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

[BurntBread]

The David Hunter interview with Mark Moss is very interesting, not so much for the first part, where he reiterates his targets for indices etc. that we have heard before, but because he elaborates a little on the collapse at the end of the 20's / start of the 30's.

Previously, he has just said he expects a system collapse and a "totalitarian response". This time he calls it out explicitly as communism, and that the ESG extremists are "useful idiots" for ushering it in. He is clear that there would be such a collapse anyway, without that kind of ideology, because we will be at the end of the super-cycle, but that for some reason "they" want to bring in global communism. He doesn't know why, and doesn't name any names, but rather shockingly, he attributes it to evil, rather than something more rational.

Maybe someone should invite him to dosbods and the Q thread (if he doesn't post here already)?

[JMD]

On 22/06/2021 at 16:29, sancho panza said:

This is a key point that people forget.The old 'gold is an inflation hedge' mantra gets trotted out so often it becomes a truth without anyone examining the basis of it.

Reality is that gold was an awful inflation hedge 1980 to 2003/4/5.Gold holders got burned in real terms.Hugely so.

Gold to me is a hedge against the central banks losing control and solvency risk.As you rightly point out,there are far better ways to hedge infaltion.

SP, interesting comment ref. gold/inflation. It reminds me of the following, it's an extract from this years' 'In Gold We Trust' report (just completed reading the report, and the passage reminded me of your post, ... he seems to agree with your points).

It's from an interview with FOFOA ("Friend of Friend of Another", not sure if you rate him? He has been mentioned several times on the thread before). He does have very interesting thoughts on (Free)gold, its future ‘market re-priced’ value of $55k!!, and its ultimate new role following the monetary reset. 

Excerpt: 

‘I need to explain a simple concept about gold, however, before I tell you what I see. At the time of this writing, Bitcoin is right around USD 55,000 per coin, which is a number that I have long used for Freegold. Meanwhile, gold is down more than 15% from its high last August. So something I’m hearing a lot is that Bitcoin has done what gold was supposed to do; therefore Bitcoin is the new gold, or something along those lines. I see this flawed premise everywhere: “Look at gold, it’s down, it’s not doing what it’s supposed to do, which is rise against all this printing and monetary inflation like commodities and other inflation hedges.” But if we look back at history, that’s not how gold works. And it’s not what Freegold predicts.

Historically, gold does its best work at transition points, not in day-to-day price movements. For example, when it was being used as part of the money supply, it didn’t track price inflation, but every 40–50 years or so it would have to be repriced, or it would jump in price due to some sort of transition or crisis (e.g., 1934 and the 1970s). It has never really worked well as an inflation hedge. Everyone assumes it should, but I think that’s a flawed premise, at least in the current system. It’s more of a transition hedge, or a singularity hedge.

This is what I see coming on the other side of the 2nd Singularity. I think we’re going to have a collapse, a reset, and a grand liquidation that will lead to a period of rebuilding, which will last perhaps decades. But it won’t be the “Great Reset” agenda of the World Economic Forum (WEF). The collapse is going to include the collapse of such oversized, centralized thinking as the WEF, and the reset is going to usher in a more localized, resilient way of thinking. As Another put it, the old ideas of building solid, enduring, long-term wealth will return.

The collapse will be a collapse of the US dollar system, the financial system, and the paper gold market, and the reset will include the repricing of physical gold. I don’t see the repricing as something that someone needs to enact, but more of a natural and obvious outcome of the collapse. The “grand liquidation” will effectively pass economic assets from the old guard to the new generation, at fire-sale prices that will make them profitable once again, and the rebuilding of a more real and more robust economy will commence. You might even call it a renaissance, or my preference, a new golden age.'

Link  to full interview...

My View of the Nixon Shock – Exclusive Interview with FOFOA | ingoldwetrust.report : ingoldwetrust.report

 

 

 

[JMD]

If we do get 'our' BK, i'd really like to get some exposure to the hydrogen battery manufactures. Does anyone have views (good or bad) on the following ones? Or perhaps alternatives? Asking because all/most of them have been mentioned on here before, but i missed out on buying any as previously i didn't have the funds.

These are all small players, and financials are not good, but i am viewing them as high risk... kinda like the junior gold miners. Plus i would only buy if they go down say 50%+ (i.e. after a BK event).

Power Cell Sweden, Ceres Power, AFC Energy, ITM Power, Ballard Power Systems, McPhy Energy SA, Plug Power.

[Loki]

29 minutes ago, BurntBread said:

The David Hunter interview with Mark Moss is very interesting, not so much for the first part, where he reiterates his targets for indices etc. that we have heard before, but because he elaborates a little on the collapse at the end of the 20's / start of the 30's.

Previously, he has just said he expects a system collapse and a "totalitarian response". This time he calls it out explicitly as communism, and that the ESG extremists are "useful idiots" for ushering it in. He is clear that there would be such a collapse anyway, without that kind of ideology, because we will be at the end of the super-cycle, but that for some reason "they" want to bring in global communism. He doesn't know why, and doesn't name any names, but rather shockingly, he attributes it to evil, rather than something more rational.

Maybe someone should invite him to dosbods and the Q thread (if he doesn't post here already)?

I've posted somewhere on here ages ago about 'money men' only seeing in numbers.  I thought it was interesting (I wanted to say great but that's not the right word) he eluded to some of the thoughts us more TFH plebs are having.  (I include myself firmly and totally in that group)

It just felt nice to have an expert come and say it at last. 

[leonardratso]

TFH?

[leonardratso]

ah tin foil hat

[King Penda]

On 14/06/2021 at 12:48, JMD said:

Important as this topic is... Whenever the subject of road stats/traffic policy come up - my mind frequently wanders to a Mad Max dystopian vision of the future... along with 'Barter-Town', where silver coins, cigarettes, unopened lego-sets and even pizza recipes(?) are traded!!

...but the question remains, who is Master Blaster? 

 

Just been a children’s party in burton on Trent this is how dad fills his time loads of these Lego sets and he has built his own Ironman outfit .

[DurhamBorn]

1 hour ago, Cattle Prod said:

Today, the US rig count declined, at ~$74 WTI. And not just the crappier stuff, but the Permian too. Some poor gimp has had to tell the CEOs that there are much fewer drilling targets when you actually need a return on your capital. Knowing a few Texan CEO types, I hope they didn't get shot!

I'm really hoping for a technical correction here in price, but fundamentals really are set up for another run into autumn. A ~10% correction here will guarantee it.

It's a long way from minus $35, or even plus $35, in a short time. But as ever, the cure for low prices is low prices. Have a good weekend.

A lot of sentiment is at play now as well where almost everyone thinks oil companies are dead money and only fools would invest in them.I wish those idiots at BP would hurry up and start buying back shares though while they still can cheap.What are they waiting for?,they can hedge some production now to ensure cash flow is locked in.Instead of telling the market 3 months ahead about buying a few % they should be at it now.I still think $200 oil is likely this cycle with $300 a maybe.

Its incredible really how auto makers are all going electric,yet there is nowhere near the infrastructure for it.I was looking at all the different wind farms in the UK as well and they all go up and down together with huge periods of nothing at all.Gas is going to be in massive demand without more nuclear.

Its going to be an incredible bull market that just runs and runs.

 

 

[Barnsey]

 

[jamtomorrow]

9 hours ago, DurhamBorn said:

Its incredible really how auto makers are all going electric,yet there is nowhere near the infrastructure for it.I was looking at all the different wind farms in the UK as well and they all go up and down together with huge periods of nothing at all.Gas is going to be in massive demand without more nuclear.

Generation and distribution infrastructure for overnight charging is already there, in the form of excess overnight capacity. *Almost* a no-brainer to take advantage of that - some structural changes to the generating market, some changes to the maintenance and duty-cycle assumptions for gas generation, more nuclear in the long term (perfect for steadier demand with smaller night/day cycles).

It's the last 100 yards where the problems are today. There simply aren't enough qualified chargepoint installers. 2 close friends recently got their first EVs, and have now been waiting months for a home chargepoint (one has already melted the plug on their granny cable).

Ordinarily, you'd expect Mr. Market to work his magic and drag a generation of school leavers into the game through price signals. But these are not ordinary times.

The situation with rapids is definitely improving in fits and starts, although it's patchy. There are now several rapids within 5 minutes of the sleepy Midlands village where I live. Morrisons have got one. You can even get a rapid charge on up at the driving range.

Still patchy nationally. Mid-Wales is a complete dead loss. But gaps are being filled all the time e.g. https://www.autocar.co.uk/car-news/industry-news-environment/electric-highways-opens-uk’s-largest-ev-motorway-charging-station

350kW is incredible - that'll charge in excess of 1000mph for most EVs, which is getting *much* closer to ballpark of dinofuelling rates.

All this to say: to my mind the generation and distribution infrastructure is a non-issue (edit to add: although I do agree the existing infrastructure will have to generate more leccy overall, mostly from gas initially). And the local infrastructure looks like it's tracking the adoption curve, more or less. Except for this installer shortage, which is *definitely* "different".

[Hardhat]

16 hours ago, JMD said:

If we do get 'our' BK, i'd really like to get some exposure to the hydrogen battery manufactures. Does anyone have views (good or bad) on the following ones? Or perhaps alternatives? Asking because all/most of them have been mentioned on here before, but i missed out on buying any as previously i didn't have the funds.

These are all small players, and financials are not good, but i am viewing them as high risk... kinda like the junior gold miners. Plus i would only buy if they go down say 50%+ (i.e. after a BK event).

Power Cell Sweden, Ceres Power, AFC Energy, ITM Power, Ballard Power Systems, McPhy Energy SA, Plug Power.

I've held Ceres / CWR for almost 2 years and it's been a multi bagger for me. I recently sold 60% of my holding as it hasn't gone anywhere in 6 months and I want to "de risk" it a bit. I track the sector, CWR, AFC and ITM tend to go up and down together.

 

The difference with CWR is that it is not a "hydrogen energy" company so much as it has designed solid oxide fuel cells - for use in e.g. haulage vehicles. The company's revenue largely comes from licensing of their designs for these fuel cells rather than energy generation, so I basically see it as a "future of transport" play, although it tends to get lumped in with the "hydrogen" companies.

SP wise 1000p is pretty much the main support for CWR at the moment, it has tested that level a lot recently and doesn't ever dip far below it. Who knows when the next run up will be, or if it will come. I was sure this would go to 2000p earlier this year, but the hydrogen sector in general feels a bit unloved at the moment.

[MvR]

1 hour ago, jamtomorrow said:

All this to say: to my mind the generation and distribution infrastructure is a non-issue (edit to add: although I do agree the existing infrastructure will have to generate more leccy overall, mostly from gas initially). And the local infrastructure looks like it's tracking the adoption curve, more or less. Except for this installer shortage, which is *definitely* "different".

I wonder how cars parked on the road will charge?  Most residential streets without drives are chock full of parked cars. There would need to be a charging point for every space...

[DurhamBorn]

2 hours ago, jamtomorrow said:

Generation and distribution infrastructure for overnight charging is already there, in the form of excess overnight capacity. *Almost* a no-brainer to take advantage of that - some structural changes to the generating market, some changes to the maintenance and duty-cycle assumptions for gas generation, more nuclear in the long term (perfect for steadier demand with smaller night/day cycles).

It's the last 100 yards where the problems are today. There simply aren't enough qualified chargepoint installers. 2 close friends recently got their first EVs, and have now been waiting months for a home chargepoint (one has already melted the plug on their granny cable).

Ordinarily, you'd expect Mr. Market to work his magic and drag a generation of school leavers into the game through price signals. But these are not ordinary times.

The situation with rapids is definitely improving in fits and starts, although it's patchy. There are now several rapids within 5 minutes of the sleepy Midlands village where I live. Morrisons have got one. You can even get a rapid charge on up at the driving range.

Still patchy nationally. Mid-Wales is a complete dead loss. But gaps are being filled all the time e.g. https://www.autocar.co.uk/car-news/industry-news-environment/electric-highways-opens-uk’s-largest-ev-motorway-charging-station

350kW is incredible - that'll charge in excess of 1000mph for most EVs, which is getting *much* closer to ballpark of dinofuelling rates.

All this to say: to my mind the generation and distribution infrastructure is a non-issue (edit to add: although I do agree the existing infrastructure will have to generate more leccy overall, mostly from gas initially). And the local infrastructure looks like it's tracking the adoption curve, more or less. Except for this installer shortage, which is *definitely* "different".

Iv been looking at all the windfarms in the UK,the main offshore,Hornsea,East Anglia,Beatrice,Racebank,Dudgeon and Walney and they have a more than 70% correlation on when they produce.For instance from the 12th May until  20th of May they were under 500mw as a group.Walney is the only one with a better profile of producing when others arent.Maybe why BP were interested in paying more for that areas leases.

Solar of course can produce during the day,but not at night,and most EVs will be charging at night,and for weeks on end without massive expansion of gas or nuclear there will be no energy.

One area that is certain to do well is power switching,where people can produce when cheap etc and a reason i still think hydrogen has a big future.

Fast charging is going to have to grow hugely,and that could be a real boon to supermarkets as they have the best land for doing it.Maybe Morrisons shareholders should turn these bids down after all.

[jamtomorrow]

17 minutes ago, DurhamBorn said:

Solar of course can produce during the day,but not at night,and most EVs will be charging at night,and for weeks on end without massive expansion of gas or nuclear there will be no energy.

Existing gas and nuclear will certainly need to generate more, but there's no need for much - if any - new *capacity* to service cars. Even if the entire UK car fleet magically switched to EV overnight, we'd need an extra 6GW of generation, most of that overnight - that's well within the existing day/night variation for UK grid.

Transports are a different matter, but still not 100% clear whether they'll go battery or hydrogen.

[DurhamBorn]

25 minutes ago, jamtomorrow said:

Existing gas and nuclear will certainly need to generate more, but there's no need for much - if any - new *capacity* to service cars. Even if the entire UK car fleet magically switched to EV overnight, we'd need an extra 6GW of generation, most of that overnight - that's well within the existing day/night variation for UK grid.

Transports are a different matter, but still not 100% clear whether they'll go battery or hydrogen.

Hydrogen on transports i think,when i left Cummins most of the focus was on hydrogen and joint projects with Hyundai.

The problem isnt going to be capacity,its base load.I think gas has a very strong future.The UK is also blessed with good wind potential,other parts of the world arent and the spike in gas prices are going to be epic.I think mid 23 is the point where gas enters a massive structural bull market.There will be some 20+ baggers in the gas space i expect,though at my point in time il be happy with the trebles coming in the big players.

Those windfarms as a group have very long periods of producing nothing.The Irish sea is the only area with a less correlated production.I think thats why BP bid more for those leases.

Of course the main drivers of the gas price will be Asia.Im more concerned with how many Indians get a fridge etc than if the UK goes EV in 10 years or 20.

My roadmap says renewables only ever reach max 50% of needs by 2050 and the pulling of coal and growth makes up for that.Gas use will be higher by 2050,unless the price gets so high (10x rather than 4x) that it speeds a lot more investment in nuclear etc.Nuclear is the gas hedge for me.

[Bobthebuilder]

8 minutes ago, DurhamBorn said:

My roadmap says renewables only ever reach max 50% of needs by 2050 and the pulling of coal and growth makes up for that.

I don't have the chart to hand, but that's what the gas industry regulator has said, in line with government projections. The chart was in the gas safe engineers' magazine a few months ago.

All new demand to be made up by renewables, extra nuclear, etc. Current gas use to remain at current levels until 2050 (projected, of course).

The powers that be, seem to agree with your roadmap.

[arrow]

2 hours ago, jamtomorrow said:

Existing gas and nuclear will certainly need to generate more, but there's no need for much - if any - new *capacity* to service cars. Even if the entire UK car fleet magically switched to EV overnight, we'd need an extra 6GW of generation, most of that overnight - that's well within the existing day/night variation for UK grid.

Transports are a different matter, but still not 100% clear whether they'll go battery or hydrogen.

From what I can recall, the 6gw is an estimate from about 5 years ago and comes with the condition of "smart" chargers. ie. if electricity demand increases past a certain point then your car will charge at a reduced rate, or not at all, until demand decreases.

You might be right about estimated demand. I don't know. The only studies, from when I was looking years ago, were by vested interests, including national grid.

Nuclear plants can take years to plan and build. There's no appetite for nuclear in much of the west. Five plus years for planning/building a nuclear plant won't be able to cope with possible policy mistakes

At the moment 40% of grid power is being supplied by fossil fuels, 15% nuclear. The greens/government/establishment are not happy about that and want it ended. My view is that there''s going to be an almighty screwup as the easiest option is to just pile into renewables,

If/when there won't be enough reliable supply, a dash for gas just as the east have increased their demand. But, as Durhamborn has said, our bets on gas aren't to do with the uk, but asia demand

[arrow]

This made me laugh and underlines the importance of gas. Ukrainians and US are not happy about Nordstream 2. It bypasses Ukraine and so stops it from its rent from the old Russia to europe gas pipeline. Ukraine and the US are so upset that they want Ukraine "compensated" for Russia choosing a different route for its gas. Apparently, if Russia chooses a different route, Ukraine must still receive "rent". Just like the Sopranos. These two posts from Seeking alpha and the FT summed things up, I thought.

 

"YCS186
Today, 3:29 AM
Comments (572)
|
Wow, just wow. We are truly living in times of peak stupidity. Germany, where euros naturally grow on trees, voluntarily agrees to subsidize a foreign nation of 45 million people. It gets better - being the green energy leaders, they are going to buy syngas produced and piped in from Ukraine. Syngas is a lovely mixture of hydrogen, carbon monoxide, and carbon dioxide, made from coal via a process that requires energy, to be obtained by burning more coal. That does not deter the green warriors because the nasty coal is going to be gasified in a country far, far away (Ukraine) and CO2 emissions from burning syngas are not going to count, because they will be for the greater good (restraining Russia). The contributions from US are going to be as usual, sanctions and weapons sales. Here is what I suspect will actually happen:
(1) Russia stops transit of gas though Ukraine and tells it to pay the same price as the EU.
(2) Ukraine cannot afford the new price and attempts to substitute via internal resources, switching to coal supplemented by syngas, but finds that it does not have the infrastructure for that.
(3) Germany and US promise to help with building the necessary infrastructure, but quickly realize that the task is too time consuming and expensive.
(3) Germany starts providing NG for all of the Ukraine’s needs, taken from NS2, for free, in perpetuity, because it was their fault NS2 was built.
(4) Putin cannot stop laughing at this stupidity and develops a stroke, fulfilling the ultimate goal of Biden’s and Merkel’s genius plan."

 

"Well,  Russia has so far not allowed Turkmen Gas to flow to Western Europe . Russia has not ratified the ECT (Energy Charter Treaty) which would mandate non-discriminatory access for Central Asian Gas to Gazproms pipeline network and sell it to customers in Western Europe.

Turkmenistan could build pipelines across the Caspian Sea then through Azerbaijan and Georgia and then again across the Black Sea to connect to the Ukrainian Gas network, bypassing Russia. 
1. Azerbaijan wants to sell its own Gas to Western Europe and is unlikely to provide much support for any competition.
2. It would cost several billion US$ to plan & build and with the current anti fossil fuel fuel sentiment it will be hard to find financing for such a project.
3. even if they could finance it, it would take at least 15 years to plan, permit and build a multi-country gas transmission system of that magnitude. By then no one will need that gas anymore.

That’s the cold and real predicament of landlocked gas producers such as Turkmen, Kazakh and other Stans.

Ukraine has only itself to blame for putting themselves into the Position they are currently find themselves in.

Did Ukraine really think they can get away with years of illegal siphoning off Russian transit gas and reselling it domestically and export it to Poland. 

I am no friend of Russia but what Ukraine and it’s corrupt politicians did for over a decade does not go unpunished."

[dnb24]

6 hours ago, Barnsey said:

 

This is what I fear, the consensus in the young seems to follow this thought process- i really think we’ve got to think economic communism is a very real threat to individual freedoms over the next decade or so.

[Hancock]

5 minutes ago, dnb24 said:

This is what I fear, the consensus in the young seems to follow this thought process- i really think we’ve got to think economic communism is a very real threat to individual freedoms over the next decade or so.

Cant blame the young, when its the old who started economic communism in the 00s to bail out their bad investments, and continuation of their nonjobs.

[Harley]

We need to be looking at things in the round.  Join up the dots.  No loose ends.  The big picture.  An integrated view.

Cars on the street with no charging points?  You will own nothing and be happy.  You will live in one of those new mega smart cities with integrated transport.  You will rent a vehicle if needed and your status allows.

Personal transport will be one of the first shoes to fall.  An easy one for a pincer movement of fake green, affordability, and legislation.  We're already currently going through a bahavioural change program to facilitate this and the rest.

Macro is macro.  Political economics is economics.  And denial is a river in Egypt.

[DurhamBorn]

3 hours ago, Bobthebuilder said:

I don't have the chart to hand, but that's what the gas industry regulator has said, in line with government projections. The chart was in the gas safe engineers' magazine a few months ago.

All new demand to be made up by renewables, extra nuclear, etc. Current gas use to remain at current levels until 2050 (projected, of course).

The powers that be, seem to agree with your roadmap.

Thats just UK as well,in Asia,including India etc it keeps growing by a lot.

[reformed nice guy]

1 hour ago, dnb24 said:

This is what I fear, the consensus in the young seems to follow this thought process- i really think we’ve got to think economic communism is a very real threat to individual freedoms over the next decade or so.

Totalitarianism came from a barrel of a gun in China and Russia, the ballot box in Venezuela and by economic means in Saudi and Qatar (those who had control of the oil, had the power)

I find it funny that in the UK the boomers keep on pointing out that the Tories have won and Labour don't have a chance as if it makes us safe. The sage committee is chocked full of commies, the major institutions are all children of '68 types and the local level is stuffed with useful idiots. There were leaked documents saying Whitehall civil servants were going to ignore orders from the government if they felt they knew better - think what is happening that is not being written down. The rot is at the core

[BurntBread]

33 minutes ago, reformed nice guy said:

There were leaked documents saying Whitehall civil servants were going to ignore orders from the government if they felt they knew better

Interesting; do you have a link? That's essentially the definition of "deep state".

[jamtomorrow]

2 hours ago, arrow said:

From what I can recall, the 6gw is an estimate from about 5 years ago and comes with the condition of "smart" chargers. ie. if electricity demand increases past a certain point then your car will charge at a reduced rate, or not at all, until demand decreases.

You might be right about estimated demand. I don't know. The only studies, from when I was looking years ago, were by vested interests, including national grid.

My estimate is 6GW *ammortized* (it's based on total annual UK passenger car miles and typical EV efficiency - so not many assumptions needed at all).

How that 6GW actually shows up in demand is the devil in the detail, like you say. Existing overnight excess capacity would take care of 4 to 5GW of it (e.g. 9GW for 11h).

Leaves something like 1GW to 2GW to find in the daytime, which probably dovetails pretty well with how people are likely to use rapids once 350kW setups are widespread.

1GW to 2GW sounds like a lot (and it *is* a lot), but it's not a huge amount in terms of national energy policy. UK demand has drifted down by 6GW or so just in the last decade.