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

[Don Coglione]

1 minute ago, Democorruptcy said:

Maybe I should send an email to Shell/BP and suggest they buy them out for 99p. A bit of psychological pricing goes a long way. Actually all the adverts these days spread the price for something over a long period. I could say "less than 2p a week for a year"?

With a market cap of just over £2bn, they must be on a number of radars?

[Loki]

20 minutes ago, Democorruptcy said:

Forgive me father for I have sinned (again), 36p this time. I don't want to mention the ticker, for fear of making people wince.

 

2 minutes ago, Ponty Mython said:

With a market cap of just over £2bn, they must be on a number of radars?

Intrigued

[HolyCow]

11 hours ago, DurhamBorn said:

The question is why would people care what the markets do this week,next week,even this year?.Nobody knows.They could fall 10% tomorrow then go up 20% Tuesday.Anyone who invests worrying about day to day,or month to month movements shouldnt invest in anything ever.Oil will be $200 to $300 by 2028 and people should be buying big oil right now.Set ladders of course,but be buying now.The cycle has ended as we expected,and the printing has started as we expected.Its only a matter of time before things turn.The energy sector is in a perfect storm at the moment,so its likely the prices are way undershooting and thats perfect for long term buyers.Every time CBs de-value their currency by printing they are storing up price growth in commods.It doesnt seem it now,but the biggest threat to wealth isnt the bat flu,its inflation.Shell could go down to £8,but its very likely to be over £40 by 2028 and another £30 in dividends.

 

Sorry if this is a silly question but is there an oil/gas ETF that I can put some money into rather than buying individual shares in BP, Shell etc?

[DurhamBorn]

If you shut your financial markets you loose the main route to the economy for all the printed money.

The QE enters the capital markets first,then the real economy,its why there is always a lag of stock crash,then recession,then recovery.The difference this time is simply the scale of printing,and where it will end up.The consumers is tapped out,and governments are calling the shots for a cycle,Industrial is almost certain.

[Democorruptcy]

42 minutes ago, Loki said:

 

Intrigued

[DurhamBorn]

31 minutes ago, HolyCow said:

Sorry if this is a silly question but is there an oil/gas ETF that I can put some money into rather than buying individual shares in BP, Shell etc?

Most are closed to UK buyers now thanks to the EU rules.To be honest i wouldnt use them anyway for big oil.Im avoiding all the smaller oilies myself and sticking to the big ones.The smallest i bought is Repsol,and thats still a very big company.I can understand for people with smaller amounts its harder,but we have a long 8 year cycle ahead so nothing wrong with buying over the first few years.If buying Repsol its better to take the extra shares as the divi,then sell later if you want as it avoids the dividend tax in Spain (at least i think)

[Nicolas Turgeon]

New blog post by Steven Jon Kaplan on his site:

https://truecontrarian-sjk.blogspot.com/2020/03/when-your-views-are-truly-contrarian.html

Interesting to see his new holdings!

Thanks all for the ongoing discussion - great to hear the different angles on everything. Plus the gardeing tips!!

[Craig]

Here we go, sub $10 incoming!

https://english.alarabiya.net/en/business/energy/2020/03/30/Saudi-Arabia-to-increase-oil-exports-to-10-6-mln-bpd-in-May-Energy-Ministry.html

[kibuc]

SilverCrest shuts down exploration and construction activities at Las Chipas for a month as a COVID precaution.

There's good, and there's not good. This is not good.

[BadAlchemy]

Saw something similar about Kirkland Lake Gold...

https://klgold.com/news-and-media/press-release-details/2020/KIRKLAND-LAKE-GOLD-PROVIDES-STATEMENT-ON-COVID-19-VIRUS/default.aspx

"Suspension of non-essential work and visits to site: All non-essential work has been suspended, including all exploration activities and the transitioning of Detour Lake Mine to reduced operations (lowering the on-site workforce from approximately 1,100 to 300). All non-essential visits to our operations are now prohibited until further notice. "

[Loki]

Not good for physical supply either

Good for price though if you already bought

[kibuc]

3 minutes ago, Loki said:

Not good for physical supply either

Good for price though if you already bought

Detour has been suspended anyway, and SilverCrest is not a producing project yet so there's no immediate impact on supply. However, we should expect more news of that ilk to drop in the coming days/weeks.

[Don Coglione]

41 minutes ago, kibuc said:

Detour has been suspended anyway, and SilverCrest is not a producing project yet so there's no immediate impact on supply. However, we should expect more news of that ilk to drop in the coming days/weeks.

Time to bail out of the performing miners perhaps, surely most will have to slow or stop production soon? Then back in when the dust settles.

[Eventually Right]

14 minutes ago, Ponty Mython said:

Time to bail out of the performing miners perhaps, surely most will have to slow or stop production soon? Then back in when the dust settles.

Lots of moving parts to that equation:

How long a shut down is already discounted by the market?

If gold were to shoot up to $1800+ how big a positive force for the share price is that, to counter the negatives of a month or two of mine closure?  ie the ounces in the ground are valued higher.

The market will anticipate re-opening the mines, as soon as the case rate growth starts slowing in that country, could be a hell of a rally when that happens.

Not saying it's the wrong course of action...especially if gold sells off, but there are risks of selling, as well as holding.

[kibuc]

1 minute ago, Eventually Right said:

How long a shut down is already discounted by the market?

Given that gold is north of 1600, I'd say some of the miners have already had any possible trouble priced in, and then some. HMY @$2.38 is just silly. Having said that, markets can stay silly etc etc.

[Castlevania]

2 hours ago, DurhamBorn said:

Most are closed to UK buyers now thanks to the EU rules.To be honest i wouldnt use them anyway for big oil.Im avoiding all the smaller oilies myself and sticking to the big ones.The smallest i bought is Repsol,and thats still a very big company.I can understand for people with smaller amounts its harder,but we have a long 8 year cycle ahead so nothing wrong with buying over the first few years.If buying Repsol its better to take the extra shares as the divi,then sell later if you want as it avoids the dividend tax in Spain (at least i think)

Ah. I was trying to figure out their flexible dividend policy. So Repsol issue you with extra shares that if you want the income you can simply sell there and then? The explanation on their website wasn’t very clear.

17 minutes ago, kibuc said:

Given that gold is north of 1600, I'd say some of the miners have already had any possible trouble priced in, and then some. HMY @$2.38 is just silly. Having said that, markets can stay silly etc etc.

South African underground mining ban due to the Coronavirus.

[Don Coglione]

13 minutes ago, Castlevania said:

South African underground mining ban due to the Coronavirus.

I hadn't heard about that, but it makes sense - and adds weight to my earlier comment!

[JMD]

15 hours ago, DurhamBorn said:

The question is why would people care what the markets do this week,next week,even this year?.Nobody knows.They could fall 10% tomorrow then go up 20% Tuesday.Anyone who invests worrying about day to day,or month to month movements shouldnt invest in anything ever.Oil will be $200 to $300 by 2028 and people should be buying big oil right now.Set ladders of course,but be buying now.The cycle has ended as we expected,and the printing has started as we expected.Its only a matter of time before things turn.The energy sector is in a perfect storm at the moment,so its likely the prices are way undershooting and thats perfect for long term buyers.Every time CBs de-value their currency by printing they are storing up price growth in commods.It doesnt seem it now,but the biggest threat to wealth isnt the bat flu, its inflation. Shell could go down to £8,but its very likely to be over £40 by 2028 and another £30 in dividends.

DB, thanks very much for the figure work. I know the numbers are very approximate and depend on many moving parts aligning through the cycle. Personally, I find them useful for judging risk/reward calculations, portfolio allocations for low/med/high risk plays, etc, and obviously don't use them to trade as its all long term investments for me in any case. You have talked before about oil/energy sector shares maybe rising 500%, excluding divis. I wonder if you have done similar calculations for the telecoms sector and the industrial (steel/chemical) sectors?  

[JMD]

14 hours ago, DurhamBorn said:

The question is why would people care what the markets do this week, next week, even this year?. Nobody knows. They could fall 10% tomorrow then go up 20% Tuesday. Anyone who invests worrying about day to day, or month to month movements shouldnt invest in anything ever. Oil will be $200 to $300 by 2028 and people should be buying big oil right now. Set ladders of course, but be buying now. The cycle has ended as we expected, and the printing has started as we expected. Its only a matter of time before things turn. The energy sector is in a perfect storm at the moment, so its likely the prices are way undershooting and thats perfect for long term buyers. Every time CBs de-value their currency by printing they are storing up price growth in commods. It doesnt seem it now, but the biggest threat to wealth isnt the bat flu, its inflation. Shell could go down to £8,but its very likely to be over £40 by 2028 and another £30 in dividends.

DB, someone recently here (apologies, cant remember who it was) commented - and I paraphrase - of not having considered the possibility that the government would front-load the spending before the debt-deflation had even begun to actually bite. I think that's an interesting observation, but i guess the order in which these things happen doesn't much alter the end destination of big inflation.

Anyway, (and kinda related) although you refer above to the printing only just starting, do you not think that the stimulus packages announced so far - amount in reality to very little - especially when taking into account the sort of policy pledges so far announced. e.g. funding peoples wages/business credit facilities, and these may even expand/or be extended well into the future. Essentially, won't most of the 'new money' just be absorbed over the next 6/12+ months. I also note that none of it is directed toward infrastructure or inflation type spending. Do these (somewhat unexpected?) government spending initiatives - at least the ones announced so far - not alter your predictions any? 

I ask because some suggest that we may not even have had the long predicted market crash, and that instead we might next go on to have a partial market recovery across some/many sectors (perhaps beginning once/if the effects of the Corona virus are less harsh than predicted)... and that the big kahuna might not happen until say 2021.

[DurhamBorn]

I think we will see 4x the printing we have seen so far.Its very fussy at the moment,and there is a big risk of more falls,or a very strong re-bound into autumn then another massive fall.One way or another massive amounts of debt need to be liquidated and monetized by CBs.The fiscal policies so far from governments are very inflationary as they are printing to give people money to not produce anything.Lags would say we see  a -18% in GDP and maybe 3rd quarter a spike in inflation.

[CVG]

Perhaps print a bit for this (hydrogen news):

FRANKFURT, March 30 - The falling cost of
producing hydrogen from renewable power offers a promising route
to cutting emissions, but governments need to step in and
provide $150 billion of subsidies over the next decade to scale
up the technology, according to research from Bloomberg New
Energy Finance (BNEF).
Renewable hydrogen can be made by splitting water into
hydrogen and oxygen, using electricity generated by cheap wind
and solar power.
The technology to do this is currently funded by companies,
but BNEF estimates that if governments worldwide were to provide
$150 billion in funding over the next 10 years - less than half
the amount currently spent on subsidies for fossil fuel
consumption - that would help halve the cost of producing
hydrogen from renewable energy sources.
The BNEF Hydrogen Economy Outlook said that usage of
carbon-free hydrogen is currently small and costs are high,
slowing the deployment of hydrogen production, storage and
transport infrastructure, which could help industries
decarbonise.
"This needs policy coordination across government,
frameworks for private investment and the roll-out of around
$150 billion of subsidies over the next decade," said Kobad
Bhavanagri, head of industrial decarbonisation at BNEF.
The cost of electrolyser technology to make hydrogen from
renewable power has fallen by 40% in the last five years in
Europe and North America, while Chinese-made systems are 80%
cheaper than those in the West, according to BNEF.
This has encouraged industries such as steel, heavy
vehicles, shipping, cement, fertilisers and power generation to
explore measures to replace natural gas usage with hydrogen, to
cut carbon emissions under climate targets.
In Japan, carmaker Toyota 7203.T seeks to establish
hydrogen-powered cities and transport and in Germany, oil majors
and utilities including BP BP.L and RWE RWEG.DE plan plants
and pipelines while the government is drawing up a hydrogen
strategy. urn:newsml:reuters.com:*:nL8N2BB64S
BNEF said the cost of producing a kilogram of hydrogen from
renewable power could fall to a range of $1.14-2.71 per kilogram
in 2030, compared with $2.53-4.57/kg now, if subsidies to the
tune of $150 billion were provided.
In 2050, the production cost could even fall to $0.8-1.6 in
most parts of the world, making hydrogen competitive with
current gas prices in Brazil, China, India, Germany and
Scandinavia, it estimated.
However, achieving this hinged on how governments enforced
CO2 curbing targets to drive out conventional processes, it
said.

(Reporting by Vera Eckert, editing by Susan Fenton)
(([email protected]; +49 69 7565 1228; Reuters
Messaging: [email protected]))

[TheCountOfNowhere]

14 hours ago, Cattle Prod said:

If you can pick the bottom mate, be sure to let us know!

I've been debating this all day.

Looking at the last week, I think we've seen the bottom.

The trillions pouring in to the US stock marker is having the desired effect by the looks of it.

More bad news is seen as good news.  Good news wont matter as the bailouts have been agreed.

Italy and Spain look to have flattened the curve and I expect, for them, by the end of April the end will be in site.

Only really bad news will reverse this now, like a very large bank going tits up.

 

[spygirl]

https://www.thearticle.com/a-future-of-debt-and-inflation

[Barnsey]

Crazy to see WTI break key level of $20 

[MrXxxx]

20 hours ago, DurhamBorn said:

The question is why would people care what the markets do this week,next week,even this year?.Nobody knows.They could fall 10% tomorrow then go up 20% Tuesday.Anyone who invests worrying about day to day,or month to month movements shouldnt invest in anything ever.Oil will be $200 to $300 by 2028 and people should be buying big oil right now.Set ladders of course,but be buying now.The cycle has ended as we expected,and the printing has started as we expected.Its only a matter of time before things turn.The energy sector is in a perfect storm at the moment,so its likely the prices are way undershooting and thats perfect for long term buyers.Every time CBs de-value their currency by printing they are storing up price growth in commods.It doesnt seem it now,but the biggest threat to wealth isnt the bat flu,its inflation.Shell could go down to £8,but its very likely to be over £40 by 2028 and another £30 in dividends.

 

I think it depends on your goal..if like @NoOne above your aim is to get a house deposit from limited funds then a `trader` type approach `buying low, selling high` is required otherwise you have little chance of meeting your objective...

...however if like yourself DB (& myself) your aim is capital preservation, especially against inflation then a long-term `Hold and wait` where the initial buy price is less important is more suitable..

...and as for @YRS aim?...I can only assume he acquired a fortune via nefarious activities and is trying to salve his guilt/punish himself by losing it all via his buying approach! :-) :-) :-)