/we will need to pivot from oil and into nuclear over the next decade. That would be a pity as I had wanted to keep my oilies for longer term, but maybe nuclear will provide even greater investment gains for us if played correctly? ...Decisions for the future I guess.

I think it would be wise to have some exposure to nuclear. RR maybe? Uranium miners another?

[M S E Refugee]

19 minutes ago, Bobthebuilder said:

I think it would be wise to have some exposure to nuclear. RR maybe? Uranium miners another?

https://en.wikipedia.org/wiki/Fortum

This company is worth a look if you want exposure to the Nuclear industry.

[Transistor Man]

2 hours ago, Bobthebuilder said:

I think it would be wise to have some exposure to nuclear. RR maybe? Uranium miners another?

Engineering Service companies are a possibility. Jacobs? Many serve oil & gas, and nuclear. 

[Chewing Grass]

If you are looking for a good long term bet Nuclear is yesterdays problem and is viewed as an expensive overhead.

The big money will be who (Engineering Company) gets first dibs and the knowledge of building this.

https://www.bbc.co.uk/news/uk-england-nottinghamshire-56256144

[Transistor Man]

20 minutes ago, Chewing Grass said:

If you are looking for a good long term bet Nuclear is yesterdays problem and is viewed as an expensive overhead.

The big money will be who (Engineering Company) gets first dibs and the knowledge of building this.

https://www.bbc.co.uk/news/uk-england-nottinghamshire-56256144

That is nuclear! Just fusion, not fission. Worth doing. But I won’t be holding my breath.

The accelerator-driven sub-critical reactor hasn’t gone anywhere yet (Energy Amplifier). Seems like quite a good idea to me. 

[Barnsey]

Had dinner with sister's other half working in oil and gas, absolutely convinced this inflation spike we're seeing will be temporary. Transitory complacency is very real out there.

[AWW]

Commercial nuclear fusion has been just ten years away for the last forty years.

[goldbug9999]

14 hours ago, Bricks & Mortar said:

Interesting set of tweets.  This guy seems fairly sure deflation will happen, but presents 3 hypotheses about the manner in which it will occur.
I think his hypothesis (1), the Beautiful Deleveraging is for the birds.  To much leverage.  Too much much depending on the leverage - like businesses, homes, jobs, capital investment, etc.
Hypothesis (2) OMG What a Mess Deleveraging:  The David Hunter Hypothesis.  I need say no more.
Hypothesis (3) Awkward Deleveraging.  A series of short deflationary events over the decade, with the Fed intervening quickly each time.

I think I'm still in David Hunter camp for US and most of the world, as I don't think their money distribution pipelines go direct to business and jobs, but more through the consumer.  So, I think there's still too much leverage, and insufficient capability for central banks to get cash where it needs to go in a bk.  Here in the UK, the BoE put in the plumbing to quickly pass cash to business, which could help us ride a global bk event without the mass bankruptcies, redundancies, and repossessions.
But, I'm not so sure that'd be good for the UK in the longer term.  If the rest of world is cleaning out their Augean Stables, it might be better not to remain up to our armpits in shit.

But, for the first time, I now see that (3) is a possibility.
 

 

All these historic comparisons aren't worth shit though because hand over fist money printing wasn't seen as acceptably prudent for a central bank in those days. Now its been completely normalised and further more all the mechanism are in place to do it quickly and at what ever scale is needed to bail out all the rich asset owners.

Fed has printed 30% of all $ in existence ever in the last year - no one can seriously think they are suddenly going to reign that in.

 

[Green Devil]

15 hours ago, Bricks & Mortar said:

Interesting set of tweets.  This guy seems fairly sure deflation will happen, but presents 3 hypotheses about the manner in which it will occur.
I think his hypothesis (1), the Beautiful Deleveraging is for the birds.  To much leverage.  Too much much depending on the leverage - like businesses, homes, jobs, capital investment, etc.
Hypothesis (2) OMG What a Mess Deleveraging:  The David Hunter Hypothesis.  I need say no more.
Hypothesis (3) Awkward Deleveraging.  A series of short deflationary events over the decade, with the Fed intervening quickly each time.

I think I'm still in David Hunter camp for US and most of the world, as I don't think their money distribution pipelines go direct to business and jobs, but more through the consumer.  So, I think there's still too much leverage, and insufficient capability for central banks to get cash where it needs to go in a bk.  Here in the UK, the BoE put in the plumbing to quickly pass cash to business, which could help us ride a global bk event without the mass bankruptcies, redundancies, and repossessions.
But, I'm not so sure that'd be good for the UK in the longer term.  If the rest of world is cleaning out their Augean Stables, it might be better not to remain up to our armpits in shit.

But, for the first time, I now see that (3) is a possibility.
 

 

Deflation. 🤣

All i can see is rampant inflation leading possibly to hyperinflation (but unlikely imo).

[Mapper]

5 hours ago, AWW said:

Commercial nuclear fusion has been just ten years away for the last forty years.

 

 

[Animal Spirits]

https://fortunefinancialadvisors.com/blog/tobacco-and-defense-as-inflation-shelters/

[DurhamBorn]

15 hours ago, JMD said:

Interesting that these pilot schemes are beginning so soon. And when the increasing costs of oil and renewables becomes terrifyingly real this type of nuclear infrastructure will become the only economic option. Just hope that the oil companies can benefit, but perhaps their business model means they will always be a competitor to nuclear? In which case I assume that  I/we will need to pivot from oil and into nuclear over the next decade. That would be a pity as I had wanted to keep my oilies for longer term, but maybe nuclear will provide even greater investment gains for us if played correctly? ...Decisions for the future I guess.

Shell could always buy,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,The Scottish share 

Nuclear is the likely winner and big oil wont be able to keep it down forever,wind and solar suits them fine,they even get to roll excess oil profits into them for 10% returns.Its unlikely big oil will be able to get into nuclear,but they could end up buying up the grids,National Grid and SSE etc.

The oilies will have incredible levels of capital spare during the cycle so the risk is they waste it.Even if they do though the market wont care ,they will just see the free cash and push the shares up.

 

[DurhamBorn]

8 hours ago, goldbug9999 said:

All these historic comparisons aren't worth shit though because hand over fist money printing wasn't seen as acceptably prudent for a central bank in those days. Now its been completely normalised and further more all the mechanism are in place to do it quickly and at what ever scale is needed to bail out all the rich asset owners.

Fed has printed 30% of all $ in existence ever in the last year - no one can seriously think they are suddenly going to reign that in.

 

I think i said way back in the thread they needed to lift money by around 30% and as you say thats where we are.Im expecting some more due to the structure of the cycle turn.

The risk of course moves over to the asset side of things as you boost the base money up.I had and have a distribution cycle kicking in with that kind of liquidity lift.People will soon need to start selling assets to finance life as they dont produce enough income.

Fed prints and it enters the economy through the financial system,the pipes,so assets gain first.Later though those assets are sold down as the money is then passed to people  providing goods and services.

As iv said one of my main takes from my roadmap is that over the next decade 60/40 40/60 type pensions will be a disaster and anyone just entering drawdown now could see their pension empty over the decade,or at best reduce to much lower levels.

 

[jamtomorrow]

2 hours ago, DurhamBorn said:

Shell could always buy,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,The Scottish share 

Nuclear is the likely winner and big oil wont be able to keep it down forever,wind and solar suits them fine,they even get to roll excess oil profits into them for 10% returns.Its unlikely big oil will be able to get into nuclear,but they could end up buying up the grids,National Grid and SSE etc.

The oilies will have incredible levels of capital spare during the cycle so the risk is they waste it.Even if they do though the market wont care ,they will just see the free cash and push the shares up.

 

There's also an intetesting emerging theme in these next-gen nuclear pilot schemes, namely handling for intermittent/diurnal demand.

I believe the existing French fleet is alreasy unusual in this respect, having a reactor capability to respond somewhat to demand changes in hours rather than days (which is more like the norm for most other civilian nuke designs).

The Wyoming molten salt design supposedly goes further (by using the heat in the molten salt to "buffer" the reactor output, thus demand response would be limited only by how quickly they can ramp steam temp and spin up turbines), and wouldn't be at all surprising to discover the Rolls design has some level of "more nimble" demand response too.

Put that together with the smoothing/buffering effect of millions of EVs plugged into the grid at any given time (and particularly overnight), and I think we can expect significant changes in the UK energy market.

Specifically, there's going to be less of a premium on intermittent generation. Sun not shining, wind not blowing? Step up the nukes. Demand dropping overnight? Charge the EVs.

We'll still need *really* fast-response stuff like pumped hydro or battery farms, but that mid-tier intermittent generation will shrink by a lot, simply because base load becomes more elastic on both demand and supply sides.

[Barnsey]

3 hours ago, DurhamBorn said:

I think i said way back in the thread they needed to lift money by around 30% and as you say thats where we are.Im expecting some more due to the structure of the cycle turn.

The risk of course moves over to the asset side of things as you boost the base money up.I had and have a distribution cycle kicking in with that kind of liquidity lift.People will soon need to start selling assets to finance life as they dont produce enough income.

Fed prints and it enters the economy through the financial system,the pipes,so assets gain first.Later though those assets are sold down as the money is then passed to people  providing goods and services.

As iv said one of my main takes from my roadmap is that over the next decade 60/40 40/60 type pensions will be a disaster and anyone just entering drawdown now could see their pension empty over the decade,or at best reduce to much lower levels.

 

So in regards to everyone and their lockdown pup thinking this is just short term supply chain disruption inflation, we are aligning ourselves on here with the consistent view that this is just wishful thinking? Impossible for this much money to enter the financial system and not get sustained inflation going forwards. If we get a crash, they'll just go even further, especially at this early stage of a recovery. G7 Taxation changes on big U.S. corps a widely applauded achievement, but as they've got the world by the balls, will just result in even more widely felt cost pressures?

[jamtomorrow]

43 minutes ago, Barnsey said:

So in regards to everyone and their lockdown pup thinking this is just short term supply chain disruption inflation, we are aligning ourselves on here with the consistent view that this is just wishful thinking? Impossible for this much money to enter the financial system and not get sustained inflation going forwards. If we get a crash, they'll just go even further, especially at this early stage of a recovery. G7 Taxation changes on big U.S. corps a widely applauded achievement, but as they've got the world by the balls, will just result in even more widely felt cost pressures?

Even if sustained, there are still questions. Do wages follow this time? Does output rise this time? Does velocity rise this time?

Velocity still seems to be stuck at historic lows, which makes it look more like a stagflation to me (for the time being). 30% increase in money supply needs either a 30% increase in prices or a 30% increase in economic activity or a bit of both just for velocity to stand still. So whilst some commodities have certainly spiked, we are nowhere near 30% across the board.

Pricing power of wage earners will be key, but very hard to tell where that stands while the one-off COVID effects work through.

[JMD]

19 hours ago, Loki said:

Does it get geopolitical though with some countries not being "allowed" nuclear and being forced to use oil/gas?

I'm reminded that the two (by far) main reserves/working mines are to be found in - Australia/Canada and Russia/Kazakhstan. So geopolitics could play out like the 1980's, or maybe we get something different and Russia ditches it's Chinese fairweather friend and turns back toward the West. I'm thinking/hoping that China will also become a pyhira to Russia (they already dislike each other), and the quicker the Chinese state and it's revolting retro-fit politics exit this word the better and safer for the rest of us. A bumpy road ahead but must be done I think.

[DurhamBorn]

1 hour ago, Barnsey said:

So in regards to everyone and their lockdown pup thinking this is just short term supply chain disruption inflation, we are aligning ourselves on here with the consistent view that this is just wishful thinking? Impossible for this much money to enter the financial system and not get sustained inflation going forwards. If we get a crash, they'll just go even further, especially at this early stage of a recovery. G7 Taxation changes on big U.S. corps a widely applauded achievement, but as they've got the world by the balls, will just result in even more widely felt cost pressures?

Yes,the inflation will keep running or it will flatline higher.Its incredible they are saying inflation is 1.5% in the UK.Ludicrous.Its flying higher,items up 20% is very common,and others all following.I think we get 65% inflation over the cycle though i have no idea if it comes up front,falls back then runs again etc.Thats the beauty of a roadmap based on liquidity mostly.I dont care about the route really,just the destination.I think we have 25% inflation across energy and food etc baked in for starters.If they pull the numbers down its with things that make little difference to people in the bottom half of income.That tax thing is a joke really.They cant tax enough to cover the structural deficit.They will have to cut spending once the CBs stop printing.

[JMD]

5 hours ago, DurhamBorn said:

Shell could always buy,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,The Scottish share 

Nuclear is the likely winner and big oil wont be able to keep it down forever,wind and solar suits them fine,they even get to roll excess oil profits into them for 10% returns.Its unlikely big oil will be able to get into nuclear,but they could end up buying up the grids,National Grid and SSE etc.

The oilies will have incredible levels of capital spare during the cycle so the risk is they waste it.Even if they do though the market wont care ,they will just see the free cash and push the shares up.

 

You've triggered me mentioning Shell and the 'Scots play' in same sentence!! ...you see Shell is my biggest holding and I dislike it's recent policies, so was looking to offload quiet a few shares if it runs up in the near/medium term future.                                                                                                                                          But more seriously are there perhaps other oilies that maybe show more than a passing interest in nuclear and might therefore be good hedges into nuclear? 

[DurhamBorn]

1 hour ago, jamtomorrow said:

Even if sustained, there are still questions. Do wages follow this time? Does output rise this time? Does velocity rise this time?

Velocity still seems to be stuck at historic lows, which makes it look more like a stagflation to me (for the time being). 30% increase in money supply needs either a 30% increase in prices or a 30% increase in economic activity or a bit of both just for velocity to stand still. So whilst some commodities have certainly spiked, we are nowhere near 30% across the board.

Pricing power of wage earners will be key, but very hard to tell where that stands while the one-off COVID effects work through.

I think lower paid will see a small cut in spending power.That bit in the middle £35k to £50k will see a big loss of spending power.Like you say its very fuzzy,but im seeing massive demand at the lower to £35k end around here in factories etc.The lower paid £10 an hour ones simple cant get workers.Even when they do,they dont turn in half the time,drop sick days ,dont turn in on friday night shift etc.Iv never had as many phone calls offering jobs,its nuts,almost every day and they always go through all the great reasons to take the job,and slip salary in late at the end.Iv taken to stopping them now and asking salary straight away.I give them the same answer usually.Thats more a uni leavers starting salary,not someone with lots of experience.They know as well,and you can tell they know things have changed.

One last week was a micro chip company and ARM are investors.They said they were getting people and losing them after a few weeks,or having to let go as useless.Then they stated salary i actually laughed on the phone.Wanting clean room trained skilled technicians for £27k a year.Why would someone want to be locked in a suit in a room for 8 hours etc for that sort of money unless it was a training/first job type of thing.I told them they could try £40k and they might get someone decent,but even then likely they would move on without share options etc.

There are zillions of easy jobs at say £23k a year so poor shifts,harder technical work etc need to be much much better paid to attract anyone.Employers are in for a massive shock i think as things open.People have tasted freedom,so to have their lives destroyed by work will demand much higher wages.

[JMD]

21 hours ago, jamtomorrow said:

Put this together with the small/modular concept being pushed by the Rolls consortium, might make 2030s interesting from an energy policy perspective. And if one or more of these technologies comes to maturity just as we're in the throes of the brewing energy crisis, I can see a *lot* of nuclear generating capacity getting commissioned in a short space of time by panicked governments.

https://www.world-nuclear-news.org/Articles/Pilot-Natrium-plant-to-be-built-in-Wyoming

Pilot Natrium plant to be built in Wyoming

Plans to construct a Natrium reactor demonstration project at a retiring coal plant in the US state of Wyoming were announced yesterday by TerraPower, PacifiCorp and Wyoming Governor Mark Gordon. The companies are evaluating several potential locations in the state for the plant, which will feature a 345 MWe sodium-cooled fast reactor combined with a molten salt energy storage system that can boost the system's output to 500 MWe for more than five-and-a-half hours when needed. They expect to announce the selected site by the end of 2021.

Jamtorrow, I'm just trying to get an idea of how many of these mini nuclear container rigs would be deployed, for example, for us here in the UK. I guess it would mainly be a function of their power output, but also where they could be adequately/safely sited, and needed in terms of plugging (sorry!) a power gap. What I mean is are we talking hundreds, or maybe even in the low thousands(?) If say most towns required one or more, for the UK alone? Or will they all end up being sited on military bases (approx 110 in uk) because they would become terrorist targets?