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

[planit]

In addition to the US Oil inventory post above (skip if you have had enough oil) 

(but I feel oil is solidly woven into the Macro picture for the next 5+ years due to the ESG insanity)

 

After reading a report that mentioned the amount of travelling the US do over July the 4th holiday I decided to look at the last 10 years US historical inventory figures.

I worked out the average extra draw on the week that included 4th July, compared to the previous week. The figure came out to be 5.93mbpd.

Since the week to 2nd July was -6.9mbpd, this would make the next predicted figure -12.8mbpd. 

I have not read anything predicting this so will it be a shock or will they find some oil down the back of the sofa because people might start to worry?

 

PS. I notice  US crude production managed to rise up to 11.3mbpd this week. It has taken a lot of hard work, $75 oil and 7 months to increase the 200k from December 2020. 

[Loki]

@planit i like your oil posts

All oil posts in fact @Cattle Prod 

[DurhamBorn]

1 hour ago, planit said:

In addition to the US Oil inventory post above (skip if you have had enough oil) 

(but I feel oil is solidly woven into the Macro picture for the next 5+ years due to the ESG insanity)

 

After reading a report that mentioned the amount of travelling the US do over July the 4th holiday I decided to look at the last 10 years US historical inventory figures.

I worked out the average extra draw on the week that included 4th July, compared to the previous week. The figure came out to be 5.93mbpd.

Since the week to 2nd July was -6.9mbpd, this would make the next predicted figure -12.8mbpd. 

I have not read anything predicting this so will it be a shock or will they find some oil down the back of the sofa because people might start to worry?

 

PS. I notice  US crude production managed to rise up to 11.3mbpd this week. It has taken a lot of hard work, $75 oil and 7 months to increase the 200k from December 2020. 

https://oilprice.com/Energy/Oil-Prices/Poor-Hedging-Could-Cost-US-Shale-20-Billion.html

[Mapper]

9 hours ago, feed said:

Maybe but so what.  It’ll just be what you pay your taxes and buy your groceries with. 

The state will not decriminalise drugs and people that trade drugs are wealthy and powerful.  Secondary and black market currencies will proliferate and it’s not like the police and legal system can cope with the drug trade today.  
 

As mentioned before, they are building a digital prison for us and most are seeming to embrace it.

But, what will be the black market currency in our brave new servitude? Cigarettes may be coming to an end, and besides with CBDC tracking they may be hard to get hold of.

[Sugarlips]

Double digit CPI print for June?! 

That should but the cat among the pigeons 

Got Silver..?

 

[kibuc]

7 hours ago, Sugarlips said:

Got Silver..?

Lots of it, unfortunatelly. I've aged 10 years in the last 18 months.

I've given up on my illusions that markets make logical sense. CPI, DXY, TLT, BLM, LGBT, none of this matters, I'm just keeping all my PM stock in hope that one day it will be randomly chosen to have its turn and I'm trying my best not to think about opportunity cost.

[jamtomorrow]

27 minutes ago, kibuc said:

Lots of it, unfortunatelly. I've aged 10 years in the last 18 months.

I've given up on my illusions that markets make logical sense. CPI, DXY, TLT, BLM, LGBT, none of this matters, I'm just keeping all my PM stock in hope that one day it will be randomly chosen to have its turn and I'm trying my best not to think about opportunity cost.

With rates this low across the board, we're as close as it gets to a pure Keynesian beauty contest, meaning winners and losers are determined mostly by game theory, not fundamentals.

That will all change if/when yield becomes a thing again, best we can do here in the meantime is get positioned for those times and try not to get too caught up in the "fun & games".

[Barnsey]

Oh looky here...

 

[feed]

8 hours ago, Mapper said:

As mentioned before, they are building a digital prison for us and most are seeming to embrace it.

But, what will be the black market currency in our brave new servitude? Cigarettes may be coming to an end, and besides with CBDC tracking they may be hard to get hold of.

How many countries run dollars or Euros alongside local currency, for multiple reasons, incl. stability, availability, tax avoidance and corruption.  That isn’t going to change with a CBDC, even assuming that the technology can be implemented globally.  

There will always be a demand for dollars in Africa and Mexico is a de facto narco state with a massive demand for physical dollars. What would the cartels use with a 100% digital dollar? Pesos?  Same for the Euro, the North African drug trade all the way to Afghanistan and you're paying in Euros. 

Any major currency that switches to digital only, creates a vacuum for other currencies to operate in those environment. No major currency region will want to give up the benefits of those markets; non domestic and black.  If we have a CBDC pound then we will also have a physical pound.  Because if we don’t have a physical pound, we’ll have a physical dollar or Euro or crypto for anonymous payments, because the rest of the world will have a process for anonymous payments.  And the banks will not want a competing payment system in something as widespread as the black-market. 

CBDC for benefits, bank loans with varying interest rates and paying taxes seems likely, but not for functional exchange.  

If BOE goes 100% CBDC, then people will be buying drugs and hookers in dollars or Euros. 

 

[Majorpain]

8 hours ago, Sugarlips said:

Double digit CPI print for June?! 

That should but the cat among the pigeons 

Got Silver..?

 

It could be true, Cleaner at work also does caring for OAP's, and to prove they are not stealing when shopping they have to take a photo of the receipts.  Its a couple of pounds extra each week spread over everything food wise for the last few months.  £7.30 Fish and chips from the local NE chippy in one of the more deprived areas as well.  

[DurhamBorn]

4 minutes ago, Majorpain said:

It could be true, Cleaner at work also does caring for OAP's, and to prove they are not stealing when shopping they have to take a photo of the receipts.  Its a couple of pounds extra each week spread over everything food wise for the last few months.  £7.30 Fish and chips from the local NE chippy in one of the more deprived areas as well.  

Yep,some big increases in shops,luckily i avoid most of them as i mostly cook my meals and my weekly spend is so low (£35ish) .£7.30 for fish and chips is getting silly isnt it.My local does a whale of a cod and large chips for £8.10,enough for two people.The local Mcdonalds though has its drive through full all day every day.Its always amazed me how busy it is when the food is utter garbage.They must be a fiver a meal now.Pizza place prices are expensive as well now.

I think surviving this cycle well isnt just about investing,its about knowing how to live well frugal,and also repairs etc yourself.There must be a point where that fish and chip price hits the spot where sales start to fall,exactly what inflation does.

[Boon]

Suspect some of the price points will be psychological, think that is why shrinkflation is chosen as opposed to simply charging more for the same item. A lot of products I think have some big ties to a price. For instance a 4-pack of chocolate bars in the supermarket has been £1 for as long as I can remember, obviously the size has changed in that time.

I'd love to get my hands on some old receipts as I'm sure some things have not changed in price and have not been shrunk. Pasta, milk, lettuces for instance.

As for eating out I have been thinking they are in for a rude awakening at some point as people see the markups. Haven't been to Harvester for years but used to go regular for their early bird deals, but the prices seem shocking considering this is not a top-range place. The mains are mostly £13-16 now, by the time you had a drink you're dropping £20+ for 1 person.

[planit]

16 minutes ago, Boon said:

Suspect some of the price points will be psychological, think that is why shrinkflation is chosen as opposed to simply charging more for the same item. A lot of products I think have some big ties to a price. For instance a 4-pack of chocolate bars in the supermarket has been £1 for as long as I can remember, obviously the size has changed in that time.

I'd love to get my hands on some old receipts as I'm sure some things have not changed in price and have not been shrunk. Pasta, milk, lettuces for instance.

As for eating out I have been thinking they are in for a rude awakening at some point as people see the markups. Haven't been to Harvester for years but used to go regular for their early bird deals, but the prices seem shocking considering this is not a top-range place. The mains are mostly £13-16 now, by the time you had a drink you're dropping £20+ for 1 person.

AND they are only paying 5% VAT at the moment, I wonder what will happen when VAT reverts to 20%.

I think restaurants have been making a lot of money last 3 months.

 

This really made me laugh yesterday, (Surprise - turkey doesn't like Christmas )

[DurhamBorn]

3 minutes ago, planit said:

AND they are only paying 5% VAT at the moment, I wonder what will happen when VAT reverts to 20%.

I think restaurants have been making a lot of money last 3 months.

 

This really made me laugh yesterday, (Surprise - turkey doesn't like Christmas )

I had a meal in Spoons last week when out with my son to watch the football,it was the worst food iv ever eaten.The burger was crap and you got about 15 chips.It used to be fine for the money.I can make 4, 3/4llb burgers for £1.70 that are beautiful and no additives.

[DoINeedOne]

Great Interview with Ronnie Stoeferle - In Gold We Trust Report

 

[Castlevania]

30 minutes ago, DurhamBorn said:

I had a meal in Spoons last week when out with my son to watch the football,it was the worst food iv ever eaten.The burger was crap and you got about 15 chips.It used to be fine for the money.I can make 4, 3/4llb burgers for £1.70 that are beautiful and no additives.

The burgers in Wetherspoons have always been crap. 

[HousePriceMania]

It's deflation after all

 

 

 

[MrXxxx]

2 hours ago, DoINeedOne said:

Great Interview with Ronnie Stoeferle - In Gold We Trust Report

 

Really good podcast, and Stoefele`s humour is spot on.

[planit]

1 hour ago, Cattle Prod said:

This chart explains all you need to know about WTI pricing. It converts oil inventory into days supply, which is a much better metric. You'll hear 5 year averages discussed, or the inventory levels in the 2009-2014 period, but these are not corrected for what consumption was back then. Days supply incorporates that. It's effectively a 'twitchiness' measument: because supply is inelastic, price gets bid up when days supply drops. 

There are too many years on here, but you can see clearly that periods of high prices like 2006 to 2014 are around 20 days supply, and we are currently at 28 days. Price is front running inventory levels to some extent. I think it's pricing the trajectory of this drop: you can see it's already cut through 2016 and 2017. It's dropped about 5 or 6 days since May. If the trend continues, we'll be back to the low 20s by the end of summer, and we haven't been there since the days of $100 oil. That said, I think the dollar will have to drop for this trend to continue, to keep oil consumption high outside of the USA, and stop imports flooding in. WTI is priced off US inventories. I suggested a while back that WTI would close the gap to Brent or even exceed it, and that is happening now. That will attract imports. Unless other countries buy it first!

Dyodd

Thanks for this, much appreciated.

I realised the absolute levels of inventory were not low, it is the trajectory I was extrapolating to try to judge when sentiment would be good or bad. Looking for future 'newsworthy' figures that will get picked up by the press.

Oilprice.com says "The latest four-week drop in inventories was the biggest such fall on a rolling basis in EIA data going back to 1982"

As you predicted, the US oil production has not increased to fill the gap. US imports will have to increase to stop the decline.

This is where it gets interesting as I am guessing that regional oil flows don't change quickly. The US has been oil sufficient for a few years so a new flow needs to be developed. Oil demand exceeds supply in all regions at the moment so there is no spare oil looking for a home. Because of this the US will have to divert oil from another region and this will only happen if it is profitable.

Hence the need for WTI to be a high price. The gap to Brent has narrowed but the inventory draw-down has avoided the price increase that will draw in more oil. This has to change and seeing that markets are forward looking, it will not be long before this happens. A period of WTI > Brent seems to be in order.

 

Let me know if any of the above is wrong, the main question for me is whether there is a quick way of the US getting 1mbpd to stop this decline or am I correct in assuming it will take a while to rebalance?

 

OPEC+ are completely in control at the moment, if you have a winning hand you don't fold, they would be stupid to screw this up so why on earth would they have a price war.

 

[Bricormortis]

https://www.youtube.com/watch?v=VI4Xp5SH9Og

David Hunter 6th July. 30 minute video 

Not much change to the essential message.

Dollar to 80-85 soon then up to

120 minimum, then end of decade below 50 

[planit]

I am getting a bit jumpy today, market is acting nervous and I think it might be due to the Delta variant. It's the speed of the growth. It could set off a drop for a few weeks. My hand is hovering on the sell button.

I realise this is not deaths and you will tell me I am stupid.

Just a random selection:

 

Edit: 30% in cash now to have a relaxing weekend. Let's see what happens next week.

[No One]

On 08/07/2021 at 14:08, DurhamBorn said:

Do you understand German witholding tax .I notice it says 15% with treaty so i guess divi from Telefonica D would see a 15% tax,but it also says 10% for valid pension scheme,so im wondering if in a SIPP it would be zero.Most brokers are a nightmare trying to get these answers from.

Notice today Telefonica D is up 3.5% among the big falls everywhere,and @sancho panza coma scores top rated have outperformed the sector since he put them up.I own a lot of BT,but sold a small tranche at 2.04p and added to other money into Telefonica D and Brasil and an outperformance since.Seem like a very useful tool in broad sectors,even just to use to maybe slice ones that have ran and the score has dropped and increase or open new positions in ones that rate top 4 in the scores.

I got taxed 15% on my T212 Tel divi's irrespective that's inside an ISA 

[Mapper]

7 hours ago, feed said:

How many countries run dollars or Euros alongside local currency, for multiple reasons, incl. stability, availability, tax avoidance and corruption.  That isn’t going to change with a CBDC, even assuming that the technology can be implemented globally.  

There will always be a demand for dollars in Africa and Mexico is a de facto narco state with a massive demand for physical dollars. What would the cartels use with a 100% digital dollar? Pesos?  Same for the Euro, the North African drug trade all the way to Afghanistan and you're paying in Euros. 

Any major currency that switches to digital only, creates a vacuum for other currencies to operate in those environment. No major currency region will want to give up the benefits of those markets; non domestic and black.  If we have a CBDC pound then we will also have a physical pound.  Because if we don’t have a physical pound, we’ll have a physical dollar or Euro or crypto for anonymous payments, because the rest of the world will have a process for anonymous payments.  And the banks will not want a competing payment system in something as widespread as the black-market. 

CBDC for benefits, bank loans with varying interest rates and paying taxes seems likely, but not for functional exchange.  

If BOE goes 100% CBDC, then people will be buying drugs and hookers in dollars or Euros. 

 

Firstly, I’ll say I hope so. It’s music to my ears that others think that the human spirit (black market or not) will prevail.

But, playing Devil’s Advocate what if there are NO physical currencies? If the Dollar and Euro go digital, what are you left with that anyone trusts?

Even drug dealers need a currency that people accept, trust, holds its value etc.

Some smaller country still has physical notes, but who wants them?

Will it (can it) be something else that oils the wheels of the black market?

Domestically it could be some commodity I guess, but internationally that’s not going to work.

[Castlevania]

1 hour ago, No One said:

I got taxed 15% on my T212 Tel divi's irrespective that's inside an ISA 

ISA’s are only tax free accounts in the eyes of the U.K. 

You can offset the withholding tax paid against U.K. dividend tax. Clearly there’s no offset if held in an ISA, but worth being aware so you can look to minimise tax for those with a reasonable amount of savings outside an ISA.

[feed]

3 minutes ago, Mapper said:

Firstly, I’ll say I hope so. It’s music to my ears that others think that the human spirit (black market or not) will prevail.

But, playing Devil’s Advocate what if there are NO physical currencies? If the Dollar and Euro go digital, what are you left with that anyone trusts?

Even drug dealers need a currency that people accept, trust, holds its value etc.

Some smaller country still has physical notes, but who wants them?

Will it (can it) be something else that oils the wheels of the black market?

Domestically it could be some commodity I guess, but internationally that’s not going to work.

Physical USD isn’t going anywhere (soon). 

Today, the Treasury and Board of Governors staffs estimate that nearly 60 percent of all U.S. banknotes in circulation, or close to $500 billion, is held outside the United States.