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


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2 hours ago, sancho panza said:

expecting a deep kahuna wave in a US election year.I think 2021 is now becoming a more likely big drop year as per Steve Kaplan's theory and my won read on things.

Agree- people will be too distracted to sell! That of course leaves room for a 2007 style oil price spike to trigger it. Not repeat, but rhyme...

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@Cattle Prod i think i speak for everyone when i say how thankful we are to have your superb knowledge of the oil sector on this thread and the way you gladly share that knowledge. The irony is m

Iv had a lot of direct messages lately asking what shares to buy etc and how to position.I simply havent had time to reply to them,and am unable to.Im not a financial advisor and to do it properly you

Happy Christmas to everyone who contributes and/or reads this thread.For me the no1 most important thing is that ANYONE is welcome here,to contribute from the technical,to what they simply see with th

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2 hours ago, sancho panza said:
10 hours ago, DurhamBorn said:

 

I've had to readjsut my timeline now ref the oilies to inlcude some considerable disruption fromthe Corona virus.Thought I was getting a good deal on XOM at n$60..............could get cheaper yet.

Prudent. Should be more buying opportunities either way. My personal allocation to the sector is about 22%, fwiw. More with work related stuff. If it drops 30% so be it - I know I’ll get it back soon enough. My main concern for the last 18 months has been accumulating capital to deploy at good prices. I’m content Im getting good prices, and every month more that goes by means more capital, so big kahuna pushing out to 2021 suits me fine. 
Especially if we have a run up in gold in the meantime. Or uranium and natural gas for that matter!

 

 

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6 hours ago, sancho panza said:

Thanks for your insights CP.There was a post a few pages back talking about how little the price of oil changed during periods of tiem when the shares of the big oilies were quite volatile.

DB $43 call whilst nbot yet right ,got the right direction of travel against the majority of oil bulls running into Christmas.

This market has got the feel of downward momentum.I was going to purcahse RDSB/XOM/EQNR/BP fir last but held off and am glad I have .Liike you,I'm not sure how long this window will stay open for but the bargains look compelling.We've already got the best part of a 15% portfolio position in big oil and I think we'll add some more tmrw as I'm off.EQNR/XOM looking cheap but may get cheaper yet.

Inteeresting to see how your' timeline for shortage has moved but makes sense with the current problems in China.

I'm always wary of expecting a deep kahuna wave in a US election year.I think 2021 is now becoming a more likely big drop year as per Steve Kaplan's theory and my won read on things.

I think any sort of depopulation of the UK for what ever reason could have a huge impact.That Asset Service paper really does dig the data wel on private LL's and certainly concurs with my own expereince of mainly middle aged/retirees levering up,As I've said several times,I'm not sure how many realise their own home is at risk.

BTL unwind when it happens could gather a pace of it's own due to the relatively small sectors of slcoirty in there that are actually exposed/levereaged in equal measure.

Every - and I mean every  BTL Ive spoken to about risk - does the 'hand the keys back to the bank' reply.

They seem to think yjr UK has non recourse mortgage lending, just liek the US.

At very long last, UK banks have regulation in place to stop banks ofering mortgages the customer is unlkikely to pay back. Theres loads of checks and whatnot, to ensure the mortgagee has the income stream to pay the motgage of.

Unless its commercial mortgage, where the regulation assume the the mortgagee has done their own research. No protection, no come back. Thats why BTL has boomed so much as OO mortgage has fallen - its unregulated.

as part of the playing with thebig boys, a BTL mortgage can be asked to be paid back, for whatever reason ,within a1 month. And if the balance is not paid off then the bank can go after every thing, inc pensions - a simple charge o nthe person til they are 55 when a pension cn been withdrawn.

Mr nM rs NotGettingMuchibnTheBabnkLetsButaRental tend to be not that leveraged, so they dont really get the IO BTL leverage to the moon returns - about ~4%  Assuming theyve got less than 60% LTV  or less leverage and 1 or 2 houses, will escape their BTL investment with a hefty but not house threatening loss.

 

 

 

 

 

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9 hours ago, Simon said:

Funds school in Africa. Bought them a tractor recently. People in civil service getting redundancy plus early retirement then their wife getting them job in local government. Never paid any real tax. Pensions being paid for by schmucks in private sector who will retire with nothing. I hate paying council tax and pay as little other taxes as possible

But is this any worse than the government foreign aid policy giving money to India who then spend their money sending a rocket to the moon?!...at least the teacher has a choice in his donation, and the tractor will increase local food production.

As for your last point, I have made this a personal goal/passion, even more so than maximizing my retirement funds...to ensure they get as little of my money/taxes to waste.

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Them that enjoyed Harleys "introduction to charts", (that includes me), might want to check out this new Youtube channel.
I guess she's a bit 'marmite', so maybe not for everyone.  The first video is just 'welcome to my new youtube channel'.  The second is how she's traded and used charts on gold & silver over the last year.
I was thinking I could learn something, and do prefer to get on at the start of a youtube channel.
 

 

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14 minutes ago, BearyBear said:

..and yesterday it closed above $1600 which is the highest closing since 2011-2013..! Very bullish!

The market is waking up to the consequences of this, there is no quick fix to companies being unable to produce because they are missing parts.  JLR are transporting components from China to UK in suitcases.....

Government splurge is nailed on now, its merely a question of inflation only or deflation then inflation.

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52 minutes ago, Majorpain said:

The market is waking up to the consequences of this, there is no quick fix to companies being unable to produce because they are missing parts.  JLR are transporting components from China to UK in suitcases.....

Government splurge is nailed on now, its merely a question of inflation only or deflation then inflation.

I think deflation then inflation still very much in play, Sweden just posted its sharpest drop in CPI for over 40 years, and seen as the leading indicator for rest of Europe. Whilst supply chain issues will possibly arise and have an inflationary effect, this will be more than offset by plummeting demand for goods both within China and globally for the near future in this downturn. However once things get back on track...

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56 minutes ago, Majorpain said:

The market is waking up to the consequences of this, there is no quick fix to companies being unable to produce because they are missing parts.  JLR are transporting components from China to UK in suitcases.....

Government splurge is nailed on now, its merely a question of inflation only or deflation then inflation.

Exactly thats the only question the next cycle is a reflation.Lots will flow back to the west from the east,all this China is the new US is just rubbish.

@Cattle Prod on oil id expect a 3 month lag on price from this virus in purely macro terms stand alone so it should be affecting price very soon (so far sentiment only),but i still see the liquidity as the main driver.That is still pointing to a $43 price.However the falls have slowed and are moving towards my down line road map,so the falls could stop soon.I usually use my road maps for positioning,not as direct buy signals.So the oil road map saying down from $60 to $43 was for positioning ie putting ladders in place for the sector along that line.For instance iv been picking up the sector,but only about half of what id like to deploy and there is room for expansion in that amount.Even at $43 i would still hold back some capital,simply in case that big spike down happens.That however relies on a lot of "if"s.

The main thought really is this.Lower oil prices will hold up the main economy for a little longer.$43 is only $7 away,$250+ is the next cycle target.What i can say is i wont be selling any oil connected stocks until oil is at least $180,none.The only people with capital to grow a green business in the next cycle will be the very oil companies everyone hates right now.Want to invest in future energy?,buy big oil.

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12 minutes ago, Barnsey said:

I think deflation then inflation still very much in play, Sweden just posted its sharpest drop in CPI for over 40 years, and seen as the leading indicator for rest of Europe. Whilst supply chain issues will possibly arise and have an inflationary effect, this will be more than offset by plummeting demand for goods both within China and globally for the near future in this downturn. However once things get back on track...

Have you broke into my house and read my things :o .Sweden is key as you say,not many people know that or use their numbers.Their supply chains are lead indicators for Germany and most of Europe due to the nature of the products.

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On the BTL front the immigration news today on the new system has in the small print "no access to means tested benefits until settled status",settled status is after 5 years.So no tax credits,no Universal Credit,no Housing Benefit.That will hammer BTL over the mid term.

Im not 100% but i think that means they cant claim for children,unless maybe if the child is born here.Have to dig deeper into that,but its a massive change.

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25 minutes ago, TheNickos said:

Anyone using iweb ? tempted to try it as it is the cheapest in fee terms but a little bit no frills compared to something like ii.

I have my wife's ISA on iWeb. For basic FTSE shares - no problems at all. Minimizing transaction costs is a fantastic way to get the best growth.

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14 minutes ago, DurhamBorn said:

On the BTL front the immigration news today on the new system has in the small print "no access to means tested benefits until settled status",settled status is after 5 years.So no tax credits,no Universal Credit,no Housing Benefit.That will hammer BTL over the mid term.

Im not 100% but i think that means they cant claim for children,unless maybe if the child is born here.Have to dig deeper into that,but its a massive change.

I think you’re right DB, the missus got her settled status a while back with relative ease but she has been here 23 years, not claimed a penny and only used the NHS once in that time. 5 years of nothing is certainty going to disrupt a last minute rush if the message is made loud and clear.

Pertaining to your previous post, she’s seen the most dramatic fall in business with German Industry customers in the past month or so, followed by Spain.

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31 minutes ago, TheNickos said:

Anyone using iweb ? tempted to try it as it is the cheapest in fee terms but a little bit no frills compared to something like ii.

I used to but not anymore, poorly designed interface and limited choices. I'd only recommend them for holding UK shares longer term.

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8 minutes ago, BearyBear said:

I used to but not anymore, poorly designed interface and limited choices. I'd only recommend them for holding UK shares longer term.

Agreed, just too limited for my liking.

ii seems to be best for my needs, £9.99 a month but get £7.99 credit (1 trade), no annual fees, regular investing just £0.99 per trade.

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8 hours ago, Cattle Prod said:

Agree- people will be too distracted to sell! That of course leaves room for a 2007 style oil price spike to trigger it. Not repeat, but rhyme...

I agree .It's this whole issue of will we get a weak dollar phase.I psoted a Russell Napier Macrovocies podcast a week or so back where he made a really intyelligent argument against there being a weak dollar phase based on his(probably right ) view that the US banking system is in a much better stats than the run up to 07/08.

Whilst I wouldn't disagree,my most punsihing lessons of the last ten years(and there have been many) have occurred because I totally underestimated the willingness of central banks to

a) pursue policies that are doomed to failure by the inherent contradictions and misunderstandings writ through them,particularly that money velocity is a constant

b) to then double down on said failing policies after they've 'remarkably' failed the first time.

The Western world needs a clean out of it's meo classical economic establishment and that's not going to happen in the next year.ergo,Powell will msot likely pursue some form of QE and rate cutting before that excellent discussion we had on here some 400 pages ago is proved right and we see a changing of the guard in terms of reserve currencies over the next ten years away from the dollar.At some point during that decade @Errol will also be proved right I suspect..

8 hours ago, Cattle Prod said:

I hadn’t really thought about it till you asked, so please don’t read much into that. My view is that’s it’s just not predictable. I won’t catch the bottom, I don’t want to miss out, and I know there will be time to deploy my capital. So I’m in enough to avoid fomo. I’m not buying more right now, like you. I will buy more if it goes into the 40s. If it goes up, there will be savage dips to fully deploy on.

Oil is inelastic, so the corona virus wont really affect short term demand (contracts to fulfill etc) But sentiment will. I think what’s holding up the price is either a) complacency, or b) long term buyers who understand the coming supply problems.

Of course the way to handle this is to lengthen ladders. But I don’t understand how the coronavirus lag will affect things. So I said Q4. @DurhamBorn will be able to see this better, but I suspect he’ll say “liquidity is far more important”. In terms of supply problems, I think it’s already happening. I just don’t know how long it’ll take to filter to Wall St.

Another signal in the supply noise: the Russians are recently  pushing forward > $100bn expensive Arctic mega projects they’ve known about for years. Why now? If they sanction them now, first oil in maybe 6-7 years. Good timing, do you think?! The last project of this scale was probably Gorgon in Australia, sanctioned something like 10 years ago. I was very interested to hear about new Rosneft sanctions today. 

Bakken oil is sold for ~$10 below WTI, while Alaskan oil is ~$5 above Brent. What’s up with that? Mostly that shale oil is light (it has to be to come out) and the physical world needs much more medium-heavy oil. And yet we all trade WTI and Brent on paper!

As I’ve always said, the one to watch is the Permian. When that stops growing, so does the US, and so does the world. It’s that concentrated. Coiled up, you could say...If the market was efficient it would be being priced in around now,, looking at the data,  but we all know here that’s not how it works.

Always appreciate your insights from the inside CP.

1) we started a mechanical buying program on the oilies mid August based on time rather than price ladders.At times we've stopped due to prices rising too much.Particuarly from Dec 12 when  I felt the amrekt was runnign.We're now in enough to avoid the fomo which is important because the last thing I want to be doing is chasing a rising market.

2) We've dipped heavily (for us)back into XOM around the $60 mark,RDSB sub £20, BP sub £4.80.But I was having a chat with my mother the other day and she was urging caution ref this corona virus very much for the reason you're stating ie sentiment.I have certain indicators I work from but my gut (don't laugh) is the number 1.My gut is saying there's more downside here

3) someone posted-it might well have been you- some analysis showing how little the price of oil has moved during some crises worth noting WTI bottomed at $41 back in Jan 09 on the monthlies.XOM currently near 10% of it's 09 low.Hence we'll keep dribbling in but my timeline has shifted further out for the bottom post corona virus.

4) fascinating that the russians are prepping those fields.It really is a sign of where it's going and it's going to be interesting tosee how the permian unwinds.It doesn't appear the market is ready for a massive bull in oil.Could catcha  lot of people out.

5) Having said all that,it's looking like PM's are getting ready to burst.No plan survivies contact etc and I have to say that I'm thinking today of pulling our oil services trades(which are breaking even) and deploying into more PM's.On a wider level I'm also wodnering whether to ditch our XOP/FCG plays and chuck it into big oil.

Questions questions.

 

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On 17/02/2020 at 20:51, sancho panza said:

Coronavirus could be there Chernobyl. Fascinating show on netflix if you havent seen it.

SP, yes perhaps so. I think Xi Jinping making himself president for life was an act of desperation not strength. We can probably even quantify the loss of control by the number of high-ranking Chinese dissidents locked-up, something that didn't happen even in the old USSR (intellectual dissidents yes, but not internal challenges to the hierarchy).  

The whistle blower doctor - Li Wenliang (deserves name check), along with the thousands of Chinese families affected/died from state mismanagement will I think begin to think what's the point of blindly following state dogma.

I'm surprised by the numbers of tourists China 'allows out to holiday abroad - was just 10m in year 2000, now over 150m last year - and they spend $300bn (astonishingly, Americans spent half this amount!). Those Chinese citizens represent maybe only a small elite but they cant unlearn what they have seen on their travels.   

It will be truly fascinating (though hopefully not '...interesting times', as the Chinese curse goes) how this plays out over the next 10 years. I do agree with the so-called controversialist historians Tom Holland/Niall Ferguson, when they write about the 'West and the rest'... in terms of systems, freedoms and belief.   

 

On 17/02/2020 at 20:51, sancho panza said:

keep us posted please.I'd be interested in that

SP, I will do.

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4 hours ago, spygirl said:

Every - and I mean every  BTL Ive spoken to about risk - does the 'hand the keys back to the bank' reply.

They seem to think yjr UK has non recourse mortgage lending, just liek the US.

At very long last, UK banks have regulation in place to stop banks ofering mortgages the customer is unlkikely to pay back. Theres loads of checks and whatnot, to ensure the mortgagee has the income stream to pay the motgage of.

Unless its commercial mortgage, where the regulation assume the the mortgagee has done their own research. No protection, no come back. Thats why BTL has boomed so much as OO mortgage has fallen - its unregulated.

as part of the playing with thebig boys, a BTL mortgage can be asked to be paid back, for whatever reason ,within a1 month. And if the balance is not paid off then the bank can go after every thing, inc pensions - a simple charge o nthe person til they are 55 when a pension cn been withdrawn.

Mr nM rs NotGettingMuchibnTheBabnkLetsButaRental tend to be not that leveraged, so they dont really get the IO BTL leverage to the moon returns - about ~4%  Assuming theyve got less than 60% LTV  or less leverage and 1 or 2 houses, will escape their BTL investment with a hefty but not house threatening loss.

 

Cheers for this info spy,I was unaware that BTL mortgages don't undergo affordability checks.Surely the bank look at the equity positoin of the mortgagor.

I was also unaware that they could chase pensions for a commercial mortgage.Amazing what I've learned after all these years.

ref the second point in bold,there are what might be termed margin call clauses in most mortgages including domestic.

Going on the BTLers I knwo -and I know a few with 10+ hosues,none of them have a clue about any of this.Most were unaware of S24.

You got a view on the impact that's having?

1 hour ago, DurhamBorn said:

The main thought really is this.Lower oil prices will hold up the main economy for a little longer.$43 is only $7 away,$250+ is the next cycle target.What i can say is i wont be selling any oil connected stocks until oil is at least $180,none.The only people with capital to grow a green business in the next cycle will be the very oil companies everyone hates right now.Want to invest in future energy?,buy big oil.

an excellnet point DB

1 hour ago, Barnsey said:

I think you’re right DB, the missus got her settled status a while back with relative ease but she has been here 23 years, not claimed a penny and only used the NHS once in that time. 5 years of nothing is certainty going to disrupt a last minute rush if the message is made loud and clear.

Pertaining to your previous post, she’s seen the most dramatic fall in business with German Industry customers in the past month or so, followed by Spain.

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16 hours ago, Agent ZigZag said:

Well lets hope they dont do it in 7 years time until I can get hold of mine.

Council tax is my big bug bear that I consider is going to be a huge head ache for Government and Local councils as the rate of % increase year on year at present is way above inflation. Projecting into the future in say 10 years time at the current rate of increase I could be looking at nearly 4k, excluding inflation. Thats a lot of money to find. They had better put up the taxable allowance to accommodate

What a sickener that the best you can hope for, is the council to swipe your tax threshold change, that in the budget the  governbankment will tell you it puts more money in your pocket. Now you see it now you don't!

I always avoid putting money in council pension machines in car parks.

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15 hours ago, Bobthebuilder said:

Shocking, My council tax bill is about the same as i spend on food a month, to pay for their pensions? crikey. Meanwhile my wife cant get a MRI scan, earns to much money so low down on the list.

 
Council tax is THEFT I'd don't give a toss what anyone says its F****** THEFT!
 
This is my only gripe where i recently bought ... is paying this Rip-off-THEFT! it makes my blood boil!:Old:
 
To soften the blow of their SCAM/THEFT...
 
I always make sure i ONLY buy Yellow Reduced Sticker items, or like DB says ONLY buy second-hand goods...
 
I save minimum 50% on my YRS monthly shop so around £125 quid a month, so i just say to me self I'm getting 1/2 price Council tax!
 
Bob, are ya doing any: Yellow Reduced Sticker vulturing...? :D
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